BILL ANALYSIS                                                                                                                                                                                                    Ó



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          CONCURRENCE IN SENATE AMENDMENTS
          AB 621 (Charles Calderon)
          As Amended July 12, 2011
          Majority vote 
           
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          |ASSEMBLY:  |47-25|(April 7, 2011) |SENATE: |37-0 |(August 30,    |
          |           |     |                |        |     |2011)          |
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           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 








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            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 








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               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.









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          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