In 2005, Congress attached an obscure, last-minute add-on to a huge omnibus transportation bill. Many such riders are largely inconsequential to many people, but this one, 49 U.S.C. 30106, has a significant impact on personal injury cases in New York and elsewhere.
Under traditional tort analysis, theories like negligent entrustment and respondeat superior would seem to apply in car crashes that involve rented vehicles, but the Graves Amendment sharply limits third party liability in these cases, at least in some circumstances.
The Graves Amendment is particularly important in today’s America, where people relocate frequently and vehicle ownership is dipping. Therefore, there are lots of rented moving trucks and rented passenger vehicles on New York streets and highways.
How It Got Started
Several years earlier, a victim in Connecticut obtained a multi-million dollar judgement against a large auto rental company following a fatal fireball collision. The company threatened to cease operations in that state and several other ones that had similar vicarious liability statutes.
Concerned over the possible effects of this move on an already fragile economy, some pro-industry lawmakers in Washington considered passing legislation that would limit, or eliminate, corporate liability in these situations, but the proposal found little backing. So, Rep Sam Graves (D-MO) introduced the legislation which bears his name as lawmakers debated a comprehensive highway bill that was already several hundred pages long.
Since Congress held no hearings on the Graves Amendment and only debated the measure for a few minutes before passing it, there is almost no legislative history that reveals Congressional intent, so courts in New York and other states have largely fared for themselves when it comes to interpreting the law. More on that in a minute.
What it Says
According to the Graves Amendment, a vehicle leasing company, like U-Haul or Enterprise, is not liable for damages caused by someone who leases one of its vehicles if:
- The owner or affiliate is “is engaged in the trade or business of renting or leasing motor vehicles,” and
- Neither the owner nor the affiliate are “negligent.”
Since the Graves Amendment does not define any of the terms it uses, most courts use their ordinary meaning.
As for “trade or business,” this phrase normally means that the entity derives most or all of its income from a certain activity. For example, a local coffee shop may also sell beer and wine, but it is still a coffee shop and not a liquor store. As far as the Graves Amendment is concerned, many truck rental entities are really moving service companies that happen to have a truck or two in the parking lot as well.
“Negligence” means a lack of ordinary care, and there is a growing trend among vehicle rental companies to verify drivers’ licenses and ensure that the customer is legally entitled to operate that vehicle. Failure to perform this verification is arguably negligence.
The Graves Amendment and Negligence in New York
In Stratton v. Wallace, a federal court in New York essentially reached these same conclusions. Moreover, the court held that for the Graves Amendment to apply, both the owner and the affiliate must be without negligence.
In terms of license verification, many courts consider owners/affiliates to be negligent as a matter of law if they lease a vehicle to a person with a suspended drivers’ license. A customer’s poor driving record is evidence of negligence, but the company can always argue that if the state of New York deems the person fit to drive, the company should not second guess that decision.
Victim/plaintiffs must also establish the other elements of a negligence case to prove vicarious liability claims. Napoli Shkolnik works with these types of cases. Should need help call a lawyer.