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Federal law insulating car rental rental companies from negligence is held unconstitutional


Posted on Jan 01, 2008

In 2005 the United States Congress passed bad legislation commonly known as the “Graves Amendment”. This amendment gave immunity to automobile rental agencies for harm caused by the negligence of drivers their rented vehicles. This amendment was hidden in a 900 page transportation appropriations bill without any review by relevant congressional committees. The amendment pre- empted state laws that imposed vicarious liability on rental car companies. Vicarious liability would make the car rental company pay victims who are injured as a result of the the negligence of the drivers who rent their vehicles. Because of this federal legislation, state law is pre-empted (or set aside or rendered invalid) by federal law and car rental no longer are held liable for the negligence of the renters of their cars. This amendment to the transportation appropriations bill was included in the bill as a result of a well funded lobbying effort by the politically active car rental industry. In a recent lower federal court ruling in Florida, a United States district judge for the southern district of Florida declared the Graves Amendment unconstitutional. In so holding, U.S. District Judge K. Michael Moore found the amendment to be “an unconstitutional overreaching of congress’ power on the commerce clause”. Basically, the court ruled that the United States Congress has no business telling state legislatures what the law should be in their state. In his ruling Judge Moore wrote: “under the rationale set forth (by the rental car companies and the United States) this Court is hard pressed to think of any type of state legislation which could not be pre-empted by congress, including state taxes”. Since North Carolina has never held car rental companies liable for the negligence of the drivers of their rental cars, the Graves Amendment did not have a significant effect on North Carolina citizens. However, the ruling could ultimately have wide repercussions regarding the federal government’s preemption powers. The United States Congress has become increasingly active, in recent years, in efforts to impose its will upon the states. The Florida lower court ruling could lead to other similar rulings by federal courts throughout the country and thereby slowdown the move of congress to pre empt or to interfere with state law. In North Carolina, a car rental company has never been held liable for the negligence of the driver of their rental cars simply because of that rental agreement. However, there is a state law in North Carolina which states that the driver of a car is presumed to be the agent of the owner. Although car rental companies could easily rebut this presumption of agency by simply showing that they only rented the car to the driver, the state law does give some advantage to victims of negligent drivers who are operating rental cars. If nothing else, this presumption of agency could allow victims of negligence to conduct discovery into whether there is some other basis to hold the car rental company liable. There are several theories of law in North Carolina which could possibly hold a car rental company liable for the negligence of the driver of the rental car. For instance, a car rental company could be held responsible for the drivers’ negligence if the car rental company does not perform an adequate background check to be sure that the driver to whom they rented the car was a responsible driver with a good driving record.

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