Harbour v. Arelco, Inc.
| Citation | 678 N.E.2d 381 |
| Decision Date | 19 March 1997 |
| Docket Number | No. 11S04-9703-CV-202,11S04-9703-CV-202 |
| Parties | Owen HARBOUR, Appellant/Defendant, v. ARELCO, INC., d/b/a National Car Rental Systems, Appellee/Plaintiff. |
| Court | Indiana Supreme Court |
This case arises under Indiana Code § 24-4-9, a consumer protection statute regulating motor vehicle rentals ("Vehicle Rental Act"). We conclude that portions of the car rental contract used in this case do not conform to the Act and therefore, as the Act provides, are unenforceable.
On March 2, 1991, Owen Harbour rented a 1991 Mercury Grand Marquis from Arelco, Inc., d/b/a National Car Rental Systems, in Terre Haute, Indiana. The agreement between the two parties consisted of three documents: 1) a two-page document entitled "Amendment to Terms and Conditions of Rental Agreement," ("Rental Agreement") which included fifteen subsections of rental terms and conditions; 2) an "Indiana Disclosure Notice"; and 3) an "Additional Authorized Driver Addendum to Rental Agreement." Harbour elected to purchase a "Collision/Loss Damage Waiver" that, in general, relieved him of liability for damage to the vehicle, and creates issues discussed below. Harbour also listed James Reed as an additional authorized driver on the Additional Authorized Driver Addendum. Reed drove the vehicle to Texas where it was reduced to a total loss. According to a Texas grand jury indictment, Reed was charged with criminal mischief, a third degree felony, for knowingly and intentionally damaging the vehicle by "striking said vehicle into a pickup truck."
Upon learning of the damage to the vehicle, Harbour requested that Arelco turn the matter over to his insurance company. Arelco was unable to reach an agreement with that company and proceeded to sue Harbour, alleging that Reed damaged the vehicle by actions that violated the terms of the contract and that under the terms of the contract Harbour was responsible for the damage. Arelco moved for partial summary judgment contending that: 1) under the contract Harbour was liable for Reed's damage notwithstanding the damage waiver; 2) Harbour's counterclaims were without merit; and 3) the contract provided for Arelco to recover its attorney fees. Harbour filed his own motion for summary judgment asserting that: 1) the contract terms that voided the damage waiver were unenforceable because they failed to comply with the Vehicle Rental Act; and 2) even if some provisions were enforceable, the Act prohibited Arelco's recovery of attorney fees.
After a hearing, the trial court granted partial summary judgment in favor of Arelco determining that: 1) the contract complied (or substantially complied) with the Act; 2) the damage waiver was inapplicable because the authorized driver engaged in a "prohibited use" of the vehicle; and 3) Harbour was responsible for the loss by the terms of the contract. The trial court also granted partial summary judgment in favor of Harbour, holding that Arelco was not entitled to attorney fees pursuant to Section 13 of the Act. The trial court certified the trial court's interlocutory order for appeal and the Court of Appeals accepted jurisdiction. In an unpublished memorandum decision, the Court of Appeals affirmed the trial court. Harbour v. Arelco, Inc., 656 N.E.2d 558 (Ind.Ct.App.1995) (mem.). Harbour now seeks transfer to this Court.
This interlocutory appeal deals with the effect of two contractual provisions. The first prohibits the use of the vehicle "for any illegal purpose" or "in any abusive or reckless manner or if convicted of careless driving," and voids the collision damage waiver for losses incurred as a result of prohibited activity. The second provides for the rental company to recover attorney fees in case of a breach. Harbour argues Arelco cannot enforce either provision against him because neither conforms to the Vehicle Rental Act. This law was enacted by the Indiana Legislature in 1989 to regulate the practices of motor vehicle rental companies. It is clear from the plain language of the statute that a major thrust of the Act is to protect consumers from being misled or given inadequate information when renting a car. Indeed, Section 24 of the Act provides that a violation of the Act is also a deceptive act that triggers the sanctions of Indiana's Deceptive Consumer Sales Act. IND.CODE § 24-5-0.5 (1993 & Supp.1995).
In this case, it is undisputed that Harbour purchased a collision damage waiver. Under a collision damage waiver, the rental company agrees to waive claims against the renter for damage to the rented vehicle. The Act deals specifically with collision damage waivers. It allows rental companies to offer and sell the waiver for a separate charge under certain conditions set forth in Section 10(a). Section 9 limits the circumstances in which the rental agreements may provide that the collision damage waiver does not apply. Section 10(b) requires that specific information be disclosed to the renter. If the contract does not "conform" to the statutory requirements, Section 19 provides that it is "unenforceable."
First, we address the collision damage waiver restrictions. In order to establish Harbour's liability, Arelco relies upon that fact that Reed used the vehicle in violation of the "prohibited use" section of the Rental Agreement. That section provides if the renter or an authorized driver engages in a prohibited use of the vehicle, the collision damage waiver is not applicable. We assume for these purposes that Reed's operation of the vehicle was within the Rental Agreement's definition of "prohibited use." Section 10(b)(4) 1 of the Act imposes precise requirements on the manner in which rental companies disclose any restrictions on the collision damage waiver. It states: "Each rental agreement that contains a collision damage waiver must disclose the following information in plain language printed in type at least as large as 10 point type ... [a]ll restrictions, conditions, and provisions in or endorsed on the waiver." Section 10(c) 2 also requires that the renter acknowledge these disclosures "on the rental agreement." The only document relevant to this issue 3 that was signed by Harbour was an "Indiana Disclosure Notice" that in its entirety stated:
At the time he rented the vehicle, Harbour also received a separate "Amendment to Terms and Conditions of Rental Agreement" detailing the terms and conditions of the contract. This document contained more than fifteen subsections of terms and conditions. Section Five of the Rental Agreement listed eleven prohibited uses of the vehicle and Section Seven contained three paragraphs dealing with the collision damage waiver option. The prohibited uses on which Arelco relies to establish Harbour's liability are not set forth in the Disclosure Notice. Arelco attempted to incorporate the prohibited uses into the Disclosure Notice via the last paragraph of the Notice quoted above. Arelco left it to the renter to search out the limitations on the collision damage waiver. Ultimately, the renter must find Section Five of the Rental Agreement, which discusses "prohibited uses" whether or not the renter purchases a collision damage waiver. The waiver is discussed in Section Seven, but that section does not include the prohibited uses. Nor does it include a specific reference to Section 5. Rather Section 7 simply states that the renter must "comply with this Agreement, including all Terms and Conditions."
Arelco argues that Harbour appropriately acknowledged the prohibited uses because he "signed the Indiana Disclosure Notice which specifically addressed the prohibited uses." The statement that the renter must "comply with the Agreement, including all Terms and Conditions" is not enough to advise the renter of the terms of the waiver's restrictions. At best, it makes clear that there are some restrictions, but does not spell out what they are. The Disclosure Notice is the only relevant document bearing Harbour's signature. The Rental Agreement was not signed or initialed by Harbour. Because Arelco relies upon the Rental Agreement's prohibited uses to establish Harbour's liability and Harbour did not acknowledge "on" that document, the contract fails to meet Indiana's statutory requirements. IND.CODE § 24-4-9-10(c) (1993). This is no mere quibble. The point of the statute is to rub the consumer's nose in any qualifications on the waiver. That is not accomplished when the consumer signs one document but would have to read another two-page, fifteen-section agreement, in, at best, ten-point type to figure out what the restrictions and conditions on the waiver may be.
The underlying goal of this statute is to protect consumers. The Legislature intended that any waiver limitations be disclosed in a way that causes renters to grasp the effect of those limitations. It specifically required that the written acknowledgment be "on the rental agreement" and that the "rental agreement" include "all restrictions" on the waiver. IND.CODE § 24-4-9-10 (1993). Although an attorney may be able to wade through the several subsections and put all these pieces together, the Legislature did not intend to put that burden on an ordinary consumer renting a vehicle in the middle of the night in a snowstorm in a strange locale. By requiring renters to wander through several subsections of two separate documents in order to determine the limitations of the collision damage waiver, Arelco has failed to comply with the statute's requirements.
Because the restrictions on the...
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