Hertz Agrees to Pay $168 Million in False-Arrest Settlement

by Matt Posky

Published: December 9th, 2022

hertz agrees to pay 168 million in false arrest settlement

Hertz has decided to pay $168 million to settle 364 individual claims that the company falsely reported its own rental cars as stolen. Criticisms date back to 2015 but the issue became national news right around the time the company was also filing for Chapter 11 bankruptcy in 2020. Hertz has since maintained that any erroneous claims made against customers were the result of a faulty inventory system that’s since been fixed. However, the people that were wrongfully accused of the crime – some of which were held at gunpoint by police and even temporarily imprisoned for a felony offense they didn’t commit – have been seeking restitution in class-action suits.

The rental firm has said the settlement will resolve claims for more than 95 of the wrongfully accused, noting that those false claims represent a tiny fraction of its business.

Hertz asserted that it does about 25 million rental transactions per year. Over 3,000 of those result in theft reports, which ultimately account for just 0.014 percent of rentals annually. Broken down, that means those false allegations are a drop in the bucket. Though it’s difficult to imagine that information offering much comfort to someone that’s been thrown in jail for a crime they didn’t actually commit.

The company maintained that some of the plaintiffs were weeks overdue during the investigative reporting done by CBS in 2021. But the relevant Delaware lawsuit makes direct reference to multiple individuals who attempted to extend rental periods only to be faulted for theft anyway. There was also at least one instance where a person who never even rented from Hertz ended up being wrongfully accused.

As a formerly frequent Hertz customer, I could see how something like this could have happened. Leading up to the pandemic, there was a notable lapse in quality among all rental agencies. Updated protocols designed to cope with the pandemic only made the situation worse, as short-staffed offices now had to contend with incoming health regulations and increasingly agitated customers. Long lines became unavoidable, with the desk staff scrambling to get people into whatever vehicles they had lying around.

This coincided with just about every rental agency buying up vehicles wherever they could due to production lapses first witnessed in 2020. Managers would often explain that their inventories were a complete mess as their opening line, right after apologizing about the ludicrous wait times. Just about every rental agency seemed to have massive organizational and staffing issues. Your author even encountered situations where he couldn’t properly return a rented vehicle because the employees were nowhere to be found.

Considering that the company filed for Chapter 11 less than two years ago, having to pay $168 million to settle the suit sounds as though it could do some real financial damage to Hertz. But a filing with the Securities and Exchange Commission makes it seem as though the business isn’t all that worried and has a plan to goose insurers.

“The Company believes that a meaningful portion of the amount being paid for the Settlements will ultimately be recovered from its insurance carriers. In May 2022, the Company filed a complaint against several of its insurers seeking a determination that certain of its commercial general liability and directors' and officers’ liability insurance policies provide coverage for the Claims; that litigation is currently pending,” reads the document. “The Company has policies to help ensure the proper treatment of its customers and to protect itself against the theft of its services and assets. It has taken significant steps to modernize and update those policies.”

With new CEO Stephen Scherr at the helm, Hertz has been more upfront about the lawsuit and is eager to put the issue in the past.

"As I have said since joining Hertz earlier this year, my intention is to lead a company that puts the customer first. In resolving these claims, we are holding ourselves to that objective," Scherr said in a press release. "While we will not always be perfect, the professionals at Hertz will continue to work every day to provide best-in-class service to the tens of millions of people we serve each year. Moving forward, it is our intention to reshape the future of our company through electrification, shared mobility and a great digital-first customer experience."

[Image: vieninsweden/Shutterstock]

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Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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2 of 10 comments

Golden2husky on Dec 10, 2022

Even one person being arrested at gunpoint is too many. We as individuals are expected to be responsible for our actions. So should Hertz. Picture yourself as the one being pulled over, abruptly searched, and thrown in jail. I'd think that each episode should result in a few million each for those wrongful arrested...Penalties must be extremely high - that ensures that such mistakes are far less likely to happen in the future.

2 Reply
Tonycd on Dec 10, 2022

I'm old enough to remember when Hertz was the high-quality choice in car rental. That was a long time ago.

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