Hurdles remain in rental car lawsuit
Some five years ago now, Judith Koenig rented a car in Durango from a national car rental company. She was expecting, presumably, a pleasant drive through southwest Colorado. Instead, she hit a deer, damaged the car and found herself in a lawsuit that will likely be a source of judicial controversy for many years to come.
The important issue in the case was: What is a car renter’s liability for loss-of- use damages resulting from the fact that, while the car is being repaired, it can’t be rented out?
The trial court in Koenig’s case threw out the car rental company’s claim for loss-of-use damages because the car rental company failed to produce evidence that it had customers wanting to rent cars but didn’t have other cars available to rent to them. The Colorado court of appeals, however, concluded the matter wasn’t that simple.
The rental agreement Koenig signed said she would be liable for loss- -of-use damages “regardless of fleet utilization.” The car rental company argued this meant, plain and simple, that it could recover damages equal to the daily rental price for the car times the number of days it was out of service. But the court of appeals didn’t buy the argument. In a contract dispute, it said, damages are supposed to make someone whole — not create a windfall. Why should the car rental company be rewarded just because Koenig took out a deer?
To the court of appeals’ apparent surprise, the issue it was facing had never been decided in a reported opinion by another U.S. court. So this was a question of “first impression” and the court, seeing the opportunity for fame, took off on a discourse about how courts have handled similar, but not identical, situations. For example, if an individual car owner loses the use of a car after another at-fault driver plows into it, the car owner is allowed to recover damages based on daily rental charges times days out of service, even if the owner doesn’t actually rent another vehicle. So why not here?
The court of appeals noted that in the case of an individual vehicle owner, damages based on daily rental charges can be justified by such things as mental anguish. Car rental companies, however, don’t suffer mental anguish. Just lost profits.
What troubled the court of appeals most in this case was the “regardless of fleet utilization” language in the contract. The court didn’t have a clue what this meant. But since it had to mean something, the court ruled the car rental company would not be denied damages just because it might have had other vehicles available in its fleet. However, to recover loss-of- use damages, the court held that the car rental company must still prove it was open for business and had at least one person wanting to rent a car for each day damages are claimed. Then, assuming it gets over that hurdle, the car rental company’s damages will be limited to lost net profit, not lost gross revenue. In other words, costs saved because the car wasn’t out there getting beat up by could-care-less customers must be deducted from gross rental charges to arrive at a net damages amount.
The court of appeals has now sent the case back to the trial court, where these newly announced rules are to be applied in determining what, if any, damages the car rental company can recover. More likely, the parties will by now have had enough of the legal system and they will settle. Or the car rental company will ask the Colorado Supreme Court to review the case in the hope of receiving a better outcome.
In the meantime, the lesson for the rest of us is this: When renting a car, be on the lookout for deer.
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Jim Flynn is a private attorney at Flynn Wright & Fredman LLC in Colorado Springs. The firm primarily represents clients in the real estate, financial services and small-business
sectors. Reach him at jtflynn@fwflegal.com.
