Hertz to Settle Most False-Arrest Claims for $168 Million

Hertz Global Holdings Inc. will spend $168 million to settle hundreds of claims that it falsely reported rental customers to the police for car theft when a vehicle was not returned on time.

The company had been fighting to bottle up the lawsuits in bankruptcy court, but in the last few months, lawyers for many claimants had won the right to take their cases before jurors. The deal will end 364 claims, or about 95% of the allegations that Hertz faces, the company said in a statement.

Hertz is likely to recover a “meaningful portion” of the settlement from its insurers, according to the statement.

Relatedly, in May 2022, the Company filed a complaint against several of its insurers seeking a determination of its rights under its commercial general liability, and directors and officers liability, insurance policies for these alleged claims in a declaratory judgment action pending in Delaware Superior Court, Hertz Global Holdings, Inc., et al. v. ACE American Insurance Co., et al., C.A. No. N22C-05-130 MMJ (CCLD).

IJ Editor’s Note: According to a 10-Q Form filing with the SEC, Hertz’s May 2022 complaint in Delaware Superior Court included insurers ACE, Lexington, Everest National, Endurance, Great American, National Union, QBE, Alterra, and Navigators.

Lawyers for the customers who are suing Hertz did not immediately respond to a request for comment. The company’s shares dropped 1.7% to $16.59 on Monday morning in New York.

Hundreds of customers said in court papers that Hertz filed police reports against them and had them falsely arrested, often at gunpoint. A small number of those cases allege errors by Hertz employees caused police to pull over innocent customers on suspicion of driving stolen cars.

The company filed bankruptcy in 2020 as the Covid-19 pandemic ravaged the economy and brought car rentals to a halt. Hertz exited bankruptcy oversight last year, but left a shell company behind to pay off its older, disputed debts, including the false arrest claims.

Bankruptcy courts don’t have juries and disputes are typically settled by judges focused on rehabilitating financially distressed companies. In state courts, juries can be unpredictable, sometimes imposing steep penalties on corporations found to have harmed the public.

Hertz is the unit of Hertz Global Holdings Inc. that operates the Hertz, Dollar and Thrifty rental brands in regions that include Europe, the Americas, Asia, Africa and Australia.

For years, Hertz filed thousands of criminal cases against customers annually, according to court documents. The company says the majority involve disputes about vehicles that weren’t returned on time and likely have been stolen, and it tries to contact customers via phone calls, text messages, emails and certified letters about overdue cars and get them back through private means, working for about 63 days beyond the return date before involving police.

The case is Rental Car Intermediate Holdings, LLC 20-11247, US Bankruptcy Court, District of Delaware (Wilmington).

Photo: Cars on a Hertz car rental lot in Berkeley, California. Photographer: David Paul Morris/Bloomberg