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Zack Hutchins
Director of Communications

August 2, 2005

Federal lawmakers ban New York's antiquated vicarious liability law

The highway bill passed by federal lawmakers on July 29 includes a ban on vicarious liability of car leasing firms, a ban The Business Council had urged New York’s lawmakers to make.

“This is a win for the car leasing industry, New York businesses and New York consumers,” said Business Council President Daniel B. Walsh. “We applaud our federal lawmakers for accomplishing what New York’s own lawmakers would not do.”

The federal highway bill also banned vicarious liability of rental cars.

Vicarious liability forces companies that lease cars to assume liability for unlimited monetary damages if the cars are in accidents, even if the company is in no way at fault.

In 2003, New York became the only state to allow unlimited liability of car leasing and rental companies after Connecticut and Rhode Island repealed their vicarious liability laws. The Alliance of Automobile Manufacturers and the Greater New York Automobile Dealers Association said last year that the law cost consumers more than $130 million each year and led to a 36 percent decline in the number of vehicles leased in the state each year.

A repeal of vicarious liability has long been a priority issue of the Council’s.

“Every sector of New York's economy, including manufacturers, is adversely affected by the virtually open ended liability created by the state's current tort laws,” the Council wrote in its description of the issue. “The cost of doing business in New York State is being driven up by frivolous lawsuits forcing companies to pay excessive damages, which are often baseless, irrational, and unpredictable.”

The New York State Trial Lawyers Association immediately criticized the bill and warned visitors to its Web site that “this could be the last day you can file a case against an automobile lessor or rental agency for liability based on ownership.” The Association said that it would seek ways to challenge the ban.