Liability for Car Dealers/Rental Companies If Pending ‘Job Killer’ Bill Becomes Law

A California Chamber of Commerce-opposed “job killer” bill exposing car dealers and rental car companies to significant liability related to “safety” recalls will be considered next week by an Assembly committee.

SB 686 (Jackson; D-Santa Barbara) precludes car dealers and rental car companies from renting, leasing, loaning, or selling a car despite the lack of actual knowledge that the car was subject to a recall that may or may not pose any imminent harm to the consumer or renter.

No National Database of Repairs

Although there is a national database of information regarding general recalls issued for certain makes and models of vehicles, there is no similar database that identifies whether a particular vehicle has undergone the repairs necessary to fix the defect.

SB 686 implicitly recognizes this problem by setting forth other potential means for a dealer or rental car company to obtain information regarding the status of a recall, including: the Internet website of a manufacturer; telephone number of a manufacturer; a franchisee of the manufacturer; or a vehicle history report.

While one of these four possibilities ultimately may produce the necessary information, there is no guarantee that it will. Nevertheless, the dealer is imputed with knowledge that it has never received.

Moreover, there is no indication how many times or for what period the dealer must attempt to obtain information from any of these four options, before the dealer can reasonably assume the vehicle is not under a safety recall. Failure on behalf of a dealer to satisfy these requirements will result in litigation or liability.

Delay Implementation

May 24 amendments to SB 686 delayed implementation of the prohibitions in the bill on a licensed dealer until the effective date of federal regulations that require the creation of a national database that lists all recalls by vehicle identification number and whether the recall has been repaired. The effective date of the regulations, however, is not necessarily the date upon which the federal database will be functional.

The CalChamber has asked that SB 686 be delayed until there is a federal database that is searchable by make, model, and vehicle identification number (VIN) to identify whether a specific vehicle is subject to a recall and has been repaired. Until this database is created, SB 686 subjects dealers to a difficult standard.

‘Safety’ Undefined

Furthermore, the term “safety” is undefined and extremely subjective. Essentially all recalls could be characterized as a safety issue, regardless of how imminent or significant the safety threat is as related to the defect.

Further clarity needs to be provided in order for licensed dealers to avoid needless litigation.

Last, SB 686 prohibits a licensed dealer from selling a vehicle as “certified” if it has been subject to a safety recall and the required repairs have not been performed. As set forth above, this is an extremely difficult standard for used car dealers to satisfy until the national database is available.

Even then, it is unlikely that the database will designate the recall as a “safety” issue versus a nonsafety recall. Accordingly, SB 686 will create uncertainty for used car dealers with regard to whether a specific recall falls within the “safety” category versus a minor fix, and whether such cars may be sold as “certified.”

Of course, any mistake by the dealer with regard to this characterization will result in litigation and possible liability.

The prohibition will have an impact on the used-car market as well as consumers’ ability to trade in such a car, thereby potentially forcing them to engage in a private party sale in the underground economy.

Action Needed

SB 686 is scheduled to be considered June 25 by the Assembly Business, Professions and Consumer Protection Committee.

Contact committee members and your Assembly representative and urge them to oppose SB 686.