Vicarious Liability Threatens New York Leasing

NASHVILLE, Tenn., Nov. 7, 2003 -- The Association of Consumer Vehicle Lessors ("ACVL") announced today the release of its "New York Vicarious Liability Survey" detailing the magnitude and effects of vicarious liability suits against ACVL member companies in New York during the period January 1, 2000 through June 30, 2003. The results clearly evidence the enormity of the vicarious liability claims filed against New York consumer vehicle lessors and explain why some ACVL member lessors have suspended their leasing programs in New York altogether while others have imposed special fees for leases written in New York. ACVL member companies reported a total of 2,564 vicarious liability lawsuits filed against them in New York between January 1, 2000 and June 30, 2003, asserting claims totaling in excess of $6.5 billion.(1) Speaking on behalf of ACVL, Robert Mize, President, stated: "The level of liability and ongoing risk to member companies and the entire consumer vehicle leasing industry in New York is untenable and unmanageable. The continuance of this archaic legal principle undermines the ability of the leasing industry to continue serving New York consumers."

Under an outdated legal doctrine now present only in New York known as "vicarious liability," leasing companies are responsible for the damages from all accidents involving their leased vehicles despite having no fault whatsoever or control over the lessee/driver. No other state subjects consumer vehicle lessors to this unlimited liability. The same vehicle, if financed as an installment sale by the same finance company and involved in the same accident, would not subject the company to any liability exposure.(2) The result is that many ACVL-member companies have reluctantly concluded that leasing in New York can no longer be justified given the enormity and unpredictability of the financial exposure and potential damages that they face.

Exhibit 1: ACVL Vicarious Liability Lawsuits In New York, reveals the dilemma faced by ACVL member companies.

                                Exhibit 1
                    ACVL Vicarious Liability Lawsuits
                               In New York
                             Claims and Suits

   Year                                  # Claims    $Total Claims

   2000                                      694        $973,647,809
   2001                                      754      $2,611,719,463
   2002                                      789      $1,445,892,450
   2003 (thru 6/30/03)                       327      $1,638,357,465
   Totals                                  2,564      $6,669,517,187

  Background

ACVL conducted the survey to collect definitive information on vicarious liability in New York for the New York legislature. In direct contrast to consumer lenders, retail lessors are subject to liability claims when leased vehicles are involved in automobile accidents in New York. This has caused a number of major consumer vehicle lessors, including General Motors Acceptance Corporation, Ford Motor Credit Company, Chase Manhattan Automotive Financial Services, and American Honda Finance, to suspend leasing in New York. Other ACVL member companies have increased fees for all lessees to help cover their rapidly rising insurance and liability costs for this unpredictable risk while they wait to see whether tort relief soon comes to New York.

New York auto dealers and consumers have been disadvantaged by the reduced availability of leasing in New York and the imposition of higher charges. By restricting the availability of leasing and raising the costs of doing business, vicarious liability is hurting:

-- hundreds of thousands of New York consumers who have come to rely on leasing as their preferred means of obtaining the vehicle that best fits their needs and economic resources,

-- New York new car dealers who have relied upon leasing as a major way to make vehicles affordable for consumers and increase customer satisfaction and repeat business, and

-- auto manufacturers, their employees and the public, by reducing new car sales, jeopardizing manufacturing jobs, and limiting the kinds of vehicles that consumers can afford.

Every state except New York has eliminated or severely limited the vicarious liability burdens for consumer vehicle leasing. To redress this problem, the New York State Senate passed S. 397a/ A.1042-a, which repeals vicarious liability for consumer vehicle lessors. The bill has been stalled in the New York Assembly. It has not been brought up for a vote that would provide relief and restore full consumer vehicle leasing to the citizens of New York. Mize stated, "There are hundreds of thousands of New Yorkers who depend on consumer vehicle leasing to secure their transportation. We urge the New York Assembly to address this issue without further delay."

The ACVL was founded in 1993. The Survey was conducted in September 2003. Based in Nashville, Tennessee, the ACVL is a national trade association for the largest manufacturer and import distributor captive finance companies, banks, and independent leasing companies whose primary goals include increasing consumer understanding of lease benefits and responsibilities through improved disclosure. ACVL's nineteen member companies represent an estimated 85 percent of all consumer vehicle leasing on a national basis. Further information about the ACVL and consumer vehicle leasing may be found on the Association's web site at www.acvl.com.

(1) Actual reported total claims were $6,669,517,188.

(2) Most states have eliminated vicarious liability for consumer vehicle lessors altogether. A few still maintain vicarious liability in limited circumstances (when the lessee does not have personal liability coverage, as required by all ACVL member lessors) and have capped it to modest amounts and manageable levels, e.g., $25,000 to $100,000 per accident.