The Office of General Counsel issued the following informal opinion on May 31, 2005, representing the position of the New York State Insurance Department.
Re: Liability for Rental Cars N.Y. Gen. Bus. Law § 396-z
In June 2002, a motor vehicle rented under a rental agreement as defined in N.Y. Gen. Bus. Law § 396-z, was stolen. May the rental vehicle company hold the person to whom the vehicle was rented liable for the entire loss of the vehicle or is his or her responsibility limited to $100?
Prior to February 24, 2003, N.Y. Gen. Bus. Law § 396-z limited the renters liability for actual loss of or damage to a rental vehicle to $100 with certain exceptions. Effective February 24, 2003, in the event of damage to or loss of a rental vehicle, the person to whom the vehicle is rented may be held responsible for the actual loss of or damage to the rental vehicle, subject to certain limitations as set forth in N.Y. Gen. Bus. Law § 396-z.
In June 2002, a rental car was stolen when the renter left the keys inside the vehicle. We assume for purposes of this analysis that the rental period was for a period not exceeding thirty continuous days.
Prior to the amendment by Chapter 656 of the Laws of 2002, N.Y. Gen. Bus. Law § 396-z(3) (McKinney 1996) provided that "a rental vehicle company may hold an authorized driver liable for actual damage to, or loss of, a rental vehicle caused by such authorized driver, up to a maximum of one hundred dollars." Thus, except for a few exemptions, in New York a rental vehicle company was barred from holding an authorized driver or renter liable for an amount above $100.00 regardless of the actual damage or loss to the vehicle.
Prior to its amendment in 2002, N.Y. Gen. Bus. Law § 396-z(2) (McKinney 1996) provided the following exceptions to the $100 limitation on liability:
(2) No rental vehicle company renting private passenger motor vehicles shall, in rental agreements of not exceeding thirty continuous days, hold an authorized driver liable for actual damage to, or loss of, such rental vehicle (including loss of use), except, where: (a) the damage of loss is caused intentionally by an authorized driver or is caused by such authorized drivers willful and wanton misconduct; (b) the damage or loss arises out of an authorized drivers operation of the motor vehicle while intoxicated by alcohol or impaired by the use of drugs within the meaning of section eleven hundred ninety-two of the vehicle and traffic law; (c) the damage or loss arises out of an authorized drivers participation in any organized speed racing competition; (d) the damage or loss arises out of the use of the vehicle when carrying persons or property for hire; (e) the damage or loss arises out of the use of the vehicle while an authorized driver is committing a felony or otherwise engaged in a criminal act in which the damage or loss of such vehicle is caused by such criminal activity; or (f) the authorized driver fails to furnish the rental vehicle company a report of an accident and the rental vehicle company complies with the following procedure:
(i) At return of the vehicle, at the termination of the rental contract or within ten days if returned by automation or after hours, the rental vehicle company shall furnish an accident report and a notice, pursuant to this paragraph, of the authorized drivers obligation to complete the accident report,
(ii) If the authorized driver declines or fails to complete the accident report, the rental vehicle company shall mail within ten days a notice, by certified mail, return receipt requested and by regular mail, with proof of mailing by production of a certificate of mailing from the post office, along with another accident report, together with a letter stating that the authorized driver declined or otherwise failed to complete the accident report and will be held liable for damages to the rental vehicle for failing to complete the accident report,
(iii) All notices shall be mailed to the authorized drivers address as stated on his license, or other address as designated by him,
(iv) The authorized driver shall complete the accident report within fifteen days of receipt of the notice,
(v) The notice as required by this paragraph shall be in at least twelve point bold face type and shall contain the statement "Failure to fill out an accident report within fifteen days will make the authorized driver liable for damages sustained to the rental vehicle",
(vi) For purposes of this paragraph, an accident report shall be defined as a motor vehicle accident report pursuant to section six hundred five of the vehicle and traffic law or any similar appropriate form furnished by the rental vehicle company,
(vii) Provided, however, if the authorized driver is physically incapable of completing the report, the penalties hereunder shall lapse until after he is able to complete the report and is notified that he must complete the report as set forth in subparagraph (ii) of this paragraph, and fails to do so,
(viii) Provided, further, thirty days prior to commencing an action against the authorized driver, the rental vehicle company must provide the authorized driver an additional opportunity to provide the accident report by providing a further notice along with another accident report, by certified mail, return receipt requested and by regular mail, with proof of mailing by production of a certificate of mailing; and the rental vehicle company cannot hold an authorized driver liable under this paragraph, if the authorized driver provides the rental vehicle company with a completed accident report within fifteen days of the receipt of the notice.
Chapter 656 of the Laws of 2002 amended N.Y. Gen. Bus. Law § 396-z. Among other things, it removed the $100.00 limit for actual damage to, or loss of, a rental vehicle caused by a renter or authorized driver. As a result, unless the renter or authorized driver is covered under a personal motor vehicle policy or other insurance policy such as a credit card account group policy under N.Y. Ins. Law § 3442 (McKinney 2005), or purchased the "optional vehicle protection" that the rental vehicle company is now permitted to sell, such renter or authorized driver may be held fully responsible for the actual damage he or she causes to a rental vehicle.
Since the facts you describe occurred in June 2002, N.Y. Gen. Bus. Law § 396-z as it was prior to the amendments made by Chapter 656 of the Laws of 2002, effective February 24, 2003, is applicable. However, whether one of the exceptions to the $100 limit on the renters liability for the actual loss is applicable depends on the facts and circumstances of this particular case.
For further information please contact Assistant Counsel Brenda M. Gibbs at the Albany Office.