Renting a car and liability

Question

Let's say someone (Person A) rents out a car to someone else (Person B). They sign a contract that states that the renter of the car (Person B) cannot hold the owner (Person A) financially liable for anything that happens while the other person (Person B) is in pocession of the car.

The next day Person B who is renting out the car drives drunk into another car causing an accident where another person (Person C) get injured.

Can Person C sue Person A for renting their car to Person B and likely win?

Answer 1

The law with regard to this issue varies from one place to another.

Most jurisdictions do not impose liability for car accidents caused by human error on the owner of the car automatically, unless the owner of the car negligently entrusted the car to someone who posed an elevated risk of causing an accident that was known or should have been known to the owner.

Some jurisdictions impose "vicarious liability" (i.e. liability without proof of wrong doing, merely due to the relationship) for car accidents on the head of the household where the driver lives.

Most jurisdictions impose vicarious liability on the employer of an employee who gets in a car accident while on the job.

Some jurisdictions expressly exempt car rental firms from liability for accidents caused by renters of cars rented by the car rental firm, or exempt people who rent cars from liability for these accidents under the relevant case law.

But there are probably some jurisdictions that do impose liability on the car owner in these circumstances.

Answer 2

You don’t mention the country. In Germany, third party liability for car insurance covers the driver, not the owner of the car or the person paying the insurance. So a German car insurance would pay Cs damage as long as the damage wasn’t done intentionally and as long as the car is insured (and when your car stops being insured police will give you a visit to make sure it is not used). A knowing that B has no license doesn't change that. Third party liability is there to protect victims, so it is very difficult for an insurance to get out of paying. (AFAIK they will often pay even if they legally wouldn't have to, as a public service that adds 10 pennies to your insurance premium because it is rare).

Of course the insurance will try to recover money from B or A if they can. If B had no license they will try to get their money back from B, similar if he was drunk. If A knew that B had no valid license, the insurance will try to get their money back from A as well.

Now if there was no insurance for the car, then no insurance will pay C, so C would have to sue A or B. Renting out an uninsured car would definitely be a reason to go after A. And A would be in trouble, plus B would be in trouble if he knew (in legal trouble beyond having to pay).

If no insurance pays, C could sue A in addition to B in a situation where A knew or should have known that renting out a car to B would put people at risk. For example if A knows that police took Bs car to stop him from driving drunk, as an extreme case. Or if the car was not insured.

Answer 3

In most countries/states the owner of the automobile is required to have third-party liability coverage in the form of insurance or other approved means (bonded self-insurance, deposit). A contract between A and B cannot remove this requirement that the government imposes on A for the protection of the public.

What would happen is victim C files a claim against the vehicle owner A. A's insurance would pay out, at least up to the limits required by law. The insurance of owner A would then pursue a claim against renter B for the recovery of the amounts paid out, as well as for the damage to the rental car. This would be where the contract where renter B agrees to indemnify owner A comes into play. If renter B had applicable insurance, that would then pay the loss. If B declares bankruptcy or disappears, A's insurance is left holding the bag.

The major exception is no-fault jurisdictions. In those areas, up to the limits of no-fault, victim C would claim against their own insurance. In areas like Quebec or British Columbia, Canada, which has no-fault nationalized bodily injury insurance, the government would compensate for both B and C's injuries/death.

Answer 4

Possibly irrelevant or tenuously analogous to the question: In the US (Mississippi) the owner (A) trusted a 3rd party (D) to administrate the rental contract with the renter (B), the owners (A) filed suit against (D). However the vehicle was a small private plane, and the airport (D) rented it to criminals (B) who crashed it in a foreign country. However, the owners were unable to prove negligence on the part of the airport in vetting the renters (B) and eventually dropped their suit.