Can You Be Liable When You Lend Someone Your Car?

Under the common law “negligent entrustment” theory, one who “entrusts” a car to another who is known, or from the circumstances should be known, to be incompetent or unfit to drive may be liable for injuries inflicted by the driver that were proximately caused by the driver’s incompetence.

The defendant is charged directly with his or her own negligence in entrusting the vehicle to a person known to be likely to create an unreasonable risk of harm. Accordingly, the threshold issue is whether defendant had knowledge that the driver was incompetent or unfit to operate a motor vehicle.

The “knowledge” requirement is satisfied if defendant either actually knew that the driver was incompetent or had knowledge of circumstances reasonably indicating that the driver would create an unreasonable risk of harm to others—e.g., knowledge of the driver’s youth or inexperience. A defendant “entruster” who had knowledge (actual or constructive) of the driver’s incompetence cannot escape liability on the ground that he or she does not “own” the vehicle. Common law negligent entrustment liability may be imposed, e.g., on the lessee or, in an appropriate case, a car dealer or sales person.

The “knowledge” element is often inextricably linked with the issue of whether the alleged “entruster” had any legal duty to act in the situation: In typical financial transactions, where a bank or commercial lender finances the purchase of an automobile, the lender usually cannot be held liable for the borrower-driver’s misfeasance. At least absent reason to suspect driver incompetence, commercial lenders have no duty to investigate the driver’s competence before financing the vehicle purchase.

A rental car company must require its customers to possess a valid driver’s license. But unless the customers give some apparent clue of unfitness to drive, a rental company is not required to investigate their driving records or inquire as to their knowledge of traffic laws before leasing them a car. Thus, a rental car agency has no duty to ask or otherwise inquire whether an apparently fit customer (who shows a valid license) has a drunk driving record. Barring the rental company’s actual knowledge of the customer’s unfitness to drive, the company cannot be reached for the customer’s tortious conduct on a negligent entrustment theory.

Similarly, a rental agency had no duty to determine whether a driver from a foreign country was familiar with California’s “rules of the road”; nor was the agency required to furnish the driver with a copy of those rules. There is no legal presumption that foreign drivers are more accident-prone than domestic drivers. Moreover, it is “pure speculation” whether a foreign driver would read, remember and obey the rules.

A parking attendant or parking lot operator (simply a bailee charged with parking the driver’s vehicle and returning it to the driver on request) may not be held liable for negligent entrustment when surrendering a vehicle to the bailor-driver who appears to be in a drunken state and thus unfit to drive. That the parking attendant might have had the right to intervene and refuse to return the vehicle to the intoxicated driver does not change this result: “The right to act … is far different from a duty to act.”

Causation: It must also be shown that the defendant “entruster” was an essential link in the chain of causation. The requisite causation is normally established by proof that defendant had the power and ability to control the driver’s use of the vehicle. For example: in an appropriate case, negligent entrustment liability may lie against a co-owner for the negligent driving of the other co-owner. A cause of action is stated liable if the co-owner had power over use of the vehicle by the other, and the negligent co-owner drove with the express or implied consent of the controlling co-owner who knew of the driver’s incompetence.