McDonough Calls for Reform of State’s 'Vicarious Liability' Law

Stamp out vicarious liability and restore auto leasing in New York

Assemblyman David G. McDonough (R,C,I-Merrick), shown here speaking at a press conference in Albany, and fellow minority Assembly members today called for reform of an antiquated state law that costs New York consumers millions of dollars each year and is making it increasingly difficult to lease an automobile in the state.

"New York’s unfair vicarious liability law means that New York consumers have one less option than consumers in every other state. Rather than face a constant stream of litigation, many leasing companies have chosen to abandon the New York market altogether, threatening to put an end to auto leasing here," said Assemblyman McDonough, the ranking minority member of the Assembly Consumer Affairs and Protection Committee.

New York is the only state in the nation to hold the lessor of automobiles liable for the negligent act of their lessees. Under the state’s vicarious liability law, car accident victims can sue the financial companies that provide auto leases even though the companies are in no way responsible for the accidents.

Between January 2000 and June 2003 vicarious liability claims totaled more than $6.5 billion. Since then, nearly 20 automakers and every major retail bank have stopped or limited leasing in the state, including Chase Auto Finance, General Motors, Ford Motor Company, DaimlerChrysler, Buick, Cadillac, Chevrolet, Dodge, Hummer, Hyundai, Jeep, Oldsmobile, Pontiac, Porsche and Subaru.

New York consumers have paid out more than $132 million in sales taxes and high lease acquisition fees since automakers and banks have discontinued leasing in the state. Subsequently, the leasing of new cars in New York has decreased by 36 percent.

When New York’s vicarious liability law was instituted in 1924, most automobile owners were wealthy individuals or livery companies. The law was initially designed to protect the people injured by uninsured, hired drivers and leasing was generally not available at the time.

A recent survey from the Alliance of Automobile Manufacturers revealed that New Yorkers strongly support auto leasing reform by a margin of two-to-one.

Jon Waterhouse, vice president of operations for Keeler Motor Car Company, said, "As the price of new and used vehicles increases, leasing has become a popular method for New York consumers to enjoy a higher-priced vehicle for a lower monthly payment. Unfortunately, due to the vicarious liability law, leasing companies have been forced to raise their rates or stop doing business altogether in New York state."