Trouble for the independents started in 1989, when the state passed a law limiting what rental companies could charge for vehicle damage to a mere $100. Customers could total a rental car and pay less than the cost of a steak dinner for two in Midtown Manhattan. Compounding the risk, Albany set the minimum age to rent at just 18 and prohibited companies from requiring that customers hold a personal car insurance policy or even a credit card. According to Faulkner, some 200 operators in the state went out of business shortly after the law went into effect.

Under its so-called "vicarious liability law," New York also exposed rental car companies to the risk of having to insure for unlimited damages when their customers were found negligent. In 1997, Faulkner was running an independent outfit in upstate New York when she got sued because an unauthorized driver—the 15-year-old son of the woman who had actually rented the vehicle—hit a pedestrian.(Faulkner's insurance company settled for an undisclosed sum.) The largest award came in 2003, when Budget was ordered to pay nearly $20 million to an accident victim.

Presumably someone thought it was a good idea to allow widespread chaos in the car rental business . . . but I'm not sure who, other than the big rental companies. And even they got tagged. No one should stand for this nonsense.

Labels: economics