The Graves Amendment: Challenges, Interpretations, and Answers

Congressman Sam Graves (R-Mo.) speaks at the 2012 Car Rental Show.
Congressman Sam Graves (R-Mo.) speaks at the 2012 Car Rental Show.

"Aug. 10, 2005 will go down in history as one of the most significant dates in the vehicle rental industry. On that day, President George W. Bush signed into law a bill popularly known as the ‘highway bill.’ The legislation contained a section, known as the Graves Amendment, which effectively bars all states from forcing vicarious liability on rental and leasing companies.”

When Michael LaPlaca penned those words for the Sept/Oct 2005 issue of Auto Rental News (“What Does the End of Vicarious Liability Mean?”), the impact of the Graves Amendment was only beginning to develop, and there were questions as to interpretation of the specifics of the law.

Previous to passage of the Graves Amendment, the doctrine of vicarious liability had a chilling effect, particularly in states that had no limits on damages awarded in vicarious liability cases involving rental vehicles. “Vicarious liability” imposes responsibility on one person (like a rental company) for the actions of another (like a renter), even if the first person was not negligent itself.

In New York, unlimited vicarious liability contributed to sky-high insurance rates that caused some companies to go out of business. Leasing — both consumer and commercial — came to a virtual standstill.

The Graves Amendment changed all that, though it has weathered challenges in the 10 years since its passage. Here’s an update on the interpretation of the Graves Amendment today and how many of those initial questions have been answered.

What’s Covered, What’s Not

Essentially, the federal Graves Amendment provides that a motor vehicle rental or leasing company cannot be held liable under state or local law for damages or injuries that occur during the rental or lease simply because the rental company (or its affiliate) is the owner of the vehicle.

To benefit from the Graves Amendment, the “owner” must be “engaged in the business of renting or leasing motor vehicles.” A vehicle “owner” may be the titleholder, lessee, or bailee of the vehicle.

The Graves Amendment, however, does not protect a rental company from its own negligence or criminal wrongdoing. If an injury is caused by a rental company’s negligent or criminal act, the rental company could still be directly liable for its actions or inactions — even if an accident occurs while a renter is driving the vehicle.

Direct negligence claims brought against rental companies typically take one of three forms: negligent entrustment, negligent maintenance, or failure to supervise or train employees. In addition, a rental company may still be held vicariously liable for damages or injury to third persons caused by the rental company’s employees, depending upon the state and circumstances.

Finally, the Graves Amendment does not affect state minimum financial responsibility (MFR) laws or laws that impose liability on rental companies for failure to meet MFRs or other insurance requirements.

Questions Answered

When Graves was enacted, a number of issues were raised regarding the new law. Today we have some answers, while some questions remain.

• On whether Graves would be applied in states such as New York, which had imposed unlimited vicarious liability on rental car companies, a number of cases in New York courts confirmed the application of Graves, as have courts in other states.

• The Graves Amendment applies to trucks, which are covered under the term “motor vehicles.”

• There has not been a wholesale increase in state MFR levels, though some saw the potential at the time.

• The application of Graves as it applies to auto dealer loaner cars was a good question in 2005 and still is today. The outcome — in particular circumstances — may depend on factors such as the terms of the loaner agreement and the practices of the auto dealer.

Implementing Graves to Limit Liability

In a typical personal injury or property damage case involving a rental vehicle, the injured party (usually another motorist or a pedestrian) names the driver/renter and the rental car owner/operator in any action.

If the rental company cannot convince the plaintiff’s lawyer to either dismiss the rental company or limit its potential liability to the state MFR, the rental company can make the following arguments to the court:

a. The Graves Amendment is a federal law that preempts any state court law. “Preemption” is a Constitutional law principle that requires states to follow federal law when the federal law encompasses an entire field of law or expressly preempts state law.

b. As the owner of the vehicle, the rental company’s liability is limited to the applicable state MFR.

c. If the renter (the party potentially responsible for the accident) has insurance sufficient to cover the state MFR level, except in a few states, that insurance generally is primary to the rental company’s MFR responsibility.

d. Accordingly, the rental company should be dismissed from the lawsuit as its liability is limited to MFR levels, and the renter’s insurance covered the MFR levels.

New Business Models

Since business models and technology often evolve at a much faster pace than the law, courts frequently must apply existing law to technology unimagined by the legislatures at the time the law was written.

The Graves Amendment is no different, and the question of its applicability to newer business models typically turns on whether a business involves an owner “engaged in the business or renting or leasing” motor vehicles. The Graves Amendment does not define “rent,” “lease,” or “engaged in the business,” so the answer is not always clear.

Carsharing operators often market themselves as an alternative to car rental. At least one court has found this approach to be a distinction without a difference as far as the Graves Amendment is concerned.

In two cases involving Zipcar, a New York state court found that the commercial carsharing company was engaged in the business of rental for purposes of the Graves Amendment, because Zipcar permits its members to use cars in exchange for a fee.

As of this writing, we are unaware of any published cases analyzing whether the Graves Amendment applies to other business models, such as peer-to-peer carsharing or hybrid models combining elements of traditional car rental, carsharing, and newer mobility services.

As technology and the ingenuity of operators evolve, a court likely will need to address this issue. The outcome will depend on how well innovators can show that their model is really just a traditional rental company using technology to deliver services in a new way.

Attempts to Limit Graves

Over the past 10 years, plaintiff’s lawyers and legislators have sought to limit the Graves Amendment. For example, some plaintiff’s lawyers have taken to including negligent entrustment claims as part of any claim in connection with an accident caused by a renter.

There are a wide variety of claims asserted, but they generally fall into three categories: The renter was impaired in some way at the time of the rental; the renter was not qualified to drive (by way of an expired or suspended license); or the renter had a poor driving record. This is sometimes a strategic move and may not ultimately have any basis in the facts of the case.

Defending these claims involves a number of tactics, but the key goal is to separate the negligent entrustment claim from any claim based simply on ownership (and thus subject to state MFR). This can be accomplished with focused discovery requests directed to the plaintiff. Confirming the basis for the claims may allow a rental company to pursue a motion with the court limiting its liability without the risk (and cost) of a full trial.

On the legislative side, in May 2010, Congressman Bruce Braley (D-Iowa) unsuccessfully sought to offer an amendment to the Motor Vehicle Safety Act of 2010, which would have repealed the Graves Amendment. Legislation to alter MFR limits and rules has also been introduced (but not passed) in states like Florida and New York.

A Constant Evolution

During its first 10 years, the Graves Amendment has survived several challenges, and courts have answered some of our initial questions.

Since the vehicle rental industry of 2016 is markedly different from that of 2005 and will continue to evolve, the application and interpretation of the Graves Amendment will continue to be critical for the industry. Stay tuned.

About the Authors

Leslie J. Pujo is an attorney and owner of LaPlaca Pujo in Rockville, Md., with substantial experience in vehicle rental law. She can be reached at [email protected]

Wesley D. Hurst is an attorney in the Los Angeles office of Polsinelli with substantial experience in rental car company litigation and representation. He can be reached at [email protected]


  1. Gerry Lynch [ March 23, 2016 @ 12:08PM ]

    Always learn something from your presentations Leslie. Thank you once again. I find the ridesharing area interesting and it is an evolving area. Many P&C carriers are now offering bridge endorsements to cover the gap between turning the app on & picking up a rider. Only GEICO has taken the approach of writing these as a commercial risk. Time will tell as the claim experience evolves - have the endorsement writers been collecting sufficient premium for the exposure?

  2. Gary crush [ August 6, 2017 @ 09:09PM ]

    My son was hit head on december 24th on his way to work, he has been an emt for 12 yrs, since the accident he has numerous injuries including 3 herniated disc's in his neck, partial loss of sight in his left eye, chronic headaches, pinched nerve, loss of grip in his right hand, memory problems constant backaches, just found out from his chiropractor he has curveture of the spine from hitting his head on the roof when she hit him, does the graves amendment mean he can't sue enterprise car rental or eas insurance which i'm sure is enterprise insurance, the woman was from north carolina and didn't have her own insurance only what enterprise sold her, the accident was in gloucester county n.j. if the graves act means he has no recourse for medical bills, pain and suffering he's already gone through and all he'll go through for the rest of his life, he's already been told by his neurologist to look for a new career that doesn't include any type of lifting or he's suceptable to doing more permanent damage to his neck and back, he knows nothing else to do which limits his job future, if that's the case then this government is totally wrong in the inception of the amendment, enterprise made 20.9 billion in 2016 probably more in 2017, if their immune from lawsuits then they should not be able to sell temporary insurance to renters unless said renter has their own insurance, that just makes it possible for enterprise to make millions more on selling cheap coverage with no liability what so ever, what would have happened if God forbid my son was killed or paralyzed from the neck down or lost limbs, being she had no insurance and the amendment limits their liability who's responsible for the care of the person injured is it supposed to be the financial and physical responsability of the parents, if that's the case then that's why this country is in the position it's in, i'm sure the ceo of enterprise could care less about the injured party as long as he takes home his multimillion dollar salary every yr,all I want to know is how can a company that makes 21 billion a yr be absolved of any responsability when that company sold the insurance policy, i'll bet everything I have that their policy replaces the car that they rented to their client but my son lost $3,000 plus the jeep he traded in so he was left without a vehicle or money to put a downpayment on another vehicle, let me know your thoughts, is my son the only one in this case to get screwed?

  3. Charles Friedrich [ August 26, 2017 @ 03:30AM ]

    I was hit from a drunk driver in a hertz rental. Who had his License suspended for DUI from an accident which the rental car originated from.Need a lawyer or information regarding challenges of The Graves Act in Florida for the Lack of Due Diligence.

  4. RJ Alexander [ January 14, 2018 @ 12:02PM ]

    This was a very information article. If you would like to have a Texas personal injury lawyer write a guest article for your publication please contact me at [email protected] and you can check my website at

  5. Brad [ March 18, 2018 @ 01:19PM ]

    Why would the above people try to blame others to get money for their injuries?

    The only person responsible for those injuries are the driver, not the car, tires, paint or anything else.

    I'm outraged that people are trying to hold others responsible that have nothing to do with a car accident.

    If someone borrows your lawn mower and cuts off someone's foot, how is that the lawn mowers owner's fault, and he has to pay? These people sound like Democrats.

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