NAII Says R.I. “Vicarious Liability” Bill Could Increase Auto Premiums

June 17, 2003

The National Association of Independent Insurers has issued a bulletin indicating that a bill, scheduled to be considered by the Rhode Island’s House Judiciary Committee, would expand liability for car renters and could lead to higher costs for all drivers.

The bill, S.B. 668, is backed by the car leasing and rental industries. NAII assistant senior counsel Gerald L. Zimmerman stated that it “would increase an auto renter’s liability to the full amount of their insurance policy, which could be as much as $500,000 in some instances. While this may be feasible for long-term rental situations, it’s a definite disadvantage for short-term rentals, and would ultimately lead to higher costs for all Rhode Island drivers.”

Current state law limits such liability to $25,000, and provides that the rental company’s insurance policy is primary and the renter’s insurance is secondary. “This doesn’t make sense in leasing situations where the renter is more like an owner and the lease is simply a financing tool,” Zimmerman continued. “But in rental situations, this bill gets the rental company owner off the hook for liability and is very unfriendly for consumers.”

The NAII noted that it has had discussions with representatives of the car rental companies and explained why expansion of liability is a problem. Zimmerman explained that “Because current policies are not priced for this change, it will lead to higher costs for everyone. Increases should be borne by people renting cars, not spread out to everyone who buys insurance.”

Topics Trends Auto Pricing Trends

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