FindLaw | Legal News & Information

Car Rental Franchisor May Be Held Liable for Fatal Van Accident

The family of three people killed in a rental van accident may pursue a claim that Budget Rent A Car is vicariously liable for its franchisee's negligence, a Florida federal judge has ruled.

Judge Stephan P. Mickle of the U.S. District Court for the Northern District of Florida denied Budget's motion for summary judgment, holding that even though Budget alleged its franchisee was an "independent contractor," there was a genuine issue of material fact as to whether the franchise relationship actually immunizes it from liability.

According to Judge Mickle's opinion, PC Rentals Inc. has operated a Budget Rent A Car franchise in Bozeman, Mont., since July 2001. The franchise agreement describes PC Rentals as an "independent contractor" and not an agent of Budget, the opinion said.

Jayne Potts, the wife of William Potts and the mother of Mary and Anna Potts, filed suit against Ford Motor Co. and Budget in the Northern District of Florida in March 2004. The lawsuit was filed in the Florida federal court because the Potts family resides there and Budget maintains its headquarters in the state.

According to the complaint, during a family vacation to Montana in July 2002, Jayne Potts rented a Ford E-350 Super Club Wagon 15-passenger van from PC Rentals' Budget franchise.

William Potts was driving the vehicle, carrying eight family members, when he lost control, causing the van to roll over, the complaint said. As a result, William, Mary and Anna Potts were killed.

The lawsuit raised several counts against Ford based on allegations that the van was defective. Those claims have since been settled.

The lawsuit also raised wrongful-death and negligence claims against Budget, seeking to hold Budget liable for its own wrongdoing as well as vicariously liable for PC Rentals' actions.

Specifically, Potts alleged that Budget and PC Rentals were negligent for renting, without proper warning, a vehicle with known design defects and dangerous characteristics that made it susceptible to rollover accidents.

Budget filed a motion for summary judgment, alleging that PC Rentals is not its agent, but rather an independent contractor not subject to Budget's control. Therefore, it argued that it was relieved of any liability to the plaintiff.

Judge Mickle held that the mere declaration that a franchisee is an independent contractor does not immunize the franchisor from liability because an independent contractor may also be considered an agent. If a principal-agent relationship exists, then a franchisor may be held liable for the franchisee's actions, the judge said.

To determine whether PC Rentals was an agent of Budget, the court must determine the presence of fiduciary elements in the franchise relationship, as well as the degree of control exercised by Budget over PC Rentals, Judge Mickle wrote.

Among the fiduciary elements that Judge Mickle found were PC Rentals' agreement not to use the Budget name for any other business, its agreement to follow specific accounting procedures devised by Budget and PC Rentals' duty to account for profits to Budget.

Judge Mickle also found evidence demonstrating that Budget maintained a significant amount of control over PC Rentals' operations.

Among the evidence cited by the judge were various system-wide requirements spelled out in the franchise agreement and Budget's operations manual, including minimum fleet size, vehicle age limits, mileage limits, maximum price markup amounts for rentals, credit card acceptance, insurance coverage specifications, the obligatory use of brochures and literature provided by Budget, and the mandatory participation in marketing programs.

Furthermore, Judge Mickle said Potts believed she was dealing directly with Budget when she rented the van because she reserved it over the company's Web site, signed a contract displaying Budget's logo and saw Budget signage when she picked up the vehicle.

Thus, Judge Mickle said there was a genuine issue of material fact as to whether a principal-agent relationship existed between Budget and PC Rentals that could subject the franchisor to liability to the Potts family.