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People v. Alamo Rent A Car, 89 N.Y.2d 560 (March 27, 1997).

AGE DISCRIMINATION - AUTOMOBILE INSURANCE - AUTOMOBILE RENTAL

CAR RENTAL COMPANIES CANNOT REFUSE TO RENT MOTOR VEHICLES TO PERSONS BETWEEN 18 AND 25 YEARS OLD SOLELY ON THE BASIS OF AGE BECAUSE INSURANCE COVERAGE FOR SUCH PERSONS IS AVAILABLE THROUGH NEW YORK STATE'S AUTOMOBILE INSURANCE PLAN.

[SUMMARY] | [ISSUE & DISPOSITION] | [AUTHORITIES CITED] | [COMMENTARY]

SUMMARY

Appellants are car rental companies doing business in New York State who refused to rent cars to drivers under the age of twenty-five. New York General Business Law § 391-g states that it is unlawful to refuse to rent motor vehicles to drivers over eighteen years old solely on the basis of age "provided that insurance coverage for such persons is available." Commercial insurance carriers did not provide insurance to cover the costs of renting to young drivers because of increased liability for this group. However, New York State's Automobile Insurance Plan ("NYAIP") exists to insure drivers who cannot obtain commercial insurance. In 1994, the Attorney General commenced suit against the car rental companies under General Business Law § 391-g seeking declaratory judgment, a permanent injunction prohibiting appellants from refusing to rent automobiles to persons between eighteen and twenty-five solely on the basis of age, and penalties. The Attorney General relied on the theory that NYAIP was "available insurance" under the statute. The Supreme Court granted a summary determination for the People, and the Appellate Division affirmed. The Appellate Division certified the question: "Was the order of the Supreme Court, as affirmed by [the Appellate Division], properly made?"

ISSUE & DISPOSITION

Issue

Whether NYAIP is "available insurance" within the meaning of General Business Law § 391-g?

Disposition

Yes. Car rental companies otherwise unable to obtain commercial insurance for drivers over the age of 18 could do so through NYAIP. Consequently, car rental companies unable to obtain commercial insurance are required to purchase NYAIP insurance rather than refuse to rent vehicles to drivers over the age of 18.

AUTHORITIES CITED

Sources Cited by the Court

COMMENTARY

State of the Law Before People v. Alamo Rent A Car

The issue of age discrimination in the rental car business is one of first impression for New York Court of Appeals. It was first addressed by the Supreme Court of New York County in People v. Alamo Rent A Car, Inc., 620 N.Y.S.2d 695 (1994). This court held that the legislative purpose of N.Y. General Business Law § 391-g is to prevent discrimination against drivers between the ages eighteen through twenty-four in the car rental business. The court also held that the New York Automobile Insurance Plan ("NYAIP") was an available form of insurance within the statute because it fulfills the minimum requirements for insurance under the law. N.Y. Veh. & Traf. Law § 370[1] (McKinney 1996).

The Appellate Division agreed with the reasoning of the Supreme Court in Alamo. 642 N.Y.S.2d 213 (1st Dept 1996). The Appellate Division reasoned that since the overriding purpose of General Business Law § 391-g is to prevent discrimination against young drivers, and not to protect rental companies from the increased risk associated with renting to this market, the insurance coverage available through NYAIP satisfies the statutory proviso. The Appellate Division concluded the fact that the NYAIP coverage does not protect rental companies from all risks they might desire to have covered, does not make it inadequate; the physical damage coverage that rental car companies are concerned about is not statutorily required. Finally, the Appellate Division stated that charging increased rates to younger drivers does not constitute a rewriting of the statute.

Effects of People v. Alamo Rent A Car on Current Law

The Alamo court interpreted N.Y. General Business Law § 391-g to require car rental companies to rent to drivers under twenty-five based on the finding that the NYAIP was "available" insurance under the statute. The lack of comprehensive coverage under NYAIP for damage to rental vehicles concerned Appellant rental car agencies because of the greater frequency and severity of accidents among younger drivers. The court remained unmoved by these concerns. The statute's language suggested no intent to provide rental car companies with full insurance to cover all risks. Instead, the court determined that the language of the statute suggested that added costs for additional coverage could be passed on to the younger renters.

In the future, rental agencies cannot refuse to rent to those over eighteen years of age. People v. Alamo Rent A Car, Inc. forecloses the argument that the statute was meant to fully protect rental car companies from the risks of renting to younger drivers and emphasizes the non-discriminatory intent of the legislature.

Unanswered Questions

The court states that the legislative history supports the view that the provision creates a safe harbor for rental companies -- that it is not discriminatory to charge young drivers more to offset the costs of added insurance. Thus, car rental companies can pass on the cost of additional insurance to young renters. The court does not address the situation where the car rental companies want to charge young drivers the total cost of additional insurance for injury to drivers, third parties, and third party property damage. Also, the court does not place limits on the amount that drivers may be charged for such insurance.

Survey of the Law in Other Jurisdictions

At this time, New York appears to be the only state in which the issue of age discrimination in the car rental industry has been litigated. Although Connecticut is considering legislation similar to New York's, no other state has made age discrimination unlawful for the rental car industry. John Caher, Court Lifts Age Barrier in Car Rental Business, Times Union (Albany, N.Y.), Main, March 28, 1997. It is unclear why other states have yet to follow New York's statutory protection of young drivers.

A directly opposite view to this type of legislation is taken by the District of Columbia. The District of Columbia's legislation, passed through both Houses of Congress, specifically allows age discrimination in such cases: "It shall not be an unlawful practice for a motor vehicle rental company to fail or refuse to rent a motor vehicle, or to impose differential terms and conditions upon the rental of a motor vehicle, based on the age of any person, where such action is reasonably related to accident risk or threat of public safety." District of Columbia Code 1981, § 1-2534.

Prepared By:

  • Scott M. Davies, 97
  • John A. Jeziorski, 98
  • Anita J. Lee, 98
  • Michael J. Smith, 98
  • Reese E. Solberg, 97
  • Joymarie Torres, 98