N.Y. Auto Industry Restarts Stalled Drive to Reform Vicarious Leasing Liability Law

March 14, 2005

Auto leasing interests in New York are renewing their battle against the state’s vicarious liability law that they say has demolished the car leasing industry in the state.

The United Auto Workers (UAW), the New York State Automobile Dealers Association (NYSADA), the Greater New York Automobile Dealers Association (GNYADA), and the Alliance of Automobile Manufacturers (Alliance) are re-launching a grassroots campaign to reform New York’s vicarious liability law. The New York State Bar Association, the American Automobile Association and banks and finance companies are also supporting reform.

“A recent poll showed that New Yorkers overwhelmingly want this law changed,” said Charles Territo, director of communications for the Alliance.

The same groups attempted to convince lawmakers to amend the law last year with a similar campaign.

New York is the only state in the nation with an unlimited vicarious liability law, Connecticut and Rhode Island repealed similar laws in 2003.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.

The so-called 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 the industry.

Last year, the business groups reported that virtually every segment of the industry has seen a decrease in the number of vehicles leased. In 2003 new car and light truck leasing in New York decreased by 36 percent while the rest of the country experienced a decline of 18 percent. Minivans experienced a 52 percent drop, SUV leases declined 44 percent, and entry- level vehicles saw a 53 percent reduction in leases. The most dramatic change appeared in the mid-size pickup category with a reduction of 89 percent in leases.

The groups 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 the industry groups. 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 groups are supporting legislation that would eliminate leaser liability in the case of a negligent driver, for whom the leasing company is not responsible. The same legislation would ensure the lessor does remain liable for defective parts.

The state Senate has passed the changes but thus far the Assembly has refused to go along.

Trial lawyers see the issue differently. The New York State Trial Lawyers Association claims that vicarious liability ensures that victims of accidents involving leased cars and uninsured or underinsured drivers are fairly compensated for their injuries.

It is also important because it encourages leasing firms to screen bad drivers, trial attorneys maintain.

NYSTLA refutes the industry claim that vicarious liability is a major issue. They claim that although there are more than 700,000 leased vehicles in New York, there were only 216 vicarious liability lawsuits pending in January 2003.

NYSTLA has proposed a plan to create a tax-exempt fund paid for by a $500 one-time fee per lease. NYSTLA estimates that based on the industry-supplied figure of 225,000 vehicles leased in New York in 2002, the $500 would generate approximately $112 million, enough to buy a master aggregate vicarious liability policy of more than $1 billion to cover all vicarious liability claims.

The leasing industry isn’t buying, however.

“It’s a fundamental matter of fairness. People who drive leased cars – and not the bank or finance company – should be held accountable for their actions,” Territo said. “Just as people who drive purchased cars – and not the bank or finance company – are held responsible for their actions.

“New Yorkers should have access to the same vehicle financing options as consumers in 49 other states. We hope that the Assembly recognizes the weight of the arguments and the will of the people and makes 2005 the year that access to affordable automobile leasing returns to New York. We will be working with consumers, dealers and workers to make sure the Assembly hears those arguments,” Territo concluded.

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