BILL ANALYSIS Ó
AB 621
Page 1
ASSEMBLY THIRD READING
AB 621 (Charles Calderon)
As Introduced February 16, 2011
Majority vote
JUDICIARY 7-3
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|Ayes:|Feuer, Atkins, Dickinson, | | |
| |Huber, Huffman, Monning, | | |
| |Wieckowski | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Wagner, Silva, Jones | | |
| | | | |
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SUMMARY : Provides a mechanism for service of legal process on
non-residents who cause injuries involving rental cars in
California, up to a maximum contractual limit. Specifically,
this bill :
1)Provides that, where a car rental company enters into a rental
contract with a renter who resides out of the United States,
and the rental car company provides third-party supplemental
liability insurance to the renter, as defined, the car rental
company shall accept service of process on behalf of the
renter related to any harm, loss, or damage related to the use
or operation of the rental vehicle.
2)Provides that process may be served by first-class mail,
return receipt requested, registered mail, or by personal
service by a registered agent of service of process on file
with the Secretary of State and Consumer Services.
3)Requires that the rental car company shall provide a copy of
any summons and complaint so served to the renter by
first-class mail, return receipt requested.
4)Requires any plaintiff who elects to deliver process to the
rental company pursuant to these provisions agree to limit his
or her recovery against the renter, authorized driver, or
rental company to the limits of the protection provided by the
insurance coverage.
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5)Specifies that acceptance of service of process by the rental
company does not create any duty or agency relationship other
than as provided above.
6)Provides a three-year sunset by which the bill will cease to
be operative on December 31, 2015.
FISCAL EFFECT : None
COMMENTS : The author states that this bill will assist drivers
and the State of California by making sure that the insurance
that car renters buy can actually be relied upon as intended by
requiring the car rental company to be the agent for service of
process for claims against insured drivers who reside outside of
California.
The author explains the reason for the bill as follows:
Civil Code Section 1936 establishes the basic contractual
obligations between vehicle rental companies and their
customers and regulates a renter's liability for damage and
loss and financial responsibility requirements. California
law also requires all motorists to carry minimum liability
insurance of at least $15,000 per person and $30,000 per
occurrence for bodily injury. Further, renters have the
ability to purchase coverage through the car rental
company. Rental car companies sell various types of
insurance and waivers. Loss damage waivers (LDW) and
collision damage waivers (CDW) from the rental company
essentially take the place of the renters own collision and
comprehensive insurance. Some LDWs include CDW and some
waivers require payment of a deductible. These types of
insurance sales are very profitable for a car rental
company. Avis, for example, sells five kinds of coverage
and about 30% of renters at Enterprise Rent-A-Car buy some
type of insurance coverage. According to a 2007 National
Association of Insurance Commissioners (NAIC) study, 34% of
consumers surveyed bought a rental car company's insurance.
Further, according to a national auto rental consultant,
sales of insurance are an "important profit center" for car
rental companies. Daily rates vary by type of car and
rental location, but a 2007 survey shows that loss damage
waivers sell from $8.95 to $35.99 a day, and supplemental
liability insurance sells from $8.95-$12.95 a day.
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However, when a non-U.S. resident who rents a car causes a
car accident and injures a California resident it can be a
nightmare for the California resident to try to locate the
car renter and seek remedial action. For example, in San
Francisco, a Tibetan rented a car and purchased the
insurance sold by that company. The Tibetan caused a major
accident, leaving a California resident severely injured,
and left the U.S. In this case, the plaintiffs actually had
to hire a yak to get to the location of service. In
another actual case from Northern California, a CAOC member
is representing a police officer who was on duty riding his
department issued motorcycle when he was injured by a
German tourist who made an illegal turn causing the officer
to hit and flip over the tourist's rental car. The expense
and difficulty of complying with the Hague convention would
cause a serious burden to the police officer's recovery.
Under current law, service of process on out of country
defendants is complicated, expensive and difficult as 1)
the onerous provisions of the Hague Convention of 1965 On
the Service Abroad of Judicial and Extrajudicial Documents
in Civil or Commercial Matters must be met; 2) not all
countries have agreed to the Hague Convention; 3) the
paperwork must be translated into the language of the
defendant; and, 4) a service processor must be located. The
losers in the current situation are Californians who are
injured or killed by an out-of-state renter because the
case cannot proceed unless the defendant is properly
served. The State of California suffers as well because if
the defendant cannot be served and the case not processed,
the medical bills may often end up being paid by California
taxpayers.
The sponsor of the measure, Consumer Attorneys of California
(CAOC), argues that the bill will make sure drivers receive the
benefits of car rental insurance when injured by an out-of-state
or out-of-country driver.
According to CAOC, a problem arises where out-of-state renters
drive recklessly and injure or kill a California resident and
then leave the state. If a lawsuit ensues, the injured
California citizen then needs to locate, and serve, the out of
state resident. CAOC notes that because the rental car company
receives the benefit of issuing the insurance, and has the
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capacity to obtain adequate information from renters in order to
locate them after an accident, it makes sense to require the
company to accept service in this very limited circumstance.
CAOC states that the Hague Convention process is inadequate
because not all countries have agreed to the Hague Convention.
Even where it applies, CAOC argues, the process is unacceptable
because the paperwork must be translated into the language of
the defendant and a service processor must be located. Such
onerous obstacles can be avoided, CAOC contends, if the rental
company simply accepts service of process on behalf of its
renter. They argue that the losers in the current situation are
Californians who are injured or killed by an out-of-state renter
because the case cannot proceed unless the defendant is properly
served.
CAOC also argues that the bill will help save the State of
California money, noting that when service of process cannot be
accomplished, California often suffers financially as well. If
the defendant cannot be served and the case not processed, the
medical bills may often end up being paid by California
taxpayers. Under the normal course of a lawsuit, the medical
bills would be repaid out of the lawsuit recovery to the state
in instances where it provides medical care. However, under the
current situation, if a defendant cannot be served, he or she
(and the insurer) avoid responsibility and the victim and the
state end up paying.
Representatives of the car rental industry write in opposition:
"AB 621 requires rental car companies to accept service of
process for customers from other countries if the rental car
causes any harm, loss, or damage to a third party and if the
customer had purchased supplemental liability insurance as part
of the rental transaction. Further, the bill obligates the
rental company to provide a copy of the summons and complaint to
the renter or authorized driver. The bill is discriminatory and
unnecessary. No other business which provides insurance is
obligated to accept service of process for its customers. There
are already two means by which foreign rental car drivers can be
served. Existing law (Vehicle Code Section 17451) currently
authorizes the DMV Director to accept service of process for
nonresident drivers. Furthermore, the United States is a
signatory to the Convention on the Service Abroad of Judicial
and Extrajudicial Documents in Civil or Commercial Matters, a
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multinational treaty more commonly called the Hague Service
Convention, which allows service of judicial documents from one
signatory state to another without recourse to consular and
diplomatic channels."
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334
FN: 0000181