• Florida Appellate Court Concludes Graves Amendment Preempts State Law
  • March 4, 2009 | Author: Barbara Fernandez
  • Law Firms: Hinshaw & Culbertson LLP - Fort Lauderdale Office; Hinshaw & Culbertson LLP - Miami Office
  • Vargas v. Enterprise Leasing Co., 993 So. 2d 614 (Fla. 4th DCA 2008)
    Brookins v. Ford Credit Titling Trust, 993 So. 2d 178 (Fla. 4th DCA 2008)

    The federal Graves Amendment, 49 U.S.C. § 30106, is designed to eliminate states’ ability to impose vicarious liability on motor vehicle owners who are in the business of renting or leasing vehicles. See 49 U.S.C. § 30106(a) (2005). (For a previous case summary involving the Graves Amendment, please see the April 30, 2007, issue of the Products Liability Bulletin.) The Graves Amendment relieves the lessor of a vehicle from liability for harm to others, by reason of being the owner of the vehicle, as long as the owner is engaged in the business of renting or leasing vehicles and is neither negligent nor criminally culpable. In a savings clause entitled “Financial responsibility laws,” however, the Amendment provides that it does not supersede the law of any state imposing financial responsibility or insurance standards on the owner or imposing liability on lessors for failure to meet financial responsibility or liability insurance requirements under state law.

    The Florida Fourth District Court of Appeal recently held in Vargas v. Enterprise Leasing Co., 993 So. 2d 614 (Fla. 4th DCA 2008), that the Graves Amendment preempts a Florida statute which imposes vicarious liability on short-term lessors of motor vehicles. The court concluded that the state statute was neither a “financial responsibility law” nor a “liability insurance requirement” which would bring it within a savings clause of the Graves Amendment. On the same day that the court decided Vargas, it also granted rehearing in Brookins v. Ford Credit Titling Trust, 993 So. 2d 178 (Fla. 4th DCA 2008), a case handled by Hinshaw & Culbertson LLP both in the trial court and on appeal. The Brookins court withdrew an earlier panel opinion holding that the Graves Amendment did not preempt section Fla. Stat. § 324.021(9)(b)(1), which imposes vicarious liability on long-term lessors of motor vehicles.

    Florida’s dangerous instrumentality doctrine imposes strict liability on the owner of a motor vehicle who voluntarily entrusts the vehicle to an individual whose negligent operation of it causes injury. The doctrine encompasses lessors as well. Fla. Stat. § 324.021(9)(b)(2), sets the liability for lessors who rent or lease a vehicle for less than a year at $100,000 per person and $300,000 per incident for bodily damage and $50,000 for property damage, with an additional $500,000 allowed if the lessee is uninsured.

    In Vargas, plaintiff’s motor vehicle was rear-ended by a rental vehicle driven by the son of that vehicle’s lessee. Plaintiff sued the lessee and the lessor. Affirming the trial court’s grant of summary judgment in favor of the lessor, the appellate court found that Section 324.021(9)(b)(2) came within the preemption language of the Graves Amendment because it imposed liability on a lessor by reason of being the owner of a motor vehicle. The more difficult question for the court, however, was whether the statute fell within the savings clause precluding preemption of state financial responsibility laws.

    Noting that “financial responsibility” is not defined under the federal statute, the court found that the term is commonly used to mean an insurance equivalent, in particular a level of security required to pay for damages arising from motor vehicle accidents as a condition of acquiring a driver's license or registering a vehicle. The court observed that the Florida legislature had adopted numerous financial responsibility laws consistent with this ordinary and common meaning of the term, and that Congress used the term the way it was used in these statutes.

    The court found that Section 324.021(9)(b)(2) did not require short-term lessors to purchase insurance; it simply endorsed and set limitations on the vicarious liability imposed under the dangerous instrumentality doctrine. Thus, the court concluded that the statute did not come within the savings clause because it did not impose financial responsibility or insurance standards on owners and was not a financial responsibility or liability insurance requirement. The court also rejected plaintiff’s contention that the Graves Amendment was an unconstitutional exercise of Congressional power under the Commerce Clause of the United States Constitution.