That’s the legal doctrine that enables a crash victim to collect damages from the owner of a vehicle that has been rented or leased. For a rental or lease car, the legal owner is the rental company or the lessor, usually a lender.
Auto leasing companies have been protected from vicarious liability by law since 2005. Now, though, the American Financial Services Association, a Washington trade group that includes major auto lenders, is worried that the limits on vicarious liability could come off, pushing lenders to pull back from auto leasing.
The group sent a letter this month to the leadership of the U.S. House Committee on Transportation and Infrastructure, asking congressmen not to overturn a law that protects auto leasing companies from vicarious liability.
“Changes are being considered,” said Bill Himpler, AFSA executive vice president. “We are probably looking at an all-or-nothing outcome. I don’t imagine there’s a lot of middle ground on this issue,” he said.
AFSA members include Ford Motor Credit Co., Toyota Financial Services, World Omni Financial Corp., Nissan Motor Acceptance Corp., Ally Financial, American Honda Finance Corp., Volkswagen Credit, Capital One Auto Finance, Wells Fargo Dealer Services, GM Financial, Mercedes-Benz Financial Services U.S.A., TD Auto Finance and Chase Auto Finance.
In addition, there’s a separate effort by a trial lawyers’ group, the Washington-based Center for Constitutional Litigation, to get an appeal before the U.S. Supreme Court. The group is seeking to overturn a Florida Supreme Court decision that upheld protection against vicarious liability for the leasing and rent-a-car industries.
How it all began
According to critics of vicarious liability, the original intent dates back to the earliest automobiles, when only the very rich owned cars and most were chauffeur-driven.
Prior to 2005, courts in several states said that a leasing company could be held liable for damages because it owns the car, even if the leasing company had no control over who drove the car or how they drove it.
In 2002, a jury in Providence, R.I., socked Chase Auto Finance and its insurance company, American International Group Inc., with a $28 million verdict because Chase owned the title to a leased car that paralyzed a woman in a 1998 accident.
After the verdict, several auto lenders quit leasing in Rhode Island, New York and a handful of other states to avoid vicarious liability. In 2005, Congress passed an amendment that was part of a giant highway funding bill, which in effect protected leasing companies from vicarious liability.
Now the issue is back — once again as part of a giant highway bill. AFSA’s Himpler said Sen. Bill Nelson, D-Fla., and the Obama Administration appear to favor getting rid of the limits on vicarious liability.
Himpler said U.S. Rep. Sam Graves, R-Mo., would likely defend the existing rule. It’s often called the Graves Law because the Missouri congressman originally co-sponsored it.