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Let's say someone (Person A) rents out a car to someone else (Person B). They sign a contract that states that the renter of the car (Person B) cannot hold the owner (Person A) financially liable for anything that happens while the other person (Person B) is in pocession of the car.

The next day Person B who is renting out the car drives drunk into another car causing an accident where another person (Person C) get injured.

Can Person C sue Person A for renting their car to Person B and likely win?

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    The country or subnational jurisdiction that has authority over the relevant law matters. This is not a question that has a uniform answer everywhere.
    – ohwilleke
    Commented Oct 18, 2023 at 19:45
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    The contract doesn't affect Person C's rights; Person C is not a party to the contract. This is purely an issue of local law.
    – PJB
    Commented Oct 19, 2023 at 12:44
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    Hi! Would you consider renaming Person A, Person B and Person C to explicit names like "the Owner", "the Renter" and "the Accidentee", or something similar, to make it easier to read and understand your story?
    – Stef
    Commented Oct 19, 2023 at 18:01
  • Additional differences, if person A is a company whose business is car rental vs an individual who is doing this once-off. AND its even murkier if there's turo.com or getaround.com or one of the other "airbnb for cars" services - is this a business doing rentals.
    – Criggie
    Commented Oct 19, 2023 at 18:21

4 Answers 4

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The law with regard to this issue varies from one place to another.

Most jurisdictions do not impose liability for car accidents caused by human error on the owner of the car automatically, unless the owner of the car negligently entrusted the car to someone who posed an elevated risk of causing an accident that was known or should have been known to the owner.

Some jurisdictions impose "vicarious liability" (i.e. liability without proof of wrong doing, merely due to the relationship) for car accidents on the head of the household where the driver lives.

Most jurisdictions impose vicarious liability on the employer of an employee who gets in a car accident while on the job.

Some jurisdictions expressly exempt car rental firms from liability for accidents caused by renters of cars rented by the car rental firm, or exempt people who rent cars from liability for these accidents under the relevant case law.

But there are probably some jurisdictions that do impose liability on the car owner in these circumstances.

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You don’t mention the country. In Germany, third party liability for car insurance covers the driver, not the owner of the car or the person paying the insurance. So a German car insurance would pay Cs damage as long as the damage wasn’t done intentionally and as long as the car is insured (and when your car stops being insured police will give you a visit to make sure it is not used). A knowing that B has no license doesn't change that. Third party liability is there to protect victims, so it is very difficult for an insurance to get out of paying. (AFAIK they will often pay even if they legally wouldn't have to, as a public service that adds 10 pennies to your insurance premium because it is rare).

Of course the insurance will try to recover money from B or A if they can. If B had no license they will try to get their money back from B, similar if he was drunk. If A knew that B had no valid license, the insurance will try to get their money back from A as well.

Now if there was no insurance for the car, then no insurance will pay C, so C would have to sue A or B. Renting out an uninsured car would definitely be a reason to go after A. And A would be in trouble, plus B would be in trouble if he knew (in legal trouble beyond having to pay).

If no insurance pays, C could sue A in addition to B in a situation where A knew or should have known that renting out a car to B would put people at risk. For example if A knows that police took Bs car to stop him from driving drunk, as an extreme case. Or if the car was not insured.

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  • Your last sentence confuses me. Are you talking about a situation where the police confiscated B's driving license, in which case A shouldn't have rented the car to B without checking that B had a license; or are you talking about a situation where the police confiscated the car because B was currently drunk, in which case A should not have rented the car to B, not because of B's car being confiscated, but because B was currently drunk? It seems to me that it should be none of A's business whether B's car was confiscated or not.
    – Stef
    Commented Oct 19, 2023 at 18:07
  • Tried to clarify. As long as the car is insured (there is an insurance contract) it's very very hard for the insurance not to pay the victim, whatever A and B did wrong and however badly they acted.
    – gnasher729
    Commented Oct 21, 2023 at 23:28
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In most countries/states the owner of the automobile is required to have third-party liability coverage in the form of insurance or other approved means (bonded self-insurance, deposit). A contract between A and B cannot remove this requirement that the government imposes on A for the protection of the public.

What would happen is victim C files a claim against the vehicle owner A. A's insurance would pay out, at least up to the limits required by law. The insurance of owner A would then pursue a claim against renter B for the recovery of the amounts paid out, as well as for the damage to the rental car. This would be where the contract where renter B agrees to indemnify owner A comes into play. If renter B had applicable insurance, that would then pay the loss. If B declares bankruptcy or disappears, A's insurance is left holding the bag.

The major exception is no-fault jurisdictions. In those areas, up to the limits of no-fault, victim C would claim against their own insurance. In areas like Quebec or British Columbia, Canada, which has no-fault nationalized bodily injury insurance, the government would compensate for both B and C's injuries/death.

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    It seems to me that A's insurance would not pay out at all and the claim would be simply dismissed because A was not the driver and C has filed a claim against the wrong person? C should file a claim against B directly.
    – Stef
    Commented Oct 19, 2023 at 18:12
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    In fact, I don't think A is required to have insurance at all. They're only an owner, not a driver. But A would definitely be entitled (and maybe even legally obligated) to check that B has insurance before they agree to rent their car to B.
    – Stef
    Commented Oct 19, 2023 at 18:14
  • @Stef No. Mandatory third-party liability generally covers all authorized drivers. For example, California Insurance Code 11580.1(b)(4) "Provision affording insurance to the named insured... and to the same extent that insurance is afforded to the named insured, to any other person using the motor vehicle, provided the use is by the named insured or with his or her permission, express or implied, and within the scope of that permission"
    – user71659
    Commented Oct 19, 2023 at 18:24
  • @Stef And no, owner A is required to have insurance. California Vehicle Code 16020 "All drivers and all owners of a motor vehicle shall at all times be able to establish financial responsibility pursuant to Section 16021, and shall at all times carry in the vehicle evidence of the form of financial responsibility in effect for the vehicle."
    – user71659
    Commented Oct 19, 2023 at 18:26
  • @Stef Normally, at least for car rental businesses in the UK, A would insure the vehicle for any driver and so B would not need to have their own insurance. The insurance would probably exclude some categories of driver, and A would simply refuse to rent to such a driver.
    – Mike Scott
    Commented Oct 20, 2023 at 8:38
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Possibly irrelevant or tenuously analogous to the question: In the US (Mississippi) the owner (A) trusted a 3rd party (D) to administrate the rental contract with the renter (B), the owners (A) filed suit against (D). However the vehicle was a small private plane, and the airport (D) rented it to criminals (B) who crashed it in a foreign country. However, the owners were unable to prove negligence on the part of the airport in vetting the renters (B) and eventually dropped their suit.

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