```

[House Report 106-774]
[From the U.S. Government Publishing Office]

106th Congress                                            Rept. 106-774
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

======================================================================

 
                      RENTAL FAIRNESS ACT OF 2000

                                _______
                                

                 July 20, 2000.--Ordered to be printed

                                _______
                                

  Mr. Bliley, from the Committee on Commerce, submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 1954]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Commerce, to whom was referred the bill 
(H.R. 1954) to regulate motor vehicle insurance activities to 
protect against retroactive regulatory and legal action and to 
create fairness in ultimate insurer laws and vicarious 
liability standards, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     3
Background and Need for Legislation..............................     3
Hearings.........................................................     5
Committee Consideration..........................................     5
Committee Votes..................................................     6
Committee Oversight Findings.....................................     9
Committee on Government Reform Oversight Findings................     9
New Budget Authority, Entitlement Authority, and Tax Expenditures     9
Committee Cost Estimate..........................................     9
Congressional Budget Office Estimate.............................     9
Federal Mandates Statement.......................................    10
Advisory Committee Statement.....................................    10
Constitutional Authority Statement...............................    10
Applicability to Legislative Branch..............................    10
Section-by-Section Analysis of the Legislation...................    10
Changes in Existing Law Made by the Bill, as Reported............    12
Minority Views...................................................    13

                               amendment

  The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

  (a) Short Title.-- This Act may be cited as the ``Rental Fairness Act 
of 2000''.
  (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title and table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Definitions.
Sec. 4. General fairness and responsibility rule.
Sec. 5. Preservation of State law.
Sec. 6. Preservation of liability based on negligence.
Sec. 7. Applicability and effective date.

SEC. 2. FINDINGS AND PURPOSES.

  The Congress finds that--
          (1) The vast majority of State statutes and common law follow 
        the generally accepted principle of law that a party should be 
        held liable only for harm that the party could guard against.
          (2) A small number of State common laws and statutes still do 
        not recognize this accepted principle of law, and continue to 
        subject companies that rent or lease motor vehicles to 
        vicarious liability for the negligence of their rental 
        customers in operating the motor vehicle simply because of the 
        company's ownership, even where the rental company has not been 
        negligent in any way and the motor vehicle operated properly.
          (3) An even smaller minority of State laws impose unlimited 
        liability on the companies for the tortious acts of their 
        customers, without regard to fault.
          (4) These small number of vicarious liability laws pose a 
        significant competitive barrier to entry for smaller companies 
        attempting to compete in these markets, in contravention of the 
        fundamental legal principle of fairness prohibiting liability 
        without fault.
          (5) Furthermore, because rented or leased motor vehicles are 
        frequently driven across State lines, these small number of 
        vicarious liability laws impose a disproportionate and undue 
        burden on interstate commerce by increasing rental rates for 
        all customers across the nation.
          (6) Due to high liability costs and unwarranted litigation 
        costs, consumers face higher vehicle rental costs in all States 
        because of the increased insurance expenses required to provide 
        coverage in the interstate insurance and rental markets.
          (7) Rental fairness will lessen burdens on interstate 
        commerce and decrease litigiousness.
          (8) Legislation to address these concerns is an appropriate 
        exercise of the powers of Congress under clauses 3, 9, and 18 
        of section 8 of article I of the Constitution of the United 
        States, and the 14th amendment to the Constitution of the 
        United States.

SEC. 3. DEFINITIONS.

  For the purpose of this Act--
          (1) Harm.--The term ``harm'' means--
                  (A) any injury to or damage suffered by a person;
                  (B) any illness, disease, or death of that person 
                resulting from that injury or damage; and
                  (C) any loss to that person or any other person 
                resulting from that injury or damage.
          (2) Motor Vehicle.--The term ``motor vehicle'' shall have the 
        meaning given to this term under section 13102(14) of title 49, 
        United States Code.
          (3) Owner.--The term ``owner'' means a person who is--
                  (A) a record or beneficial owner or lessee of a motor 
                vehicle;
                  (B) entitled to the use and possession of a motor 
                vehicle subject to a security interest in another 
                person; or
                  (C) a lessee or bailee of a motor vehicle, in the 
                trade or business of renting or leasing motor vehicles, 
                having the use or possession thereof, under a lease, 
                bailment, or otherwise.
          (4) Person.-- The term ``person'' means any individual, 
        corporation, company, limited liability company, trust, 
        association, firm, partnership, society, joint stock company, 
        or any other entity (including any governmental entity).
          (5) State.--The term ``State'' means each of the several 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the Virgin Islands, Guam, American Samoa, the Northern 
        Mariana Islands, any other territory or possession of the 
        United States, or any political subdivision of any such State, 
        commonwealth, territory, or possession.

SEC. 4. GENERAL FAIRNESS AND RESPONSIBILITY RULE.

  (a) In General.--No owner engaged in the trade or business of renting 
or leasing motor vehicles may be held liable for harm caused by a 
person to himself or herself, to another person, or to property, which 
results or arises from that person's use, operation, or possession of a 
rented or leased motor vehicle, by reason of being the owner of such 
motor vehicle, except to the extent of any required financial 
responsibility statute.
  (b) Construction.--Subsection (a) shall not apply if such owner does 
not maintain the required limits of financial responsibility for such 
vehicle, as required by State law.

SEC. 5. PRESERVATION OF STATE LAW.

  (a) State Financial Responsibility Requirements.--Nothing in this Act 
shall relieve any owner engaged in the trade or business of renting or 
leasing motor vehicles from the obligation to comply with a State's 
minimum financial responsibility, motor vehicle, or insurance statutes 
or regulations imposed by that State for the privilege of registering 
and operating a motor vehicle within that State.
  (b) Priority of Payments.--Nothing in this Act shall preempt any 
State law regarding priority of payment requirements or whether 
coverages provided under such statutes or regulations are primary or 
secondary.

SEC. 6. PRESERVATION OF LIABILITY BASED ON NEGLIGENCE.

  Nothing in this Act shall preempt the ability of the States to impose 
liability based on acts of negligence or criminal wrongdoing.

SEC. 7. APPLICABILITY AND EFFECTIVE DATE.

  Notwithstanding any other provision of law, this Act shall apply with 
respect to any action commenced on or after the date of enactment of 
this Act 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.

                          Purpose and Summary

    The purpose of H.R. 1954, the Rental Fairness Act of 2000 
is to protect consumers and businesses from the imposition of 
vicarious liability to motor vehicle rentals in different 
States. The Rental Fairness Act establishes the simple legal 
rule for rental vehicles that the party at fault should bear 
the responsibility for any liability incurred. Where a party is 
not negligent, or not at fault for an action, then that party 
should not be held liable for another's harm. Specifically, the 
bill provides that vehicle rental companies will not be held 
liable for the negligent or intentional acts of others solely 
because of ownership of the vehicle. State laws other than 
those imposing vicarious liability are not affected. Companies 
that own or operate motor vehicles within a State are still 
fully subject to that State's financial responsibility laws and 
are explicitly subject to any claims for negligence or criminal 
wrongdoing. The legislation thus does not in any way limit 
actions against a rental or leasing company for their 
wrongdoing or malfeasance. It further allows all current 
recovery rights against such companies (including those based 
solely on ownership), but only up to the coverage amounts 
required under a State's financial responsibility insurance 
laws, with compensation procured through the State's insurance 
regime with all accompanying consumer protections and 
regulations.

                  Background and Need for Legislation

    Vicarious liability is liability for the tort or wrong of 
another person. It is an exception to the general legal rule 
that each person is accountable for his own legal fault, but in 
the absence of such fault is not responsible for the actions of 
others. In a small minority of States, companies that rent or 
lease motor vehicles are held ``vicariously'' liable for the 
negligence of their renters or lessees. This means that in a 
few States, a court can impose unlimited liability on a car 
rental company for the actions of the renter, even if the car 
operated perfectly and the company was not at fault for an 
accident in any way. For example, Ms. Sharon Faulkner, a former 
small business owner of Capitaland Rental Car, testified at the 
October 20, 1999 hearing of the Subcommittee on Finance and 
Hazardous Materials that she decided to sell her company and 
lay off all her employees after a vicarious liability lawsuit. 
A Capitaland customer rented a car and loaned it to the 
customer's son (an unauthorized driver). The son, without his 
mother's knowledge, drove the car into New York City. He struck 
a pedestrian, who then sued the rental company for ``enormous 
sums'' of pain and suffering damages. Even though Ms. 
Faulkner's small business was in no way responsible for or at 
fault in the accident, she was concerned that her company faced 
potential bankruptcy because the accident occurred in one of 
the few States which imposes unlimited vicarious liability--
liability without fault--on rental companies.
    These small number of vicarious liability laws pose a 
significant competitive barrier to entry for smaller companies 
attempting to compete in these markets who cannot afford 
insurance coverage for potentially unlimited liability. This 
results in less competition and less access for consumers. 
Further, because rented or leased motor vehicles are frequently 
driven across State lines, these small number of vicarious 
liability laws impose a disproportionate and undue burden on 
interstate commerce by increasing rental rates for all 
customers across the Nation. Due to high liability costs and 
unwarranted litigation costs, consumers face higher vehicle 
rental costs in all States because of the increased insurance 
expenses required to provide coverage in the interstate 
insurance and rental markets. Enactment of the Rental Fairness 
Act of 2000 will lessen burdens on interstate commerce and 
decrease litigiousness.
    This theory of vicarious liability for motor vehicle 
rentals has its foundation in the last century before the 
advent of the automobile, when a town's livery stable was 
deemed to know the disposition of a horse it was lending. The 
livery shop's owner was held liable for the disposition of the 
horse which was presumed to cause any accidents. However, the 
vast majority of States have agreed that motor vehicles do not 
generally have dispositions which are likely to cause 
accidents. If a car is defective in any way, the rental company 
can be held liable for negligence. However, if the car 
functioned properly, but the accident was caused by the renter 
or someone taking the car from the renter through no fault 
whatsoever of the rental company, then almost all States have 
agreed that vicarious liability should either not be applied, 
or should be capped at the coverage level of the State's 
minimum financial responsibility insurance laws.
    To provide appropriate levels of protection for people 
injured by motor vehicles, every State has established minimum 
financial responsibility laws. These laws establish a minimum 
level of insurance coverage that must be maintained on every 
vehicle. In most states the financial responsibility laws 
operate to cover the liability of any driver who operates a 
car. Some states have broader no-fault insurance laws which do 
not require liability on the part of the driver to trigger 
coverage. Only five States and the District of Columbia have 
not yet replaced their unlimited vicarious liability laws. 
(See, Conn. Gen. Stat. Ann. 14-154a; D.C. Code Ann. 40-408; 
Iowa Code 321.493; Me. Rev. Stat. Ann. 29-A 1652-53; N.Y. Veh. 
& Traf. 388; R.I. Gen. Laws 31-33-6, 31-33-7). A few States 
have restricted the application of their vicarious liability 
laws only to those cases when the rental or leasing company 
does not maintain the required insurance coverage under the 
State's minimum financial responsibility laws, (See, Nev. Rev. 
Stat. 482.305; Ariz. Rev. Stat. 28-324; Neb. Stat. 25-21,239 
(applying only to trucks)), or have capped the liability of 
their companies at the same level as the financial 
responsibility laws (See, Cal. Veh. Code 17150-51; Idaho Code 
49-2417; Mich. Comp. LawsAnn. 257.401). These latter two groups 
of States would not be affected by the Rental Fairness Act, as it 
similarly conditions the protection against vicarious liability on 
maintenance of the required insurance coverages and allows recovery up 
to the level of such minimum financial responsibility levels. Two 
States have recently enacted laws which begin to limit the application 
of vicarious liability, but with liability exposures set at a higher 
level than the preexisting financial responsibility requirements (See, 
Minn. Stat.170.54; Fla. Stat. 324.021).
    The mandatory financial responsibility laws represent 
decisions by the States as to the appropriate levels of 
liability for which its resident motor vehicle owners should be 
required to insure. Unfortunately, no State is able to protect 
its residents from being subjected to unlimited liability, as 
rental cars are frequently driven through multiple states, or 
renters may get into accidents with plaintiffs who reside in 
one of the remaining vicarious liability states. For example, 
the Commonwealth of Virginia has no way of protecting its 
companies against the vicarious liability laws of the District 
of Columbia if someone drives a rental car into the District or 
hits a District resident.
    Vicarious liability cases are estimated to cost more than 
$100 million annually in settlements and jury verdicts alone, 
not including expenses for additional insurance costs and 
attorneys fees (American Car Rental Association, study of 
vicarious liability costs, 1999). These costs are passed 
through to consumers in all States, through increased rental 
rates. As one of the leading historical jurists in the 
development of tort law, Justice Benjamin Cardozo, stated, 
``[t]he whole doctrine [of vicarious liability] is foolish, 
antiquated, unjust, and ought to be abolished. But I suppose we 
will leave that change to the clumsy process of legislation.''

                                Hearings

    The Subcommittee on Finance and Hazardous Materials held a 
hearing on H.R. 1954, the Rental Fairness Act of 1999 on 
October 20, 1999. The Subcommittee received testimony from: Ms. 
Sharon Faulkner, Premier Car Rental Corporation; Mr. Raymond T. 
Wagner, Jr., Enterprise Rent-A-Car Corporation; and Mr. Richard 
H. Middleton, Jr., Association of Trial Lawyers of America.

                        committee consideration

    On November 2, 1999, the Subcommittee on Finance and 
Hazardous Materials met in open markup session and approved 
H.R. 1954 for Full Committee consideration, without amendment, 
by a record vote of 12 yeas to 11 nays. The Full Commerce 
Committee met in open markup session on March 15, 2000, and 
ordered H.R. 1954 reported to the House with a favorable 
recommendation, amended, by a record vote of 26 yeas and 23 
nays.

                            committee votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
following amendments were agreed to by voice vote:
    An Amendment in the Nature of a Substitute by Mr. Bryant, 
No. 1, striking title I of the underlying bill, changing the 
definition of the term ``harm,'' expanding the findings and 
purposes contained in title II, improving the ``General 
Fairness and Responsibility Rule,'' explicitly preserving the 
ability to file actions under State law against automobile 
owners for negligence or criminal wrongdoing, and preserving 
State law regarding the priority of payment for insurers.
    An Amendment to the Amendment in the Nature of a Substitute 
by Mr. Deal, No. 1b, clarifying that an owner engaged in the 
trade or business of renting or leasing motor vehicles may not 
held liable for harm caused by a person's use, operation, or 
possession of a rented or leased motor vehicle, except to the 
extent of any required financial responsibility statute.
    The Committee took record votes on the following amendment 
and motion. The names of Members voting for and against follow:
    An Amendment to the Amendment in the Nature of a Substitute 
by Mr. Engel, No. 1a, providing an exception to the General 
Fairness and Responsibility Rule for pedestrians or other 
persons who were not the driver or passenger of the rented 
motor vehicle involved in the incident, was not agreed to by a 
record vote of 16 yeas and 22 nays (Record Vote No. 24).
    A motion by Mr. Bliley to order H.R. 1954 reported to the 
House, as amended, with a favorable recommendation was agreed 
to by a record vote of 26 yeas and 23 nays (Record Vote No. 
25).

                      committee oversight findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee held a legislative 
hearing and made findings that are reflected in this report.

           Committee on Government Reform Oversight Findings

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, no oversight findings have been 
submitted to the Committee by the Committee on Government 
Reform.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
1954, The Rental Fairness Act of 2000, would result in no new 
or increased budget authority, entitlement authority, or tax 
expenditures or revenues.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, March 23, 2000.
Hon. Thomas Bliley,
Chairman, Committee on Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1954, the Rental 
Fairness Act of 1999.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Lisa Cash 
Driskill.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 1954--Rental Fairness Act of 1999

    CBO estimates that enacting H.R. 1954 would have no impact 
on the federal budget. Because the bill would not affect direct 
spending or receipts, pay-as-you-go procedures would not apply. 
H.R. 1954 contains an intergovernmental mandate as defined in 
the Unfunded Mandates Reform Act (UMRA), but CBO estimates that 
the costs would not be significant and thus would not exceed 
the threshold established in that act ($55 million in 2000, 
adjusted annually for inflation). The bill contains no new 
private-sector mandates as defined in UMRA.
    H.R. 1954 would establish that companies that rent or lease 
cars are not subject to unlimited liability under state law for 
damages caused by the operator of a rented or leased vehicle. 
Such companies would still be responsible for damages to the 
extent of the minimum insurance or financial responsibility 
required by state law.
    The bill would preempt the liability laws of as many as 
seven states and the District of Columbia, and thus would be a 
mandate as defined in UMRA. The bill would no longer allow 
these states and the District to impose unlimited liability on 
rental and leasing car companies and would cap the damages for 
which such companies are responsible to the minimum financial 
or insurance requirements set by state law. Because the bill 
would not require state to take any specific action, however, 
it would impose no significant costs on state, local, or tribal 
governments.
    The CBO staff contact is Lisa Cash Driskill. This estimate 
was approved by Peter H. Fontaine, Deputy Assistant Director 
for Budget Analysis.

                       federal mandates statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      advisory committee statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   constitutional authority statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  applicability to legislative branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             section-by-section analysis of the legislation

Section 1. Short title and table of contents

    Section 1 designates the short title of the Act as the 
``Rental Fairness Act of 2000'' and provides a table of 
contents for the Act.

Section 2. Findings and purposes

    Section 2 sets forth the findings and purposes for the Act.

Section 3. Definitions

    Section 3 defines the terms used in the bill.

Section 4. General Fairness and Responsibility Rule

    Section 4 establishes the general rule eliminating 
vicarious liability for vehicle rental and leasing companies. 
This provision does not relieve rental or leasing companies 
from any liability for negligence, nor does it relieve them of 
any obligation to maintain and apply minimum insurance 
coverages as required under any State financial responsibility 
statute. State financial responsibility statutes require motor 
vehicle owners to maintain insurance coverage for anyone who 
drives the vehicle, providing a minimum level of available 
compensation for any accident caused by such driver (some 
States also require no-fault insurance coverage, which would 
similarly not be affected by this Act). This section eliminates 
the current practice in some States of requiring that injured 
parties go directly to court with the surrounding legal 
expenses, often with significant or unlimited liability imposed 
on an innocent vehicle renter or lessor merely because of 
ownership of the vehicle. Instead, it allows the States to 
focus on establishing the appropriate level of coverage and 
recompense through their insurance regimes, with all of the 
accompanying consumer protections provided by the States' 
insurance regulations. While routing compensation claims 
through the State insurance regimes, this section makes clear 
that any compensation or coverage available to injured parties 
in the State before this legislation will continue to apply, 
but only up to the amounts specified in any State law 
establishing minimum levels of financial responsibility for 
motor vehicle injuries and liabilities. Subsection (b) of 
section 4 provides that a State's vicarious liability laws will 
continue to fully apply without modification if a motor vehicle 
owner does not maintain the levels of insurance coverage or 
similar financial responsibility required under the applicable 
State law.

Section 5. Preservation of State law

    Section 5 clarifies that State laws other than those 
imposing vicarious liability are not affected. Specifically, 
subsection (a) clarifies that a person who owns or operates a 
motor vehicle within a State is still fully subject to the 
State's financial responsibility laws. Subsection (b) clarifies 
that this bill does not in any way effect the determination of 
which insurance coverages are primary or secondary, or any 
other determination of priority of payments, in any injury or 
accident involving a motor vehicle.

Section 6. Preservation of liability based on negligence

    Section 6 clarifies that the bill does not affect any 
claims against a motor vehicle renter or lessor where such 
renter or lessor has itself committed an act of negligence or 
criminal wrongdoing. This clarifies that the Act is not 
intended in any way to protect the renter or lessor when the 
renter or lessor has done something wrong, but only to relieve 
the renter or lessor from vicarious liability for the 
wrongdoing of other parties beyond the requirements of the 
States' financial responsibility requirements imposing minimum 
insurance coverages.

Section 7. Applicability and effective date

    Section 7 establishes that the Act applies to any legal 
action or insurance claim made on or after the date of 
enactment of the Act, regardless of when any harm occurred.

         changes in existing law made by the bill, as reported

    This legislation does not amend any existing Federal 
statute.

                             MINORITY VIEWS

    We strongly oppose H.R. 1954, the Rental Fairness Act of 
1999. At Committee markup, all Democrats present were joined by 
two Republican members of the Committee in voting ``No'' on 
reporting this legislation to the House.
    Despite its title, there is nothing fair about this 
legislation. Instead, H.R. 1954 is special interest legislation 
designed to provide unjustified liability protection for the 
highly profitable, $14.6 billion a year, car rental industry. 
If the driver of the rental vehicle cannot pay, H.R. 1954 would 
force innocent motorists and pedestrians to assume 
responsibility for their own injuries and damages, even if 
these innocent victims were guilty of nothing more than being 
in the wrong place at the wrong time.
    It is certainly not the case that the car rental industry 
is incapable of properly insuring itself for claims brought 
against it. ``Vicarious liability'' costs the car rental 
industry less than one penny of every dollar of revenue. In 
short, this legislation is without merit, without good purpose, 
and deserves to be resoundingly defeated if brought to the 
floor of the House.
    The proponents of H.R. 1954 intend that the legislation 
preempt ``vicarious liability'' laws in 11 states (Florida, New 
York, California, Iowa, Michigan, Minnesota, Nevada, Idaho, 
Maine, Connecticut, and Rhode Island) and the District of 
Columbia that are designed to protect innocent victims from the 
negligent acts of those who drive rented or leased vehicles. 
Without these state liability laws, a child innocently standing 
on a street corner may face a lifetime of unmet medical and 
other needs, if he or she is hit by an uninsured driver 
operating a rented or leased vehicle.
    This legislation is nothing more than a liability ``bath'' 
for large, highly profitable companies that have freely chosen 
to engage in the business of renting or leasing motor vehicles. 
If H.R. 1954 were to become law, motor vehicle rental or 
leasing firms could be virtually certain that, despite the 
requirements of state law, they would not have to pay claims 
when their vehicles cause injury and damages. While many of our 
Republican colleagues on the Committee may think it is fair to 
shield such companies from what is nothing more than a normal 
cost of doing business, we believe the liability exemption 
contained in H.R. 1954 would produce a callously unfair and 
wholly unconscionable result.
    Instead of a rental or leasing firm being held accountable 
for accidents caused by the vehicles it puts on the road, this 
legislation would hold liable the victims--innocent children 
and other bystanders--for injuries caused by negligent, 
uninsured drivers of rented or leased vehicles. Congressman 
Engel offered an amendment to prevent rental or leasing firms 
from escaping liability when their vehicles injure innocent 
bystanders. Congressman Engel's amendment was defeated despite 
support from almost all of the Democratic Members of the 
Committee present.
    This is the way H.R. 1954 would work. Someone comes into a 
car rental agency. That person could be a drug user of an 
alcoholic. That person could also have a prodigiously bad and 
irresponsible driving record, and in fact, may have caused 
vehicular accidents that resulted in serious injury or death. 
Even though federal law [18 USC 2721(6)(3)] allows car rental 
firms to do an on-line background check of rental car 
applicants, these background checks are not required and are 
often not done.
    So, the car rental agency goes ahead and rents the car to 
the applicant. That person then takes the rented car and, under 
the influence of alcohol or narcotics, runs head on into a 
mother driving a carload of children to school. Some of the 
victims are killed; others are seriously injured, possibly 
requiring a lifetime of treatment and care.
    Under H.R. 1954, the rental company could escape all 
liability for the injuries caused by the vehicle that it put on 
the road, even if the driver of the rental car may be totally 
fiscally irresponsible, uninsured, and have no means whatsoever 
to address the problems of the people that he has killed or 
hurt. That driver may also be in the position of being 
bankrupt.
    The 11 states and the District of Columbia that have these 
``vicarious liability'' laws have said they want to protect 
their citizens against this kind of situation. They have chosen 
to do that by holding the rental or leasing firm liable. 
Whether you agree or disagree with the method of accountability 
these states have selected, does it make any kind of sense at 
all for this Congress to arbitrarily, and without consultation, 
say that these states cannot protect their citizens against 
this kind of injury and loss?
    We say this effort to remove state protections is not only 
wrong; it is unfair, and totally indefensible. Who is going to 
pay for the loss, the medical care and treatment, that this 
driver causes? H.R. 1954 does not provide any answer at all to 
this basic question. If the driver who causes the accident 
cannot pay, H.R. 1954 basically says it is the innocent 
victim's ``tough luck''. Effectively, the proponents of this 
bill are saying they do not care if anyone pays for the care a 
kid will need who becomes paralyzed as a result of such an 
accident. They make is very clear that it's simply not their 
concern. Instead, their only concern is in making sure that the 
rental car company does not have to pay.
    And this points out another inequity caused by H.R. 1954. 
This legislation only gives liability protection to firms that 
engage in the trade or business of renting or leasing vehicles. 
If a private citizen loans his vehicle to another person who 
then injures or kills someone, that private citizen, as the 
owner of the vehicle, is held liable and will still be held 
liable if H.R. 1954 becomes law. If the proponents of this 
legislation are so interested in holding liable only the one 
who causes the accident, why do they not think a private 
citizen who loans his or her vehicle should be exempt as well?
    At Committee markup,the bill's proponents spent a great 
deal of time discussing among themselves what they believed 
H.R. 1954 would or would not do. It was asserted that the 
language of subsection (b) of section 4 of H.R. 1954 ensures 
that a firm could only be exempt from state vicarious liability 
laws, if it pays claims caused by the negligence of those to 
whom it rents or leases vehicles up to the amount of whatever 
minimum insurance coverage state law requires such firms to 
take out on its vehicles.
    Unfortunately, there is no such requirement in subsection 
(b) of section 4 of the bill. Instead, subsection (b) 
conditions the exemption from state vicarious liability laws 
only on the requirement that a rental or leasing firm insures 
its vehicles according to whatever minimum level state law 
requires. Subsection (b) establishes no ``duty'' for the rental 
or leasing firm to use this coverage to pay claims. In Michigan 
and other states that have vicarious liability laws, there is 
no strict liability standard that ensures an innocent bystander 
can obtain payment from a rental or leasing firm's insurance 
coverage, if the state's vicarious liability law is preempted, 
as H.R. 1954 provides.
    Subsection (b) could have the net effect, therefore, of 
guaranteeing that rental and leasing firms will never be held 
liable for the negligence of those that drive its vehicles as 
long as such firms insure its vehicles for the amount required 
by state law. In this case, insurance coverage should be quite 
cheap since H.R. 1954 provides the means to protect such 
insurance policies from having to pay claims.
    In an effort to address this problem, Congressman Deal, a 
supporter of the bill, offered an amendment at the markup that 
said state vicarious liability laws are preempted, ``except to 
the extent of any required financial responsibility statute.'' 
This amendment, however, can be read to permit a state 
vicarious liability law to be considered a ``required financial 
responsibility statute'' and thereby produce the nonsensical 
result that the first part of section 4(a) would preempt state 
vicarious liability laws while the last part of section (4)(a) 
would protect vicarious liability laws from preemption by the 
bill. This problem with the amendment offered by Congressman 
Deal was raised by Congressman Dingell, the Ranking Member of 
the Committee, in the following exchange he had with 
legislative counsel during the markup:

    Mr. Dingell. Okay, so it is then--a state vicarious 
liability statute is then a required financial responsibility 
statute. Is it not?
    Mr. Meade (Senior Counsel, Office of the Legislative 
Counsel). It could be interpreted that way.
    Mr. Dingell. It could be. Now, I am trying to understand 
then, here we are saying that required--rather, that state 
vicarious liability statutes do not apply. But now we find that 
state vicarious responsibility statutes meet the definition of 
required financial responsibility statutes in the gentlemen's 
amendment. So we have a kind of a circular or elliptical 
reasoning problem here in which we are saying they don't apply, 
but in which we are now saying they do apply.
    Mr. Meade. Well, this would only occur in the what--six 
states.
    Mr. Dingell. No Eleven states.
    Mr. Meade. Eleven states have vicarious liability.
    Mr. Dingell. So let us not debate where they would occur. 
Let us just try to understand the perfection, the scintillating 
perfection of this amendment, and how it addresses the problem 
that lies before the committee. I sense that we are defining 
something which is going to be excluded in Section A, but at 
the end, we are putting an amendment now which says it will be 
included, because it meets the definition of any required 
financial responsibility statute. This is a most extraordinary 
amendment to a most remarkable piece of legislation.

    This effort by Congressman Deal to clarify the preemption 
provision of the bill raises more questions and confuses the 
situation even further, but that did not stop the proponents of 
this legislation from adopting the amendment.
    It is all too clear to us that the principal effect of H.R. 
1954 is to protect big firms that rent or lease motor vehicles 
at the expense of innocent accident victims. We are appalled at 
the effort to leave innocent bystanders who suffer serious 
injury to fend for themselves, while large car rental and 
leasing firms are protected from what is nothing more than what 
11 states and the District of Columbia have decided should be a 
normal cost of doing business. We urge members to vote against 
H.R. 1954 if it is brought to the House floor.

                                   John D. Dingell.
                                   Edolphus Towns.
                                   Henry A. Waxman.
                                   Sherrod Brown.
                                   Frank Pallone, Jr.
                                   Tom Barrett.
                                   Ron Klink.
                                   Bart Stupak.
                                   Eliot L. Engel.
                                   Lois Capps.
                                   Tom Sawyer.
                                   Ted Strickland.
                                   Karen McCarthy.
                                   Anna G. Eshoo.
                                   Bobby L. Rush.
                                   Bart Gordon.
                                   Edward J. Markey.
                                   Diana DeGette.
                                   Albert R. Wynn.
                                   Bill Luther.
                                   Gene Green.

                                

```