Update on the Graves Amendment: Vicarious Liability in Vehicle Rental and Leasing

I. Update to the Graves
Amendment

On August 10, 2005, President George W. Bush enacted the historic legislation known as the “Safe, Accountable, Flexible and Efficient Transportation Equity Act of 2005,” which introduced significant modifications to Sub-Chapter 1 of Chapter 301 of Title 49 of the United States Code, widely recognized as the “Graves Amendment.” This pivotal law effectively eliminates the burden of vicarious liability for car and truck rental and leasing companies across the country, ensuring they cannot be held liable for damages stemming solely from the negligence of their renters. Congressman Graves, who championed this legislative effort, elaborated on its core principle, stating: “What we are doing is eliminating vicarious liability simply because the [car rental agencies] own the vehicle.” 151 Cong. Rec. H1199, H1200-01, 134 (daily ed. March 9, 2005)(statement of Rep. Graves). Consequently, the Graves Amendment explicitly bars any legal actions based on vicarious liability against entities engaged in the rental or leasing of vehicles.

The practical implications of the Graves Amendment are profound; it safeguards consumers by ensuring that the creeping litigation costs do not translate into inflated rental prices, which often result in higher fees for everyday renters. Moreover, it serves a vital role in supporting smaller rental and leasing businesses that might otherwise struggle to survive amidst the fear of relentless litigation. The Amendment aims to standardize the legal landscape, particularly for the car rental industry, which previously faced varying levels of liability across fifteen states and the District of Columbia, where corporate owners of rental vehicles could face vicarious liability under local laws.

While the Graves Amendment effectively precludes most forms of vicarious liability, it does not create an all-encompassing shield for vehicle owners, as certain limited scenarios do permit liability claims to proceed. Specifically, under 49 U.S.C. §30106(a)(2), rental or leasing companies may still be held accountable for negligent maintenance of their vehicles, although such instances are infrequently applicable and should be pursued with caution, given Congress’ clear directive to limit lawsuits against vehicle leasing companies. Carton v. General Motors Acceptance Corp., 639 F.Supp.2d 982, 996 (N.D. Iowa 2009). “Unless a State specifically imposes a legal duty on lessors to ensure that their lessees maintain adequate insurance or to ensure that their lessees have adequate driving records, § 30106(a)(2) only appears to apply to claims predicated on criminal wrongdoings and negligent maintenance claims…” Dubose v. Transp. Enter. Leasing, LLC, 2009 WL 210724 (M.D. Fla. Jan. 27, 2009)(emphasis added).

The Savings Clause provides a distinct exception allowing for state insurance and licensing mandates. “Under the Graves Amendment, states may require insurance or its equivalent as a condition of licensing or registration, or may impose such a requirement after an accident or unpaid judgment.” Garcia v. Vanguard Car Rental USA, Inc., 540 F.3d 1242, 1244 (11th Cir. 2008).

II. The Savings Clause Exception: When Graves Amendment
Does Not Apply

Many plaintiffs have pointed out glaring shortcomings in the Graves Amendment, especially in jurisdictions that favor plaintiffs. Consequently, in various situations, particularly where pleading requirements are lenient, plaintiffs often craft claims of negligence against the vehicle owner to circumvent the constraints of the Graves Amendment. This tactic effectively obligates vehicle owners or lessors to engage in the protracted discovery process rather than resolving disputes at the pleading phase.

For instance, the Graves Amendment does not preclude liability claims asserting that a vehicle owner irresponsibly entrusted a vehicle to an unsuitable driver. In Muhammad v. Skomsvold, the Court determined that Hertz, as a rental vehicle company, could be deemed negligent for trusting a vehicle to an individual deemed unfit to operate it; therefore, the protections of the Graves Amendment did not apply. No. 2:21-cv-01536-APG-EJY, 2021 U.S. Dist. LEXIS 204021, at *4-5 (D. Nev. Oct. 22, 2021); see, Grandelli v. City of N.Y., 2019 NY Slip Op 32856(U), ¶ 7 (Sup. Ct.)(Denying Home Depot’s Motion for Summary Judgment on the grounds that it was too early to conclude Home Depot did not have any causal responsibility for the October 31, 2017 terrorist attack by renting a truck to Sayfullo Saipov).

Moreover, the Graves Amendment does not extend protection in cases where vehicles are alleged to have been inadequately maintained. Novovic v. Greyhound Lines, Inc., No. CV-08-3190 (CPS), 2008 U.S. Dist. LEXIS 94176, at *8-9 (E.D.N.Y. Nov. 19, 2008). In these cases, an examination is necessary to determine who held the duty of maintaining the vehicle or what involvement the lessor had regarding the upkeep. The Court in Novovic posited that a valid claim could exist against the lessor when a lease stipulated that the lessee adhere to the lessor’s recommended standards of care and maintenance. Id.; see also, Johnson v. Alamo Fin., L.P., No. 6:09-cv-1768-Orl-19GJK, 2009 U.S. Dist. LEXIS 109062, at *8 (M.D. Fla. Nov. 19, 2009)(“The allegation of negligent maintenance therefore brings the vicarious liability claim within the exception to the Graves Amendment set forth in Section 30106(a)(2).”)

A recent federal ruling from the Western District of New York has further clarified this exception to include potential negligence from affiliated firms. In Stratton v. Wallace, No. 11-CV-74-A(HKS), 2014 U.S. Dist. LEXIS 105816 (W.D.N.Y. July 31, 2014), Julie Stratton tragically lost her life when her disabled vehicle was hit by a tractor-trailer operated by Thomas Wallace. In this case, Julie Stratton’s spouse, Michael Stratton, initiated a legal action against several corporate entities, which included the employer of Thomas Wallace, Millis Transfer, Inc.; the owner of the truck, Great River Leasing, LLC; and the overarching corporate entity common to both Millis Transfer, Inc. and Great River Leasing, LLC, Midwest Holding Group, Inc. Id. at *3. The Court in Stratton analyzed how the relationship and structure among these businesses impacted their liability concerning the Graves Amendment. The ruling determined that in order to escape vicarious liability, both the vehicle owner and its affiliate must prove they acted without negligence. Id. at *12. Thus, for the Graves Amendment to effectively serve as a shield from liability, it necessitates that the affiliate companies—both the lessee [Millis Transfer, Inc.] and the lessor [Great River Transfer, LLC]—not be negligent in their actions. Id. at *15.

While it remains uncertain whether other Courts will adopt the Stratton interpretation, this ruling could prompt entities to carefully evaluate their operational practices and corporate structures, particularly in light of the evolving constraints placed by the Graves Amendment. Companies with complex relationships with affiliates in vehicle rental or leasing may soon find themselves needing to prove not only their own lack of negligence but also that their affiliates have acted responsibly. In addition, contractual agreements that grant control over vehicle maintenance to an owner or lessor may expose them to greater liability.

Please note that the law surrounding the Graves Amendment is dynamic and subject to change, shaped by ongoing decisions from both state and federal courts along with legislative actions.

What are the main exceptions to the Graves Amendment that allow for liability claims against rental companies?

‌**Interview with Legal Expert on Updates to the Graves Amendment**

**Host:** Welcome, everyone, to today’s segment where we explore significant legal updates impacting the ​car rental and leasing industry. Joining us is legal expert and attorney Sarah ⁣Miller. Sarah, thank you for being here.

**Sarah Miller:** Thank you for having me!

**Host:** Let’s dive right in. The Graves Amendment, enacted⁣ back in 2005, has faced critique and legal challenges since its inception. Can‌ you explain how it fundamentally changed the ‌liability landscape ⁤for rental ⁣companies?

**Sarah Miller:** Certainly! The Graves Amendment essentially shields car and truck rental ⁣companies from‍ vicarious⁢ liability, meaning they can’t be held responsible for accidents caused by their renters⁢ simply‍ because they own the vehicle. This was a significant shift ⁢aimed at reducing litigation costs for these companies, which would, in turn,⁣ help keep rental prices stable ‌for consumers.

**Host:** That’s quite‍ impactful. However, it seems there are exceptions that⁣ allow ⁢for liability claims to proceed under certain circumstances. Could you elaborate‍ on those?

**Sarah Miller:** Absolutely.⁣ While the Graves Amendment‍ provides broad ​protection, there are specific exceptions. For instance, if a vehicle ⁣owner is negligent by entrusting⁤ a vehicle to an unfit⁣ driver, ​they can still be held liable. A recent case, *Muhammad v. Skomsvold*, illustrates this, ​where ‍Hertz was found potentially negligent for renting to an unsuitable driver.⁤ Additionally, claims involving inadequate maintenance of vehicles can also bypass the Graves Amendment’s protections, as noted in the *Novovic v. Greyhound Lines* case.

**Host:** Interesting! It sounds like these exceptions are essential ⁣for plaintiffs​ seeking justice in cases that might ‍initially appear shielded by the Amendment.‍ Are​ there other⁢ notable recent⁤ cases that have helped clarify these exceptions?

**Sarah Miller:** Yes, one⁤ recent ruling from *Stratton v. Wallace* further ⁢affirms that negligence claims could extend beyond just rental companies to affiliated firms, broadening the scope of potential liability in specific circumstances. This is crucial for plaintiffs as it indicates that various entities may be held accountable if they have a role​ in ‍the​ vehicle’s ⁢use or maintenance.

**Host:** ​So, despite the overarching protections of the Graves Amendment, plaintiffs can still find pathways to justice ⁣under ​specific ⁣conditions?

**Sarah Miller:** Exactly! Plaintiffs are ‍often leveraging these exceptions, particularly in jurisdictions where pleading standards are more lenient. This strategy ⁤can compel vehicle owners or rental companies into lengthy discovery⁣ processes instead of dismissing cases outright at the pleading phase.

**Host:** It definitely​ seems like a complex balancing act. In your opinion, what does this mean for the future of vicarious liability in the car rental industry?

**Sarah Miller:** I⁣ believe it signals ongoing evolution in this area of law. As these exceptions continue to be tested in courts, we may see further clarifications‌ that ⁤either reinforce or challenge ‌the limits set by the Graves Amendment. ⁣Ultimately, it highlights the need for rental companies⁢ to ensure they have robust protocols for assessing driver suitability and vehicle maintenance to mitigate⁤ liability risk.

**Host:** Great insights, Sarah! Thank you so much for your ⁢time⁢ today and for breaking down such a nuanced topic for ⁢our audience.

**Sarah Miller:** Thank you for having me! It was a pleasure to discuss these important legal developments.

**Host:** And thank you to our viewers​ for tuning in! We’ll continue to keep you updated on legal ⁢developments‌ affecting consumers and the industry. Stay informed!