Facing threats from at least three car leasing companies that they’d pull out of Rhode Island if the state’s cap on vicarious liability is allowed to expire this Thursday, the state House of Representatives has voted to extend the cap through June 2.
The 60-to-2 vote came just hours after the U.S. lease financing company for Chrysler automobiles threatened to stop leasing here as of Aug. 1. Ford’s leasing company and Chase Manhattan have also said they’ll leave, said Jack Perkins, executive vice president of the Rhode Island Automobile Dealers Association.
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Under the state’s vicarious liability law, the legal owner of a car can be held liable for any damages caused by the vehicle, even if the owner had nothing to do with the incident.
In 2002, the Rhode Island Supreme Court ruled that the law can be applied to car leasing and rental companies, and it went on to uphold a $28-million verdict against the Chase Manhattan Automotive Finance Corp. in a personal-injury case.
Fearing a string of such verdicts, leasing companies set out to get rid of unlimited vicarious liability provisions in every one of the few states that had them. New York resisted, and most leasing firms pulled out. Rhode Island offered a compromise that kept leasing firms here.
Under the law that expires Thursday, rental companies’ liability is capped at $250,000 per person or $500,000 per accident for injuries or death, and $25,000 for property damage.
Leasing companies aren’t held liable at all if their customer has insurance for at least $100,000, $300,000 and $50,000, respectively, and their liability is limited to the difference between actual coverage and those caps if the policy falls under those limits.
The caps expire next Thursday, however. The bill approved by the House on Friday, as originally drafted, would have extended the caps indefinitely, but it was amended in committee to expire on July 1, 2007. Still, resistance to the measure was still strong enough that the bill had been awaiting a vote since mid-April.
Perkins said leasing companies had been concerned that legislators would amend the bill on the House floor to increase the liability caps. That did not happen, but legislators did approve, 56 to 2, an amendment to extend the caps only until June 2.
The measure still requires Senate passage. A companion bill sponsored by state Sen. Maryellen Goodwin (D-Providence) did not make it out of committee, but now the Senate will get a chance to review the watered-down House version.
In a news release Friday, William F. Jones Jr., vice president of Chrysler Financial, said if the caps expire, “Chrysler Financial will be forced to exit the Rhode Island leasing market based on significant financial exposure if we continue to offer leasing.”
Chrysler Financial pulled out of New York last year.
Perkins said he hoped legislators would “realize the seriousness” of the situation before casting their votes.
