What Is the Graves Amendment?

The Graves Amendment is a federal law – 49 U.S.C. § 30106, enacted August 10, 2005 as part of the Safe, Accountable, Flexible, Efficient Transportation Equity Act – that limits the vicarious liability of vehicle rental and leasing companies for accidents caused by their customers. Before the Graves Amendment, several states held vehicle owners (including rental companies) vicariously liable for any accident occurring while a permitted user drove the vehicle. The Graves Amendment ended that exposure for qualifying businesses at the federal level.

What does the Graves Amendment do?

Under the Graves Amendment, the owner of a motor vehicle (or an affiliate of the owner) who is in the trade or business of renting or leasing motor vehicles and who rents or leases that vehicle to another person is not liable under any state law for harm to persons or property that results from the use of the vehicle during the rental or lease period, if:

• The owner was not negligent or engaged in criminal wrongdoing, and
• The harm did not result from a defect in the vehicle that the owner knew or should have known about before the rental

This federal preemption applied to rental companies in states like New York and Florida that had enacted broad vicarious owner-liability statutes. Those state statutes made rental companies automatically liable for renters’ accidents simply because the company owned the vehicle. The Graves Amendment eliminated that automatic liability.

For example, if a renter caused a serious crash with no personal liability coverage, a New York rental company before 2005 faced the full judgment solely because it owned the vehicle, even though it played no role in causing the accident.

What does the Graves Amendment not protect rental companies from?

The Graves Amendment protects against vicarious liability – liability based solely on ownership. It does not shield rental companies from:

• Their own negligence: A rental company that rents to a driver it knew was intoxicated, unlicensed, or otherwise unfit can face direct negligence claims (negligent entrustment). The Graves Amendment only protects against liability imposed because the company owned the car, not liability for its own conduct in renting the car.
• Vehicle maintenance failures: If a mechanical defect in the rental vehicle contributed to an accident and the company knew or should have known about it, the federal protection does not apply.
• Companies in states with vicarious liability laws not preempted by the Amendment: The preemption is specific to businesses in the trade of renting or leasing. A private individual who allows a friend to borrow their car is not protected by the Graves Amendment.

Why does the Graves Amendment matter for rental car accident claims in Georgia?

A person injured by a negligent rental car driver in Georgia generally cannot recover from the rental company solely because the company owned the car. The claim against the rental company succeeds only if the company was itself negligent – most commonly by renting to an unqualified driver it knew or should have known was unfit. Otherwise, recovery flows from the at-fault driver’s own insurance and personal assets.

For example, if that driver carried only Georgia’s 25,000 dollar bodily injury minimum and your medical bills reached 80,000 dollars, your own uninsured motorist or underinsured motorist policy would need to cover the gap, not the rental company.

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