What is the liability coverage owed by the lessor’s insurer in a long term lease agreement?

Long term lease agreement is one that last for one year or longer. The owner (lessor) of a vehicle that is a long term lease has greater protection under Florida’s dangerous instrumentality doctrine. Unlike short term rental agreements, under a long term lease the lessor is not considered to be the owner of the vehicle as long as certain requirements are met. F.S. 324.021(9)(b)1 The requirements are that (1) the lessor has required that the lessee buy adequate coverage; and (2) the lessee has bought and maintained that coverage. If the lease requires that the lessee maintain minimum insurance coverage as required under F.S. 324.021(9)(b)1 and the lessee does maintain it, then the lessor is relieved from liability.

The general requirements under Florida law are $100,000 per person and $300,000 per incident for bodily injury liability and $50,000 property damage liability or not less than a total $500,000 combined bodily injury and property damage liability. So what happens if you get in a car accident with another person who has a leased car and their insurance had lapsed because they forgot to send in their renewal payment? No worries because the lessor will probably be subject to liability under the dangerous instrumentality doctrine for damages that the lessee caused. Kraemer v. General Motors Acceptance Corp., 572 So.2d 1363 (Fla. 1990). In a typical lease, the type of agreement created is referred to as a closed-end lease agreement (rental agreement that puts no obligation on lessee to purchase at end of lease term).

In a Florida case where the lessor tried to argue that they should not be liable for damages caused by the lessee because the lease was a closed-end lease and they did not have beneficial ownership, the court held that lessor retained beneficial ownership because there were restrictions on the use of the vehicle, the lease stated that the lessor was the owner, and the lease gave the lessor the right to repossess the car if payments were not made. Id. Based on the Kraemer case, it seems very unlikely that a leasing company will not be held liable for damages caused by their lessee in a leased vehicle. In the event that the lessor purchases an excess policy that satisfies the statutory requirement of F.S. 324.021(9)(b)1, Florida courts have not allowed the lessor to escape vicarious liability for the damages caused by the lessee because they have strictly interpreted the Florida law which states that “the lessee must obtain and maintain insurance coverage.”