SENATE BILL REPORT

ESHB 1068

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

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):March 30, 1989; March 31, 1989

Majority Report:  Do pass as amended.

      Signed by Senators von Reichbauer, Chairman; Johnson, Vice Chairman; McMullen, Matson, Moore, Rasmussen, Smitherman.

Senate Staff:Benson Porter (786-7470)

                  March 31, 1989

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE, MARCH 31, 1989

BACKGROUND:

The renter of a car from an automobile rental company can be held responsible for damage to the automobile whether or not he or she caused the damage.  A renter can escape this liability for vehicle damage by purchasing a collision damage waiver.  The collision damage waiver agreement is a contractual provision within the car rental agreement in which the rental company waives its right to hold the renter responsible for damage to the vehicle in exchange for a fee.  So long as the renter does not violate the terms of the agreement, the company will not hold the renter responsible for damages to the vehicle.  The price for the waiver agreement varies from company to company but generally ranges from $8 to $12 per day.

A renter who does not pay for the collision damage waiver agreement may rely on his or her own automobile insurance if a personal policy covers damage to a rental car.  This coverage, however, usually does not cover the rental company's loss of income from nonuse of the damaged rental vehicle while it is being repaired for which the renter may be held responsible.

Critics of collision damage waivers claim that the waivers fees are not based upon the risk-related use of the product and their use is profit oriented.  In addition, critics claim that car rental companies sometimes use pressure sales tactics to sell the waiver.

Last year, the National Association of Insurance Commissioners and the National Association of Attorneys General 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:

Car rental companies are prohibited from holding an authorized driver liable for any damages, including loss of use.  This prohibition, in effect, eliminates the sale of collision damage waivers.  There are several exceptions to this prohibition.

An authorized driver can be held liable for damages caused by either intentional or wanton conduct, or by the driver being illegally intoxicated or under the influence of an illegal drug.  In addition, an authorized driver can be held liable if damages occur outside the United States or Canada unless the contract provides for such use, the car rental agreement contains false or incomplete data supplied by the renter, or damages occur while the vehicle is being used during a criminal activity or a speed contest.  The rental car company may not request a deposit or security for damage to the vehicle during the rental period and may not offer to eliminate one of the exceptions described above for a fee.

An authorized driver cannot be held liable for damages caused by a person moving the vehicle in an emergency situation or by a parking or servicing attendant at a commercial or public establishment.

If a rental car company brings an action for damages arising from use of a vehicle subject to a rental agreement, the action must be brought in the state and county of the authorized driver's primary residence.

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

A violation of this act is a violation of the Consumer Protection Act.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

SUMMARY OF PROPOSED SENATE AMENDMENT:

The Legislature finds the increased disclosure of provisions and practices associated with collision damage waivers is beneficial to citizens of this state.

A rental car company must provide a separate disclosure concerning a collision damage waiver to an individual renting a motor vehicle.  Such disclosure must contain an explanation of the nature and extent of the renter's liability, a statement that the renter's personal automobile coverage may provide coverage for damages to a rented vehicle, a statement encouraging the renter to contact his or her agent, and a list of exclusions from which the collision damage waiver does not apply.

The disclosure must be printed in at least 10 pt. size print and the renter must acknowledge receipt of the disclosure.

Signs containing the same disclosures must appear at the place where the renter signs the contract.

A joint select committee is established to examine issues related to the sale of collision damage waivers.  The committee is to report its findings to the House and Senate Financial Institutions and Insurance Committees by December 1, 1989.

Senate Committee - Testified: Representative Fred May (pro); Don Burnett, Basic Transportation; Jim Boldt, Washington Auto Dealers Association; Foster Cronyn, National Association of Independent Insurers (pro); Jean Leonard, State Farm (pro); Vicki Chiechi, Avis, Hertz, Budget (pro); Ed Southon, Insurance Commissioner's Office (pro); Timothy J. Walton, Rent-A-Dent Car Rentals (pro); Clark Sitzes, Independent Agents (pro); Dick Hemstad, Alamo Rent-a-Car (con); Beverly Burnett, 19.95 Rent-A-Car (con)