Written by: Talbot M. Quinn

Rental car companies provide customers with vehicles to drive every day. However, under Louisiana law, these rental car companies are usually not liable for accidents that occur by the driver of a rental vehicle.

Pursuant to La. R.S. 32:861, the Motor Vehicle Safety Responsibility Law (“LMVSRL”), every motor vehicle shall be covered by an automobile liability policy with minimal liability limits required by the state. However, in enacting the LMVSRL the legislature, apparently recognizing the unique nature of rental car agencies, specifically stated in La. R.S. 32:1041 that vehicle owners "engaged in the business of renting or leasing motor vehicles" are not required to furnish proof of financial responsibility to satisfy any judgment entered against their lessees. Hearty v. Harris, 574 So.2d 1234, 1242 (La. 1991). The legislature did not intend rental agencies to bear the financial responsibility for the negligent actions of a lessee operating the leased vehicle in accordance with the terms of the lease. Id; Cenance v. Tassin, 2004 WL 575097, 2003-1379 (La. App. 4 Cir. 2004).

La. R.S. 32:1041 (B) states specifically:

Any person, firm, association, or corporation licensed and engaged in the business of renting or leasing motor vehicles to be operated on the public highways shall only be required to furnish proof of financial ability to satisfy any judgment or judgments rendered against said person, firm, association, or corporation in his or its capacity as owner of the said motor vehicles, and shall not be required to furnish proof of its financial ability to satisfy any judgment or judgments rendered against the person to whom the motor vehicle was rented or leased at the time of the accident. La. R.S. 32:1041.

Louisiana law is clear that a self-insured rental agency is not required to provide omnibus insurance coverage on its vehicles.  Dennison v. Liberty Mutual Insurance Company, 94-0026 (La. App. 1 Cir. 11/10/94); 645 So.2d 1227; Hearty v. Harris, 574 So.2d 1234 (La. 1991); Weston v. Hollis, 26, 380 (La. App. 2 Cir. 12/7/94); 647 So.2d 459.

In Washington v. Stephens Leasing, Inc., 540 So.2d 433 (La. App. 1 Cir. 1989), plaintiff sued the commercial lessor of a vehicle, Stephens Leasing, Inc., driven by William Debruyn, the lessee, for damages sustained in a motor vehicle accident caused by the lessee.  The First Circuit reasoned that “…the duty of obtaining and maintaining liability insurance falls upon the appropriate person in a given situation.”  The lease in question clearly stated that the lessee was to procure and maintain the insurance on the vehicle. Thus, the duty of maintaining liability insurance on the vehicle fell to the lessee, Debruyn, not the lessor.  Washington, 540 So.2d 433, 435 (La. App. 1 Cir. 1989).  The First Circuit upheld the trial court’s decision to grant Stephens Leasing, Inc.’s Exception of No Cause of Action.

Additionally, in Dennison, supra, the First Circuit held that automobile lessors need only insure themselves as owners and need not insure their lessees. The court reasoned that any liability coverage extended to a lessee by a rental agreement is in the nature of a voluntary “automobile liability policy” and such a policy could be contractually limited through the lease agreement between the insured and lessee.

Automobile lessors are not required to offer any insurance at all to their customers to cover a customer’s potential liability to third parties.  Any such liability insurance extended by a rental agency, whether as a self-insurer or through an insurance policy, is in the nature of a “voluntary automobile liability policy.”  Collins v. Randall, 836 So.2d 352, 2002-0209 (La. App. 1 Cir. 12/2/02); Hearty v. Harris, 574 So.2d 1234 (La. 1991).