BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
AB 621 (Calderon)
As Amended June 20, 2011
Hearing Date: July 5, 2011
Fiscal: No
Urgency: No
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SUBJECT
Vehicle Rental Agreements
DESCRIPTION
This bill would require a rental car company that enters into a
vehicle rental agreement with a renter who is not a resident of
this country to do the following when that renter purchases
liability insurance as part of the agreement: (1) accept service
of process of any summons and complaint against the renter for
any accident resulting from the operation of the rental car
within California; and (2) mail a copy of the summons and
complaint to the renter. This bill would specify how process
must be served on the rental car company and would require that
the plaintiff agree to limit his or her recovery to the limits
of protection provided by the insurance. This bill would sunset
on January 1, 2015.
BACKGROUND
Existing law provides that in certain instances an individual is
deemed to have consented to the appointment of another entity to
serve as his or her agent for service of process. For example,
under the Vehicle Code, out-of-state drivers impliedly consent
to the appointment of the Department of Motor Vehicles' director
as their agent for service of process in any action against that
nonresident driver for injuries caused by an accident or
collision. Similarly, this bill, sponsored by the Consumer
Attorneys of California, would require a rental car company to
accept service of process for out-of-country renters when those
renters purchase liability insurance as a part of the vehicle
rental agreement. This bill is nearly identical to last year's
(more)
AB 621 (Calderon)
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AB 2059 (Calderon, 2010) which was vetoed by Governor
Schwarzenegger.
(This analysis reflects author's amendments to be offered in
Committee.)
AB 621 (Calderon)
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CHANGES TO EXISTING LAW
Existing law specifies restrictions on rental vehicle agreements
and regulates a renter's liability for loss due to theft, a
rental company's loss of use, damage, or loss to the car, damage
waivers and damage waiver fees. (Civ. Code Sec. 1936.)
Existing law provides that a rental car company may act as a
rental car agent for an authorized insurer in connection with
liability insurance, which may include uninsured motorist
coverage, that provides coverage to the renter and is not
duplicative of any standard liability coverage, for liability
arising from the negligent operation of the rental vehicle.
(Ins. Code Sec. 1758.85(b).)
Existing law provides that a nonresident driver impliedly
consents to the appointment of the director of the Department of
Motor Vehicles (DMV) as his or her agent for service of process
in any action against the nonresident driver for injuries caused
by an accident or collision. Existing law provides that service
of process shall be made by delivering a copy of the summons and
complaint to the director. The plaintiff must also send a copy
of the summons and complaint by registered mail to the
nonresident driver, return-receipt requested. (Veh. Code Secs.
17451, 17454, 17455, 17456.)
This bill would, as described in more detail below, authorize a
rental car company that enters into a vehicle rental agreement
with a renter who is not a resident of this country to accept
service of a summons and complaint against that renter when the
renter purchases liability insurance as defined in Insurance
Code Section 1758.85.
This bill would require the rental car company, if served as set
forth in the bill, to accept service of a summons and complaint
against the foreign renter for any accident or collision
resulting from the operation of the rental vehicle within
California during the rental period.
This bill would require the rental car company, within 30 days
of acceptance of service of process, to provide a copy of the
summons and complaint to the foreign renter by first class mail,
return receipt requested.
This bill would specify that, if the rental car company has a
registered agent for service of process on file with the
AB 621 (Calderon)
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Secretary of State, process shall be served on the rental
company's registered agent, either by first class mail, return
receipt requested, or by personal service.
This bill would provide that a plaintiff who elects to serve a
foreign renter by delivering a copy of the summons and complaint
to the rental car company as provided by this bill shall agree
to limit his or her recovery against the foreign renter and the
rental car company to the limits of the protection extended by
the liability insurance.
This bill would sunset on January 1, 2015.
COMMENT
1. Stated need for the bill
The author writes:
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 renter's 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. . . .
However when a non-California 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
US. 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
AB 621 (Calderon)
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tourist's rental car. The expense and difficulty of complying
with the Hague convention ÝSee Comment 4b] would cause a
serious burden to the police officer's recovery. . . . 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 CA 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.
Sponsor Consumer Attorneys of California (CAOC) writes that the
bill will help Californians because the service of process
requirements under the Hague Convention are "onerous obstacles
Ýwhich] can be avoided if the rental company simply accepts
service of process on behalf of its renter." CAOC also points
out that:
Ýw]hen service of process cannot be accomplished, often
California 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.
2. Rental car companies and others neutral on bill with most
recent amendments
This bill was amended on June 20, 2011 to revise and recast its
provisions. Most significantly, the amendments limit the bill's
provisions only to accidents and collisions that take place in
the State of California. In addition, the amendments make clear
that, if the rental car company has a registered agent for
service of process on file with the Secretary of State, process
must be served on that agent, either by first class mail, return
receipt requested, or by personal service.
With these amendments, Hertz Corporation, Enterprise Holdings,
the Chamber of Commerce, and the Civil Justice Association of
California indicate that they are neutral on the bill.
3. Bill would require rental car companies to accept service of
process for out-of-country renters
AB 621 (Calderon)
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This bill would require a rental car company to accept service
of process for out-of-country renters who purchase liability
insurance as a part of the vehicle rental agreement. The bill
would also require the rental car company, within 30 days of
accepting service of process, to mail a copy of the summons and
complaint to the foreign renter by first class mail, return
receipt requested.
a. Accepting service of process for out-of-country renters;
registered agent must be served
This bill would require a rental car company to accept service
of process for out-of-country renters for any accident or
collision resulting from the operation of the rental vehicle
within California during the rental period. If the rental car
company has a registered agent for service of process on file
with the Secretary of State, this bill would require that
process be served on that agent either by first class mail,
return receipt requested, or by personal service.
Existing law requires all corporations to designate an agent
for service of process (Corp. Code Sec. 1502(b)), and requires
corporations to file with the Secretary of State specified
information, including the designated agent (Corp. Code Sec.
1502(a)). As a result, a plaintiff serving a summons and
complaint under this bill should simply have to go to the
Secretary of State's Web site to locate the rental car
company's designated agent. If, however, the company had not
designated an agent for service of process, then a plaintiff
could serve the company itself with a copy of the summons and
complaint.
b. Plaintiff's recovery limited
This bill would specify that a plaintiff who elected to serve
the renter in the manner prescribed by the bill would be
limited in his or her recovery against the renter or the
rental company to the limits of the protection extended by the
liability insurance. Once the bill's service of process
requirements are met as described above, the plaintiff would
be able to bring his or her claim against the liability
insurance policy in order to recover.
c. Liability insurance
AB 621 (Calderon)
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This bill's requirement that a rental car company accept
service of process for out-of-country renters applies when
that renter has purchased liability insurance, as defined in
Insurance Code Section 1758.85(b), as a part of the vehicle
rental agreement.
Insurance Code Section 1758.85 permits a rental car company to
act as a rental car agent for an authorized insurer only in
connection with the rental of vehicles and only with respect
to specified kinds of insurance, including liability
insurance. Section 1758.85(b) defines "liability insurance"
as "insurance which may include uninsured motorist coverage,
whether offered separately or in combination with other
liability insurance, that provides coverage to the renters and
to other authorized drivers of a rental vehicle and is
nonduplicative of any standard liability coverage or
self-insurance limits provided by the rental company in its
rental agreement, for liability arising from the negligent
operation of the rental vehicle during the rental period."
This bill's provision defining liability insurance pursuant to
Insurance Code Section 1758.85(b) makes clear that the
insurance coverage referenced in the bill is the coverage
purchased from the rental car company as part of the vehicle
rental agreement rather than the renter's own automobile
insurance policy or any self-insurance limits provided by the
rental car company in its rental agreement.
Rental car companies offer liability insurance policies at an
additional cost which varies, depending on the company. In
one case, the charge for liability insurance for a recent
rental would be $11.99 per day. Another company charged
$14.80 per day. These policies generally cover up to $1
million for third party liability claims, although at least
one company provides coverage up to $2 million, depending on
the location.
d.Requirement to mail summons and complaint to the renter
This bill would require a rental car company, within 30 days of
acceptance of service of process, to provide a copy of the
summons and complaint to the foreign renter by first class
mail, return receipt requested. This provision would not
require the rental car company to do anything more than
provide a copy of any summons and complaint served on the
company to the out-of-country renter by first-class mail,
AB 621 (Calderon)
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return receipt requested. The rental car company is arguably
in the best position to be able to forward the summons and
complaint to the renter since the company has the renter's
contact information (and the plaintiff likely does not). And,
as long as the company mailed to the renter the summons and
complaint, the company would be in compliance with the
statute.
In addition, the bill specifically provides that the requirement
that the rental car company accept service of process shall
not create any duty, obligation, or agency relationship other
than the responsibility to provide the summons and complaint
to the renter.
4. Existing service of process mechanisms
a.Vehicle code provisions
Under existing law, a nonresident driver impliedly consents to
the appointment of the director of the DMV as his or her agent
for service of process in any action against the nonresident
driver for injuries caused by an accident or collision. (Veh.
Code Sec. 17451.) "Nonresident" is defined as a person who is
not a resident of California at the time of the accident or
collision. (Veh. Code Sec. 17450.) Service must be made upon
the director, and a notice of service and a copy of the
summons and complaint must be sent by registered mail to the
defendant. (Veh. Code Secs. 17454, 17455.) A return receipt
is required to show proof of compliance. (Veh. Code Sec.
17456.)
With respect to these provisions, the sponsor notes that the
U.S. Postal Service does not accept return receipts for many
international deliveries so plaintiffs may not use these code
sections in those instances. In addition, even if the Postal
Service did accept return receipts in all cases, the Vehicle
Code provisions still impose difficult burdens on the
plaintiff because they require that a copy of the summons and
complaint be sent by registered mail to the nonresident
renter. This requires that the plaintiff know the renter's
address, which may only be accessible from the rental car
company's records.
b.Hague Convention of 15 November 1965 on the Service Abroad of
Judicial and
Extrajudicial Documents in Civil or Commercial Matters
AB 621 (Calderon)
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(Hague Convention)
The author and his sponsors assert this bill is necessary
because "Ýs]ervice 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." Legal commentators have
also noted the complexity of serving international defendants.
(See, e.g., Comment, Dysfunctional Equivalence: The New
Approach to Defining "Postal Channels" Under the Hague Service
Convention, (2007) 55 UCLA L. Rev. 205; Greenwood, Serving
Them Right: When Taking on International Defendants, Expect
Challenges, Even Complications, (2005) 91 A.B.A.J. 24.)
One supporter of last year's AB 2059, nearly identical to
this bill, stated "? a Denmark resident caused my client to
suffer a serious injury as a result of negligent driving of a
vehicle that was rented here in California. The Denmark
driver purchased bodily injury liability insurance through the
rental company. The insurance company knows of the bodily
injury and the negligence that caused my client to suffer
damages. The insurance company will eventually cover the
loss, however, the insurance company is refusing to even
negotiate on the claim unless and until we effect service of
process on the driver in Denmark. This has unnecessarily
delayed the claim, which is causing additional damages to my
client, and that is preventing other companies here in
California to be reimbursed for medical expenses that they
incurred as a result of the Denmark driver's negligence.
Moreover, this has caused an unnecessary lawsuit to be filed,
just so that we can effect service in Denmark complying with
the Hague Service Convention. Furthermore, we will incur
substantial additional cost and delay as a result. All of
this would have been unnecessary if your Ýb]ill had already
been the law."
By requiring rental car companies in certain instances to
accept service of process for international renters, this bill
implicates service of process outside of the United States.
Both California law and the Hague Convention govern the
transmission of documents outside the United States. In
addition, under the Supremacy Clause (U.S. Const. Art. VI),
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the Hague Convention preempts any inconsistent state laws.
(Volkswagenwerk Aktiengesellschaft v. Schlunk (1988) 486 U.S.
694.) There are currently 64 countries, or "Contracting
States," that are parties to the Hague Convention, which
"deals primarily with the transmission of documents; it does
not address or comprise substantive rules relating to the
actual service of process." (Outline, Hague Service
Convention, Hague Convention of 15 November 1965 on the
Service Abroad of Judicial and Extrajudicial Documents in
Civil or Commercial Matters,
http://www.hcch.net/upload/outline14e.pdf .) Contracting
States may opt out of one or more forms of service.
California law provides that, except as otherwise provided
by statute, a summons shall be served on a person outside the
United States as provided in the Code of Civil Procedure, as
directed by the court in which the action is pending, or, if
the court before or after service finds that the service is
reasonably calculated to give actual notice, as prescribed by
the law of the place where the person is served or as directed
by the foreign authority in response to a letter rogatory.
(Code Civ. Proc. Sec. 413.10.) These rules are subject to the
provisions of the Hague Convention. (Id.)
While the rules governing service of summons outside of the
United States are subject to the provisions of the Hague
Convention, depending on the receiving country, it would
appear that this bill's provisions requiring rental car
companies to mail a copy of the summons and complaint to the
out-of-country renter would arguably meet service
requirements. The sponsor provides the following rationale:
. . . AB 2059 provides for an agent for service of process
within the United States (rental car company); therefore,
the Hague Convention is not the exclusive means of service.
ÝAlso] AB 2059 is not inconsistent with the Hague
Convention. AB 2059 seeks to facilitate service of process
abroad. The Hague Convention "was formulated in 1964-65 by
delegates from the United States and 22 other nations?.with
the original intent to help ensure that defendants sued in
foreign jurisdictions would receive actual and timely
notice of suit and to facilitate proof of service abroad."
(citations omitted) The U.S. Supreme Court has stated
that: "We do not think that any country will draft its
internal laws deliberately so as to circumvent the
Convention in cases in which it would be appropriate to
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transmit judicial documents for service abroad?we
anticipate that parties may resort to the Convention
voluntarily, even in cases that fall outside the scope of
its mandatory application." (Volkswagenwerk at 705-706.)
AB 2059 is consistent with the intent and with the express
language of the Convention.
5. Governor's veto of AB 2059
As noted in the Background, this bill is nearly identical to
last year's AB 2059 (Calderon, 2010). That bill was vetoed by
Governor Schwarzenegger who stated:
This bill provides a mechanism for service of legal process on
non-residents who cause injuries involving rental cars in
California, by allowing process to be served to the rental
company. While I appreciate the challenging nature of serving
process on people who live out of the country, it does not
seem reasonable or justified to simply shift that burden from
the plaintiff to the rental car company.
6. Technical author's amendments
The following amendments are needed to make technical
corrections:
On page 21, line 25 after "complaint" insert "and any other
required documents"
On page 21, line 29, delete "and Consumer Services"
On page 22, line 8, after "pursuant" insert "to"
Support : Consumer Federation of California
Opposition : None Known
HISTORY
Source : Consumer Attorneys of California
Related Pending Legislation : None Known
Prior Legislation : AB 2059 (Calderon, 2010). See Background.
AB 621 (Calderon)
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Prior Vote :
Assembly Floor (Ayes 47, Noes 25)
Assembly Judiciary Committee (Ayes 7, Noes 3)
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