More than a quarter of all new vehicles on the road are leased. Unless an antiquated law is changed soon, that popular option will no longer be available in New York state. As part of a sweeping lawsuit abuse package, New York State Assemblyman Charles Nesbitt says he has proposed legislation that would end "vicarious liability."

When New York's "vicarious liability" law was passed nearly 80 years ago, it applied mainly to livery and chauffeur-driven vehicles. When these cars were involved in accidents, often the drivers could not afford to properly compensate victims. The automobile owners could, though, so "vicarious liability" was put in place to hold them responsible, instead.

Today, when a car is leased, the leasing company is technically still its owner. Therefore, the company can be held responsible for accident damages, even though it has no control over the driver's actions. This is not true to the original intent of the law, which did not take leasing into account, Nesbitt said.

Because of this loophole, over 200 personal injury or property damage cases against leasing companies are currently pending in New York courts, with total damages possibly costing the companies more than $1.5 billion. Ultimately, it is the consumers who will pay.

On March 1 of this year, General Motors Acceptance Corp. raised the upfront cost consumers must pay when entering a new lease to $1,000 from $595. GMAC is poised to stop leasing in New York state, altogether, unless the law is changed by May 1. Ford Credit has said it will follow suit in early July.

"Vicarious liability" was meant to make sure accident victims got proper medical care and compensation in a time when only the wealthy owned cars, and auto leasing was not generally available. The law has outlived its usefulness. Its continued existence threatens the future of leasing in New York state, according to Nesbitt.