VEHICLE OWNERSHIP LIABILITY: ONE FOOT IN THE "GRAVES"
In California, like in numerous other states, the law provides that an owner of a motor vehicle is liable for death or injury to persons and property resulting from the negligence of the permissive operator of the vehicle. (California Vehicle Code, §17150.) However, for owners who rent or lease out their vehicles, the liability created by this and other similar statutes has been eliminated thanks to the “Graves Amendment” (49 U.S.C.S. §30106) to the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users ("SAFETEA-LU"). The “Graves Amendment” provides, in pertinent part:
“An owner of a motor vehicle that rents or leases the vehicle to a person shall not be liable under the law of any State, or political subdivision thereof, by reason of being the owner of the vehicle, for harm to persons or property that results or arises out of the use, operation, or possession of the vehicle during the period of the rental or lease if: 1) the owner is engaged in the trade or business of renting or leasing motor vehicles; and 2) there is no negligence or criminal wrongdoing on the part of the owner.”
This federal statute preempts conflicting state laws, and is clearly aimed at protecting persons and companies engaged in the business of renting or leasing vehicles to others from being held liable as an owner of a motor vehicle whose operator negligently caused a loss. Accordingly, and for example, car rental agencies are no longer vicariously liable under State vehicle ownership statutes for the negligence of their renters. (Infante v. U-Haul of Florida (2006) 2006 NY Slip Op 26020; Piche v. Nugent, et al. (2005) 2005 U.S. Dist. Lexis 2275.)
The Graves Amendment does not insulate vehicle renters and lessors from liability in every circumstance. First, the Amendment is inapplicable to actions commenced prior to August 10, 2005. (49 U.S.C.S. §30106(c).) Further, the Amendment does not protect vehicle renters and lessors from liability when they are independently negligent, such as where the renter/lessor negligently maintains its vehicle and that failure causes an accident, or where the renter/lessor negligently entrusts its vehicle to an incompetent driver. (49 U.S.C.S. §30106(a)(2).)
Similarly, the Graves Amendment does not afford liability protection for the negligence of a vehicle owner’s own agents or employees. (49 U.S.C.S. §30106(a)(2).) Accordingly, it is clear that a rental car agency will be held liable for the negligence of its driver who is involved in an accident. However, the question is not nearly as easily resolved in the case of a motor carrier which routinely leases or rents its vehicles to another carrier. In this context, the determination of whether the involved driver is deemed the agent or employee of the renter/lessor can often be quite complex. Similarly, if the renter/lessor is a carrier which assigned its transportation duties to another, the renter/lessor may be liable not as a vehicle owner, but instead pursuant to the non-delegable duty doctrine (Restatement 2d of Torts, §428; Taylor v. Oakland Scavenger Company (1941) 17 Cal.2d 594; Eli v. Murphy (1952) 39 Cal.2d 598.).
Finally, it must be noted that the Graves Amendment does not preempt State laws requiring the owner of a motor vehicle to obtain and maintain necessary levels of insurance (49 U.S.C.S. §30106(b)), nor are state statues regarding contents of an insurance policy preempted; i.e. generally, under California Insurance Code, §11580.1, a permissive user of a vehicle must be deemed an insured. Thus, while the Graves Amendment may operate to insulate a vehicle owner from liability arising from the negligence of a permissive driver, the permissive driver may be entitled to insurance coverage on the owner’s liability policy, depending on the circumstances. These latter scenarios will need a case-by-case analysis.
All in all, the Graves Amendment has significantly effected ownership liability statutes across the U.S. As reflected in the foregoing, however, whether the Amendment precludes any responsibility may be another issue entirely. [This article has been brought to you by Firm Senior Counsel Shawn Elliott. To find out more, please contact Mr. Elliott at (818) 205-9955].
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Related Attorney(s):
Shawn K. Elliott
Related Practice Area(s):
Transportation Law
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