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
] | [ISSUE & DISPOSITION
| [AUTHORITIES CITED
] | [COMMENTARY
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
Whether NYAIP is "available insurance" within the meaning of General Business
Law § 391-g?
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.
Sources Cited by the Court
Gen. Bus. Law § 391-g (McKinney 1996).
Ins. Law § 5301 (McKinney 1985).
Vec. & Traf. Law § 370 (McKinney 1996).
Memorandum of Senator Joseph Pisani and Assemblyman Richard Gottfried,
Bill Jacket, L, ch 136 (1977).
Memorandum of Assemblyman Richard Gottfried, Bill Jacket, L, ch
Memorandum of Senator Joseph Pisani, NY Legis Ann. (1977).
Report of N.Y. County Lawyers' Ass'n, Bill Jacket, L, ch 136 (1977).
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
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 (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
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.
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
(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, §
Scott M. Davies, 97
John A. Jeziorski, 98
Anita J. Lee, 98
Michael J. Smith, 98
Reese E. Solberg, 97
Joymarie Torres, 98