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The Graves Amendment and Rental Car Liability

Imagine you were struck in the crosswalk by an absent-minded tourist in a rental car, resulting in multiple broken bones, torn ligaments, and years of painful and expensive physical therapy. Typically, you would settle your injury claims through the driver's own insurance policy or even through a lawsuit against the driver. But before 1995, you also could file a claim against the car rental company for damages under the legal theory of "vicarious liability" in states with laws allowing such claims against the "owners" of motor vehicles.

This all changed when the so-called Graves Amendment (49 U.S.C. § 30106) was passed in 1995, virtually eliminating vicarious liability claims against rental car companies. The following is a discussion of this federal law and how it affects rental car liability.

The Graves Amendment at a Glance

The Graves Amendment is part of a federal highway bill signed into law in 1995. It basically bars vicarious liability claims against car rental companies for injuries caused by their customers, unless it can be proven that the company's negligence or actions contributed to those injuries. Federal law states the following:

An owner of a motor vehicle that rents or leases the vehicle to a person (or an affiliate of the owner) shall not be liable under the law of any State or political subdivision thereof, by reason of being the owner of the vehicle (or an affiliate of the owner), 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 (or an affiliate of 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 (or an affiliate of the owner).

Since most rental cars cross state lines (or operate in multiple states), and are thus engaged in interstate commerce, the Graves Amendment preempts state liability laws. It also has been used in state courts to protect companies that rent tractors, trailers, and other such vehicles from vicarious liability. It also has been determined to apply to carsharing companies such as Zipcar. However, it's still not clear whether this also extends to loaner agreements with auto dealers.

A Brief History of Rental Car Liability and the Graves Amendment

The Graves Amendment was added in response to a growing number of states passing vicarious liability laws that lacked an exception for car rental companies. Some states, including New York, had no statutory limits on vicarious liability, leading to unsustainably large settlements against some plaintiffs. For example, a New York pedestrian who was paralyzed in an accident involving a Budget Rent-a-Car in 2000 was awarded $21 million in a vicarious liability claim against the company. Even though the driver who hit him had run a red light, Budget ultimately was on the hook for damages because the driver lacked insurance.

According to amendment author Rep. Sam Graves (R-Mo.), vicarious liability was costing consumers an extra $100 million in increased rental costs annually. Opponents, meanwhile, were concerned that victims would have no recourse if struck by uninsured motorists in rental cars. The amendment passed by a slim margin.

What the Graves Amendment Means for You

Even before the amendment was passed, car rental companies were in the practice of drafting contract language that released them from vicarious liability, offering temporary rental insurance for those otherwise lacking coverage. Generally, you (either personally or through your own insurer) are liable for any injuries caused by a rental car that are determined to be your fault.

But if the injuries were the result of the company's negligence -- dangerously worn brakes, for instance -- then the victim may pursue a claim against the car rental company. Similarly, the rental company will be liable for any injuries resulting from criminal activity. Typical negligence claims against rental companies include negligent entrustment, negligent maintenance, and failure to properly train or manage employees.

Involved in a Rental Car Accident? Get a Free Legal Assessment

Whether it's a simple fender bender or an accident causing serious injury, you want to make sure you understand the law and follow the right procedures. If it's unclear who is responsible for your injuries or how to get started with a claim, you'll want to speak with an injury attorney as soon as possible. Have a local attorney evaluate your claim at no cost to you.

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