The Graves Amendment and the Vicarious Liability Landscape in North Carolina – Transportation


Imagine this: A law-abiding cyclist is struck by a driver texting while driving. The cyclist suffers from multiple bone fractures, resulting in an extended hospital stay followed by years of physiotherapy and other treatment. The injured cyclist contacts a lawyer to find out if he has recourse. While this may seem like a straightforward liability case, there is a complication. The driver was in a rental car. This raises a new question: who, if any, is responsible? Could the rental company be required to pay damages?

Before 2005, the problem was simpler. If the accident occurred in North Carolina, the cyclist would have had a cause of negligence action against the individual driver, and because the vehicle was owned by a rental company, the injured party would also have had a cause of negligence. A valid action against the rental company under a legal theory called “vicarious liability”. This means that regardless of whether the rental company is directly involved or not, it could still be held liable as the owner of the vehicle according to the agency’s principles. However, in 2005, a federal law called the Graves Amendment (49 USC § 30106) changed the liability landscape by effectively eliminating vicarious liability claims against a rental company. So, in the scenario above, the injured cyclist would have only one path to recovery: a direct pursuit against the driver of the vehicle. By passing the Graves Amendment, Congress rejected the premise that renters of vehicles have become agents of the rental entity.

Part of a federal freeway bill signed in 2005, the Graves Amendment prohibits vicarious liability claims against rental car companies for injuries caused by their customers. unless the injured party can prove that the rental company was otherwise negligent. Specifically, the law states that the owner of a motor vehicle, or any subsidiary of the owner, who leases or leases that vehicle shall not be held responsible simply because they own the vehicle. This protection extends to damage to persons or property resulting from or resulting from the use, operation or possession of the vehicle during the rental period, provided that:

  1. The owner is in business rental or leasing of motor vehicles; and
  2. There is no negligence or wrongdoing on the part of the owner.

According to the first part of the law, the amendment does not apply to a person who rents a vehicle from a friend and who is then released from all liability. The law is specifically designed to protect rental fleet owners and their affiliates. Most of the ambiguities will lie in the second prong, which is to analyze whether the rental company has adequately maintained its fleet of vehicles. This will involve reviewing, among other factors, whether the rental company has kept their vehicles in good working order and whether they have addressed known issues with the hardware parts of their vehicles.

Because this is a federal law, the Graves Amendment generally takes precedence over state laws that might conflict with it. This is because most rental cars cross state borders and as such engage in interstate commerce by traveling on highways across the country.

Practical application of the Graves amendment

The Graves Amendment was a response to the rapid increase in the number of states enacting vicarious liability laws without exception for car rental companies. Many of these same states have no legal limits on vicarious liability claims. The two combined, without additional protection, could potentially make it economically impossible to lease motor vehicles due to the possibility of unlimited liability risks. Such risks could potentially outweigh the rewards for car rental companies.

Notably, in New York, a driver who rented a vehicle from a rental company in 2000 ran a red light in Manhattan, colliding with a pickup truck, which then struck a 25-year-old pedestrian: Wall Street trader Ethan Ruby. Ruby was paralyzed from the chest down. In a lawsuit against the rental company, the final judgment in favor of Ruby included $ 2 million for past pain and suffering and an additional $ 8 million for future pain and suffering, which is said to be one of the most important state awards in a personal injury lawsuit. As this case illustrates, a single claim has the potential to completely wind up a business. For some companies, the answer has been to dramatically increase the cost of renting vehicles to ensure there is a “cushion” in the event of an incident. This, of course, has a substantial economic impact.

The amendment’s protections for rental companies extend beyond traditional rental cars, also protecting those that hire or lease trucks, semi-trailers and semi-trailers. The protection of these vehicles is based on the same principle: they are actuated by “mechanical power” and designed to be used on public roads. This means that the protections may, in certain circumstances, extend to motorcycles, ATVs, snowmobiles, boats and golf carts. As a general rule, if state law imposes vicarious liability on its owner, it is likely protected by the Graves Amendment.

However, it is crucial to note that in all cases, “not vicarious responsible “does not mean” not at all responsible “. directly liable for damage caused by its own negligence (i.e. negligent maintenance or repair of the vehicle causing or contributing to the accident).

In addition, the amendment does not apply to replace laws on insurance standards or minimum financial liability of the state. If state law (or a contractual relationship) imposes minimum auto insurance standards for financial liability on a vehicle owner, the Graves Amendment will not prevail. As such, in states that require minimum auto insurance limits, even if Graves isolates a rental business from vicarious liability, the company’s insurance policy may still be required to cover. losses to permissive vehicle users up to the jurisdiction’s minimum financial liability limits if the lessee is not sufficiently covered by their own personal automobile insurance.

In short, Graves has eliminated the premise that vehicle renters are agents of the rental entity. When considering vicarious liability and the Graves Amendment, litigants should keep in mind that regardless of what state law says, whether the rental car owner is i) in the vehicle rental or leasing business, and ii) has not been directly negligent, then Graves will provide a mantle of protection against vicarious liability.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.


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