"Graves Amendment" Bars Vicarious Liability Against Rental Car Company

AUTO – VICARIOUS LIABILITY OF RENTAL CAR COMPANY – GRAVES AMENDMENT APPLIES
Hall v. Elrac, Inc.
(1st Dept., decided 6/10/2008)

Technically this is not an insurance coverage case, but its holding certainly will affect the array of liability coverages available to respond to injuries or damages resulting from the use of rental cars in New York State.

In AFFIRMING the Bronx County Supreme Court's grant of summary judgment to Elrac (Enterprise Rent A Car), the First Department once again ruled that plaintiff's vicarious liability claims against Enterprise were barred by 49 USC § 30106, the "Graves Amendment."

As had the Second Department in Graham v. Dunkley, 50 AD3d 55 (2nd Dept. 2008), appeal dismissed __ NY3d __ (2008), the First Department rejected plaintiff's argument that the Graves Amendment violates the Commerce Clause of the US Constitution. The appellate court also rejected plaintiff's argument that the Graves Amendment violates equal protection by favoring car rental companies over other vehicle owners, such as taxi owners, repair shop owners who provide loaner vehicles to customers, and car dealerships that allow test drives, who also allow others to operate their vehicles.

The renting of vehicles has a clear substantial effect on interstate commerce (Graham, 50 AD3d at 61-62), unlike these other activities, and the same rational basis for regulating the renting of vehicles under the Commerce Clause even in purely intrastate instances - that elimination of vicarious liability will result in a reduction of insurance costs that will in turn result in a reduction of consumer prices and allow more lessors to remain in business (see id. at 61) - supports the classification for purposes of equal protection.

To read most posts about New York cases involving the Graves Amendment, click here.