Opinion
In Osborn v. Hertz Corp.
(1988)
In this case, we consider whether, in light of the availability of electronic driver’s license checks,
Osborn
should be revisited so as to impose on rental car companies the duty to make an electronic search of the driving records of their customers to determine their fitness to drive. We conclude that the rationale of
Osborn
remains persuasive, and, further, that the subsequent passage of Vehicle Code section 14604
1
and the decision of the California Supreme Court in
Philadelphia Indemnity Ins. Co.
v.
Montes-Harris
(2006)
The Complaint
Plaintiffs Jesus and Concepcion Flores’s son died after being struck by a car driven by Alexander Wadsworth Dederer, who had rented the vehicle from defendant Enterprise Rent-A-Car Company of Los Angeles (ERAC-LA). Plaintiffs sued ERAC-LA, as well as Enterprise Rent-A-Car Company (ERACC), alleging (in the operative second amended complaint) causes of action for wrongful death (a survivorship claim), negligent entrustment, and punitive damages.
According to plaintiffs, the standard of practice in the rental car industry is to screen potential renters for past convictions for driving under the influence (DUI) of drugs or alcohol, and to refuse to rent a vehicle if the customer has one conviction within the previous 48 months. Plaintiffs alleged that defendants “knew or should have known that persons with DUI convictions in the past 48 months pose[] an unreasonable risk of harm to those using the California roadways,” but defendants nonetheless adopted a corporate policy of not performing electronic driver’s license checks because the cost exceeded the cost of paying for losses caused by accidents involving such drivers. Plaintiffs alleged that Dederer had prior DUI convictions in the last 48 months, and that defendants should have known this information and should have declined to rent the vehicle to him.
The Motion for Summary Adjudication Filed by ERAC-LA
ERAC-LA filed a motion for summary adjudication of issues challenging plaintiffs’ negligent entrustment cause of action. As here relevant, ERAC-LA presented evidence that through its fictitious business name of Enterprise Leasing Company of Nevada, it owned the car driven by Dederer at the time of the accident. The accident occurred when Dederer, driving the vehicle, looked down to adjust his stereo and the vehicle struck Diego Flores. Dederer presented a valid California driver’s license when he rented the car and showed no signs of being under the influence of alcohol. Dederer was not under the influence of alcohol at the time of the accident, and was not charged with DUI.
Relying on
Osborn, Philadelphia,
and sections 14604 and 14608, ERAC-LA argued that it had no statutory or common law duty to screen
The Motion for Summary Judgment Filed by ERACC
ERACC asserted it was entitled to summary judgment for two reasons: it was neither the owner of the rental car driven by Dederer nor a party to the rental agreement, and in any event it could not be liable for failure to require ERAC-LA to conduct electronic driver’s history searches because there is no legal duty to investigate the driving history of a person with a valid driver’s license.
Plaintiffs’ Opposition to Defendants’ Motions
In opposition to defendants’ motions, plaintiffs produced evidence regarding ERACC’s analysis of the use of electronic driver’s history checks, and evidence regarding other rental car companies’ practices. 2 Based on this evidence, plaintiffs argued that ERACC had considered using electronic driver’s history checks, but decided not to do so for economic reasons, except in the State of New York. Plaintiffs argued that ERACC made this decision despite having determined that other major rental car companies were conducting checks of drivers’ histories. Plaintiffs asserted that ERACC controlled the decision whether ERAC-LA, its subsidiary, would conduct driver’s license checks.
On the issue of duty, plaintiffs argued that Osborn was inapposite because automated driver’s license checks were not then available, that Philadelphia was distinguishable, and that sections 14604 and 14608 do not define, as a matter of law, the duty of due care owed by a rental car agency. Rather, the jury should determine whether ERAC-LA acted as a reasonable and prudent rental car agency by deciding not to use electronic driver’s history screening, which was readily available and commonly used in the industry.
Plaintiffs also produced evidence that Dederer had been convicted of DUI in August 2002 and May 2003 and that he had marijuana and the drug Ativan in his system at the time of the accident. Plaintiffs argued that defendants had failed to introduce evidence sufficient to show as a matter of law that Dederer was not under the influence of drugs at the time of the accident.
The trial court found that defendants were entitled to judgment as a matter of law because the undisputed facts established that Dederer had a valid driver’s license and gave no indication that he was unfit to drive at the time of the rental. Relying on Osborn, Philadelphia, and sections 14604 and 14608, the court declined to impose an additional duty on defendants to investigate customers’ DMV (Department of Motor Vehicles) records. Further, the court noted that plaintiffs’ wrongful death and survivorship claims were premised on the assertion that defendants negligently entrusted the vehicle to Dederer. Resolution of the negligent entrustment claim in favor of defendants therefore also defeated the remainder of plaintiffs’ claims. Accordingly, the trial court entered judgment in favor of ERACC and ERAC-LA.
This appeal followed.
DISCUSSION
I. Rental Car Agency’s Duty
In
Osborn, supra,
In the present case, plaintiffs contend that the trial court erred in granting summary judgment, because
Osborn
is no longer viable. According to plaintiffs, electronic driver’s license checks are now available to the rental car industry, changing the way rental car companies operate such that they should be charged with the duty to make an electronic inquiry about customers’ driving histories in order to screen out incompetent or unfit drivers. We conclude, however, that the availability of electronic driver’s license checks does not render the rationale and holding of
Osborn
obsolete. To the contrary,
Osborn
remains persuasive. Further, developments since Osborn—the enactment of section 14604 and the California Supreme Court’s decision in
Philadelphia, supra,
In Osborn, a passenger in a rental car was injured when the driver, to whom the car had been rented, drove the car into a tree while under the influence of alcohol. The passenger sued the rental car agency for negligently entrusting the car to the driver, asserting that the agency was negligent for failing to do more than inspect his driver’s license and observe that he appeared sober at the time of the rental. The passenger argued that the agency had a further duty to investigate the driver’s qualification by asking him whether he had a record of DUI, whether his license had ever been suspended, whether he had ever been denied automobile insurance, and whether he intended to drive under the influence. Had it conducted such an investigation, the passenger argued, the company would have discovered that the driver had been twice convicted of drunk driving (most recently seven years before) and that his license had been suspended for six months. (Osborn, supra, 205 Cal.App.3d at p. 706.)
The appellate court in
Osborn
affirmed the trial court’s grant of summary judgment in favor of the rental car agency. The court observed that “ ‘[i]t is generally recognized that one who places or entrusts his [or her] motor vehicle in the hands of one whom he [or she] knows, or from the circumstances is charged with knowing, is incompetent or unfit to drive, may be held liable for an injury inflicted by the use made thereof by that driver, provided the plaintiff can establish that the injury complained of was proximately caused by the driver’s disqualification, incompetency, inexperience or recklessness ....’”
(Osborn, supra,
“No person shall rent a motor vehicle to another unless:
“(a) The person to whom the vehicle is rented is licensed under this code or is a nonresident who is licensed under the laws of the state or country of his or her residence.
“(b) The person renting to another person has inspected the driver’s license of the person to whom the vehicle is to be rented and compared the signature thereon with the signature of that person written in his or her presence.
“(c) Nothing in this section prohibits a blind or disabled person who is a nondriver from renting a motor vehicle, if both of the following conditions exist at the time of rental:
“(1) The blind or disabled person either holds an identification card issued pursuant to this code or is not a resident of this state.
“(2) The blind or disabled person has a driver present who is either licensed to drive a vehicle pursuant to this code or is a nonresident licensed to drive a vehicle pursuant to the laws of the state or country of the driver’s residence.”
In response to the contention that “car rentals involve an especially high degree of risk to the public,” the court responded: “The practical effect of plaintiff’s proposed rule would be to make it impossible for anyone previously convicted of drunk driving, or whose license was once suspended, from renting a car. However, rental cars play an indispensable role in contemporary American business. The proposed rule would impose a severe hardship on countless responsible citizens who were once convicted of vehicle offenses and who depend on rental cars to do their jobs. If the past legal transgressions cited by plaintiff should disqualify citizens from driving rental cars, the Legislature should say so. Absent such legal disqualification, defendant was entitled to rely upon [the driver’s] valid driver’s license as sufficient evidence of his ability to drive.”
(Osborn, supra,
Although rental car companies now have the ability to gain access to computerized records of their customers’ driving histories, the rationale of
Osborn
remains valid. True, such a check might show, for instance, a previous conviction of DUI, but as a policy matter we question whether, based solely on that information, a rental car agency should be deemed to have violated its duty of due care if it rents a car to that customer. Plaintiffs’ argument in the present case, like the argument made by the passenger in
Osborn,
contains the implicit premise that a conviction of DUI disqualifies a person from renting a vehicle, even though the person currently possesses a valid license. As the court in
Osborn
reasoned, such a rule would “disturb [the] carefully considered balance” “struck by the Legislature between the dangers of drunk driving and the recognition that driving a car may be ‘essential in the pursuit of a livelihood.’ ”
(Osborn, supra,
Two events since
Osborn
convince us of the soundness of its reasoning. The first is the enactment of section 14604, which further defined the obligation of rental car companies in a manner consistent with
Osborn.
Enacted six years after
Osborn
(Stats. 1994, ch. 1221, § 14, p. 7565), section 14604 was “part of an overall legislative effort to address the serious public safety danger posed by unlicensed drivers and drivers with suspended or revoked licenses.”
(Philadelphia, supra,
Taken together, sections 14604 and 14608 provide, in substance, that a rental car agency is prohibited from renting a car to an unlicensed driver, and must “make a reasonable effort” to determine whether the prospective driver possesses a valid driver’s license. But that reasonable effort does not include checking DMV records. It is sufficient for the rental car agency to comply with section 14608 by examining the license, and comparing the signature on the license to one written by the prospective renter in the presence of the rental company’s agent. 5 The legislative declaration that rental car agencies are not required to check DMV records to investigate the validity of a customer’s license implicitly means they are also not required to check DMV records to investigate the driving history that may be relevant to that license status.
Indeed, that is precisely the conclusion reached by the California Supreme Court in Philadelphia when it considered the effect of sections 14604 and 14608 on the scope of an excess liability insurer’s assumed duty to investigate the insurability of rental car customers. The context of Philadelphia, and the reason its analysis is compelling here, requires some explanation.
In Philadelphia, the rental car agency rented a car to a customer who presented what appeared to be a valid Arizona driver’s license. The agency complied with its duty under section 14608 by inspecting the renter’s license and verifying the signature. But, in fact, the license had been suspended two months earlier. The customer also purchased excess liability insurance coverage through the agency’s master excess policy of supplemental liability insurance (the renter was enrolled as an additional insured under the master policy). (Philadelphia, supra, 40 Cal.4th at pp. 155-156.) The policy excluded coverage for injuries arising from the use of a rental car obtained through fraud or misrepresentation. (Id. at p. 156.)
Four days after renting the vehicle, the renter was involved in an accident in which several persons were injured.
(Philadelphia, supra,
40 Cal.4th at
Through proceedings not relevant here, the Ninth Circuit requested the California Supreme Court to decide whether “the duty of an insurer to investigate the insurability of an insured, as recognized ... in
Barrera
v.
State Farm Mut. Automobile Ins. Co.
(1969)
The precise holding of Philadelphia does not apply here, and the context in which the decision arose—whether an automobile excess liability insurer breached its assumed duty to investigate the insurability of the rental car customer who purchased the excess insurance—is different. But because the court’s analysis relied on sections 14604 and 14608, and because it placed the excess insurer for analytical purposes in the shoes of the rental car agency (the rental company being the agent of the insurer), the analysis is instructive in defining the duty of investigation that must be undertaken by a rental car agency before entrusting a vehicle to a customer.
Explaining the import of these provisions, the court stated: “Significantly, the enactment of section 14604 in 1994 was part of an overall legislative effort to address the serious public safety danger posed by unlicensed drivers and drivers with suspended or revoked licenses.
Because section 14604 specifically addresses rental car situations, that provision is reasonably viewed as reflecting a legislative policy decision that, given the unique nature and operational constraints of the rental car business, compliance with the inspection duties set forth in section 14608, subdivision (b), is an appropriate safeguard against the problem of unlicensed drivers in the rental car context.
Thus, when an insurer makes its excess liability insurance available to a rental car customer only after the rental car agent complies with the license inspection and signature verification requirements of section 14608, subdivision (b), the excess insurer conducts its business in a manner that is fully consistent with what the Legislature views as a ‘reasonable effort or inquiry to determine whether the prospective driver possesses a valid driver’s license’ in the rental car context.”
(Philadelphia, supra,
The court also addressed the question whether a rental car agency, as an agent of the excess insurer, should be required to perform license checks through the DMV. Although the injured plaintiffs in the underlying state action (“claimants” in the particular proceeding before the court in Philadelphia) suggested such a measure, they “acknowledged that allowing private companies access to DMV records may raise grave concerns about the privacy rights of rental customers, and also may cause congestion of DMV’s computer systems and delay for rental car companies and their customers.”
(Philadelphia, supra,
40 Cal.4th at pp. 162-163.) The court “note[d] the
We take from the reasoning of
Philadelphia
two salient points. The first is that through section 14604, the Legislature has balanced the danger caused by those who drive with revoked or suspended licenses against “the unique nature and operational constraints of the rental car business”
(Philadelphia, supra,
Finally, we address
Snyder v. Enterprise Rent-A-Car, San Francisco
(N.D.Cal. 2005)
In denying that portion of the rental car agency’s cross-motion for summary judgment directed at punitive damages, the court ruled that the plaintiff’s evidence “would be sufficient to support a finding that defendants were aware that, in the absence of taking any step to verify license validity, they would inevitably rent vehicles to persons who were not licensed, and that defendants chose to run the risk that the losses caused by such drivers being involved in accidents would be less than the cost of verifying licenses. In other words, plaintiffs’ evidence is sufficient to support a finding that defendants were ‘aware of the probable dangerous consequences of [their]
To the extent Snyder suggests that under California law the question whether a rental car agency need make an electronic check of DMV records is a question of fact for the jury and cannot be determined as a matter of law by the court, we disagree. We do not believe that Snyder gives adequate consideration to the import of sections 14604 and 14608. Indeed, Snyder was decided before the Supreme Court’s decision in Philadelphia, which, as we have discussed, effectively dispels the notion that California law requires a rental car agency to inquire of the DMV about customers’ driving records. We therefore find Snyder not persuasive.
In light of our conclusion regarding the scope of a rental car agency’s duty, the only remaining issue we must address is whether the trial court properly entered judgment in favor of ERAC-LA, after it moved only for summary adjudication of issues. 7
II. Additional Statutory Ground for Vehicle Owner’s Liability
Plaintiffs point out that ERAC-LA moved for summary adjudication of issues only, not summary judgment. In fact, ERAC-LA conceded in its moving papers that it remained potentially liable under section 17150 as the owner of the vehicle whose driver struck and killed plaintiffs’ son. 8 Nevertheless, the trial court granted summary judgment in its favor. Plaintiffs contend on appeal that the trial court erred in doing so.
In response, ERAC-LA argues that, even if the trial court erred in granting summary judgment, plaintiffs were not prejudiced because no further recovery would be available on remand because plaintiffs have settled their case as to Dederer for payment of the statutory maximum available from Dederer and ERAC-LA jointly.
9
ERAC-LA filed a request that we take judicial notice of
Where a vehicle’s operator settles the claim of a third party injured due to the operator’s negligence for a sum equal to, or in excess of, the amount of the vehicle owner’s statutory liability for the operator’s negligence, the owner’s obligation is discharged.
(Rashtian v. BRAC-BH, Inc.
(1992)
“ ‘[W]here matters of which the court has judicial knowledge occur subsequent to the trial court’s action and have the effect of destroying the basis for the plaintiff’s cause of action, it has been held that the appellate court may dispose of the case upon those grounds.’ ”
(City of National City v. Wiener
(1992)
The judgments entered in favor of defendants are affirmed. Defendants shall receive their costs on appeal.
Manella, J., and Suzukawa, J., concurred.
Notes
All unspecified section references are to the Vehicle Code.
Plaintiffs filed a motion seeking an order allowing them to file under seal certain confidential documents which were the subject of a stipulated protective order approved by the court. ERACC joined in plaintiffs’ motion. The court granted the motion and placed under seal the internal business documents of ERACC that contained trade secrets.
Section 14608 provides:
Section 14609 requires those renting a motor vehicle to another person to keep a record of the vehicle’s registration number, the name and address of the renter, and the renter’s driver’s license number, expiration date, and issuing jurisdiction.
The rental car agency also must record certain information regarding the driver’s license (§ 14609), but ERAC-LA’s compliance with that requirement is not at issue here.
The Legislature has since amended other sections within the chapter of the Vehicle Code regarding violation of license provisions, in which sections 14604, 14608 and 14609 are located (see, e.g., §§ 14601.5, 14602.6, 14602.8), but none of these amendments have any bearing on the issues discussed here.
The issues we need not discuss include (1) whether plaintiffs adequately demonstrated that the standard in the rental car industry is to use electronic DMV checks; and (2) issues of causation, such as whether Dederer was or was not impaired at the time of the accident, and whether a driver with prior license suspensions poses a foreseeable risk of harm to the driving public.
Section 17150 provides: “Every owner of a motor vehicle is liable and responsible for death or injury to person or property resulting from a negligent or wrongful act or omission in the operation of the motor vehicle, in the business of the owner or otherwise, by any person using or operating the same with the permission, express or implied, of the owner.”
Section 17151, subdivision (a), limits the liability of an owner (not arising through the relationship of principal and agent or master and servant) to $15,000 for the death or injury of one person.
We note that Code of Civil Procedure section 437c, subdivision (m)(2) provides: “Before a reviewing court affirms an order granting summary judgment or summary adjudication on a ground not relied upon by the trial court, the reviewing court shall afford the parties an opportunity to present their views on the issue by submitting supplemental briefs. The supplemental briefing may include an argument that additional evidence relating to that ground exists, but that the party has not had an adequate opportunity to present the evidence or to conduct discovery on the issue.” However, providing the parties with an opportunity to submit supplemental briefing pursuant to this provision is not warranted here. In February 2010, ERAC-LA filed its request that we take judicial notice of the documents indicating the Floreses settled with Dederer for $15,000, and also filed its respondent’s brief in which it argued that the Floreses suffered no prejudice as a result of the court’s granting summary judgment because no further recovery from ERAC-LA would be permissible. The Floreses had the opportunity to present their views on the issue in their reply brief filed thereafter, and to argue that additional evidence relating to the issue existed, but the Floreses did not do so. We take their silence on the matter as acquiescence that they were not prejudiced by the court’s granting summary judgment because no further recovery would be permissible pursuant to sections 17150 and 17151.