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Bill May Curtail Vicarious Liability Lawsuits Against Lessors

March 23, 2005

A bill passed by the U.S. House of Representatives this month may repeal existing vicarious liability tort laws. Bill 6862 would provide relief to vehicle leasing companies and rental car agencies, especially in New York State, which has no cap on tort liability. New York is the only state in the nation with an unlimited vicarious liability law. Connecticut and Rhode Island repealed similar laws in 2003. The law allows lessors of cars to be sued along with the lessee if the lessee gets into an accident.Current vicarious tort liability laws have led major consumer vehicle lessors such as General Motors Acceptance Corp., Ford and American Honda Finance to either curtail their activity, or suspend it altogether, in New York. It is estimated over $6 billion in claims were paid out from 2000-2003, according to Fitch Ratings.The vicarious liability law raises car leasing firms’ costs by more than $130 million a year, and has led to a 36 percent decline in the number of vehicles leased in New York each year, according to a report in Insurance Journal.A coalition of auto manufacturers, dealers and associations said that vicarious liability has contributed to the closing of 70 leasing companies since September 2000. Those no longer leasing include 20 automakers and every major retail bank in New York, according to Insurance Journal story. They said that Buick, Cadillac, Chevrolet, Chrysler, Dodge, Ford, GMC, Hummer, Hyundai, Jeep, Kia, Lincoln, Mazda, Mercury, Oldsmobile, Pontiac, Porsche, Saab, Saturn, and Subaru are no longer leasing in New York because of the liability situation.The New York state Senate has passed the changes, but the Assembly hasn’t thus far.On the national front, legislation will now have to be passed in the U.S. Senate and then signed by President Bush in order to become law.
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