[Senate Hearing 106-1023]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 106-1023

               S. 1130, MOTOR VEHICLE RENTAL FAIRNESS ACT

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

                                HEARING

                               before the

     SUBCOMMITTEE ON CONSUMER AFFAIRS, FOREIGN COMMERCE AND TOURISM

                                 of the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 30, 1999

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation


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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
SLADE GORTON, Washington             JOHN D. ROCKEFELLER IV, West 
TRENT LOTT, Mississippi                  Virginia
KAY BAILEY HUTCHISON, Texas          JOHN F. KERRY, Massachusetts
OLYMPIA J. SNOWE, Maine              JOHN B. BREAUX, Louisiana
JOHN ASHCROFT, Missouri              RICHARD H. BRYAN, Nevada
BILL FRIST, Tennessee                BYRON L. DORGAN, North Dakota
SPENCER ABRAHAM, Michigan            RON WYDEN, Oregon
SAM BROWNBACK, Kansas                MAX CLELAND, Georgia
                       Mark Buse, Staff Director
                  Martha P. Allbright, General Counsel
     Ivan A. Schlager, Democratic Chief Counsel and Staff Director
               Kevin D. Kayes, Democratic General Counsel
                                 ------                                

     Subcommittee on Consumer Affairs, Foreign Commerce and Tourism

                   John Ashcroft, Missouri, Chairman 
SLADE GORTON, Washington             RICHARD H. BRYAN, Nevada
SPENCER ABRAHAM, Michigan            JOHN B. BREAUX, Louisiana
CONRAD BURNS, Montana
SAM BROWNBACK, Kansas


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held September 30, 1999..................................     1
Statement of Senator Ashcroft....................................     1
Statement of Senator Gorton......................................    20

                               Witnesses

Elder, Ken, chief executive officer, Welcome Corporation.........    12
    Prepared statement...........................................    13
Faulker, Sharon, area manager, Premier Car Rental Corporation....     8
    Prepared statement...........................................    10
Stewart, Larry S., Association of Trial Lawyers of America.......    15
    Prepared statement...........................................    17
Wagner Jr., Raymond T., vice president, Legal and Legislative 
  Affairs, Enterprise Rent-A-Car Corporation.....................     3
    Prepared statement...........................................     4

                                Appendix

Statement of Hon. Ernest F. Hollings, U.S. Senator from South 
  Carolina.......................................................    23
Statement of Hon. Trent Lott, U.S. Senator from Mississippi......    23

 
               S. 1130, MOTOR VEHICLE RENTAL FAIRNESS ACT

                              ----------                              


                      THURSDAY, SEPTEMBER 30, 1999

                                       U.S. Senate,
    Subcommittee on Consumer Affairs, Foreign Commerce and 
                                                    Tourism
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:35 a.m. in 
room SR-253, Russell Senate Office Building, Hon. John 
Ashcroft, chairman of the subcommittee, presiding.
    Staff members assigned to this hearing: Robert Taylor, 
Republican counsel; and Moses Boyd, Democratic senior counsel.

           OPENING STATEMENT OF HON. JOHN ASHCROFT, 
                   U.S. SENATOR FROM MISSOURI

    Senator Ashcroft. Good morning. Let me thank all of you for 
being here and let me call this meeting of the Consumer Affairs 
Subcommittee of the Commerce Committee to order.
    I am aware of the fact that we normally wait 10 minutes for 
full professors while we are in college and sometimes even 
longer if we are in law school, if our grade is in question, 
but we I think ought to proceed this morning. There are other 
Senators who have just recently voted on an item. The vote 
started at 10, and they have had sometime to both vote and make 
their way here.
    I would just like to get this moving, because the day is a 
day full of serious challenges. The purpose of this morning's 
hearing is to review S. 1130, the Motor Vehicle Rental Fairness 
Act, a bill introduced by Chairman John McCain, several of my 
colleagues, and by me.
    I want to begin by thanking all of our witnesses for their 
participation in today's hearing. The committee understands 
that each witness is very busy, and we appreciate your time and 
your assistance.
    S. 1130 seeks to put a halt to an absurd aberration in our 
legal system. Under the liability laws of a small number of 
States, companies that rent or lease motor vehicles are held 
strictly liable if their renters or leasers are negligent or 
cause an accident. The company does not have to be negligent in 
any way. The vehicle may operate perfectly, be maintained 
properly, and still be the occasion of the liability of the 
company. These States simply hold the company liable because of 
their ownership of the vehicle. This has been true even if the 
car has been used by an unauthorized driver.
    While most of these cases are settled, since there are no 
defenses to vicarious liability the outcomes are perverse. Car 
rental companies are being held responsible for renters who go 
out and get drunk or use drugs and then cause an accident, for 
renters who let unauthorized or underage drivers use the car, 
for renters who fall asleep at the wheel or who are otherwise 
severely negligent. In many cases, it is a family member of the 
renter who is injured in an accident and then they turn around 
and sue the rental car company.
    The American judicial system should be based on, in my 
judgment, general principles that a defendant should be liable 
for the harm he or she could prevent, not merely because the 
defendant has a deep pocket.
    Vicarious liability laws undermine car rental and leasing 
competition in these States. They also adversely impact 
interstate commerce because companies located in nonvicarious 
States own cars that are driven into vicarious States, 
subjecting them to unlimited liability. Finally, vicarious 
liability statutes have driven some smaller rental and leasing 
companies out of business.
    Again, I want to thank our witnesses, and I look forward to 
their testimony.
    Now, at the request of the Ranking Member of the full 
committee, Senator Hollings, Mr. Stewart, who is here to oppose 
this bill, will be asked to testify last, because the Ranking 
Member asked that he come. I do not want anyone to think that I 
am trying to adversely--but having the last word is something 
that I know my wife always appreciates having, so maybe, Mr. 
Stewart, you would understand that that is the reason the 
sequencing will be as it is.
    Mr. Stewart. I appreciate that also, Senator.
    Senator Ashcroft. It is my pleasure, first of all, to 
introduce to this committee Mr. Raymond Wagner, who is a 
corporate official--the vice president of legal and legislative 
affairs at Enterprise Rent-A-Car. Enterprise is a family-owned 
corporation headquartered in St. Louis, Missouri, and I am 
delighted to welcome Mr. Wagner to this committee.
    I might just take a moment to indicate that Mr. Wagner and 
I have had a long opportunity to serve together in Government. 
He served as legal counsel in the Governor's Office of the 
State of Missouri, and as the Director of the Department of 
Revenue in the State of Missouri while I was Governor. Upon my 
retirement as Governor, he went to be the Director of Revenue 
in the State of Illinois, so I was pleased that our neighbors 
saw the quality of his work and invited him there, but I wanted 
our relationship to be clear and open to everyone, and we 
appreciate the fact that you have come to the committee.
    Mr. Wagner. Thank you, Senator.
    Senator Ashcroft. I have asked that we set a timer so that 
you all will have the benefit of a mechanical device, which 
will not interrupt you but alert you to the fact that the time 
allotted for your testimony has expired, if not the patience of 
the committee, so please proceed.

 STATEMENT OF RAYMOND T. WAGNER, JR., VICE PRESIDENT OF LEGAL 
   AND LEGISLATIVE AFFAIRS, ENTERPRISE RENT-A-CAR CORPORATION

    Mr. Wagner. Thank you, Mr. Chairman.
    Good morning, Mr. Chairman, members of the committee. My 
name is Ray Wagner, and I am a vice president at Enterprise 
Rent-A-Car Company. Enterprise, as you have indicated, is a 
family-owned corporation headquartered in St. Louis, Missouri. 
I appear before you today on behalf of Enterprise to express 
our support for Senator McCain's ``Motor Vehicle Rental 
Fairness Act of 1999.''
    Thank you, Mr. Chairman, for inviting me to present 
testimony this morning and for your continued strong support 
for vicarious liability reform here in Congress. I view the 
current vicarious liability laws from perhaps a unique 
perspective. Not only am I a vice president at Enterprise, but 
I am also a circuit court judge in the municipal division in 
St. Louis County, and I am also an adjunct professor of law at 
Washington University School of Law.
    I am here today to say that the current vicarious liability 
laws are unfair, and badly in need of reform. The title of this 
legislation accurately describes its impact. S. 1130 will 
return the notion of fairness to litigation involving car 
rental companies in these handful of States which still cling 
to this unfair doctrine. It is simply not fair to subject car 
rental companies to unlimited liability for the acts of their 
renters, and yet that is exactly what the vicarious liability 
laws in Connecticut, Iowa, Maine, New York, Rhode Island, and 
the District of Columbia impose.
    It is not fair to impose multimillion-dollar judgments on 
any entity, whether an individual or a corporation, when they 
have done nothing wrong. It is not fair to force our customers 
across the Nation to pay higher rental rates for the misguided 
and outdated vicarious liability laws, which incidentally date 
back to the days of horse and buggies, when horse and buggy 
rental operators were presumed to know the personality of their 
horses.
    The laws of these States force car rental companies to 
charge nonresident renters high rates to cover their losses. In 
essence, nonresident accident-free renters are forced to 
subsidize accident-prone renters in vicarious liability States. 
We would submit this is poor public policy.
    It is not fair to deprive consumers of the competition and 
lower rental rates that smaller operators can offer, but that 
is exactly what is happening, because literally hundreds of 
companies have been forced out of business. It is not fair that 
the only sure way an operator, even one operating outside of a 
vicarious liability State, can protect itself against such 
claims is to simply go out of business.
    S. 1130 will return uniformity and fairness to the car 
rental industry and to our customers. Quite simply, it will 
preempt the laws in a small minority of States which presently 
hold the car rental companies vicariously liable for the 
negligence of their customers.
    Opponents of this legislation will raise three central 
arguments against it. First, they will argue that Congress 
should not preempt State laws as a matter of States's rights 
and federalism. I would agree with this argument if the impact 
of these State laws were confined to their borders and their 
citizens, but this is not the case. Our customers across the 
Nation pay for vicarious liability losses through higher rates. 
A company operating in Virginia cannot stop its customers and 
vehicles from traveling to New York or the District of 
Columbia, and as the selection of cases attached to my 
testimony outlines, creative plaintiff lawyers seek to apply 
these vicarious liability laws no matter where the accident 
occurs.
    Second, opponents will argue that the bill will somehow 
lower the standard of care companies will use in the future 
renting vehicles. They will allege we will feel free to rent to 
drunk customers, or to not maintain our vehicles because we 
have no fear of liability. These arguments are simply not true, 
and I believe that they know this.
    S. 1130 expressly states that the bill will not impact 
claims alleging a company's negligence whether by negligently 
entrusting their car to a renter, or by failing to maintain the 
car. If Enterprise, for example, has been negligent in any way, 
S. 1130 does not shield the company from potential liability, 
nor should it.
    Third, opponents of S. 1130 will argue that the innocent 
injured persons will go uncompensated if these laws are not 
preserved. It is, indeed, true that persons are injured every 
day in vehicle accidents, and that financial resources either 
through insurance or personal wealth are in many cases 
insufficient to compensate, but it is also true that our 
Nation's liability system is based on fault. Compounding a 
wrong, the original accident, by adding another injustice, 
holding the car rental company liable, does not make the 
original wrong right.
    My company has been subject to numerous vicarious liability 
judgments and settlements over the past 10 years. These 
judgments have cost Enterprise tens of millions of dollars, 
costs that we simply must pass along to our customers. 
Collectively, vicarious liability results in well over $100 
million, exclusive of insurance costs and legal fees, for the 
industry.
    In sum, Mr. Chairman, S. 1130 will right an ongoing wrong. 
These laws, these current laws impact interstate commerce 
through higher rental rates for all consumers. These laws 
lessen competition, acting as a barrier to entry into business 
in vicarious liability States, and these liability laws 
undermine the fundamental principle of our Nation's liability 
system that a person should pay damages for harm caused only 
when he or she is at fault or could have prevented the harm in 
some way.
    Thank you for inviting me to present this testimony today. 
I urge this committee to pass this bill so that it can be 
enacted into law by the end of this year. I would be pleased to 
answer any questions you may have, Senator.
    [The prepared statement of Mr. Wagner follows:]
    Prepared Statement of Raymond T. Wagner, Jr., Vice President of 
    legal and Legislative Affairs, Enterprise Rent-A-Car Corporation
    Good morning, Mr. Chairman and Members of the Committee. My name is 
Ray Wagner and I am a Vice President at Enterprise Rent-A-Car Company. 
Enterprise is a family-owned corporation headquartered in St. Louis, 
Missouri. I appear before you on behalf of Enterprise to express our 
support for Senator McCain's ``Motor Vehicle Rental Fairness Act of 
1999'' (S. 1130). Thank you, Mr. Chairman, for inviting me to present 
testimony this morning and for your continued strong support for 
vicarious liability reform legislation.
    I view the current vicarious liability laws from perhaps a unique 
perspective. Not only am I a vice president at Enterprise, I am also a 
municipal circuit court judge in St. Louis County and an adjunct 
professor at the Washington University School of Law in St. Louis. And 
I am here to say that the current vicarious liability laws are unfair 
and badly in need of reform.
    The title of the legislation under consideration today accurately 
describes the impact this bill will have when it is enacted. S. 1130 
will return the notion of fairness to litigation involving car rental 
companies in a handful of states that still cling to the unfair 
doctrine of vicarious liability for companies that rent or lease motor 
vehicles.
    It is not fair to subject car rental companies to unlimited 
liability for the acts of their renters. And yet that is exactly what 
the vicarious liability laws in the states of Connecticut, Iowa, Maine, 
New York, Rhode Island, and the District of Columbia impose on 
Enterprise and other companies.
    It is not fair to impose multi-million dollar judgments on any 
entity, whether an individual or a corporation, when they have done 
nothing wrong. Again, that is exactly what the vicarious liability laws 
of these states do.
    It is not fair to force car rental customers across the nation to 
pay through higher car rental rates for the misguided and outdated 
vicarious liability laws that exist in only a handful of states. But 
that is exactly what happens every day, as the laws of these states 
force car rental companies to charge renters outside of these states 
higher rates to cover their losses in these vicarious liability states.
    It is not fair to deprive consumers the competition and lower 
rental rates that smaller car rental companies can offer. But that is 
what has happened because vicarious liability laws have forced many 
companies out of business.
    And it is not fair that the only sure way a car rental company, 
even one operating outside of vicarious liability states, can protect 
itself against vicarious liability claims is to go out of business. But 
that is the only way that a car rental company can make sure it avoids 
such claims.
    S. 1130 will return uniformity and fairness to the car rental 
industry and to the customers who rent our cars. Quite simply, it will 
pre-empt the laws in a small minority of states that hold companies 
that rent or lease motor vehicles liable for the negligence of their 
customers only because the company owns the vehicle involved in the 
accident.
    Opponents of this legislation will raise three central arguments as 
to why S. 1130 should not become law. I would like to respond to each 
argument in turn.
    First, opponents will argue that Congress should not pre-empt state 
laws as a matter of states' rights and federalism. I would agree with 
this argument if the impact of these states' vicarious liability laws 
was confined to their borders and their citizens. But, this is not the 
case. Car rental customers across the nation pay for the vicarious 
liability losses incurred by car rental companies through higher rates. 
A car rental. company operating in Virginia cannot stop its vehicles 
from traveling to New York or the District of Columbia. And, as the 
selection of cases attached to my testimony outlines, creative 
plaintiffs' lawyers will seek to apply one of these states' vicarious 
liability laws no matter where an accident occurs.
    Second, opponents of S. 1130 will argue that the bill will somehow 
lower the standard of care car rental companies will use in the future 
in renting their vehicles. They allege that we will feel free to rent 
to drunk customers or to not maintain our vehicles in peak condition 
because we will have no fear of liability. These arguments are pure 
bunk and they know it. S. 1130 expressly states that the bill will not 
impact claims alleging a company's negligence, either by negligently 
entrusting the car to a person or by failing to maintain the car. If 
Enterprise, for example, has been negligent in any way, S. 1130 does 
not shield the company from potential liability for an accident. Nor 
should it.
    Third, opponents of S. 1130 will argue that innocent, injured 
persons will go uncompensated if these states' vicarious liability laws 
are not preserved. It is indeed true that persons are injured every day 
in motor vehicle accidents and that financial resources, either through 
insurance or personal wealth, are in many cases insufficient to 
compensate  these persons. But it also is true that our nation's 
liability system is based on fault. If a person is not at fault for an 
accident, then he or she should not be held liable. Compounding a 
wrong--the original accident--by adding another injustice--holding the 
car rental company liable--does not make the original wrong right.
    My company has been subject to numerous vicarious liability 
judgments and settlements over the past ten years. These vicarious 
liability judgments have cost Enterprise tens of millions of dollars--
costs that we must pass through to our customers. Together, vicarious 
liability results in losses by car rental companies of over $100 
million every year, exclusive of insurance costs and legal fees.
    In sum, Mr. Chairman, S. 1130 will right an ongoing wrong--holding 
a car rental company liable for the negligent actions of their renters. 
Vicarious liability impacts on interstate commerce through higher 
rental rates for all consumers, not just those in vicarious 
jurisdictions. Vicarious liability lessens competition in vicarious 
states by acting as a barrier to entry into business in the vicarious 
states. And vicarious liability undermines the  fundamental principle 
of our nation's liability system--that a person should pay damages for 
harm caused only when he or she is at fault or could have prevented the 
harm in some way. Federal vicarious liability reform is appropriate and 
long overdue.
    Thank you for inviting me to present this testimony today. I urge 
this Committee to pass this bill so that it can be enacted into law by 
the end of this year. I would be pleased to answer any questions my 
testimony may have raised.
                SELECTED EXAMPLES OF VICARIOUS LIABILITY
                   cases against car rental companies
    Settlements and judgments from vicarious liability claims against 
car rental companies cost the industry over $100 million annually. 
Listed below are selected examples of cases involving vicarious 
liability and car rental companies.

Fu v. Fu, 733 A.2d 1133 (1999)

    In 1993, two friends rented a car in New Jersey from Freedom River, 
Inc., a Philadelphia licensee of Budget Rent-A-Car Corporation. The 
rental agreement identified only the two renters as authorized drivers 
of the car. The car, while being driven by Defendant Hong Fu (the wife 
of one of the renters and an unauthorized driver under the rental 
contract), was involved in a single car accident in New York. Plaintiff 
Li Fu, the sister of the Defendant and the wife of the other renter, 
was seriously injured in the accident. An arbitrator applied New York 
law and found the defendant and Freedom River liable for $3.75 million. 
This judgment was affirmed by the New Jersey Supreme Court.

Brown v. National Car Rental System. Inc., 707 So.2d 394 (1998]

    Renter, a Georgia resident, leased a car from the Georgia office of 
National. The car was registered in Florida. Renter, in violation of 
the rental agreement, loaned the car to a friend, also a Georgia 
resident, who drove the car to Florida. While the unauthorized driver 
was driving in Florida, he hit a car driven by the plaintiff, a 
Florida. resident. The lawsuit was brought in Georgia, and yet Florida 
law was applied. On appeal, the court held that National was 
vicariously liable for plaintiffs injuries under Florida law. National 
settled the case for $70,000.

Brown v. Welcome Corporation t/a Thrifty Car Rental, Docket No. 10779/
96, Supreme Court of New York for the County of Westchester (1997)

    Welcome Corporation, a Thrifty licensee, rented a car to Scott 
Freeman in Norfolk, Virginia. Freeman was the only authorized driver 
under the rental contract. Freeman gave the car to an employee, Harrell 
Davis, to use for business. Frank Dibello, another employee of Freeman, 
took the car without the permission of either Freeman or Davis and 
drove it to New York, where he was involved in an accident with 
Plaintiff. Despite the tortured connection of this accident to Welcome, 
the company was found vicariously liable for the accident under New 
York law and settled the case for $75,000 plus over $100,000 in defense 
costs.

Larocca v. Budget Rent-A-Car Corporation, Docket No. 08632/95, Supreme 
Court of New York for the County of Suffolk (1995)

    Budget rented a vehicle to Rosalba Larocca in New York. Larocca 
gave permission to her son, an unauthorized driver under the rental 
contract with a suspended New York driver's license, to drive the 
vehicle. The son lost control of the vehicle on the New Jersey turnpike 
in a one-car accident. Larocco was a passenger in the vehicle at the 
time of the accident and suffered injuries. Mother sued son for his 
negligence, and jury found Budget vicariously liable for the son's 
negligence under New York law. A jury returned a verdict of $450,000 
against Budget.

McNamara v. Thrifty Canada. Ltd, Civil Action No. 98-CV-507, U.S. 
District Court, N.D.N.Y. (1999).

    Thrifty rented the car to renter in Toronto. Renter was involved in 
an accident in New York in which the plaintiff, the driver of another 
car, was injured. The police report on the accident indicated that the 
renter was driving too fast for the prevailing conditions and following 
too close. After a three day jury trial, Thrifty was held vicariously 
liable under New York law and ordered to pay $1.1 million in damages to 
plaintiff.

Zafra v. National Car Rental. Inc., Docket No. 126728/95, Supreme Court 
of New York for the County of Westchester (1995).

    In 1995, a 19-year-old, who was an unauthorized driver under the 
rental contract for a car rented in New York by her mother, was driving 
in Vermont. She turned around to tell her friends in the back seat to 
be quiet and the car veered off the road and rolled over. One of the 
passengers was injured and sued the driver and National. Despite the 
fact that the accident occurred in Vermont, New York law was applied. 
National settled the claim for $985,000. Of particular interest, 
National was insured for $1 million, but the insurance company denied 
the claim because the driver was underage, in violation of the 
insurance coverage. However, New York prohibits car rental companies 
from refusing to rent to anyone 18 years of age or older.

Clay et al. v. Alamo Rent-A-Car. Inc., 586 So.2d 394 (1991).

    Four British sailors rented a car from Alamo in Fort Lauderdale to 
drive to Naples. While driving to Naples, the driver of the car fell 
asleep at the wheel. The car left the road and ended up in a canal. The 
driver and two passengers were killed; the fourth passenger was 
seriously injured. Alamo was found vicariously liable for the deaths 
and injuries due solely to the fact that it owned the vehicle. No 
negligence for the accident was attributed to Alamo. Alamo was ordered 
by a jury to pay the plaintiffs $7.7 million. The jury award was 
affirmed on appeal.

Nichols v. Value Rent-A-Car. Inc.. Case No. 92-20889(21), Circuit Court 
of the 17th Judicial Circuit in and for Broward County (1992).

    In a single vehicle accident, the driver of a passenger van rented 
from Value lost control of the van after braking on a freeway to avoid 
a slower moving vehicle. The van rolled over and plaintiff Nichols, who 
was not wearing a seat belt, was thrown from the van. She sustained 
injuries to her hands and her head. At trial, Value was not found 
negligent for her injuries in any way, and yet the jury ordered Value 
to pay the plaintiff $2.2 million for her injuries.

Rodrigues v. Dollar Rent A Car Systems. Inc., Case No. 94-10085 CA6, 
Circuit Court for the 11th Judicial Circuit in and for Dade County 
(1994).

    Plaintiff was speeding in a Dollar rental car when another vehicle 
ran a stop sign, striking the rental car and causing it to overturn. 
The injured parties in the rental vehicle received $800,000 payments 
from the insurance company that covered the other vehicle. Plaintiffs 
sued Dollar based on the negligence of the driver of the rental car 
(she admitted to speeding at the time of the accident). The jury 
awarded total damages of $420,000 against Dollar based upon the 
negligence of the driver and Dollar's ownership of the vehicle.

Watson v. Budget Rent A Car Corporation, Case No. 91/055232, Orange 
County Circuit Court (1991).

    Budget rented a van to a family in Florida. At the time of the 
accident, the mother of the family was driving the van. The mother lost 
control of the van in a single-vehicle accident. Her infant son (the 
plaintiff), who was not restrained in the van, was thrown from the van 
and suffered severe injuries. Based upon the infant's mother's 
negligence and Florida's vicarious liability doctrine, Budget settled 
the case for $490,000.

Stein v. Thrifty Rent-A-Car. Inc.. Case No. 298-6936-TS, Supreme Court 
of New York for the County of Suffolk (1986).

    The renter of a Thrifty car ran a stop sign and collided with 
Stein's car. Stein was thrown from the vehicle and killed. Stein's 
estate sued Thrifty based upon New York's vicarious liability statute. 
At the original trial, the jury found that Stein's death was caused by 
her failure to wear a seat belt and awarded no damages. In 1992 a New 
York appellate court reversed the original jury verdict and ordered a 
new trial on the issue of damages alone. The second trial resulted in a 
$1.25 million jury verdict against Thrifty.

    Senator Ashcroft. I thank you for your testimony. I think 
you get the award for coming closest to a compact 5-minute 
statement that I have seen. You do not even have to pay a 
charge for redelivering the car past the deadline.
    [Laughter.]
    Mr. Wagner: Thank you. I am grateful for that.
    Senator Ashcroft. It is my pleasure now to call upon Ms. 
Sharon Faulkner, who is the area manager for Premier Car Rental 
Corporation, located in Albany, New York. Premier is a 
subsidiary of Budget Rent-A-Car Corporation. Ms. Faulkner.

STATEMENT OF SHARON FAULKNER, AREA MANAGER, PREMIER CAR RENTAL 
                          CORPORATION

    Ms. Faulkner. Good morning, Mr. Chairman and members of the 
committee. My name, as you said, is Sharon Faulkner, and I am 
the area manager for Premier Car Rental in Albany, New York. 
Thank you for inviting me to appear at this hearing today. My 
testimony is in support of S. 1130, the ``Motor Vehicle Rental 
Fairness Act of 1999.'' I thank Senator McCain for introducing 
this important legislation. In addition, I thank you, Mr. 
Chairman, for your longstanding commitment to reforming State 
vicarious liability laws.
    Let me tell you about my own personal experience, which I 
hope will help the members of this committee understand the 
importance of this bill. For 17 years, until 1997, I was a 
small business owner operating an independent car rental 
company in upstate New York. The company, called Capitaland Car 
Rental, was headquartered in Albany, and during those years, 
thanks to the hard work of my employees and the loyalty of our 
local customers, my company survived two recessions and fierce 
competition.
    Well, that situation changed one day in 1997, when I was 
notified that I and my company were being sued for an accident 
involving one of our rental cars that had occurred over a year 
previously. Capitaland had rented a car in 1996 to a female 
customer who possessed a valid New York driver's license. As 
part of Capitaland's standard rental agreement, the customer 
agreed that she would be the only driver of the car.
    Our customer then loaned the car to her son, an 
unauthorized driver under the rental agreement. The renter's 
son, without my knowledge, drove the car to New York City and 
was involved in an accident in which a pedestrian was struck in 
the crosswalk. The injured person sued our company for the 
son's negligence in causing the accident.
    This lawsuit caught me completely by surprise, because when 
I checked our records I found that the rental vehicle had been 
returned to us without any damage, no accident report. As a 
result I had no idea that an accident had ever occurred, or 
that a person had ever been injured. Nevertheless, my company 
was named as a co-defendant in the lawsuit, which demanded 
enormous amounts of money to pay for medical bills and 
compensate the injured person.
    You might wonder how it is that my company was sued for 
this accident. We rented to a licensed driver, the renter then 
loaned the car to an unauthorized driver, and it was the 
unauthorized driver, a person who neither I nor any of my 
employees had ever met, that caused the accident that injured 
this pedestrian. We were not negligent in any way, and we could 
not have prevented the accident from occurring. Therefore, how 
could we be considered liable?
    However, New York is one of the very small minority of 
States that hold the companies that rent motor vehicles liable 
for the negligence of persons driving their vehicles, whether 
that person is a customer or not.
    In these States, a car rental company can be assessed 
unlimited damages by a court under the legal doctrine of 
vicarious liability if one of its cars is involved in an 
accident in which the driver of the car was negligent. Simply 
because we owned the car, New York law held my company liable 
for the negligence of the renter.
    For me, this lawsuit was the final straw. I am a mother 
with three children, and Capitaland was our sole means of 
support. I found it incredible that I could lose everything I 
had worked to achieve for 17 years because of an accident that 
was not my fault.
    In effect, every time I rented a car to a customer, I 
realized I was putting my family's future on the line in the 
hope that the customer did not drive the car negligently and 
therefore cause an accident, so I made a decision to sell my 
company, the assets of which were purchased by a company that 
is now Budget Group Incorporated. All of my employees were laid 
off, many of them with me for years and years.
    Another independent car rental company disappeared in my 
State, and my company is not alone. Capitaland was only one of 
over 300 car rental companies that have closed in New York 
since 1990.
    Unlimited vicarious liability for car rental companies 
exists in five States, Connecticut, Iowa, Maine, New York, 
Rhode Island, and the District of Columbia. Vicarious liability 
for companies that rent or lease motor vehicles is unfair and 
contrary to our Nation's fundamental pillars of justice that a 
person should be held liable only for harm that he or she 
causes or could have prevented.
    In the car rental industry, vicarious liability increases 
rates for all of the customers, not just the customers in the 
small minority of States that adhere to this outmoded doctrine. 
I could give you many examples of this unfair and unjust legal 
doctrine. Together, these cases result in well over $100 
million in judgments and settlements against car rental 
companies every year, costs that must be recovered by the 
companies through the rates they charge every rental customer.
    In effect, these judgments from a small minority of States 
results in a tax on the car rental customers everywhere, not 
just on the citizens of the vicarious liability States. S. 1130 
will put a stop to this legal lottery. This bill will preempt 
State vicarious liability laws that hold the companies that 
rent or lease motor vehicles liable for the negligence of their 
renters or lessors. Specifically, it prohibits a State from 
imposing liability on a company solely because the company owns 
the vehicle.
    Let me take a minute to tell you what the bill will not do. 
This section will not shield the car rental company from its 
own negligence or for failing to maintain that car properly. 
This bill will not shield the car rental company from potential 
liability if it rents a car to a person who is intoxicated and 
that person causes an accident. That is negligence, and this 
bill will not prevent any action based upon the negligence of 
the car rental company.
    In addition, it will not impact on the requirement that a 
car rental company must insure the vehicles at the level 
required by State law.
    I urge this committee to pass S. 1130 as quickly as 
possible. While it is too late to help my former company, it is 
not too late to put a stop to this legal lottery in the future.
    I would be pleased to answer any questions that you may 
have.
    [The prepared statement of Ms. Faulkner follows:]
Prepared Statement of Sharon Faulker, Area Manager, Premier Car Rental 
                              Corporation
    Good morning, Mr. Chairman and members of the Committee. My name is 
Sharon Faulkner, and I am the regional manager for Premier Car Rental 
Company in Albany, New York. Premier is a subsidiary of Budget Rent A 
Car Corporation.
    Thank you for inviting me to appear at this hearing today. My 
testimony is in support of S. 1130, the ``Motor Vehicle Rental Fairness 
Act of 1999.'' I thank Senator McCain for introducing this important 
legislation, and urge this Committee to approve this bill in the near 
future.
    Let me be very clear about what this bill would and would not do. 
This bill would right a wrong by adopting a unifonn federal standard 
that would not hold motor vehicle rental companies liable for damages 
when the companies in no way caused an accident. The bill would not, 
however, eliminate the liability of the companies when they are 
negligent or failed to maintain the vehicle properly.
    Let me relay my personal experience to you, which I hope will help 
the Members of this Committee understand the importance of this bill. 
For 17 years, until 1997, I was a small business owner, operating an 
independent car rental company in upstate New York. The company, 
Capitaland Car Rental, Inc., was headquartered in Albany. During those 
years, thanks to the hard work of my employees and the loyalty of our 
local customers, my company survived two recessions and fierce 
competition from the larger, nationwide car rental companies.
    That situation changed one day in 1997, when I was notified that I 
and my company were being sued for an accident involving one of our 
rental cars that had occurred over a year previously. Capitaland had 
rented a car in 1996 to a female customer who possessed a valid New 
York driver's license. As part of Capitaland's standard rental 
agreement, the customer agreed that she would be the only driver of the 
car. Our customer then loaned the car to her son, an unauthorized 
driver under the rental agreement. Our renter's son, without her 
knowledge, drove the car to New York City and was involved in an 
accident in which a pedestrian was struck in the crosswalk. The injured 
person sued our customer's son for his negligence in causing the 
accident.
    This lawsuit caught me completely by surprise, because, when I 
checked our records, I found that the rental vehicle had been returned 
to Capitaland without any damage. As a result, I had no idea that an 
accident had occurred or that a person had been injured. Nevertheless, 
Capitaland was named as a co-defendant in the lawsuit, which demanded 
enormous amounts of money to pay medical bills and compensate the 
injured person for his pain and suffering.
    You might wonder how it is that my company was sued for this 
accident. We rented to a licensed driver. The renter then loaned the 
car to an unauthorized driver. It was the unauthorized driver--a person 
neither I or any of my employees had ever met--that caused the accident 
that injured this pedestrian. We were not negligent in any way and 
could not have prevented the accident from occurring. Thus, we should 
not have been liable.
    However, New York is one of a very small minority of states that 
hold the companies that rent motor vehicles liable for the negligence 
of persons driving their vehicles--whether that person is a customer or 
not. In these states, a car rental company can be assessed unlimited 
damages by a court under the legal doctrine of ``vicarious liability'' 
if one of its cars is involved in an accident in which the driver of 
the car was negligent. Simply because we owned the car, New York law 
held my company liable for the negligence of our renter.
    For me, this lawsuit was the final straw. I am a mother with three 
children and Capitaland was our sole means of support. I found it 
incredible that I could lose everything I had worked to achieve for 17 
years because of an accident for which I was not at fault. In effect, 
every time I rented a car to a customer, I was putting my family's 
future on the line in the hope that the customer did not drive the car 
negligently and cause an accident.
    I made the decision to sell my company, the assets of which were 
purchased by a company that is now Budget Rent A Car. All of my 
employees were laid off, and another independent car rental company 
disappeared in New York. And my company is not alone. Capitaland is one 
of over 300 car rental companies that have closed in New York since 
1990.
    Unlimited vicarious liability for car rental companies exists in 
five states (Connecticut, Iowa, Maine, New York, and Rhode Island) and 
the District of Columbia. One other state, Florida, has limited 
vicarious liability to a cap of $900,000 per accident. Forty-four other 
states have either discarded unlimited vicarious liability or never 
adopted it in the first place.
    Vicarious liability for companies that rent or lease motor vehicles 
is unfair and contrary to one of our nation's fundamental pillars of 
justice--that a person should be held liable only for harm that he or 
she causes or could have prevented. In the car rental industry, 
vicarious liability increases rates for all of our customers, not just 
for customers in the small minority of states that adhere to this 
unfair and outmoded doctrine.
    Vicarious liability undermines competition in the car rental 
industry. As I have stated, hundreds of companies have disappeared from 
New York this decade--leaving the major, nationwide systems as the only 
car rental option for consumers in the state. In addition, many 
smaller, growing car rental companies will not do business in vicarious 
liability states and seek to prohibit their customers from driving into 
those states. And vicarious liability operates as a legal lottery, 
enabling trail lawyers to target the so-called ``deep pockets'' of car 
rental companies for huge judgments.
    I and the other witnesses here today can give you numerous other 
examples of this unjust and unfair legal doctrine. Single car accidents 
where the only person at fault was the driver. A car rented in Ohio and 
driven to New York where an accident occurred and New York's law was 
applied. Customers loaning their cars to a friend who loans it to a 
sibling who runs a stop sign and has an accident. All of these 
situations have resulted in car rental companies being sued and paying 
tens of millions of dollars in judgments--despite the fact that the car 
rental company was not negligent or at fault for the accident.
    Together, these cases result in over $100 million in judgments and 
settlements against car rental companies every year--costs that must be 
recovered by the companies through the rates they charge every rental 
customer. In effect, these judgments from this small minority of states 
results in a tax on all car rental customers everywhere, not just on 
the citizens of the vicarious liability states.
    S. 1130 will put a stop to this legal lottery. This bill will pre-
empt state vicarious liability laws that hold companies that rent or 
lease motor vehicles liable for the negligence of their renters or 
lessors. Specifically, it prohibits a state from imposing liability on 
a company solely because the company owns the vehicle involved in an 
accident.
    Let me take a minute to tell you what S. 1130 will not do. It will 
not shield a car rental company from its own negligence or for failing 
to maintain the car properly. It will not shield a car rental company 
from potential liability if it rents a car to a person who is 
intoxicated and that person causes an accident. That is negligence, and 
this bill specifically states that it will not prevent any action based 
upon the negligence of the car rental company. In addition, it will not 
impact on the requirement that a car rental company insure their 
vehicles at the level required by state law.
    Instead, this bill will prevent the situation I faced in 1997--
being sued and forced to sell the company that I had worked so hard to 
make successful.
    I urge this Committee to pass S. 1130, as quickly as possible. 
While it is too late to help my former company, it is not too late to 
put a stop to this legal lottery in the future.
    I would be pleased to answer any questions that my testimony may 
have raised.

    Senator Ashcroft. Well, you have just nosed out Mr. Wagner 
for compliance. [Laughter.]
    Thank you very much.
    Ken Elder is the chief executive officer of the Welcome 
Corporation, headquartered in Alexandria, Virginia. It is a 
pleasure to have you here and to welcome you here as a member 
of the Welcome Corporation.

   STATEMENT OF KEN ELDER, CHIEF EXECUTIVE OFFICER, WELCOME 
                          CORPORATION

    Mr. Elder. Thank you. Good morning, Mr. Chairman, ladies 
and gentlemen. I am appearing today on my own behalf to testify 
in support of S. 1130. I thank Senator McCain for authoring 
this important legislation and you, Senator Ashcroft, for 
calling this hearing and being an original cosponsor of the 
bill. I am most grateful for and appreciate the invitation to 
be here, and to participate in this process.
    To understand the reasons why I support this legislation, 
let me tell you a little bit about my company. My wife, Judie, 
and I founded our company in 1970 with 29 cars. In those days, 
I washed them and she rented them. Through the hard work of 
many dedicated employees, we now have 35 offices, including 
offices at seven airports, and we operate an average fleet of 
about 4,000 vehicles company-wide, with 325 people, including 
40 of whom who have been with us for over 10 years. We are 
really proud of that.
    I guess most folks would call Welcome an American success 
story. It is a small business that has grown and prospered. I 
consider it a success on a far more personal level, because now 
my son, who is a junior at William and Mary, is as passionate 
about the company as am I, and he plans to come to work for the 
company as soon as he graduates.
    But we have been lucky, and every day our success is 
threatened by unfair laws in a few States, and they risk the 
future of our company on events that we have no control over. 
These vicarious laws permit my company to be sued and forced to 
pay judgments and settlements when we have done nothing wrong.
    To date, we have just been lucky. Welcome has not been hit 
by a multimillion judgment. However, each year my company pays 
in excess of $1 million in judgments and settlements from 
claims that somewhat relate to vicarious liability. For 
vicarious liability, there is no need to show that we have been 
negligent in any way. Instead, my company is held liable simply 
because we own the car. If an accident occurs because we are in 
any way negligent, S. 1130 offers no protection to us 
whatsoever, nor should it.
    Because of vicarious liability, every time one of Welcome's 
cars leaves the lot, we are in effect betting the company on 
the hope that our renter will not cause an accident in a 
vicarious liability jurisdiction. Some day I will lose this 
bet, because the odds will eventually catch up with us.
    You may have heard the argument that I can insure for my 
company's exposure to vicarious liability claims, but sir, that 
is far more easily said than done. I can buy insurance, so long 
as I do not have a claim. However, if we are ever hit by a 
multi-million claim, one of the following will happen. Either 
the judgment itself will bankrupt the company, or insurance 
will become prohibitively expensive, or it may not even be 
there at any price, and I cannot and will not operate without 
any insurance.
    Let me give you a couple of examples of some vicarious 
liability claims my company has faced. These are not the big 
ones you may hear about from other car rental companies, but 
they have taken money directly from us.
    First of all, we rented a car to an individual in Norfolk, 
Virginia. He drove the car to Florida, picked up a friend on 
the way to the beach, 3 days later the renter was involved in a 
single car accident on a freeway at 5 in the morning. Both the 
driver and the passenger were legally intoxicated, according to 
blood tests. Tragically, the driver was killed and the 
passenger was seriously injured.
    The passenger in this car sued us for $1.1 million under 
Florida's vicarious liability doctrine. Eventually we settled 
the case for $400,000, despite the fact that Welcome had not 
been negligent in any way.
    Another example in 1995 is, we leased a car at the Richmond 
Airport office. The renter said he was going to use the car in 
his local business. A month later, we received a report that 
the car was involved in an accident in New York. The vehicle 
was driven by Mr. Tim Baker, who was not the same person as the 
fellow that rented the car, and had no apparent connection with 
our renter.
    A passenger in the car was, indeed, injured, and sued 
Welcome under the New York vicarious liability statute because 
we were simply the owner of the car. While some issues remain 
to be settled in this case, we have already paid out $55,000, 
with the potential of many more thousands to come. We are 
paying for these sums despite the fact that Welcome was not 
negligent and in fact had no business or contractual 
relationship with the person who was responsible for the 
accident.
    S. 1130 would protect us from incidents like these, but I 
want to emphasize this bill would not impact my company's 
liability if we are negligent in any way.
    I strongly urge you to pass S. 1130 as quickly as possible. 
If you do not, then one morning soon I may wake up to find my 
fears realized, but if that happens and our family business is 
taken away from us, I will be able to tell my son, the one that 
wants to come to work with us in the business, that we did 
everything we could to change this unjust system.
    Thanks again for your invitation to be here, sir. I would 
be pleased to answer any questions.
    [The prepared statement of Mr. Elder follows:]

       Prepared Statement of Ken Elder, Chief Executive Officer, 
                          Welcome Corporation

    Good morning, Mr. Chairman and Members of the Committee. My name is 
Ken Elder. I am the Chief Executive Officer of the Welcome Corporation, 
headquartered in Alexandria, Virginia. Welcome is Thrifty Car Rental's 
licensee in the Baltimore/Washington area. Our car rental locations 
also stretch north to Harrisburg, Pennsylvania and as far south as 
Richmond, Virginia and the Tidewater area.
    I am appearing today on my own behalf to testify in support of S. 
1130, the ``Motor Vehicle Rental Fairness Act of 1999.'' I thank 
Senator McCain for authoring this important legislation and you, 
Senator Ashcroft, for calling this hearing and for being an original 
co-sponsor of the bill.
    In order for you to understand the reasons I support this 
legislation, you must know something about my company. My wife and I 
founded Welcome in 1970 with 29 cars. We used to joke that I washed and 
fueled the cars and she rented them. Through hard work, we have grown 
since then. Welcome now has 35 rental locations, including operations 
at seven airports. We operate an average fleet of about 4,000 vehicles 
company wide and employ 325 workers, including more than 40 who have 
been with us over 10 years.
    Most people would call Welcome an American success story--a small 
business that has grown and prospered through personal owner 
involvement and the dedication and commitment of our employees. I 
consider it a success on a far more personal level. My son, now a 
junior at William & Mary, is as passionate about the company as I am 
and plans to work for Welcome after graduation.
    I am proud to say that our company is a success. But every day, 
this success is threatened by an unfair law that risks the future of 
our company on events over which we have absolutely no control.
    The reason for this threat is the laws in a small minority of 
states that hold Welcome liable for the negligence of our renters. 
These so-called ``vicarious liability'' laws permit my company to be 
sued and forced to pay judgments and settlements when we have done 
nothing wrong. To date, I have been very lucky. Despite the fact that 
many of the cars we rent regularly travel into Washington, D.C., 
Florida, and New York--all vicarious liability jurisdictions--Welcome 
has not been hit with a multi-million dollar judgment. However, each 
year, my company pays a total of over $1 million in judgments and 
settlements from claims relating to vicarious liability.
    Vicarious liability laws hold car rental companies liable for the 
negligence of their renters solely because the company owns the vehicle 
involved in the accident. A plaintiff need not show that Welcome did 
anything wrong: that we negligently entrusted one of our cars to an 
unlicensed driver or to someone under the influence; or, that we failed 
to maintain the vehicle properly. I take great pride in the quality of 
our rental fleet. If an accident occurs because we have failed to 
maintain the car properly, we should be responsible and be sued for our 
negligence.
    But that is not the case here. For vicarious liability, there is no 
need to show that we have been negligent in any way. Instead, my 
company is held liable simply because we own the car.
    As a result, every time one of Welcome's cars leaves our lots, we 
are in effect betting the company on the hope that our renter will not 
cause an accident in a vicarious liability jurisdiction. Someday, I 
fear that I am going to lose this bet because the odds eventually catch 
up with everyone.
    Vicarious liability may make some sense when it is applied to 
individuals. Perhaps society should discourage individuals from lending 
their personal cars to family members or friends for fear of being held 
liable for someone else's negligence. That is not for me to decide. 
However, in the commercial context--such as the car rental industry--
where lending cars is the very nature of the business activity 
involved, it does not make sense. An individual can avoid vicarious 
liability by not lending his or her car to someone else. The only way 
my company can avoid vicarious liability is to stop renting cars. In 
other words, to go out of business.
    Some may argue that I can insure against my company's exposure to 
vicarious liability claims. But that is more easily said than done. 
Currently, Welcome self-insures for all claims up to $100,000. We carry 
an additional insurance policy that covers claims between $100,000 and 
$5 million. That policy currently costs my company $225,000 per year 
and we have an excellent claims history. Please understand, if we were 
hit with a large vicarious judgment, our premiums will skyrocket even 
higher, if insurance is available to us at all. Just like your premiums 
would if you make a claim against your personal auto insurance.
    As I stated above, without ever accessing our insurance policy, we 
pay over 
$1 million every year in vicarious liability claims. And if a claim is 
ever made against my company for more than $5 million, as has happened 
to larger car rental companies in recent years, then I might as well 
simply lock the door and turn over the keys because the company I 
worked so hard to create for almost 30 years will be bankrupt.
    Let me give you a couple of examples of the vicarious liability 
claims my company has faced. While these claims do not involve the 
multi-million dollar payments you will hear about from other car rental 
companies, these cases have taken money directly out of my pocket.
    First, Welcome rented a car to an individual in Norfolk, Virginia. 
The renter drove the car to Florida and picked up a friend on the way 
to the beach. Three days later, the renter was involved in a single car 
accident on a freeway at 5:00 in the morning. Both the driver and his 
passenger were legally intoxicated, according to blood tests. The 
driver was killed in the accident and his passenger was seriously 
injured.
    The passenger in this car sued Welcome for $1.1 million under 
Florida's vicarious liability doctrine. Eventually, we settled this 
case for $400,000, despite the fact that Welcome had not been negligent 
in any way and there was no evidence that the car did not operate 
perfectly.
    Second, in 1995, a renter leased a Welcome car at the Richmond 
airport, stating that he was going to use the car in his local 
business. One month later, we received a report that the car was 
involved in an accident in New York. The vehicle was being driven by 
Mr. Tim Baker, who was not the same person who rented the car and had 
no apparent connection to our renter. A passenger in the car was 
injured and sued Welcome under New York's vicarious liability statute 
because we were the owner of the vehicle. While some issues remain to 
be settled in this case, Welcome already has paid out over $55,000 in 
claims to date on this case with many more thousands of dollars 
potentially to come in the future. We are paying these sums despite the 
fact that Welcome was not negligent and in fact had no business or 
contractual relationship to the person responsible for the accident.
    These cases represent a miscarriage of justice and they should be 
stopped. S. 1130 would accomplish this goal. Simply stated, S. 1130 
would pre-empt state laws that hold my company liable for the 
negligence of our renters solely because we own the vehicle involved in 
the accident. This bill would not impact my company's potential 
liability if we are negligent in any way. If we entrust a car to an 
unqualified driver or fail to maintain the car properly and either of 
these negligent acts leads to an accident, this bill would not shield 
my company from liability. Nor should it. However, if the only action 
we are ``guilty'' of is owning a quality car that we rent to a 
qualified, licensed driver, then S. 1130 would not hold us liable for 
that driver's negligence.
    I strongly urge you to pass S. 1130 as quickly as possible. 
Vicarious liability reform has been passed by both the House and the 
Senate in the past as part of more sweeping product liability reform 
legislation. This Committee approved legislation in 1996 that contained 
a provision on vicarious liability reform. I ask you to move this bill 
in this session of Congress and work for its enactment this year.
    If you do not, then one morning soon I may wake up to find my fears 
realized and the company I have worked 30 years to create will be 
forced into bankruptcy by a vicarious liability judgment. But, if that 
happens, and our family business is taken away from us, at least I will 
be able to tell my son--the one who wants to join me at Welcome--that I 
have done everything in my power to change this unjust system.
    Thank you again for your invitation to testify at this hearing 
today. I would be pleased to answer any questions my testimony may have 
raised.

    Senator Ashcroft. Thank you very much. We will move now to 
Mr. Larry Stewart, who is a partner with Stewart Tilghman Fox & 
Bianchi, which is located in Miami, Florida. He is here today 
to speak on behalf of the Association of Trial Lawyers of 
America.

STATEMENT OF LARRY S. STEWART, ASSOCIATION OF TRIAL LAWYERS OF 
                            AMERICA

    Mr. Stewart. Thank you, Mr. Chairman, members of the 
committee. I appreciate this opportunity to be here to urge 
that S. 1130 not become law, because it would single out one 
industry for special protection on a subject that is uniquely a 
matter of State's rights, and that would be tantamount to 
congressional regulation of State insurance laws.
    States have the right to regulate insurance. It is 
guaranteed by the McCarran-Ferguson Act. Indeed, this bill 
recognizes the authority of States to impose financial 
responsibility on car rental agencies.
    Vicarious liability is another form of financial 
responsibility. It is not unique to the car rental agency 
business. It is a principle of law that has existed since the 
founding of the union and that is applied in almost every 
industry and throughout America.
    As far as car rental companies are concerned, States which 
impose vicarious liability on the car rental companies, the 
owners of the vehicles--and it is not just five; there are 12 
States that impose some form of vicarious liability on the 
companies--have made a policy decision that if the driver of 
the vehicle is uninsured, or underinsured, the owner can be 
held responsible. In so doing, those laws encourage the owners 
to have insurance.
    In effect, as between the owner and the injured party, 
those States have made the choice that it is better as a matter 
of fundamental fairness for the owner to be liable, which can 
be protected by insurance, than to risk the State having to 
pick up the tab for the care and treatment of the accident 
victims.
    The promoters of this bill, which I would respectfully 
submit should be perhaps retitled as a car rental company 
protection act, while acknowledging State's rights to regulate 
financial responsibility, say that they do not want too much 
responsibility imposed upon them.
    Every special interest would like to have immunity from 
lawsuits, but there is no demonstrable need here. While $100 
million is a lot of money, to put it in perspective, it amounts 
to less than 1 cent of every dollar of revenue that the car 
rental companies receive. As a matter of fact, it is minuscule. 
It is only seven-tenths of a penny of every $1 that is 
received, and this from an industry that is making millions of 
dollars in America. There is simply no reason for any company 
that has taken reasonable steps and acquired insurance to go 
out of business.
    Moreover, this liability is something that car rental 
companies could protect themselves from. If they are held 
responsible, they have a right to sue the drivers to recover 
what they have paid out, and if they make sure that the drivers 
have insurance, they would be protecting not only themselves, 
but also the public, but in the rush to rent as many cars as 
possible, no company inquires about driver insurance.
    They know that in a certain number of cases bad things will 
happen. People are unfamiliar with the cars, and with the roads 
they drive on. People let others drive the cars. People do 
unpredictable things in cars, and accidents will hurt and kill 
members of the public.
    They know in some States if a driver is uninsured, or 
underinsured, they will be held liable, and that they will not 
be able to effectively recover from the driver if the driver 
does not have insurance, but no company cares enough to ask if 
the driver is insured.
    As far as the companies know, every renter that they put on 
the road is a potential uninsured or underinsured driver, and 
the reason that they do not make inquiry is that if they did, 
it would drastically reduce the number of rentals and income 
that they receive.
    But more important than that, this has already been 
factored into the rates that the companies charge the public, 
and what they are charged by their insurance companies, so it 
is worth the risk that occasionally they might have to step up 
and pay damages in the 12 States that impose vicarious 
liability.
    Under those circumstances, it should not be surprising that 
some States have made the policy decision that they have. 
Washington should not be in the business of telling states how 
to deal with these insurance-driven issues, not for the car 
rental agencies, industry, or for any other industry.
    On the other hand, if we are going to plunge into these 
insurance-driven issues, let's not just put our toe in the 
water and federally regulate one industry. Let us treat this as 
an amendment to the McCarran-Ferguson Act, and let us open up 
the entire issue of Federal regulation of insurance.
    I urge that we not take this piecemeal step to protect one 
single industry, and that this legislation not receive the 
approval of Congress.
    I would be happy to answer any questions. Thank you.
    [The prepared statement of Mr. Stewart follows:]

        Prepared Statement of Larry S. Stewart, Association of 
                        Trial Lawyers of America

    Mr. Chairman and members of the Commerce Committee, my name is 
Larry Stewart, and I am a practicing attorney from Miami, Florida. I 
have practiced law for 35 years and am currently a partner with the 
firm of Stewart Tilghman Fox and Bianchi P.A. I also had the honor of 
serving as President of the Association of Trial Lawyers of America 
(ATLA) from 1994 to 1995. Mr. Chairman, thank you for the opportunity 
to present ATLA's views in opposition to S. 1130, the ``Motor Vehicle 
Rental Fairness Act.''
    The Association of Trial Lawyers of America opposes this bill for 
several reasons, including our long standing belief that people who 
have been injured should have a real opportunity to be compensated for 
that harm. Vicarious liability laws are one means to help ensure that 
is the case. This bill would abolish that principle in the several 
states which have applied it to car rental agencies. We are also 
concerned that Congress is once again seeking to limit the rights of 
the states to enact liability laws as they see fit. That this effort 
comes in the midst of other legislative initiatives to federalize all 
state class actions, create a federal statute of repose, federalize no-
fault auto insurance, and alter long standing state laws on punitive 
damages and joint and several liability makes the situation all the 
more alarming in a Congress sworn to return power to the states.
    The principle of vicarious liability--the legal doctrine that one 
entity may be held liable for the actions of another, based on their 
relationship to each other--is deeply rooted in anglo-saxon 
jurisprudence. Where state courts and legislatures have adopted this 
principle, they have done so not only to ensure that injured parties 
are compensated for the harm they have suffered, but also to spread the 
risks and costs of doing business across a broader community. These 
vicarious liability laws also encourage renters and lessors of cars, 
and other merchants, to monitor their products and services more 
carefully, thereby ensuring safer products in the marketplace. This 
bill chooses to protect a thriving car rental industry rather than 
preserve the long standing principle of vicarious liability. As such, 
this legislation not only derogates state prerogatives, but does so on 
behalf of special interests.

THE ``MOTOR VEHICLE RENTAL FAIRNESS ACT'' IS ONLY FAIR TO THRIVING CAR 
                            RENTAL AGENCIES

    Let's be clear. The ``Motor Vehicle Fairness Act'' is only ``fair'' 
to the thriving car rental businesses. Many of these businesses had 
billions of dollars in revenues in the past few years. Surely, they do 
not need this legislation in order to flourish. They are merely trying 
to limit their financial liability so they may reap additional profits. 
But, for the individuals who are injured by drivers of rented or leased 
cars, including the drivers themselves, this bill would curtail 
possible avenues of recovery. When rental car drivers are injured or 
injure others, they may seek recovery from a number of possible 
defendants, including the rental agency and the manufacturer of the 
automobile. This is not unlike the situation that exists in most other 
industries, where the businesses are held vicariously liable for the 
acts of others. There is no rationale or moral basis to single out car 
rental companies for special immunities. That would not only be wrong 
but the wrong is compounded by the fact that there is no demonstrable 
need for such protection from Congress. The current system is working 
and there is no documented evidence to support a federal override of 
current state laws governing this area of tort law. Indeed, this 
proposed bill recognizes that states have the authority to impose 
financial responsibility laws on car rental businesses. Vicarious 
liability is in essence another form of financial responsibility. 
States that decide it is in their best interest or good public policy 
to impose such responsibility should not be prevented from doing so.
vicarious liability laws were established to protect the injured and to 

 ENSURE THE SAFEST POSSIBLE PRODUCTS ARE AVAILABLE IN THE UNITED STATES
    THE COURTS ESTABLISHED THE PRINCIPLE OF VICARIOUS LIABILITY 

primarily to ensure injured parties recover damages for the harm they 
have suffered. But vicarious liability laws serve the additional 
purposes of spreading the risks and costs of doing business throughout 
a broader community, and of encouraging the sellers or renters of 
products to monitor those products closely to ensure the safest 
products possible are available to American families.
    This bill would gut this fundamental principle for one industry by 
prohibiting states from holding any car rental agency liable for the 
harm resulting from a driver's negligent operation of a operation of a 
rented or leased motor vehicle they own. Those states which have 
established vicarious liability laws for car rental agencies clearly 
believe there are strong policy reasons to hold these agencies 
responsible for any harm involving their vehicles. Holding businesses 
accountable via vicarious liability is one way of making sure that 
profit-making businesses shoulder the risks they create. It also 
ensures that innocent victims injured by the business's activities are 
compensated for their injuries, and it creates an incentive for 
businesses to decrease the amount of risk to which the larger community 
is exposed. Ultimately, this legislation would weaken car rental 
companies' responsibility to the community at large, and thereby reduce 
safety on the roads for all of us.

  S.1130 IS YET ANOTHER EXAMPLE OF CONGRESS SEEKING TO DICTATE STATE 
                                POLICIES

    This bill is also another example of the federal government seeking 
to dictate how the states should behave. Currently, only 12 states, 
either through statute or common law, allow for the determination of 
vicarious liability in cases involving rented or leased cars, but 
virtually all states impose some form of financial responsibility on 
car rental businesses, although the precise terms may vary. Congress 
should allow those 12 states to continue with their ongoing policies 
and practices. Those states which have vicarious liability laws for car 
rental agencies recognize that car rental companies enjoy a profit-
making enterprise within their borders that places potentially high-
risk drivers on their roads.
    These companies are putting people behind the wheel of unfamiliar 
cars, often in unfamiliar places. In addition, the people who rent the 
cars do not have pride of ownership in the vehicle; therefore, they may 
engage in behaviors that they would not normally do in their own car. 
States like California, Florida, and New York, which have large 
populations, large tourism industries and the largest rental car 
markets, have either enacted legislation or follow common law 
principles to make car rental companies vicariously liable. If a 
company wants to profit from renting cars in their states, thereby 
creating more potential risks and accidents, then they should help bear 
the cost of the risk they create.
    New York embodies the rationale of why states hold car rental 
companies financially responsible via vicarious liability. The New York 
Court of Appeals noted that New York's vicarious liability legislation 
was designed to ``ensure access by injured persons to a financially 
responsible insured person against whom to recover for injuries.'' The 
New York Law Revision Commission noted that the legislation was 
intended to regulate the conduct of automobile owners by 
``discourag[ing] owners from lending their vehicles to incompetent or 
irresponsible drivers.''\1\  California, Connecticut, Idaho, Iowa, 
Nevada, Maine, Michigan, Minnesota and Rhode Island have all codified 
vicarious liability statutes, in addition to the other jurisdictions 
that follow common law principles. These states have decided that 
vicarious liability is the best way to handle the risks created by car 
rental companies. Their judgment is prudent, sound, and should be 
respected.
---------------------------------------------------------------------------
    \1\ Haggerty v Cedeno 653 A.2d 1166 (1995) (quoting the New York 
Law Revision Commission at 593 (1958))
---------------------------------------------------------------------------
    For more than 200 years, civil liability under tort and contract 
law have been the sovereign domain of the states. Measures that would 
preempt our state-based liability system, like S. 1130, are contrary to 
values expressed by lawmakers on both sides of the aisle. Particularly 
since 1995, I was under the impression that a central mission of the 
Congressional leadership was to work assiduously to give more authority 
back to the states. If that is correct, then I find it baffling, to say 
the least, that this Committee is conducting a hearing on federal 
legislation which would clearly extinguish states' rights. It is 
particularly curious behavior when one considers that another Senate 
Committee is poised to take action on Senator Thompson's bill, S. 1214, 
the ``Federalism Accountability Act of 1999,'' that is designed to 
restrain federal intervention into the traditional domains of state law 
and authority.
    The agenda behind S. 1130 is unambiguous: the proponents of this 
legislation seek to unilaterally take power away from the states on an 
issue that historically has been left to the states, that is, the 
regulation of automobile liability. ATLA believes that extinguishing 
state liability laws that work to protect our families is a measure 
that is at best ill conceived, and at worst unconscionable.

   WHY CAR RENTAL COMPANIES SHOULD BE HELD RESPONSIBLE VIA VICARIOUS 
                               LIABILITY

    The policy rationale underlying vicarious liability for car rental 
companies is justified and effective. Car rental companies are the 
experts on their own businesses. Therefore, they are in a best position 
to anticipate the risks of renting cars to a variety of drivers and to 
plan for those risks. In addition, the major car agencies appear to be 
able to bear the consequences for the risks they create. According to 
the Auto Rental News 1997 Fact Book, there were 1.6 million rental cars 
in service at last count. Total revenues for all rental car companies 
reached $14.6 billion in 1996, which was an 18.7 percent increase from 
1985. Hertz's year end revenue was $4.2 billion dollars last year. Avis 
had revenues of $2.3 billion. Budget was at $1.2 billion. Alamo 
generated $201 million in revenue last year. According to the Wall 
Street Journal, profits for the top eight companies was $245 million 
dollars in 1996.\2\ Do not let these companies tell you they are facing 
egregious accident and litigation costs. The entire industry had only 
$100 million in accident costs in 1996.\3\ To put this in perspective, 
their accident cost is .7 cents of a dollar, not even a penny of their 
revenue. Clearly, these car rental agencies are managing the risks they 
face in states with vicarious liability laws.
---------------------------------------------------------------------------
    \2\ Lisa Miller, Car Rental Companies are Jacking Up the Prices, 

Wall Street Journal, Feb. 4, 1997 at B6.
    \3\ Auto Rental News, Sept./Oct. 1996.
---------------------------------------------------------------------------
    Yet, car rental companies are motivated to find the most cost 
effective methods in dealing with liability issues. In fact, their 
efficiency in dealing with liability issues has brought us to this 
Hearing Room today. After all, the most cost efficient way for these 
companies to deal with liability issues is to eliminate them 
altogether. But as a matter of fairness, car rental companies should 
not continue to profit from the business without being held responsible 
for accidents being caused by their lessees. Companies like Hertz, 
Avis, Alamo, and Budget, and countless other large and small profitable 
car rental concerns continue to impose risks on ``individually random 
but collectively predictable victims of the activity,''\4\ namely the 
people injured by under-insured lessees.
---------------------------------------------------------------------------
    \4\ Harry J. Steiner, Moral Argument and Social Vision in the 
Courts 71 (1987)
---------------------------------------------------------------------------
    Vicarious liability gives car rental companies incentives to 
conduct their businesses with the safety of others in mind. For 
example, they prevent drivers under the age of 25 years from renting 
their vehicles. They don't rent to customers without credit cards. They 
ask for your driver's license. They run a DMV check on your driving 
record. Prohibiting vicarious liability statutes would eliminate one of 
the remaining incentives car rental agencies have to continue to work 
toward decreasing the dangers they are imposing on the public at large. 
Do not let these companies walk away from their responsibilities.
    There are numerous examples of how vicarious liability helps 
compensate innocent victims of accidents that involve rental cars, but 
I would like to leave you with just one. Two married couples rented a 
vehicle from Budget Rent-A-Car for a trip to Cornell University in 
Ithaca, New York. The rental contract named both couples as the parties 
allowed to drive the car. Unfortunately, there was an accident. One of 
the wives was driving when her view became distorted due to rain and 
fog. Due to her unfamiliarity with the vehicle, she could not find the 
windshield wiper. She lost control of the car, veered across two lanes 
of traffic, rolled over, and hit an embankment. The wife who was a 
passenger, a cardiologist, suffered a severe traumatic brain injury and 
will never remember her medical training or be independent again.\5\
---------------------------------------------------------------------------
    \5\ Su v. Hong Fu and Freedom River d/b/a Budget Rent-a-Car, 733 
A.2d 1133 (NJ 1999).
---------------------------------------------------------------------------
    Let me pose this question as my concluding remarks. Who is better 
positioned to cope with the risk? The wife who has suffered traumatic 
brain injuries because she happened to have the unfortunate luck of 
traveling in a rented car that was unfamiliar to the driver? Or Budget, 
who has to deal with the risk of accidents every day and who profits 
from putting drivers on the road every day? For those states with 
vicarious liability laws for auto rental agencies, we believe that 
system is more equitable and fair than the system S. 1130 would create. 
The Motor Vehicle Rental Fairness Act protects companies that profit 
from risk-creating activities at the expense of innocent victims. Do 
not let innocent victims go uncompensated to protect the thriving car 
rental industry.
    Last Congress, as time was running out on the Second Session, these 
same rental car companies tried an end run around any real legislative 
scrutiny and attempted to have this same type of legislation buried in 
the massive Omnibus Appropriations bill. They were stopped dead in 
their tracks. Of course, that might not stop them from making a second 
try in the next three weeks.
    Nevertheless, today, at least, the sunlight of public scrutiny is 
being directed on this special interest legislation that would gut 
state rights and potentially expose our communities to more reckless 
behavior on the roads. Mr. Chairman, I very much appreciate having the 
opportunity to discuss the nature of this legislation and why it should 
be strongly opposed. Thank you.

    Senator Ashcroft. Thank you very much.
    I am pleased to note the presence of the Senator from 
Washington here, and would ask if he had any comments, or chose 
to question the witnesses.

                STATEMENT OF HON. SLADE GORTON, 
                  U.S. SENATOR FROM WASHINGTON

    Senator Gorton. I think it is time, Mr. Chairman, for you 
to be able to ask questions. As you know, I am a cosponsor of 
this bill, which was one element in the broader product 
liability legislation that has been considered a number of 
times, and once at least got as far as a veto by the President.
    While I was listening to this last testimony, I was also 
reading the staff memo we have here, and I am tickled by the 
one-liner that I suspect you read as well, and the line is, 
Justice Benjamin Cardozo, considered one of the leading jurists 
in the development of tort law, described the vicarious 
liability doctrine in the following manner: ``The whole 
doctrine is foolishly antiquated, unjust, and ought to be 
abolished, but I suppose we shall have to leave the change to 
the clumsy process of legislation.'' He wrote those words in 
1928. We are still at the clumsy process 71 years later.
    Senator Ashcroft. I would make a comment on that if I 
thought I could add to it. [Laughter.]
    Well, let me begin by asking a question. Is there any 
practice, Mr. Wagner, that is taken by car rental companies to 
ascertain the identity of people to whom they rent? Are there 
any requirements?
    Mr. Stewart suggests that car rental companies are solely 
interested in volume, and that they do not check things. Are 
there things that are done?
    Mr. Wagner. Senator, thank you for asking that question. I 
believe that Mr. Stewart painted the industry with a very broad 
brush when he made that comment, and certainly I would call 
upon Mr. Elder or others to make comments as well, but 
Enterprise Rent-A-Car does, in fact, take precautions in 
entering into rental agreements with customers.
    We typically check to ensure that there is a driver's 
license, an valid driver's license. We do inquire about 
insurance, as I understand the practice, and in fact we even go 
so far as to offer insurance-related type products for those 
individuals who may have an interest.
    Senator Ashcroft. Do people have to be a specific age in 
order to rent from Enterprise?
    Mr. Wagner. The laws on that question vary. In some States 
we are required--New York specifically, we are required to rent 
to customers 18 years or older, and in other States we have as 
a matter of policy determined that we will rent to them if they 
are over 21 years old, and the industry varies on that, but we 
typically do rent to anybody who is a licensed driver at least 
18 years of age or older.
    Senator Ashcroft. Are there any jurisdictions which you 
rent to people who are 16 years of age?
    Mr. Wagner. Not to my knowledge. Generally speaking, that 
is not the practice of the industry. Mr. Elder may be able to 
comment on that.
    Senator Ashcroft. Mr. Elder, do you have a comment?
    Mr. Elder. I do not know of anyone who rents to youngsters 
that are 16 years old, unless there's a State law that requires 
it some place. We certainly do not in Washington.
    Senator Ashcroft. Why don't you rent to 16-year-olds?
    Mr. Elder. Well, the same reason that my son had to pay an 
awful lot of money to buy insurance when he first got his 
driver's license. Youngsters are particularly prone to 
accidents, and we just do not feel comfortable turning them 
lose in our car to go out and hurt someone.
    Senator Ashcroft. Wait a second. Mr. Stewart indicates all 
you care about is the volume of cars that you rent. Now you are 
telling me that you care about something else, that you care 
about whether or not there are accidents, and it is reflected 
in your policy, so you have a policy not to rent to people who 
are just 16 years old?
    Mr. Elder. That is correct, absolutely. We do rent to 
people who are 21. The one thing that we do do as well is, if 
someone comes in and rents a car, and there is an additional 
renter, we have to make sure that additional renter or 
additional driver is qualified on the very same basis as the 
primary renter of the car just to make sure that we are not 
putting a car out for someone that is apt to go out and have an 
accident.
    If it is someone who did not have a driver's license, and 
we just took a name, then I think we would be responsible, and 
should be liable for anything that happens, but we qualify 
additional drivers, 21-year-olds, the same way we would qualify 
anyone else.
    Senator Ashcroft. How much competition is there in the 
industry? Is there? And Ms. Faulkner, you work now for Premier, 
and you previously had Capitaland.
    Ms. Faulkner. Capitaland was a small independent. I work 
for Budget Group, Incorporated, in a division called Premier, 
which does local rentals.
    Competition is relatively strong throughout most States, 
not as strong in the various States, and certainly not strong 
in New York at all.
    There are 25 independent rental car companies left in the 
State of New York. All of the rest are national chains such as 
Hertz, Avis, National, and Budget, and Enterprise, and they 
maintain a presence in New York.
    Senator Ashcroft. Is there price competition among these 
firms?
    Ms. Faulkner. Price competition in New York is not that 
high. The rates are just simply high in New York to compensate 
for additional expenses that we have in that State, so we do 
not have to fight for price.
    One comment, though, about not asking people if they have 
insurance. We do ask in New York if you have insurance 
coverage. We do list your insurance.
    We even try to get your policy number, but we are primary 
in that State, and it is against the law to refuse to rent to 
someone without insurance. You have to rent to that person. It 
is discriminatory. Many people in the city of New York do not 
own a car, therefore they do not have insurance, so I cannot 
turn them down on that basis.
    Senator Ashcroft. Senator Gorton, do you have questions you 
would like to ask?
    Senator Gorton. No, thank you.
    Senator Ashcroft. Well, let me thank all of you for coming 
and presenting your testimony today. I am grateful for the 
opportunity to hear from you about this important issue.
    I had hoped that Senator Hollings would be here. We had 
rearranged the schedule of testimony. I now am told that 
Senator Hollings is not going to be able to come. I want to 
thank you, Mr. Stewart, for letting us adjust your sequence of 
appearance in that respect, and thank you all for being here.
    With that, this hearing is concluded.
    [Whereupon, at 11:10 a.m., the subcommittee adjourned.]


                            A P P E N D I X

            Prepared Statement of Hon. Ernest F. Hollings, 
                    U.S. Senator from South Carolina

    My position on this legislation--S. 1130--will come as a surprise 
to no one: I am opposed to its passage.
    This bill is merely another attempt to overturn state tort law. As 
I have noted previously, those, including members of Congress and 
outside interests, who seek to use the power of Congress to overturn 
the states jurisdiction of tort law should factually demonstrate a 
compelling reason for such action. Based on my review of the research, 
and the testimony that has been submitted for today's hearing, this 
standard has not been met by the supporters of the legislation before 
the committee.
    Currently, only five states hold automobile rental and leasing 
companies to any form of significant vicarious liability. This is 
hardly sufficient to justify federal preemption of state law. Moreover, 
there is no evidence that automobile rental and leasing companies are 
being burdened and hindered by liability suits. If they were, it would 
be reflected in their insurance premiums. However, data obtained from 
the Congressional Research Service (CRS) shows that insurance costs for 
one of the largest companies in the industry--the Hertz corporation--
amount to only 3% of annual revenues. The CRS data also demonstrates 
that the automobile rental industry is doing exceptionally well 
financially, producing annual revenues of approximately $15 billion.
    As the members of this committee are aware, I have been a longtime 
opponent of federal legislation designed to overturn state tort law and 
curtail American citizens' constitutional right to civil redress for 
wrongs done to them in the marketplace. I believe that like all 
provisions of the Constitution and the Bill of Rights, the right of 
civil redress is a precious right, and that, as such, Congress must act 
with severe caution and restraint regarding legislation designed to 
reduce the protections afforded by this right. As I indicated above, 
based on the factual record before the committee, I am unconvinced of 
the case that has been made by the supporters of S. 1130 on the need 
for the legislation. I thank the Chairman for this opportunity to 
present my views.
                                 ______
                                 
      STATEMENT OF HON. TRENT LOTT, U.S. SENATOR FROM MISSISSIPPI

    Mr. Lott. Mr. Chairman, I am pleased to offer my strong support for 
S. 1130, the ``Motor Vehicle Rental Fairness Act of 1999.'' I am a co-
sponsor of this legislation, and I want to thank Senator McCain and 
Senator Ashcroft for their efforts in sponsoring this legislation and 
moving it ahead in the Senate.
    I have been committed to tort reform during my entire tenure in 
Congress, and I believe that this legislation presents an excellent 
opportunity to further address this issue. This legislation 
specifically addresses the problem of vicarious liability for companies 
that rent or lease motor vehicles. The reforms that this legislation 
would bring about have been considered by this Committee in each of the 
last two Congresses and included in legislation passed by this 
Committee in 1996 and 1997. In 1996, the full Senate endorsed 
legislation which would have implemented vicarious liability reform.
    Mr. Chairman, it is time that vicarious liability reform be enacted 
into law with the passage of S. 1130 during the 106th Congress. 
Vicarious liability for car rental companies is especially unfair for 
the small businesses that are impacted by the application of this legal 
principle. Small businesses are particularly vulnerable to the 
devastating potential of vicarious liability laws. It is my 
understanding that there will be testimony today from a former small 
business owner in New York who was driven out of business by a judgment 
in a case when there was absolutely no negligence on the part of the 
business. This case is clearly an example of the inability of a small 
business to weather an unjust liability verdict. Small businesses 
operate on very tight budgets and profit margins, and usually cannot 
afford to self-insure in this type of situation. It is clear that the 
practice of certain states of holding car rental companies vicariously 
liable is having a negative effect on interstate commerce, and it is 
the Constitutional duty of Congress to act in this area.
    I am proud to support this legislation, and I am eager to see it 
move forward. I am confident that Senator McCain and Senator Ashcroft 
will ensure that this bill makes its way quickly through the 
legislative process, and I look forward to this legislation becoming 
law in the near future.

                                
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