Court Opinion

ID: 5956700
Source: CourtListenerOpinion
Date Created: 2022-01-13 06:41:08.158956+00
Date Added: 2024-06-11T08:47:52.806247
License: Public Domain

Callahan, J. P. (dissenting).
The majority opinion states that "Snappy’s position, that a car rental agency and its customers should be free to contract away this statutorily imposed liability, is contrary to public policy.” It also states that "Snappy’s attempt to shift the costs of plaintiff’s injuries onto plaintiff herself by means of an indemnity agreement is but another effort by a rental agency to limit the application of the statute” (see, Vehicle and Traffic Law § 388). We agree.
The majority concludes, however, that, by use of the indemnity agreement, Snappy may limit its exposure in damages to $10,000, the minimum amount required under the statute. In our view, that determination is inconsistent and condones another attempt to evade the legislative intent of the statute. Such a strained and narrow interpretation should not be upheld (see, Matter of Allstate Ins. Co. v Shaw, 52 NY2d 818, 821). "An agreement between two private parties, no matter how explicit, cannot change the public policy of this State” (Public Serv. Mut. Ins. Co. v Goldfarb, 53 NY2d 392, 400).
Vehicle and Traffic Law § 388 (1) imposes vicarious liability on owners of motor vehicles. In pertinent part it provides that an "owner of a vehicle * * * shall be liable and responsible for death or injuries to person or property resulting from negligence in the use or operation of such vehicle * * * by any person using or operating the same with permission, express or implied, of such owner.” "In addition to making the owner of a vehicle vicariously liable for the negligence of anyone driving it with permission, the statute requires that *125all vehicle owners procure insurance to cover the liability it creates (see, Vehicle and Traffic Law § 388 [1], [4]). This linkage of an owner’s vicarious liability to an owner’s obligation to maintain adequate insurance coverage suggests that the Legislature’s goal was to ensure that owners of vehicles that are subject to regulation in New York 'act responsibly’ with regard to those vehicles [citations omitted]” (Fried v Seippel, 80 NY2d 32, 41). The imposition of vicarious liability on an owner under Vehicle and Traffic Law § 388 "is part of the legislatively prescribed system for protecting innocent victims of automobile accidents by assuring that there will be a financially responsible party who is available to answer in damages (see, Continental Auto Lease Corp. v Campbell, 19 NY2d 350)” (Fried v Seippel, supra, at 41).
With respect to car rental companies, it has been observed that rental vehicles traverse New York’s public highways and it therefore "is inevitable that some will become involved in their fair share of accidents” (MVAIC v Continental Natl. Am. Group Co., 35 NY2d 260, 263). Thus, the Legislature "has required rental agencies to file a financial security bond as a certificate of self-insurance prior to registering their vehicles (Vehicle and Traffic Law, § 370, subds. 1, 3)” (MVAIC v Continental Natl. Am. Group Co., supra, at 263). Moreover, in light of the large numbers of vehicles car rental agencies rent daily to the general public for profit, those companies are not in the "same position as the private car owner who loans his car to a friend or relative for a limited purpose * * * [and] restrictions in rental agreements affect the use of a large number of vehicles” (MVAIC v Continental Natl. Am. Group Co., supra, at 263). Therefore, restrictions in a car rental agreement that run contrary to the legislative scheme prescribed in the Vehicle and Traffic Law can have broad implications on New York’s public policy of insuring that persons injured by the negligent operation of a motor vehicle have recourse to financially responsible defendants.
New York courts have not hesitated to declare void private contractual arrangements between car rental companies and renters in the name of public policy. It has been held that provisions in car rental agreements that restrict the use of the automobile by the renter so as to escape liability to third persons on the ground that the violation of the restriction removed the element of consent required by section 388 are void as against public policy (see, MVAIC v Continental Natl. Am. Group Co., supra; Wynn v Middleton, 184 AD2d 1019; *126Allstate Ins. Co. v Dailey, 47 AD2d 375, 376, affd 39 NY2d 759).
In this case, the rental agreement does not attempt to avoid section 388 liability by imposing restrictions on the use of the automobile; instead, through an indemnification provision, it shifts the risks of ownership from the car rental company to the renter such that the renter becomes an "owner” of the automobile. We submit that such risk shifting violates New York public policy.
The Legislature has determined that only lessees of vehicles with lease agreements extending beyond 30 days may become "owners” of the vehicle for purposes of vicarious liability under section 388 (see, Vehicle and Traffic Law § 128). Thus, where there exists a lease agreement of 30 days or less, the lessee may not be considered an "owner” for purposes of section 388 and the lessee should not be required to maintain liability coverage (see, MVAIC v Continental Natl. Am. Group Co., supra, at 265; Simon v El Serv. Corp., 85 AD2d 556). Clearly, the Legislature in defining the term "owner” intended to limit the scope of vicarious liability in section 388. It did not want lessees of short-term leases to be required to provide liability coverage when they were not active tortfeasors. Thus, a provision that requires a renter to indemnify a rental company on a short-term lease runs contrary to the intent of the Legislature.
By shifting the risks of ownership from the owner to the lessee, an indemnification provision renders meaningless the requirement that car rental companies maintain adequate insurance coverage. Clearly, the legislative scheme under the Vehicle and Traffic Law envisions that rental companies bear the risk of ownership of their vehicles. Snappy should not be able to shift the risk of economic loss resulting from such ownership onto its renters while at the same time continuing to reap all of the benefits. Car rental companies must be treated in the same manner as companies transporting passengers for hire (see, Vehicle and Traffic Law § 370 [1]; Matter of Allstate Ins. Co. v Shaw, supra, at 821-822). Thus, the indemnification provision, by shifting the risks of loss of ownership from owner to renter, runs contrary to public policy and is invalid.
Accordingly, the order appealed from should be modified to deny Snappy’s motion for a conditional order of summary judgment on its counterclaim for indemnification from plaintiff.
*127Boomer and Davis, JJ., concur with Lawton, J.; Callahan, J. P., dissents in part in a separate opinion in which Pine, J., concurs.
Order modified, on the law, and as modified, affirmed, with costs to plaintiff, in accordance with the opinion by Lawton, J.