Congress passed the so-called Graves Amendment, 49 USC 30106, a few years ago which abolishes vicarious liability in the case of rental and leased cars. In other words, the car owner (the rental company) will not be liable for the negligence of the operator. This federal law preempts any state law, such as Connecticut’s, which creates vicarious liability against a car rental company. This federal law seriously affects the ability for an injured person to be fully compensated in the event of a car accident. Prior to the law, leasing and rental car companies would be responsible in the following scenario:
- The leased car went through a red light causing serious injuries to the driver of the other car. The innocent car carried only 50/100 coverage. The leased car which ran the light had no insurance! However, the leasing company carried its own insurance of $1,000,000. Therefore, a pool of $1,050,000 was available to the injured person. Under the Graves Amendment the injured person would only have $50,000 in insurance coverage.
This law was a gift from Congress to the auto rental and leasing companies. Furthermore, it is a double standard. If you permit someone to drive your vehicle and that person causes an accident, you are responsible for the injuries because you permitted someone to drive your vehicle. Under the Graves Amendment, not only do the auto leasing and rental companies permit others to drive vehicles they own, they get paid for the granting of that permission. Yet, in exhange for those payments, they face no financial responsibility when the driver causes injuries as a result of negligent driving.
This law adss another reason why everyone driving should be adequately insured including conversion uninsured and underinsured conversion which will be discussed in further detail in a future blog post.