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Post date: April 3 2001

Court Declares Rental Car Company's Standard Contractual Clauses Illegal

Attorney General Spitzer today hailed a decision of the New York Court of Appeals confirming that car rental companies may not enforce a standard contractual clause against consumers. Under the standard clause, renters agree to indemnify the car rental company for any injuries caused to third parties by use of the rental car. The Court held that such clauses are unenforceable against consumers for personal injury damage amounts falling within the minimum insurance that the rental company is required to provide under State law.

"This is a great decision for consumers who can no longer be required to contract away their statutory right to minimum insurance coverage by car rental companies," Spitzer said. "This decision affirms the significance of my office's separate, but related, lawsuit which seeks relief for consumers deceived by rental car companies into paying additional fees for unnecessary liability insurance costs."

In May 2000, Spitzer's office filed a lawsuit to stop Enterprises' widespread practice of tacking on extra fees for liability insurance coverage to consumers' rental bills and for failing to provide a legal defense or coverage if a renter is sued by an injured third party.

In his lawsuit, Spitzer claimed that it is a deceptive practice to convince customers that they should pay an additional $6.95 per day above the car rental rate to insure themselves and the company against personal injury claims. The state Vehicle and Traffic Law, Insurance Law and ample case law all provide that the owner of the vehicle, in this case, Enterprise Rent-A-Car, must provide the statutory minimum of $25,000 for bodily injury and $50,000 for death.

Paralleling Spitzer's case were four private cases which were merged and recently argued before the New York State Court of Appeals. Spitzer's office filed a "friend of the court" brief in support of the private parties who all were forced by Enterprise to pay court judgments covering personal injury incidents. Today, the state's highest court overturned lower court decisions and ruled in favor of the consumers.

"The state's highest court affirmed the underlying arguments made by my office and held that minimum liability insurance coverage is the sole responsibility of the rental car company and not the renter," Spitzer said.

The Attorney General's case against Enterprise is being handled by Assistant Attorneys General Joy Feigenbaum and Melvin Goldberg of the Consumer Frauds and Protection Bureau. The Attorney General's "friend of the court" brief filed in the four private cases merged in the Court of Appeals was prepared by the Consumer Frauds and Protection Bureau and the Solicitor General's office.

Individuals with questions regarding rental car companies are encouraged to contact the Attorney General's consumer help line at (800) 771-7755.