Graves Amendment Upheld in Loaner Vehicle Rental

In Massachusetts, dealerships that lend a courtesy car to customers while their car is being fixed are federally protected from liability if the courtesy car is in an accident. This protection overrides a state law that holds the car owner responsible, finds the Massachusetts Supreme Judicial Court (SJC).

The SJC ruled that a dealership offering a courtesy vehicle is not subject to a state law (§ 85A) that presumes the owner of a vehicle is responsible for accidents caused by the driver. Instead, the court ruled that the Graves Amendment, a federal law, prevents rental and leasing car companies from being held vicariously liable for torts committed by customers driving their vehicles.

The SJC found that even without a separate charge for vehicle usage, the auto dealership is protected from vicarious liability, reported Insurance Journal.

In the case, a New Jersey-based automobile dealership provided a courtesy vehicle to a customer, Kolawole Oke, because service work on his automobile was expected to take over three hours. MBF Auto owned and registered the courtesy vehicle, which was one of 125 cars in the dealership's "loaner car fleet."

Oke signed documents that showed he had a valid driver's license and understood that:

• Would be the only driver of the car;
• The vehicle was limited to operation within 100-mile radius of the dealership; and
• Would be responsible for all third-party claims arising from his use of the courtesy vehicle.

Though Oke signed the documents, he drove the vehicle beyond the permitted 100-mile radius into Massachusetts. While in Boston, he left the vehicle illegally parked in a crosswalk with the key in the ignition and the engine running to run an errand leaving his then-wife, Shanitqua Steele, in the vehicle. When a parking officer demanded that the illegally parked car be relocated, Steele, who knew she wasn't authorized to drive it, still moved into the driver's seat. While trying to turn off the turn signal, she accidentally drove the car into a red light and hit Maria Blanca Elena Garcia, who was crossing the street. Garcia suffered severe injuries.

Garcia and her spouse sued MBF Auto, Oke, and Steele, accusing Steele and the dealership of negligence and Oke of negligent entrustment.

The dealership and Oke were granted summary judgment by a Superior Court judge, but the plaintiffs appealed moving the case to the SJC.

The SJC ruling affirms the summary judgement for MBF Auto, finding it was protected by the federal Graves Amendment. However, the court overturned the summary judgment for Oke and determined a jury could conclude he was negligent in giving Steele control of the vehicle.

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