Harbour v. Arelco, Inc.

678 N.E.2d 381, 1997 Ind. LEXIS 25, 1997 WL 121231
CourtIndiana Supreme Court
DecidedMarch 19, 1997
Docket11S04-9703-CV-202
StatusPublished
Cited by58 cases

This text of 678 N.E.2d 381 (Harbour v. Arelco, Inc.) is published on Counsel Stack Legal Research, covering Indiana Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Harbour v. Arelco, Inc., 678 N.E.2d 381, 1997 Ind. LEXIS 25, 1997 WL 121231 (Ind. 1997).

Opinions

ON PETITION TO TRANSFER

BOEHM, Justice.

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.

Factual and Procedural History

On March 2, 1991, Owen Harbour rented a 1991 Mercury Grand Marquis from Arel-co, 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. Arel-co 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) Har-bour’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 [383]*383determining 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.

I. Indiana’s Vehicle Rental Act

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 ear. 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.”

II. Arelco’s Disclosures and Harbour’s Acknowledgment Do Not Comply with the Act

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 [384]*384information 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 issue3 that was signed by Harbour was an “Indiana Disclosure Notice” that in its entirety stated:

National Car Rental

Indiana Disclosure Notice

If I enter into this Agreement and if I am involved in an accident or the car sustains damage, even from unknown causes, I am responsible for the resulting damages including loss of use, claims processing fees and administrative charges regardless of fault. This financial responsibility is eliminated if I accept the [Collision/Loss damage waiver] Option, pay for it, and comply with the Agreement, including all Terms and Conditions.

I understand that you offer an optional Collision/Loss damage waiver for an additional charge of $5.00 per full or partial day. I further understand that I should examine my or the Authorized Driver’s automobile insurance policy to determine whether the policy provides coverage for collision damage, loss or loss of use to the rented vehicle, and the amount of the deductible. I understand that I may already be sufficiently covered for damage to the rental vehicle by insurance; that you cannot interpret the terms of my insurance policy; that it is my responsibility to check with my insurance agent.

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Cite This Page — Counsel Stack

Bluebook (online)
678 N.E.2d 381, 1997 Ind. LEXIS 25, 1997 WL 121231, Counsel Stack Legal Research, https://law.counselstack.com/opinion/harbour-v-arelco-inc-ind-1997.