Congress pre-empts vicarious car-lease liability

In a surprising stroke, Congress has included in its new transportation bill a provision that would abolish New York’s “vicarious liability” law, which places auto manufacturers and independent leasing firms on the hook for unlimited vicarious liability when cars they lease are later involved in accidents, regardless of whether the lessors have been negligent or behaved wrongfully (see my N.Y. Post op-ed of Jun. 9, 2003 as well as many posts on this site including Feb. 2, Sept. 5, etc.) The law, stoutly defended by New York’s trial lawyers and certain of their allied “consumer groups”, has driven most of the largest automakers out of the leasing business in New York and led to a steep hike in lease charges for those that remain. The bill is headed to the desk of President Bush, who is expected to sign it. (Tom Incantalupo, “Auto leasing may return to NY”, Newsday, Aug. 2; Joe Mahoney, “New law may cut car lease cost”, New York Daily News, Aug. 3; Ian Bishop, “Boost for NY Car Leasers”, New York Post, Aug. 3; Michael Cooper, “Congress Passes Bill Nullifying a State Law, and Making It Easier to Lease Cars in New York”, New York Times, Aug. 4)(many links via Henry Stern’s NYCivic.org).

The provision is found as sec. 1409 at p. 219 of the 1075-page bill, and is reprinted below in the post’s extended entry (definitions omitted). Among the bill’s notable features: it will take effect immediately to block newly filed vicarious suits, including those over accidents before the law’s effective date; it apparently applies to short-term car rentals of the Hertz and Avis kind, which have also been much discouraged in New York by the vicarious liability law; and (from a casual reading, at least) it also appears to pre-empt the laws of other states which impose some degree of vicarious liability after a crash on lessors (up to a capped figure of damages, that is; only New York imposes unlimited liability).

“All it will do is enrich leasing companies and automobile companies,” charged Shoshana Bookson of the New York State Trial Lawyers Association — a prediction whose accuracy should be testable soon enough. (Alan Wechsler, “Congress paves way for cheaper vehicle leases”, Albany Times-Union, Aug. 3). And according to the Staten Island Advance, Charles Carrier, a spokesman for Democratic Assembly Speaker Sheldon Silver, “said the law change would be unfortunate because it ‘means that companies can rent to anyone — even someone drunk — and not incur a liability.'” (Robert Gavin, “Bill would scrap N.Y. law allowing crash victims to sue leasing firms”, Aug. 3). In point of fact, sec. (a)(2) of the bill specifically preserves liability in cases of “negligence or criminal wrongdoing” by the owner or its affiliate.

P.S. Well, it didn’t take long to falsify Ms. Bookson’s prediction. An Aug. 4 editorial in the New York Daily News (“Congress repeals the Shelly Tax”) says: “Expecting the President’s signature, a number of car companies that fled the New York market years ago are now planning their return. And several others announced immediate $600 price reductions, proof positive that [assembly speaker and trial lawyer Sheldon] Silver was the sole reason New Yorkers have unfairly paid extra for leasing a car. Call it the Shelly Tax, and thank heaven, or Washington, that it is finally gone.”


SEC. 1409. RENTED OR LEASED MOTOR VEHICLES.

a) IN GENERAL.—Subchapter I of chapter 301 of title 49, United States Code, is amended by adding at the end the following:

Ҥ 30106. Rented or leased motor vehicle safety and responsibility

“(a) IN GENERAL.—An owner of a motor vehicle that rents or leases the vehicle to a person (or an affiliate of the owner) shall not be liable under the law of any State or political subdivision thereof, by reason of being the owner of the vehicle (or an affiliate of the owner), for harm to persons or property that results or arises out of the use, operation, or possession of the vehicle during the
period of the rental or lease, if—

“(1) the owner (or an affiliate of the owner) is engaged in the trade or business of renting or leasing motor vehicles; and

“(2) there is no negligence or criminal wrongdoing on the part of the owner (or an affiliate of the owner).

“(b) FINANCIAL RESPONSIBILITY LAWS.—Nothing in this section supersedes the law of any State or political subdivision thereof—

“(1) imposing financial responsibility or insurance standards on the owner of a motor vehicle for the privilege of registering and operating a motor vehicle; or

“(2) imposing liability on business entities engaged in the trade or business of renting or leasing motor vehicles for failure to meet the financial responsibility or liability insurance requirements under State law.

“(c) APPLICABILITY AND EFFECTIVE DATE.—Notwithstanding any other provision of law, this section shall apply with respect to any action commenced on or after the date of enactment of this section without regard to whether the harm that is the subject of the action, or the conduct that caused the harm, occurred before such date of enactment.

[definitions omitted]

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