Short Term Lessor’s Liability For Statutory Minimum

The short-term lessor of a motor vehicle who permits the short-term lessee to operate the vehicle upon the highways, and who has not complied with NRS 482.295 insuring or otherwise covering the short-term lessee against liability arising out of his negligence in the operation of the rented vehicle in limits of not less than $15,000 for any one person injured or killed and $30,000 for any number more than one, injured or killed in any one accident, . . . is jointly and severally liable with the short-term lessee for any damages caused by the negligence of the latter in operating the vehicle. . . .

NRS 482.305(1) creates a limited “safe harbor” protecting short-term lessors of motor vehicles that provide the minimum statutory coverage from being held jointly and severally liable for damages caused by a negligent lessee. The statute does not, however, expressly address the specific issue presented here. We are, nonetheless, able to discern the legislature’s intent from the broader context of Nevada’s financial responsibility law.

NRS 485.185 requires that every owner of a motor vehicle provide insurance in the minimum amounts set forth therein. Also, in lieu of the “owner’s policy” required by NRS 485.185, the driver may provide an “operator’s policy,” which essentially insures the driver while operating any motor vehicle, in the same minimum amounts. See NRS 485.186. Observing the foregoing in light of NRS 482.305(1), we infer that, in instances where the lessee of an automobile under a short-term lease agreement is covered by an owner’s or operator’s policy, the legislature was aware that more than one insurance policy would cover the automobile lessee — the driver’s personal policy pursuant to NRS 584.185 or NRS 485.186 and the lessor’s policy provided pursuant to NRS 482.305(1). We therefore conclude that, by enacting a scheme that contemplates dual coverage, the legislature intended that both policies provide coverage up to the respective statutory minimums.

Allstate counters that such a construction leads to the absurd result of providing a windfall for accident victims. We disagree. We first observe that a “windfall” describes a situation in which the recipient receives some benefit undeserved or unmerited. This term does not describe the recovery that accident victims may receive to compensate their actual losses. Furthermore, reason and public policy support our conclusion: the general spirit of Nevada’s financial responsibility law clearly favors protecting accident victims to the extent possible. See Hartz v. Mitchell, 107 Nev. 893, 896, 822 P.2d 667, 669 (1991) (“Nevada has a strong public policy interest in assuring that individuals who are injured in motor vehicle accidents have a source of indemnification.”).

Allstate cites Alamo for the proposition that, once the statutory minimum is paid by the lessee’s personal insurance, the lessor is absolved of further liability. See Alamo, 114 Nev. at 154, 953 P.2d at 1074. In Alamo, we held that in cases where the lessee’s own insurance policy and the policy provided by the lessor both contain mutually repugnant “other insurance” clauses, the driver’s personal insurance is the primary insurer up to the statutory minimum. See id. at 160, 953 P.2d at 1077. Accordingly, we stated that absent a personal policy covering the driver, the lessor “will step in and compensate the victim up to the minimum limits.” Id. In Alamo we determined that the lessee’s personal insurance is “primary” and the lessor’s insurance is “secondary,” but we did not address the specific scenario at hand, wherein the lessee’s personal insurance has been consumed to the statutory minimum and the damages incurred allegedly exceed that amount. Thus, Alamo does not guide our analysis of the instant matter.

Instead, we conclude that the legislature enacted a statutory scheme providing dual coverage in instances such as this. Sound public policy dictates that a short-term lessor of motor vehicles may be required to compensate the victim, at least up to the statutory minimum, in cases where the lessee’s personal insurance does not fully compensate the victim(s). Therefore, in this instance, where the lessee’s personal insurance policy has first been extinguished pursuant to Alamo, Allstate may still be required to compensate the victims up to an additional $30,000.00, the statutory minimum for one accident pursuant to NRS 482.305(1), depending on the damages proved.

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