Among the most unfair anti-business laws are those that impose liability on businesses when the customer does something wrong. It's called “vicarious” liability, or liability without fault. Until a new federal law took effect this year, vicarious liability extracted a particularly heavy toll on truck rental and leasing companies.
Under the old law, a rental/leasing company could be found liable for damages resulting from an accident caused by the negligence of the driver of a leased or rented vehicle — even if the company had no role, foreseeable or otherwise, in creating or preventing the accident.
Truck rental/leasing companies have been subject to a patchwork of state statutes that imposed this doctrine by legislative fiat. Behind such laws was the pernicious assumption that justice is served by imputing liability for negligence upon “deep-pocket” owners. Although they may have done nothing wrong, they were deemed most able to absorb the cost of claims in cases where the real wrongdoer (the driver) was considered “judgment proof” because of poverty, lack of insurance, or both.
“The risk of this exposure had enormous costs,” said Peter J. Vroom, president and CEO of the Truck Renting and Leasing Assn. (TRALA), which led the fight against these laws. “Much higher insurance premiums and the potential bottomless-pit expense of litigation were huge negatives to the cost of doing business,” he said. “One member had a vicarious liability case which was the largest liability claim in its 50-year history. The company was innocent of any negligence or wrongdoing,” he added.
For at least a decade, TRALA made eliminating these laws — which were costing the car and truck renting and leasing industries over $100 million annually — its highest legislative priority. The National Private Truck Council, American Trucking Assn., U.S. Chamber of Commerce and other groups supported these efforts and supported TRALA's effort to gain this critical relief, which would directly benefit not only lessors, but their customers as well.
“We had been pretty successful over the years in getting vicarious liability reform passed in individual states,” said Vroom, “but a handful of states like New York, Maine and Connecticut were still clinging to antiquated laws which…created unlimited liability for our companies. We knew the ultimate cure had to come from Congress.”
TRALA took the lead a few years ago in rallying colleagues and a bipartisan group of members of Congress to push for federal preemption of all state vicarious liability laws. Together, they succeeded in getting this done through an amendment to the Highway Bill.
“This is a victory with many winners,” said Vroom. “Truck rental and leasing companies will experience overall decreases in insurance and will no longer face the threat of lawsuits they cannot protect against,” he said. Vroom believes that major banks and large finance lease companies involved in vehicle leasing will [now] become far more active in states like New York.
Vroom added, “The private fleet customer, for example, is also ultimately a winner because of fewer hindrances to business activity and more availability of vehicles across a wide spectrum of markets. This is especially true in states where vicarious liability laws were the toughest.”
“For the truck renting and leasing industry, long-awaited tort reform has finally arrived.”
Gary Petty is President and CEO of the National Private Truck Council. The council's web site is www.nptc.org. His column appears monthly in FLEET OWNER.