BILL ANALYSIS Ó AB 621 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 621 (Charles Calderon) As Amended July 12, 2011 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |47-25|(April 7, 2011) |SENATE: |37-0 |(August 30, | | | | | | |2011) | ----------------------------------------------------------------- Original Committee Reference: JUD. 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 when a rental company enters into a rental agreement in the state for the rental of a vehicle to any renter who is not a resident of this country and, as part of, or associated with, the rental agreement, the renter purchases liability insurance, as defined, from the rental company in its capacity as a rental car agent for an authorized insurer, the rental company shall be authorized to accept, and, if served as set forth in this subdivision, shall accept, service of a summons and complaint and any other required documents against the foreign renter for any accident or collision resulting from the operation of the rental vehicle within the state during the rental period. If the rental company has a registered agent for service of process on file with the 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. 2)Specifies that within 30 days of acceptance of service of process, the rental company shall, provide a copy of the summons and complaint and any other required documents served in accordance with this subdivision to the foreign renter by first class mail, return receipt requested. 3)Requires that any plaintiff, or his or her representative, who elects to serve the foreign renter by delivering a copy of the summons and complaint and any other required documents to the rental company shall agree to limit his or her recovery against the foreign renter and the rental company to the AB 621 Page 2 limits of the protection extended by the liability insurance. 4)Clarifies that, notwithstanding any other provision of law, the requirement that the rental company accept service of process pursuant this section shall not create any duty, obligation, or agency relationship other than that provided. 5)Establishes a three-year sunset by which the bill will cease to be operative on December 31, 2015. The Senate amendments are technical and clarifying. AS PASSED BY THE ASSEMBLY , this bill was substantially similar to the version approved by the Senate. 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 AB 621 Page 3 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. 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. AB 621 Page 4 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 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. Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334 FN: 0002037