Neb. Supreme: Customer Doesn’t Owe Avis for ‘Voluntary’ Payment

No one threatened to sue Avis Rent a Car after Roynetta McDavid’s little sister borrowed her rental car without permission and smashed it into another vehicle.

But a claims handler for the company paid three people who were hurt in the crash $40,100 anyway. McDavid would have been stuck with that bill if it weren’t for the help of a pro-bono attorney who took her case before the Nebraska Supreme Court.

The high court ruled Friday that the rental agreement that McDavid signed doesn’t require her to reimburse Avis for its “voluntary payment” because the company had no legal obligation to pay the accident victims. The court reversed a decision by the trial court in favor of Avis.

“In the absence of any viable theory of liability, there is no basis to find that Avis was potentially liable to the injured parties in any amount,” the Supreme Court’s unanimous opinion says.

McDavid’s lawyer, Sean P. Rensch in Omaha, said Avis’ claims administrator, Sedgwick, was apparently unaware that federal law protects rental car companies from lawsuits that charge they are vicariously liable for accidents caused by their customers. There was no reason to pay for any releases, he said.

“I think Sedgwick just dropped the ball,” Rensch said on Tuesday.

“If I were Avis, I would be looking at my books to see how many times they did that.”

McDavid rented a car from Avis in Nebraska so she could drive with her mother and her younger sister to visit another sister who lived in Tennessee. McDavid says she told her family they could not drive the car.

Nevertheless, while in Tennessee McDavid’s younger sister drove the car to a friend’s house. McDavid was sleeping at the time. The sister collided with another vehicle on the return trip, injuring three passengers.

An employee for Sedgwick, which administers claims for Avis, paid a total of $40,100 to the injured passengers in exchange for signed releases of claims against Avis, McDavid and McDavid’s sister.

Avis demanded that McDavid reimburse the company, pointing to an indemnification provision in the rental car agreement.When she didn’t pay, the company filed a lawsuit alleging she had violated the terms of the rental contract. Douglas County District Court Judge W. Russell Bowie III granted summary judgment in favor of Avis.

Rensch said he took on the case through the Volunteer Lawyers Project, a nonprofit organization established by the Nebraska State Bar that provides free legal assistance to low-income individuals. He said he could not understand why Avis was paying potential litigants to release claims when a federal law, known as the Graves amendment, bars vicarious liability claims against car rental companies for injuries caused by their customers.

“All I can do is surmise that there was a blunder,” he said.

Rensch appealed after Bowie ruled in favor of Avis. Rensch said for his client, the $40,100 judgment might as well have been $10 million. She did not have the assets to pay that amount.

“They are suing their own insured over a crash that she did not cause,” he said. “You just can’t do this to people.”

The state Supreme Court said instead of granting summary judgment for Avis, the district court should have granted summary judgment for McDavid.

The rental car contract obligated McDavid to indemnify Avis for expenses “incurred” by Avis from the use of its car. Avis can “incur” an expenses only if there is a legal obligation to pay it, the opinion says.

“Avis does not point to any language in the rental agreement showing that McDavid agreed to indemnify it for any amounts it voluntarily chose to pay others related to her rental, irrespective of whether Avis faced liability,” the opinion says.

Rensch said as a personal injury attorney, he rarely finds opportunities to do pro bono work for the Volunteer Lawyer Project. He said he was happy to take on the case.