Legal Cases/Articles - Vicarious Liability, Leased Vehicles,
and the Graves Amendment
Vicarious Liability, Leased Vehicles, and the Graves Amendment
By Jaime E. Suarez
Florida's vicarious liability doctrine as it pertains to lessors of motor vehicles is known as the “dangerous instrumentality doctrine.”
A. Florida’s Dangerous Instrumentality Doctrine
Florida's dangerous instrumentality doctrine imposes strict vicarious liability upon motor vehicle owners when a non-owner, who is driving the vehicle with the owner's permission, negligently causes injury.1 Florida is the only state which imposes strict vicarious liability against innocent motor vehicle owners who entrust their vehicles to another.2
The dangerous instrumentality concept was first applied to motor vehicles by the Florida Supreme Court in 1920.3 The doctrine “imposes strict vicarious liability upon the owner of a motor vehicle who voluntarily entrusts that motor vehicle to an individual whose negligent operation causes damage to another.”4 Based on the following public policy concerns, the dangerous instrumentality doctrine was adopted:
The dangerous instrumentality doctrine seeks to provide greater financial responsibility to pay for the carnage on our roads. It is premised upon the theory that the one who originates the danger by entrusting the automobile to another is in the best position to make certain that there will be adequate resources with which to pay the damages caused by its negligent operation. If Florida's traffic problems were sufficient to prompt its adoption in 1920, there is all the more reason for its application to today's high-speed travel upon crowded highways. The dangerous instrumentality doctrine is unique to Florida and has been applied with very few exceptions.5
In 1959, the Florida Supreme Court extended the dangerous instrumentality doctrine to lessors, thereby making them vicariously liable for the lessee's negligent operation of the motor vehicle.6
B. Florida’s Tort Reform
In 1999, the Florida Legislature passed a tort reform package contained within Chapter 324 of the Florida Statutes, entitled “Financial Responsibility.” The purpose of Chapter 324 is set forth in Fla. Stat. § 324.011:
It is the intent of this chapter to recognize the existing privilege to own or operate a motor vehicle on the public streets and highways of this state when such vehicles are used with due consideration for others and their property, and to promote safety and provide financial security requirements for such owners or operators whose responsibility it is to recompense others for injury to person or property caused by the operation of a motor vehicle.7
The Florida Legislature also enacted section 324.021(9)(b), Florida Statutes, in order to limit such liability and to shift responsibility for damages arising out of motor vehicle accidents from innocent owners and lessors of motor vehicles to those at fault.8 Therefore, this section created an exception to the dangerous instrumentality doctrine for lessors of motor vehicles. As applicable to this article, § 324.021(9)(b) provides:
(9) Owner, owner/lessor.-
(b) Owner/lessor.-Notwithstanding any other provision of the Florida Statutes or existing case law:
1. The lessor, under an agreement to lease a motor vehicle for 1 year or longer which requires the lessee to obtain insurance acceptable to the lessor which contains limits not less than $100,000/$300,000 bodily injury liability and $50,000 property damage liability or not less than $500,000 combined property damage liability and bodily injury liability, shall not be deemed the owner of said motor vehicle for the purpose of determining financial responsibility for the operation of said motor vehicle or for the acts of the operator in connection therewith; further, this subparagraph shall be applicable so long as the insurance meeting these requirements is in effect. The insurance meeting such requirements may be obtained by the lessor or lessee, provided, if such insurance is obtained by the lessor, the combined coverage for bodily injury liability and property damage liability shall contain limits of not less than $1 million and may be provided by a lessor's blanket policy.
2. The lessor, under an agreement to rent or lease a motor vehicle for a period of less than 1 year, shall be deemed the owner of the motor vehicle for the purpose of determining liability for the operation of the vehicle or the acts of the operator in connection therewith only up to $100,000 per person and up to $300,000 per incident for bodily injury and up to $50,000 for property damage. If the lessee or the operator of the motor vehicle is uninsured or has any insurance with limits less than $500,000 combined property damage and bodily injury liability, the lessor shall be liable for up to an additional $500,000 in economic damages only arising out of the use of the motor vehicle. The additional specified liability of the lessor for economic damages shall be reduced by amounts actually recovered from the lessee, from the operator, and from any insurance or self-insurance covering the lessee or operator. Nothing in this subparagraph shall be construed to affect the liability of the lessor for its own negligence.9
Essentially, this statute means that short term lessors of automobiles are vicariously liable only up to $100,000 per person and up to $300,000 total for bodily injury and up to $50,000 for property damage arising from a vehicular accident. Furthermore, Florida’s Third District Court of Appeal has held that the caps provided in section 324.021(9)(b) limit the vicarious liability of innocent rental car companies and owners; however “[n]othing prevents the injured party from seeking additional damages from the negligent driver as there is no cap on the negligent driver's direct liability.”10 Thus, the limitation of section 324.021(9)(b) is effectively not an absolute bar to recovery beyond the amount of the cap, because even if a plaintiff cannot recover against a motor vehicle owner, he or she can still recover against the driver.11
C. The Graves Amendment – and the Turmoil It Created
On Aug. 10, 2005 President Bush signed into legislation the Safe, Accountable, Flexible, Efficient Transportation Equity Act, otherwise known at the time as the “Highway Bill.” Included in the Highway Bill is a section known as the Graves Amendment.12
Without any real notice to Floridians and their attorneys, the Graves Amendment sent Florida’s well-established law regarding vicarious liability and leased vehicles into turmoil. The Federal Statute states in pertinent part:
49 U.S.C.A. § 30106. Rented or leased motor vehicle safety and responsibility
(a) In general.--An owner of a motor vehicle that rents or leases the vehicle to a person (or an affiliate of the owner) shall not be liable under the law of any State or political subdivision thereof, by reason of being the owner of the vehicle (or an affiliate of the owner), for harm to persons or property that results or arises out of the use, operation, or possession of the vehicle during the period of the rental or lease, if--
(1) the owner (or an affiliate of the owner) is engaged in the trade or business of renting or leasing motor vehicles; and
(2) there is no negligence or criminal wrongdoing on the part of the owner (or an affiliate of the owner).
(b) Financial responsibility laws.--Nothing in this section supersedes the law of any State or political subdivision thereof--
(1) imposing financial responsibility or insurance standards on the owner of a motor vehicle for the privilege of registering and operating a motor vehicle; or
(2) imposing liability on business entities engaged in the trade or business of renting or leasing motor vehicles for failure to meet the financial responsibility or liability insurance requirements under State law.
(c) Applicability and effective date.--Notwithstanding any other provision of law, this section shall apply with respect to any action commenced on or after the date of enactment of this section without regard to whether the harm that is the subject of the action, or the conduct that caused the harm, occurred before such date of enactment.
(d) Definitions.--In this section, the following definitions apply:
(1) Affiliate.--The term "affiliate" means a person other than the owner that directly or indirectly controls, is controlled by, or is under common control with the owner. In the preceding sentence, the term "control" means the power to direct the management and policies of a person whether through ownership of voting securities or otherwise.
(2) Owner.--The term "owner" means a person who is--
(A) a record or beneficial owner, holder of title, lessor, or lessee of a motor vehicle;
(B) entitled to the use and possession of a motor vehicle subject to a security interest in another person; or
(C) a lessor, lessee, or a bailee of a motor vehicle, in the trade or business of renting or leasing motor vehicles, having the use or possession thereof, under a lease, bailment, or otherwise.
(3) Person.--The term "person" means any individual, corporation, company, limited liability company, trust, association, firm, partnership, society, joint stock company, or any other entity.
The Graves Amendment now preempts all state law (including Florida law) to the extent those laws hold owners in the business of renting or leasing motor vehicles vicariously liable for the negligence of drivers, except when there is negligence or criminal wrongdoing on the part of the owner.13 However, at least one federal court in Florida has also concluded that “vicarious liability of motor vehicle lessors under Florida's dangerous instrumentality doctrine is now preempted by federal law” and “[c]onsequently Florida Statute. § 324.021(9)(b)(2) is also preempted.”14 In support of its decision, the court concluded that the Florida Statute “is not a ‘financial responsibility law,’ it is merely a damages cap on other causes of action, and cannot survive separate and apart from Florida's dangerous instrumentality doctrine.”15
D. The Constitutionality of the Graves Amendment
Although one federal court in Florida has deemed 49 USC § 30106 constitutional,16 a court in New York has ruled that “49 USC § 30106 is an unconstitutional exercise of congressional authority under the Commerce Clause of the United States Constitution, Article I, § 8.”17
In that determining the Graves amendment to be unconstitutional, the New York court stated in pertinent part:
The issue of supremacy of congressional legislation over New York State law is not one to be simply assumed, for Congress has only those powers to legislate that are conferred on it by the United States Constitution. The substantive law of torts is not to be faintly acquiesced to legislation by Congress, particularly when there is no preponderance of constitutional authority to support such a conclusion. While the court's decision is strictly limited to the facts of this case, this court cannot wholly exempt a corporate class of tortfeasor from liability to otherwise innocent men, women and children, who seek recompense in the courts of the State of New York when they become sick, seriously injured, permanently maimed or even killed, directly as result of a dangerous instrumentality owned by that corporate class of tortfeasor who is doing business in the State of New York and subject to the laws of the State of New York, unless otherwise directed by the New York State Legislature.18
Because of its effect on Florida’s Financial Responsibility statute and Florida’s rental car companies, the Graves Amendment is far from being well-settled law in Florida. Opponents of the federal statute may attack the law based on several fronts.
One front includes that the Graves Amendment has retroactive effects for individuals who had been injured in a vehicular accident with a rental or leased vehicle prior to August 10, 2005, and had not filed suit against the owner before August 10, 2005. These potential cases were immediately extinguished (without notice) by the passage of this federal law. Cases involving these circumstances may attack the constitutionality of the Graves Amendment based on Constitutional grounds – that is, the Takings Clause of the Fifth Amendment.
1 See Lewis v. Enterprise Leasing Co., 912 So.2d 349, 350 (Fla. 3d DCA 2005) (citing Hertz Corp. v. Jackson, 617 So.2d 1051, 1052-53 (Fla.1993)).
2 See Lewis v. Enterprise Leasing Co., 912 So.2d at 350 (citing Hertz Corp. v. Jackson, 617 So.2d 1051, 1052-53 (Fla.1993)).
3 See Garcia v. Vanguard Car Rental USA, Inc., Slip Copy, 2007 WL 686625 *3 (M.D. Fla. March 5, 2007) (citing Southern Cotton Oil Co. v. Anderson, 86 So. 629 (1920)).
4 See Garcia v. Vanguard Car Rental USA, Inc., supra (citing Estate of Villaneuva ex rel. Villanueva v. Youngblood, 927 So.2d 955 (Fla.Dist.Ct.App.2006); see also Southern Cotton, 86 So. at 637.
5 Id. at *4 (quoting Aurbach v. Gallina, 753 So.2d 60, 62 (Fla.2000) (quoting Kraemer v. Gen. Motors Acceptance Corp., 572 So.2d 1363, 1365 (Fla.1990)).
6 Id. (citing Susco Car Rental System v. Leonard, 112 So.2d 832 (Fla.1959)).
7 See Id. (citing Fla. Stat. § 324.011).
8 See Lewis v. Enterprise Leasing Co., 912 So.2d at 351 (citing Sontay v. Avis Rent-A-Car Sys., Inc., 872 So.2d 316, 319 (Fla. 4th DCA 2004) (quoting Enterprise Leasing Co. S. Cent. v. Hughes, 833 So.2d 832, 839 (Fla. 1st DCA 2002)); see also Fla. H.R. Comm. on Judiciary HB 775 (1999), Staff Analysis (final June 2, 1999) at 21 (stating that the legislative intent of the bill which amended section 324.021 included the goals of reducing payments by innocent third parties and shifting emphasis toward responsibility based upon fault)).
9 See Fla. Stat. § 324.021(9)(b)(1), (2).
10 See Lewis v. Enterprise Leasing Co., 912 So.2d at 351 (citing Enterprise Leasing, 833 So.2d at 838).
11 See Lewis v. Enterprise Leasing Co., supra 912 So.2d at 351-352.
12 See 49 U.S.C.A. § 30106.
13 See Garcia v. Vanguard Car Rental USA, Inc., 2007 WL 686625 *9 (M.D. Fla. Mar 05, 2007)
14 See Id.
15 Id.
16 See Garcia v. Vanguard Car Rental USA, Inc., 2007 WL 686625 (M.D. Fla. Mar 05, 2007)
17 See Graham v. Dunkley, 13 Misc.3d 790, 806 827 N.Y.S.2d 513, 525 (N.Y. Sup. 2006).
18 See Id.
Jaime E. Suarez © 2007. All rights reserved. |
