State laws differ however in general rental car agencies may be required to have some sort of insurance on the vehicles they own however when renting out vehicles to drivers rental car companies put in the rental contract that the person renting the vehicle us assuming liability and thus must either have their own auto insurance that will cover the rented vehicle or purchase liability insurance for the period of their rental.

We contacted the California Department of Insurance (DOI) to see if they could give us any insight into CA laws regarding this topic. Their consumer communications bureau responded to us by stating that typically a person renting a car signs a rental agreement which places responsibility for damages caused in an accident on the renter.

The CA DOI representative also noted that in 2005 there was an amendment passed to a Federal House Transportation Bill to rescind ‘vicarious’ liability to rental car companies. Basically, rental car companies are not responsible for the actions of their rental drivers. Therefore it is highly recommended that if a driver does not have liability coverage that would apply to a rental car situation, coverage should be purchased from the rental car company.

This amendment that was referred to by the DOI states specifically that an owner of a motor vehicle that rents or leases the vehicle to a person shall not be liable under the law of any State or political subdivision thereof, by reason of being the owner of the vehicle, for harm to persons or property that results or arises out of the use, operation, or possession of the vehicle during the period of the rental or lease. Thus rental car company can put the burden of carrying liability for the rental car period on the individual(s) renting the vehicle. Since it is a Federal law that now includes this amendment than this liability issue is the same for California as well as any other state within the US.

So while traveling in the United States as a foreign visitor from New Zealand or elsewhere you will need to pay for the liability coverage offered by the rental car company unless you have your own liability coverages that will extend to a rental car here in the US.