Understanding Third Party Owner Liability

Understanding Third Party Owner Liability

At nearly 15 percent of all vehicle owners, California has one of the highest numbers of uninsured motorists in the country. Additionally, the Golden State has one of the lowest insurance minimum requirements in the United States. As a result, many drivers do not have sufficient insurance coverage to fully compensate victim/plaintiffs for their economic and noneconomic damages, especially in cases involving wrongful death or other catastrophic injuries. It’s legally possible to recover excess damages from individuals, but it’s easier to find other responsible parties and add them to the lawsuits, therefore increasing the pool of available funds.

Private Owner Liability

Straightforward private negligent entrustment claims come up in a variety of car crash scenarios.

  • A young minor borrows a family member’s vehicle to go to the store, and on the way back, the minor misses a curve in the darkness and causes a car wreck.
  • Rhonda Roommate allows Rachel Roommate to use her car while Rhonda is out of town for the weekend, even though Rhonda has seen that Rachel does not always use required prescription eyeglasses when she’s behind the wheel.
  • During concert setup, Peter Performer asks a roadie to bring some sound equipment from the studio to the event, and the roadie causes a car crash.

Negligent entrustment works a little differently in California than in some other jurisdictions, because in the Golden State, it is against the law (Vehicle Code 14606(a), to be specific) for owners to lend their vehicles to incompetent drivers.

There are basically three ways to prove incompetence. First, and this is the most commonly-used theory, unlicensed drivers are incompetent as a matter of law, regardless of how carefully they drive. This presumption applies to drivers without licenses, even if they have been driving for many years, and drivers with suspended licenses, especially if the state suspended their licenses after a safety-related Negligent Operator Treatment System process.

The presumption also applies to drivers who do not adhere to license restrictions, like no night driving or no freeway driving, and operators without valid licenses for the type of vehicle they are operating, such as a driver with a valid Class C license operating a fully-loaded delivery truck.

Second, the plaintiff can show actual knowledge of incompetence. In the above examples, Rhonda actually knew that Rachel was incompetent, because she knew Rachel was supposed to wear glasses but didn’t do so. Owners also have actual knowledge if they know that the tortfeasor (negligent driver) had caused a prior car wreck.

Third, the plaintiff can argue that the tortfeasor was such a bad driver that the owner must have known that the tortfeasor was incompetent. The insurance company can try to rebut these claims.

Employer/Owner Liability

Obviously, employers do not “own” their employees in the everyday sense of that word, but for most legal purposes, ownership has more to do with control than legal title. For example, in theft cases, prosecutors often call store security guards as witnesses when they need an owner’s testimony, because the although the guards do not legally own the property, they do have a superior right of possession.

Most employees fall under the respondent superior rule, which states that employers are liable for the negligent acts of their employees which are committed during the course and scope of employment. However, if respondent superior is inapplicable for whatever reason, the plaintiff can invoke:

  • Negligent Hiring: Employers who knowingly hire unfit workers and this unfitness creates a particular risk of harm, these employers can be liable for damages.
  • Negligent Supervision: Similarly, if employers do not keep proper tabs on their workers, they can be liable for damages if they negligently or intentionally commit torts.

As San Diego personal injury attorney Curtis Quay explains “in all negligent entrustment-type cases, victims are entitled to compensation for their economic damages, such as lost wages, and their noneconomic damages, such as pain and suffering.”

Transactional Liability

If money changes hands, the federal Graves Amendment, as opposed to VC 14606(a) or another state law provision, is the governing law. Congress passed this law as a spending bill add-on to make vehicle rental companies immune from negligent entrustment lawsuits. Complete immunity automatically applies unless:

  • The vehicle’s owner or agent was not in the “trade or business” of renting vehicles, or
  • The owner or agent was “otherwise negligent.”

California courts interpret that second loophole in a broad and victim-friendly way. According to a line of cases including Flores v. Enterprise Rent-A-Car Co., commercial owners are negligent as a matter of law if they rent vehicles to unlicensed drivers, and if the operator had a poor driving record, the company is presumptively negligent if it rents a vehicle to that customer. In most cases, owner/agents have a duty to perform drivers’ license checks beyond a mere visual inspection.

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