In general, when renting a car from a rental car company a person normally signs a form stating that they (the renter) will be held responsible for damages caused to the vehicle. This would include damages to other vehicles caused by the renter as well if they were at-fault in an accident.
The California Department of Insurance's guide to auto insurance states, when renting a vehicle, the automobile rental companies hold the renter responsible under the rental agreement for damage to their vehicle. The guide goes on to say normally the rental agency will offer a Damage Waiver at an additional cost. This is not insurance, but a contractual agreement between the renter and rental company.
Therefore, if a waiver is not purchased, review your own automobile policy to determine if any extension of coverage applies. Also, determine how the liability coverage afforded by your policy applies in the event you are at fault in an accident with the rented vehicle.
[Let CarInsurance.com help you find affordable auto insurance now.] A driver may not need to buy insurance from the rental car if their own personal car insurance coverages will cover the rental car. Some credit cards also provide insurance protection when you use it to rent the vehicle.
As for legal information regarding if rental car companies and if they are liable for the actions of their drivers, we found the following information. Many consumers believe that car rental companies will assume full responsibility for the cars they rent. In most states, car rental companies are not obligated to take responsibility for the actions of their rental drivers. But in 16 states—Arizona, California, Connecticut, Delaware, Florida, Idaho, Iowa, Maine, Michigan, Minnesota, Nevada, New York, Oklahoma, Pennsylvania, Rhode Island, and Wisconsin, plus the District of Columbia—car rental companies can be held responsible for the negligent actions of rental car.
State law in these sixteen states and the District of Columbia requires the companies to assume responsibility if they rent a car to an uninsured driver and that person causes injury and are financially unable to compensate the people they injure or kill. In March 2005, there was an amendment offered to a Federal House Transportation Bill to rescind this "vicarious" liability. The House voted narrowly to accept this amendment, which would nullify state laws imposing vicarious liability to rental car companies if it becomes law. We were unable to find if the bill was enacted into a law or not by mid-2006.
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For information on specific California Code that is related to this subject try contacting the CA Department of Insurance. In 1999 a CA state bill created a rental car agent license and authorized the California Department of Insurance to issue this license to a rental car company and its franchisee so they hopefully should be able to answer any other questions you have regarding rental car accidents and liability. | 
