HOUSE BILL REPORT

ESHB 1068

As Amended by the Senate

BYHouse Committee on Financial Institutions & Insurance (originally sponsored by Representatives Dellwo, May, Nutley, R. Meyers, Ferguson, Chandler, Winsley, Inslee, Rector, Wang, Belcher, Kremen, Moyer, D. Sommers, Wolfe, Crane, Schoon and Betrozoff; by request of Insurance Commissioner)

Regulating automobile rental liability.

House Committe on Financial Institutions & Insurance

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (8)

      Signed by Representatives Dellwo, Chair; Anderson, Baugher, Crane, Inslee, Nutley, Schmidt and K. Wilson.

Minority Report:  Do not pass. (4)

      Signed by Representatives Chandler, Ranking Republican Member; Beck, Day and Dorn.

House Staff:John Conniff (786-7119)

AS PASSED HOUSE MARCH 14, 1989

BACKGROUND:

When a person rents a car from an automobile rental company, the person is responsible for damage to the automobile whether or not the person caused the damage.  If the renter wishes to escape this liability for vehicle damage, the renter can pay the company a fee and the company will waive its right to hold the renter responsible for vehicle damage.  This contractual provision contained in the car rental agreement is known as a collision damage waiver agreement.  The price for this agreement varies from company to company but generally ranges from $9 to $15 per day.  So long as the renter does not violate the terms of the agreement or does not violate certain other terms of the rental agreement, the company will not hold the renter responsible for damages to the vehicle.

In the past three years, the National Association of Insurance Commissioners and the National Association of Attorneys General investigated consumer complaints against the car rental industry.  Last year, both organizations recommended adoption of a model act prohibiting car rental companies from holding the renter responsible for damage to the rental vehicle except in limited circumstances.  In effect, the model act would require rental companies to build the cost of vehicle damage into the rental price of a vehicle.

SUMMARY:

The Legislature notes the importance of the car rental industry to business and tourism and notes the adverse impact of excessive and unfair collision damage waiver agreements that are often a part of a car rental agreement.  The Legislature recognizes that the legitimate interests of rental companies and renters are best served by prohibiting rental companies from holding renters responsible for damage to rental vehicles except in limited circumstances.

Various terms are defined including "private passenger automobile" which limits the scope of the act and "authorized driver" which identifies the persons who cannot be held responsible for damages.

No rental company may hold an authorized driver responsible for damages to a rental vehicle if the rental contract is for a period of less than 30 days unless: 

a.  the damage is caused by intentional acts or willful or wanton misconduct;

b.  the damages result from the driver's intoxication from alcohol or drugs;

c.  the damages arise from a speeding contest;

d.  the renter obtains the rental vehicle through fraud;

e.  the damages result from the criminal activity of the driver; or

f.  the damages occur outside the United States or Canada.

An authorized driver is not responsible for the acts of a person who moves the rented vehicle because of an emergency or for the acts of a person to whom the vehicle is entrusted for parking or servicing.

If a rental company sues a renter for damages, the court action must be brought in the county where the renter resides.

The rental company cannot require or accept a deposit for damages during the rental period or pending resolution of a damage dispute.

The rental company cannot sell a waiver for any of the types of damage that the company may collect from the renter.

Violations of the act constitute violations of the state Consumer Protection Act entitling renters to the remedies available under the Consumer Protection Act.

EFFECT OF SENATE AMENDMENTS:  All provisions of the House Bill are deleted.  Car rental companies must provide certain disclosures regarding the renter's liability for vehicle damage and the availability of a collision damage waiver.  In addition, a joint select committee is created to study collision damage waiver agreements and report to the Legislature in December of 1989.

Fiscal Note:      Not Requested.

Effective Date:This bill takes effect January 1, 1990.

House Committee ‑ Testified For:    David Rodgers, Insurance Commissioner's Office; and Vicki Chiechi, Avis, Budget, and Hertz.

House Committee - Testified Against:      Barry Curry, Catrala Thrifty Car Rental; Tom D. Huling, III, Catrala Thrifty Car Rental; and Harold Clayton.

House Committee - Testimony For:    Car rental companies charge an excessive amount for the sale of a collision damage waiver agreement.  In addition, these agreements contain many exclusions and conditions that can trap the unwary consumer.  Rental companies should be completely barred from continuing the sale of collision damage waivers and prohibited from engaging in unfair and deceptive practices.  Many states have either adopted laws regulating car rental companies or are in the process of adopting such laws.

House Committee - Testimony Against:      No one has demonstrated that Washington rental companies have engaged in practices to the detriment of the consumer.  Prohibiting the sale of collision damage waiver agreements will seriously hurt smaller rental companies who are less able to absorb the costs of insuring against damage to rental vehicles.  While some disclosure to consumers is desirable and some practices by a few rental companies should be prohibited, extensive regulation of rental companies unnecessarily interferes with business decisions.

VOTE ON FINAL PASSAGE:

      Yeas 50; Nays 46; Absent 2

Voting Nay: Ballard, Basich, Baugher, Beck, Betrozoff, Bowman, Bristow, Brough, Brumsickle, Chandler, Day, Dorn, Ebersole, Ferguson, Fisher, R., Fuhrman, Grant, Hankins, Hargrove, Heavey, Jesernig, Kremen, Locke, McLean, Miller, Nealey, Nelson, Padden, Prince, Rasmussen, Rayburn, Schmidt, Silver, Smith, Sommers, D., Sprenkle, Tate, Valle, Van Luven, Walk, Walker, Wilson, K., Wilson, S., Winsley, Youngsman and Zellinsky.

Absent:     Representatives Appelwick and Brooks.