BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
AB 753 (Monning)
As Amended June 20, 2011
Hearing Date: June 28, 2011
Fiscal: Yes
Urgency: No
SK
SUBJECT
Vehicle Rentals:
The Raechel and Jacqueline Houck Rental Car Safety Act
DESCRIPTION
Under existing law, a rental car company may not rent a vehicle
that does not conform to federal motor vehicle safety standards
or that is not mechanically sound and safe to operate. This
bill would expressly prohibit a rental car company from renting
a vehicle that is subject to a recall notice unless the vehicle
has been repaired as specified in the notice.
(This analysis reflects author's amendments to be offered in
Committee.)
BACKGROUND
Existing law prohibits rental car companies from renting
vehicles that do not conform to federal motor vehicle safety
standards or that are not mechanically sound and safe to
operate. Despite this prohibition, media reports over the past
few years have indicated that many rental car companies
nevertheless rented vehicles subject to safety recall notices
without having fixed the identified problem. (See, e.g., "Faced
with recalls, rental companies sometimes decide to wait," New
York Times, April 19, 2011; "Controversy builds over renting out
recalled cars," Los Angeles Times, March 14, 2011; "Rent-a-car
companies putting recalled autos on the road," ABC News, July 7,
2010; "Rental cars which are recalled are being investigated for
repairs," Associated Press, November 24, 2010.)
(more)
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The issue came to light most prominently because of a tragic
accident in Santa Cruz several years ago in which two sisters
were killed while driving a recalled PT Cruiser. In that case,
". . . Raechel Houck, 24, and Jacqueline Houck, 20, died on Oct.
7, 2004, when their rented Chrysler PT Cruiser crashed and
caught fire on Highway 101 near King City while they were
returning to Santa Cruz from a visit with their parents.
Enterprise Rent-A-Car rented out the vehicle even though it had
been recalled because of a faulty power steering hose that could
lead to fires under the hood. During the civil trial against
Enterprise, an employee testified the company routinely rented
out recalled cars." ("Rental car safety pushed by mother of 2
crash victims," Scripps Howard News Service, May 13, 2011.)
According to the author, the recalled car had been rented out to
three other customers before it was rented to the Houck sisters.
The Houck family sued and, after rejecting an offer to settle
the lawsuit secretly and five and a half years of litigating the
matter, Enterprise admitted responsibility. The jury awarded
the Houck parents $15 million.
In 2010, the National Highway Transportation Safety
Administration (NHTSA) began investigating rental car companies
and whether they were repairing vehicles subject to a recall
quickly enough. ("Car rental firms in U.S. safety probe,"
CNNMoney.com, November 22, 2010.) As a part of that discussion,
various rental car companies indicated that their policies
regarding recalled vehicles had changed. For example,
Enterprise indicated that under its current company policy,
"'virtually all' cars under recall are grounded until they're
fixed except for rare exceptions in which the company chooses
not to fix certain recalled cars. . . . Hertz told ABC News it
dramatically changed its policy to ground all cars under
recall." ("Rental car agencies band together against NHTSA
study," ABC News, March 8, 2010.) In April 2011, both
Enterprise and Hertz indicated that recalled vehicles may still
be rented out if the companies determine that the recall does
not pose an immediate risk to public safety (in the case of
Hertz, an "imminent or potentially serious risk attributable to
an identified defect repair campaign"). (Letters from
Enterprise and Hertz company executives to Ms. Jennifer T.
Timian, Chief, Recall Management Division, Office of Defects
Investigation, National Highway Traffic Safety Administration,
available at http://www-odi.nhtsa.dot.gov/.)
This bill, sponsored by Consumers for Auto Reliability and
Safety, would expressly prohibit a rental car company from
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renting a vehicle that is subject to a recall notice unless the
vehicle has been repaired as specified in the notice.
CHANGES TO EXISTING LAW
Existing law prohibits any person engaged in the rental of a
vehicle for 30 days or less from renting, leasing, or otherwise
allowing the operation of a vehicle unless:
all necessary equipment required by law for the operation of
the vehicle upon a highway has been provided or offered to the
renter for his or her use;
the vehicle conforms to all applicable federal motor vehicle
safety standards established under the federal National
Traffic and Motor Vehicle Safety Act of 1966 (15 U.S.C. Sec.
1381 et seq.); and
the vehicle is mechanically sound and safe to operate. (Veh.
Code Sec. 24010.)
Existing federal law , Part 577 of 49 C.F.R. 577.1, sets forth
the requirements for when manufacturers must notify vehicle
owners, dealers, and distributors about a defect that relates to
motor vehicle safety or noncompliance with a federal motor
vehicle safety standard. (49 C.F.R. 577.1.)
This bill would expressly provide that a vehicle may not be
rented if it is subject to a federal safety recall notice issued
pursuant to Part 577 of 49 C.F.R. 577.1, unless the repairs
necessary to correct the noncompliance or defect have been
performed on the vehicle consistent with that part.
This bill would expressly provide that a vehicle may not be
rented if it is subject to a federal safety recall notice issued
pursuant to Part 577 of 49 C.F.R. 577.1, that provides for
interim steps to temporarily correct the noncompliance or defect
unless the interim steps specified in the most recent notice
have been performed on the vehicle.
This bill would provide that for purposes of the above two
provisions, a vehicle is not deemed to be subject to a Part 577
federal safety recall notice in any of the following instances:
the federal safety recall notice has not been received by the
lessor (e.g., rental car company) at the time it provides the
vehicle to the lessee (renter);
the vehicle is subject to a federal safety recall conducted in
stages, including, but not limited to, a recall notice or a
series of notices advising owners of vehicles in different
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model years to take their vehicle to an authorized dealer to
have the repair performed during subsequent time periods, and
the lessor has not received a written notice advising it that
the vehicle should be taken to an authorized dealer to have
the repair work performed; or
the vehicle is subject to a federal safety recall notice that
is only applicable to geographic regions outside of
California.
This bill would provide that any person engaged in the rental of
a vehicle for 30 days or less shall not sell a vehicle at retail
unless that vehicle is in compliance with the bill's provisions
described above.
COMMENT
1. Stated need for the bill
The author writes:
All the major rental car companies have a record of renting
out or selling vehicles that are under federal safety recalls,
placing their customers at potential risk of serious injury or
death, and posing a threat to other drivers. . . .
A tragic example of this occurred in the Santa Cruz area when
sisters Raechel and Jacqueline Houck were killed while driving
a recalled PT Cruiser rented from Enterprise. Approximately
one month before the Houck sisters were killed, Enterprise
received notice from Chrysler that the PT Cruiser had a
defective steering component that was prone to catch fire.
Despite the warning, Enterprise rented out the car to three
other customers before renting the PT Cruiser to the Houck
sisters.
While some rental car companies claim they have changed their
policies as a result of the Houck case, legislation is still
necessary to ensure that rental car customers are not placed
in unknown danger when renting a car under a manufacturer's
safety recall.
Consumers for Auto Reliability and Safety, sponsor of the
measure, notes that "Ýa]uto manufacturers are required by
federal law . . . to recall vehicles when they meet one of two
criteria: Ý1] when they pose an 'unreasonable risk' to safety
Ýor 2] when they fail to comply with the minimum federal motor
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vehicle safety standards."
A number of individuals wrote in support of this bill, including
one who stated:
In a sense every person who rents a car believes that for
their money they are being provided with a safe vehicle that
will get them to their destination. Since the loss of Raechel
and Jacqueline, I have not felt safe when renting a car. I
have asked attendants if the car that they are providing to me
has had any recalls and if so have they been taken care of?
The answer I receive is always very vague, or "It should be
fine." I feel that these companies should be required to fix
all recalls on a vehicle before it can be rented to anyone.
2. June 20th amendments seek to address concerns; rental car
companies request additional amendments
This bill would expressly prohibit a rental car company from
renting a vehicle that is subject to a recall notice unless the
vehicle has been repaired as specified in the notice. Rental
car companies had raised concerns that the bill did not
recognize the varying issues that may arise from safety recall
notices. For example, some recall notices are issued only for
certain geographic regions; in February 2011, Mitsubishi issued
a recall for certain Endeavor vehicles when operated in cold
weather states where road salt is used.
Rental car companies raised concerns that, in other instances,
the manufacturer may recommend temporary interim measures that
may be taken to make the vehicle safe for driving until a more
permanent solution is available. As an example, Toyota sent
certain vehicle owners a notice directing them to remove the
driver's side floor mat as an interim remedy while the company
identified the procedure and parts necessary to permanently fix
the problem of accelerator pedals becoming stuck in the open
position, causing sudden acceleration.
Finally, some recall notices are issued before parts are
available to address the identified problem. In those
instances, manufacturers may direct vehicle owners to bring
their vehicles in for repair on a staggered basis. For example,
last year General Motors issued a recall of more than one
million Chevrolet Cobalts because of problems with the power
steering. Owners were notified of the recall on a rolling basis
over an eight-month period.
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The author has amended the bill in an effort to address the
above-described concerns. The June 20th amendments:
allow vehicles to be rented when they are subject to a recall
notice that is conducted in interim steps with different
notifications for each step, provided that the remedy
recommended by the manufacturer has been performed;
allow vehicles to be rented when they are subject to a recall
notice that is completed in stages, provided that the repair
work is performed once the rental car company receives a
notice that it is time to complete the repair work on the
vehicle;
allow vehicles to be rented if they are subject to a recall
notice that is only applicable to geographic regions outside
the state of California;
delete provisions of the bill relating to vehicles already
rented at the time a recall notice is received; and
transfer the bill's provisions from the Civil Code to the
Vehicle Code.
Opponent rental car companies indicate that, while they
appreciate the amendments taken by the author thus far, they
remain opposed to the bill and are seeking additional
amendments. Those amendments would permit a rental car company
to rent a recalled vehicle if the company did either one of the
following: (1) performed any repairs necessary to correct the
noncompliance (but not necessarily consistent with the Part 577
notice); or, in the alternative, (2) implemented an interim
measure which the manufacturer has communicated in writing to
owners of the vehicle either in a Part 577 notice, "or
otherwise," and that interim measure would resolve the safety
defect and has not been rejected by NHTSA as insufficient to
address the safety issue in question.
In addition, the opposition's proposed amendments revise the
bill's existing exemption for staged recalls to provide that the
rental car company would only have to meet one of two conditions
in order for the staged recall exemption to apply rather than
both conditions as the bill currently requires.
In response to these proposed amendments, the sponsor, Consumers
for Auto Reliability and Safety (CARS) writes:
. . . the rental car companies have proposed a sweeping,
unprecedented scheme that would allow them to continue to rent
to the public, or sell at retail, any vehicle-regardless how
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unsafe it is-whenever the manufacturer of the defective
product issues an informal written communication calling for
an "interim measure" in lieu of the federally required repair.
This concept is fundamentally flawed, and would be a radical
departure from decades of solidly established precedent. In
fact, we are not aware of any other consumer product in the
nation that is regulated under such a lax scheme.
Consumers Union, the Trauma Foundation, and the Center for Auto
Safety also oppose the industry's suggested amendments.
Consumers Union writes that it opposes "the rental car
industry's proposed amendment that would allow car manufacturers
to decide which rental car defect outlined in a NHTSA safety
recall is necessary to repair and which is not, or to provide
any sort of 'interim measure' in lieu of a full repair. All
rental cars subject to NHTSA-approved safety recalls should be
repaired to ensure the safety of its occupants before being
rented out to consumers."
3. Bill would prohibit rental car companies from renting vehicles
subject to a federal safety recall
Under existing law, a vehicle may not be rented if it does not
conform to federal motor vehicle safety standards or is not
mechanically sound and safe to operate. As a result, it is
arguably already a violation of existing law to rent a recalled
vehicle that does not conform to federal motor vehicle safety
standards or is not mechanically sound and safe to operate.
This bill, in addition, very clearly and expressly would provide
that a vehicle that is subject to a federal safety recall notice
may not be rented unless it has been repaired as specified in
the notice.
Under federal law, Part 577 of 49 C.F.R. 577.1 sets forth the
requirements for when manufacturers must notify vehicle owners,
dealers, and distributors about a defect that relates to motor
vehicle safety or noncompliance with a federal motor vehicle
safety standard. (49 C.F.R. 577.1.) Manufacturers must give
notice when a vehicle contains a defect that relates to motor
vehicle safety or fails to conform to an applicable federal
motor vehicle safety standard. (49 C.F.R. 577.5.) The National
Traffic and Motor Vehicle Safety Act defines "motor vehicle
safety" to mean "the performance of a motor vehicle or motor
vehicle equipment in a way that protects the public against
unreasonable risk of accidents occurring because of the design,
construction, or performance of a motor vehicle, and against
unreasonable risk of death or injury in an accident, and
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includes nonoperational safety of a motor vehicle." (49 U.S.C.
30102.) A defect "includes any defect in performance,
construction, a component, or material of a motor vehicle or
motor vehicle equipment." (Id.)
The National Highway Transportation Safety Administration
(NHTSA) lists a number of examples of defects considered
safety-related such as, among others:
steering components that break suddenly causing partial or
complete loss of vehicle control;
problems with fuel system components, particularly in their
susceptibility to crash damage, that result in leakage of fuel
and possibly cause vehicle fires;
accelerator controls that may break or stick;
windshield wiper assemblies that fail to operate properly;
seats and/or seat backs that fail unexpectedly during normal
use;
critical vehicle components that break, fall apart, or
separate from the vehicle, causing potential loss of vehicle
control or injury;
wiring system problems that result in a fire or loss of
lighting; or
air bags that deploy under conditions for which they are not
intended to deploy.
With respect to the importance of safety recalls, NHTSA stated
in April 2011, "The National Highway Transportation Safety
Administration believes that rental car companies have a
responsibility to provide safe vehicles to their customers. All
safety recalls resulting from defects present an unreasonable
risk to safety and we believe it is inappropriate to suggest
that some defects are not risky enough to require repair. For
the safety of the motoring public, all recalled vehicles should
be fixed promptly."
This bill would prohibit a vehicle from being rented if that
vehicle is subject to a federal safety recall notice issued
pursuant to Part 577, described above. As a result, either the
manufacturer or NHTSA would have determined that the vehicle
contains a defect that relates to motor vehicle safety or fails
to conform to an applicable federal motor vehicle safety
standard. By linking the prohibition in the bill to the Part
577 safety recall notice, this bill makes clear that a
safety-related issue is implicated and the vehicle should not be
rented unless that issue is addressed. The bill is thus limited
to instances where a safety recall notice has been issued, and
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would not apply to instances where a Part 577 safety recall
notice has not been issued. For example, a service campaign or
Technical Service Bulletin might deal with lesser problems and
less urgent defects. This bill would not apply in those
instances.
4. Federal law requires manufacturers to send notice of a recall
to the owner of the vehicle
Under federal law, if a manufacturer identifies a safety defect
in a vehicle, it must notify NHTSA as well as vehicle owners,
dealers, and distributors. Federal law requires that a
manufacturer repair an identified safety defect at no cost to
the owner; this includes rental car companies. Safety recall
notices issued by manufacturers must give the vehicle owner all
of the following information:
a clear description of the defect, including what system or
part is affected;
the malfunction that may occur because of the defect;
the conditions that might cause the malfunction to occur;
what precautions, if any, the owner may take to reduce the
likelihood that the malfunction will occur before the problem
is fixed;
an evaluation of the risk that the defect poses to motor
vehicle safety. For example, in some cases, the defect will
be so significant and create such an unreasonable risk to
safety that the notice will advise the vehicle owner to stop
driving the car; and
measures that must be taken to remedy the defect.
Existing law requires that all of the above information be
conveyed to a vehicle owner in a safety recall notice. As a
result, the rental car company, as the owner of the vehicle,
will be aware of this important safety information while the
customer renting the recalled vehicle will not. Instead, rental
car customers are in a different position and are likely not
aware of a safety recall, instead assuming that the vehicles
they are renting are safe. This bill would ensure that renters
are not put in this position in the first place by prohibiting
the rental of the recalled vehicle unless the safety issues
identified in the recall have been addressed.
5. Opposition
The following rental car companies write in opposition to the
measure: Alamo, Avis, Budget, Enterprise, Hertz, and National:
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For the rental industry (of which approximately 87 percent is
represented by the companies above) vehicle safety is our
mission. The industry can only operate with the trust of the
renting public, and bears the full responsibility for any
negligence. . . . AB 753 will not further improve
safety-related issues. Additionally, AB 753 fails to consider
the realities of the way manufacturers issue recalls, and
inappropriately focuses on rental cars (and not, for example,
fleet vehicles, taxicabs, limousines or other vehicles used by
persons other than the owner). On average there are 1.6
million rental cars in service in the U.S. roughly 10 percent
of those vehicles are in use in California. Our clients are
committed to providing safe vehicles for their customers, and
the results of their efforts are evident. By no means are we
trying to minimize the tragedy of the 2004 accident, but there
have been NO other events remotely similar to the accident in
question in our clients' rental history.
ÝThe bill] fails to recognize that the federal standards and
the instruction given by the manufacturers are typically
silent on whether the vehicles should continue to be operated
pending completion of the recall work and therefore require
thoughtful and diligent analysis. While exceptions to the
industry's standard practice of resolving all recalls before
renting the vehicle are infrequent, some of the examples
Ýcited above in Comment 2] affected many, many thousands of
California rental cars.
The California Chamber of Commerce opposes this bill, writing
(prior to the most recent amendments) that it ". . . seeks to
address a unique, albeit tragic situation, by imposing a broad
prohibition on the rental of any car subject to a federal recall
for any reason. In so doing, AB 753 would unnecessarily limit
access to rental cars in California, burdening rental car
companies and the state's tourism industry alike."
6. Technical author's amendments
To correct inadvertent drafting errors and make other clarifying
changes, the following amendments are necessary:
1. On page 2, line 1, insert:
SECTION 1. This act shall be known, and may be cited, as
the Raechel and Jacqueline Houck Rental Car Safety Act.
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SEC. 2
2. On page 2, line 13, strike "15 U.S.C. Sec. 1381 et seq."
and insert "49 U.S.C. Sec. 30101 et seq."
3. On page 3, line 17, after "a" insert "federal"
4. On page 3, line 23, delete "recall" and insert "repair"
5. On page 4, between lines 2 and 3, insert:
(e) For purposes of this section, a notice of a federal
safety recall received by a parent company of a rental
company shall be deemed notice to each of its subsidiaries,
and notice received by a subsidiary of a rental company
shall be deemed notice to its parent company.
(f) This section shall apply to a rental company as defined
in Section 1936(a)(1) of the Civil Code. This subdivision
is declaratory of existing law.
Support : California Coalition of Travel Organizations;
California Nurses Association; CalPIRG; Consumer Action;
Consumer Attorneys of California; Consumer Federation of
California; Consumers Union; Consumer Watchdog; Center for Auto
Safety; The Trauma Foundation; several individuals
Opposition : Alamo; American Car Rental Association; Avis Budget
Group; California Chamber of Commerce; California Travel
Association; Enterprise; Hertz; National; U.S. Travel
Association
HISTORY
Source : Consumers for Auto Reliability and Safety
Related Pending Legislation : None Known
Prior Legislation : None Known
Prior Vote :
Assembly Floor (Ayes 43, Noes 26)
Assembly Judiciary Committee (Ayes 6, Noes 4)
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