Strategies, Challenges, and Answers

The Graves Amendment Eliminates Vicarious Liability Of Motor Vehicle Rental Companies . . . Mostly?

This article was originally published in the October 2016 issue of COMMUNIQUÉ, the official publication of the Clark County Bar Association.”

Many lawyers are unfamiliar with the 2005 Graves Amendment, 49 U.S.C. § 30106(a). This federal law eliminates vicarious liability claims against vehicle rental companies based exclusively on a company’s status as the owner of the vehicle. Most direct challenges to the law have failed. But practitioners have found ways around effects of the law and may use those same methods to overcome Nevada’s limitations to claims against rental car companies.

The legislation was meant to protect vehicle rental companies from vicarious liability claims. Anglero v. Hanif, 140 A.D.3d 905, (N.Y. App. Div. 2016). The statute preempts contrary state law. See Carton v. Gen. Motor Acceptance Corp., 611 F.3d 451, 456 (8th Cir. 2010); Curry v. Raymond, No. 15-2314, 2016 U.S. Dist. LEXIS 55472, at *6 (E.D. La. Apr. 26, 2016).

Many industries have directly benefited from the Graves Amendment. For example, short-term car rental companies have seen success in overcoming claims of vicarious liability brought by those harmed by the negligent operation of rental vehicles. Cruz v. The Hertz Corporation, 5 So.3d 758 (Fla. Ct. App. 2009). Long-term auto leasing companies have also used Graves Amendment to their benefit. See Kahn v. MMCA Lease Ltd., 100 A.D.3d 833, (N.Y. App. Div. 2012).

Renters and lessors of commercial grade vehicles have seem some success using this law. Byrne v. Collins & Budget Truck Rental, 77 A.D.3d 282, (N.Y. App. Div. 2011). Others have not. Vargas v. FMI, Inc., 233 Cal. App. 4th 638, (2015). Self-moving companies have prevailed in cases using the Graves Amendment. Aubry v. U Haul of Arizona, 2012 N.Y. Slip. Op. 52040 (N.Y. Sup. Ct. 2012).

At the time Congress passed the Graves Amendment, 12 jurisdictions, including Nevada, were allowing plaintiffs to assert some form of vicarious liability against a rental or leased vehicle’s owner. Gregory J. Johnson, “Auto Dealer Buzz, Rentals and Vicarious Liability, An Overview of the Graves Amendment” (Aug. 26, 2014).

Because of the impact of the Graves Amendment, plaintiff’s attorneys have found ways to circumvent its effect. Initially, head-on challenges to the amendment were not uncommon. Plaintiffs often argued that the law was unconstitutional. For the most part, courts have rejected those arguments. Rodriguez v. Testa, 993 A.2d 955 (Conn. 2010); Garcia v. Vanguard Car Rental USA, Inc., 540 F.3d 1242 (11th Cir. 2008); Vargas v. Enterprises Leasing Co., 60 So.3d 1037 (Fla. 2011). There have been no reported challenges to the constitutionality of the Graves Amendment in Nevada. The U.S. Supreme Court has also not addressed the constitutionality question.

In addition to constitutional challenges, plaintiffs’ have looked for other ways around the Graves Amendment. For example, the Graves Amendment does not protect a vehicle’s owner from its own direct negligence. 49 U.S.C. § 30106(a)(2). If an employee of the vehicle’s owner is operating the vehicle in the course and scope of employment, the Graves Amendment is not a bar.

Other plaintiffs have asserted claims of direct negligence by the owner of the rental vehicle, like negligent entrustment or negligent maintenance. Khan V. MMCA Leasing, Ltd., 100 A.D.3d 833, (N.Y. App. Div. 2012); Terranova v. Waheed Brokerage, 78 A.D.3d 1040 (N.Y. App. Div. 2010).

Nevada recognizes the theory of negligent entrustment. Zugel v. Miller, 100 Nev. 525, 688 P.2d 310 (1984). When defending allegations of negligent entrustment, Nevada rental car companies point to NRS 483.610. The statute requires rental companies to verify the following three items:

  1. The rental driver must be licensed in the state or country of his/her residence;
  2. The rental driver’s signature on the rental contract must match the signature on the renter’s driver’s license; and
  3. The company must record the date, name, and address of the renter and the registration number of the vehicle rented to that person.

Nevada rental car companies argue that absent egregious facts, such as renting to a clearly intoxicated driver, if the rental companies meet these requirements, they have satisfied their duty of care. No Nevada appellate court has confirmed the companies’ position.

The Supreme Court of Nevada has recognized the theory of negligent maintenance or repair. Coblentz v. Hotel Emples. & Rest. Emples. Union Welfare Fund, 112 Nev. 1161, 925 P.2d 496 (1996). The case coming closest to that theory in the auto context is Stubli v. Big D International Truck, Inc., 107 Nev. 309, 810 P.2d 785 (1991). In Stubli, the plaintiff brought suit for negligent repair and products liability against the mechanic, Big D, and the trailer’s manufacturer. A springhanger on the trailer’s suspension had broken loose. Big D welded it back onto the trailer frame. Later, the tractor-trailer was involved in a single vehicle accident on I-80 in Wyoming. Stubli’s expert opined that the cause of the accident was a second failure of the weld. The expert said that the failure was a result of either a manufacturing defect or a repair defect. The plaintiff saved the failed parts, but did not save the entire trailer. This was Stubli’s downfall. When the defendants asked to inspect the trailer, only the parts were available. Defendants filed a motion to dismiss as a sanction for spoliation. See, e.g., Fire Ins. Exchange v. Zenith Radio Corp., 103 Nev. 648, 649, 747 P.2d 911, 912 (1987). The Supreme Court of Nevada upheld the trial court’s sanction of dismissal. There is no reason to believe that Nevada appellate courts would not recognize a cause of action for negligent maintenance of a rental vehicle. If the facts support such an allegation, negligent maintenance may be a way around the effects of the Graves Amendment.

Under NRS 482.305, a rental company can in fact be held jointly and severally liable for the negligence of the rental driver, but only if the rental car company does not have the proper insurance. This outcome may seem to be prohibited by the Graves Amendment. However, such an outcome is remarkably unlikely. Before rental car companies can conduct business, they must provide proof of minimum coverage on every rental vehicle. If the rental car company has the minimum limits of insurance as required by NRS 482.295, the rental car company will be dismissed out of the suit pursuant to NRS 482.305(4). Thus, a properly insured rental car company should never be held liable in contravention of the Graves Amendment. Nevertheless, practitioners should still assert the Graves Amendment affirmative defense even if the problem might never arise.

Nevada practitioners have done their best to use the same causes of action that overcome the effects of the Graves Amendment to work equally as well against the effects of NRS 482.305(4). Thus, claims of negligent entrustment, negligent maintenance, or vicarious liability due to employee negligence are often seen in complaints naming Nevada rental car companies as defendants.

The Graves Amendment preempts state law by eliminating or limiting vicarious liability of rental car companies just because they own the automobile. Under the right facts, plaintiffs have devised ways around the Graves Amendment. Defendants should continue to assert the Graves Amendment to claim the benefits of its effect.

Michael C. Mills, Esq. practices with Bauman Loewe Witt & Maxwell in Las Vegas, Nevada. He can be reached at mmills@BLWMLawFirm.com or by phone at 702-240-6060. For more information regarding transportation issues, please subscribe to the Nevada Trucking Law Blog at http://nevadatruckinglaw.com/.

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