Graves Amendment

The Graves Amendment, found in the Federal Transportation Equity Act of 2005, created immunity for vehicle lessors as to claims of vicarious liability arising out of the lessee's conduct during the rental period.

The relevant subsections of the Graves Amendment read as follows:

(a) In general. - 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).[1]

In essence, the Graves Amendment protects car rental companies from vicarious liability for the conduct of their lessees during the rental period.  This federal protection applies to vehicle owners, as well as affiliates of owners—a person that directly or indirectly controls, is controlled by, or is under common control with the owner.[2]

Despite its broad application, Graves immunity is limited in its preemption to state claims of vicarious liability only.  A lessor is only immunized from claims regarding the alleged negligence of its lessee.  Thus, direct claims of negligent entrustment do not fall under the umbrella of Graves' protections and are still actionable against rental/lessor companies.[3]

In a suit for negligent entrustment, a Texas plaintiff must show there was (1) entrustment of a vehicle by the owner; (2) to an unlicensed, incompetent or reckless driver; (3) the owner knew or should have known was unlicensed, incompetent or reckless; (4) the driver was negligent on the occasion in question; and (5) the driver's negligence was a proximate cause of the accident.[4]  Despite lessor's exposure to direct liability, Texas case law is abundantly clear—the possession of a valid, unrestricted driver's license is evidence of a driver's competency absent any evidence to the contrary.[5]  Thus, an entity lending its car to a licensed driver has no duty to inquire further into the driver's competency to drive.[6]  Generally, rental companies have adequate policies and procedures in place to ensure a lessee's license is valid, then photocopied and filed for protections against third party claimants.

Without substantial recourse in direct suits, Texas plaintiffs have attempted to limit the applicability of the Graves Amendment when a lessor cannot produce a written lease.  However, Texas courts have held the lack of a written lease in evidence does not conclusively negate the existence of a lease and does not automatically preclude Graves immunity.[7]  Regardless, with large rental companies maintaining advanced recording systems whereby lease agreements are rarely misplaced or unavailable, this is rarely a point of contention.

Conclusion

Graves Amendment immunity from vicarious liability, coupled with state court leniency in direct suits for negligent entrustment, provides rental car companies with the freedom and flexibility in conducting business absent open-ended liability for the actions of their lessees. A lessor's duty to third parties is ultimately satisfied upon validation of a lessee's unrestricted driver's licenses.  These clear, bright line protections allow for the rental car industry to implement internal procedures, ensuring strict compliance and limiting their liability to third party complainants.


[1] Federal Transportation Equity Act, 49 U.S.C. § 30106 (2005).

[2] 49 U.S.C. § 30106(d)(1).

[3] Dubose v. Transp. Enter. Leasing, LLC, 2009 WL 210724, *4 (M.D. Fla. Jan. 27, 2009); Carton v. General Motor Acceptance Corp., 611 F.3d 451, 457 (8th Cir. 2010).

[4] Schneider v. Esperanza Transmission Co., 744 S.W.2d 595, 596 (Tex. 1987).

[5] Mundy v. Pirie-Slaughter Motor Co., 206 S.W.2d 587, 590 (Tex. 1947); Bartley v. Budget Rent–A–Car     Corp., 919 S.W.2d 747, 752 (Tex. App.—Amarillo 1996, writ denied).

[6] Bartley, 919 S.W.2d at 752 (emphasis added).

[7] Patterson v. Brewer Leasing, Inc., 490 S.W.3d 205, 221 (Tex. App.—Houston [1st Dist.] 2016, no pet.).

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