Immunity for Car Rental Companies–How It Works


In prior posts we discussed the federal Graves Amendment which precludes a finding of vicarious liability against a car rental or leasing company.  See our prior posts here and here.

This post discusses some practical examples that we have encountered in our law practice.  We have handled nearly 7,000 cases as of this writing.

I.  Vicarious Liability

It has been long established law in New York and a few other states, such as Florida, that the owner of a motor vehicle will be vicariously liable for the negligence of the operator.  For example, if I were to lend my car to my friend, and the friend has an accident, both the friend and I would be liable for the accident.  The concept of vicarious liability passes the liability from the active tortfeasor (the operator) to the owner who may not even be present at the time of the accident.

II.  The Graves Amendment

Congress passed the so-called Graves Amendment, 49 USC 30106, a few years ago which abolishes vicarious liability in the case of rental and leased cars.  In other words, the car owner (the rental company) will not be liable for the negligence of the operator.  This federal law preempts any state law, such as New York’s, which creates vicarious liability against a car rental company.

As has been discussed in prior posts, the Graves Amendment is being contested in the courts.

The car rental and leasing industries sought the Graves Amendment claiming that liability lawsuits were impeding doing business nationally.  More about this later.

III.  The Practical Effect of the Graves Amendment in New York

As a result of this law, the car rental company is not vicariously liable.  As a general rule, the car rental company will provide the driver-renter minimal insurance coverage required under the law, such as 25/50 coverage.

This has been a gift to the car rental industry.  Before the Graves Amendment, if Hertz or Avis were the owners, the injured party would be assured enough insurance coverage for his injuries in the event that he sustained very serious injuries.

The Graves Amendment would have prevented full recovery to the injured people in the following lawsuits that we handled:

  • The leased car went through a red light, and the four occupants of the innocent car were all seriously injured.  The innocent car carried only 50/100 coverage.  The leased car which ran the light had no insurance!  However, the leasing company carried its own insurance of $1,000,000.  Therefore, a pool of $1,100,000 was available to the various clients.  The injured clients were able to settle their claims for reasonable amounts in relation to their injuries.  Under the Graves Amendment the clients would have had only a pool of $100,000 to split among themselves.
  • The leased car went through a stop sign and struck a pedestrian.  The client had a torn rotator cuff which required surgery as well as a hernia which required surgery.   It turned out that the renter had no insurance.  The leasing company’s insurance had to step-in so that that client received a fair settlement of $150,000.  If the Graves Amendment had been in effect, the client would have received only $25,000 which is the coverage afforded by MVAIC for uninsured vehicles. 
  • About 17 years ago we handled a case where a young girl was struck by a rental car.  She sustained a fractured ankle which required surgery (open reduction with internal fixation).  A settlement of $100,000 was obtained.  If the Graves Amendment were in effect the client’s recovery would have been limited to $10,000 which was New York’s legal minimum at the time. 

Conclusion

The U.S. Congress gave the auto rental/leasing industry a nice gift in the Graves Amendment.  In reality, high verdicts and settlements are a rarity in auto rental and leasing cases although the industry claimed that such were everyday occurrences.

If you have been in an accident involving a rental or leased car, please feel free to call us at 800-581-1434.

Mark E. Seitelman, 9/6/08, www.seitelman.com.

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4 Responses to Immunity for Car Rental Companies–How It Works

  1. […] Sammy Maseko wrote an interesting post today onHere’s a quick excerptIn other words, the car owner (the rental company) will not be liable for the negligence of the operator. This federal law preempts any state law, such as New York’s, which creates vicarious liability against a car rental company. … […]

  2. […] admin wrote an interesting post today onHere’s a quick excerptIn other words, the bcar/b owner (the brental company/b) will not be liable for the negligence of the operator. This federal law preempts any state law, such as New York’s, which creates vicarious liability against a bcar rental company/b. b…/b […]

  3. […] carenarahen wrote an interesting post today onHere’s a quick excerptAs a result of this law, the bcar rental/b company is not vicariously liable. As a general rule, the bcar rental/b company will provide the driver-renter minimal binsurance/b coverage required under the law, such as 25/50 coverage. b…/b […]

  4. […] Rental car agencies are protected from liability from negligent operation of its car by its renter.  In other words, the vehicle owner, the car rental company, will not be liable for the renter’s negligence in the event of an accident.  The federal law, popularly known as the Graves Amendment, has created this special liability protection to renting and leasing companies.  See our prior post, “Immunity for Car Rental Agencies–How It Works.”  […]

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