Graves Amendment: Rental Car Accident Liability (Apr 2025)

Vicarious Liability

Under a legal theory called vicarious liability, injured people can sue someone other than the party who injured them. For example, someone injured by a child might have a case against the parent.

Likewise, a victim injured by an employee performing their job duties can often sue the employer. This version of vicarious liability, called respondeat superior, dates back centuries. The underlying idea is that a “servant” acts for the benefit of their “master.” When the servant injured someone or damaged their property, the master bore the burden.

Vicarious liability has always represented a tradeoff. On the one hand, the person who caused the injury might have significantly fewer resources to pay a personal injury judgment. Thus, imposing vicarious liability gave victims access to greater compensation.

On the other hand, vicarious liability is often unfair. The liable party might not have had control over the person who caused the injury. Imposing liability on a party for actions they did not order seems unfair in many situations.

This unfairness was one reason why the car accident law of many states did not impose vicarious liability on rental car companies. The car company has no control over the vehicle after it leaves its premises. The party that causes the crash, namely the driver, should bear the resulting liability.

Some states tried to change these rules. New York, for example, has a law imposing liability for car crashes on the vehicle’s owner. When applied to minor children and their parents, this law might make sense since the parents typically have insurance.

However, imposing liability on rental car companies could have threatened the viability of the industry.

What Is the Graves Amendment?

The Graves Amendment is a federal law that insulates rental companies from state laws that impose vicarious liability on them. This law overrides state laws under the U.S. Constitution’s Supremacy Clause. In other words, the Graves Amendment answers the question of whether rental car companies are vicariously liable for crashes caused by customers. The answer is no.

The Graves Amendment covers all companies in the business of renting motor vehicles. Thus, it does not apply when you lend your car to your friend. Instead, it only applies to companies that rent cars, moving trucks and other vehicles.

Notably, the law does not require the company to rent vehicles as its primary business. Thus, a home improvement store that offers rental pickup trucks to customers might qualify for Graves Amendment truck leasing immunity.

Before the Graves Amendment: How Liability Used to Work

The Graves Amendment was passed in 2005. Before that, rental car companies could be held vicariously liable for accidents caused by renters. This meant that if you ran a car rental business and a customer injured someone while driving recklessly, you could be held responsible.

As you might imagine, insurance for car rental companies was astronomically high — so high that some companies even went bankrupt.

Key Provisions of the Graves Amendment

The Graves Amendment is a complex piece of legislation, but it boils down to three key provisions:

It Applies to Short-Term Rental Companies

The amendment covers any person or business who rents or leases vehicles for less than 30 days at a time.

Rental Companies Don’t Have Absolute Immunity from Liability

The Graves Amendment ensures that rental companies can’t be held liable for the actions of negligent drivers. However, it does not shield rental companies from liability for car accidents caused by their own negligence.

It Overrides State and Local Laws

Even if state laws or local laws state that a rental company is vicariously liable for the actions of negligent customers, the Graves Amendment takes precedence.

Graves Amendment Exceptions

The law does not give blanket immunity to Graves Amendment rental cars. First, you still have the ability to pursue legal claims for your injuries against an at-fault driver. Thus, you have the same option you always have when another driver negligently crashes into you.

Second, the law does not immunize rental companies from their own negligence. A rental company could be liable for negligence in a few situations.

The rental company could supply a vehicle to a customer that required maintenance or repairs. If the car malfunctions and causes the driver to crash into another vehicle, the company’s liability arises from its own actions and not vicariously from the actions of its customer.

The company could improperly instruct the driver in operating the vehicle. If the driver relied on the company’s incorrect instructions and caused a crash, any injured victims may have a claim against the rental company.

The most commonly used exception to the Graves Amendment involves driver screening. For example, car rental companies in California may be held liable for negligent entrustment if they fail to conduct a reasonable investigation before renting the vehicle to someone.

The company will typically check the renter’s driving record and verify that they have a valid driver’s license. If this check uncovers anything that would raise reasonable concerns about the driver, the company should decline to rent the vehicle. If it rents the vehicle anyway, accident victims could argue that it negligently entrusted its vehicle to a dangerous driver.

The Graves Amendment negligent entrustment exception can open the door to a lawsuit against the rental company. However, your car accident attorney must prove the information could have been discovered through a reasonable search and that it would have raised legitimate concerns about the driver’s ability to drive safely.

Can I Sue a Rental Car Company After an Accident?

You can’t sue a rental car company simply because it owns a car that caused an accident. However, if you can demonstrate that the rental company itself was negligent, you may be able to file a car accident lawsuit against the business. Here are two examples:

Failure to Maintain Vehicles

If a rented vehicle malfunctions in a way that causes an accident — and the malfunction was due to improper maintenance — you might have a case against the rental company.

Negligent Entrustment

Negligent entrustment is a legal concept that allows a person or business to be held liable if they knew (or should reasonably have known) that allowing someone to use a given product could result in harm.

For example, imagine you are injured in a rear end collision caused by someone driving a rental car. You find out that the driver did not have a license. Because the rental company rented a car to an unlicensed driver, you likely could file a lawsuit.

What This Means for You as a Rental Car Driver

Because car rental companies can only be held responsible if their negligence directly causes an accident, your insurance will likely have to pay if you cause an accident while driving a rental vehicle.

This means that you should be positive you have insurance coverage before stepping inside the vehicle. Depending on your policy, your existing car insurance may cover you when you drive a rental car.

Some credit cards offer rental insurance when you use them to book, and you also should be able to purchase insurance through the rental company.

Contact ConsumerShield for Assistance After a Rental Car Crash

Every collision is unique. As a result, there is no hard and fast rule to predict when a car rental company may be liable for your injuries. Instead, you will need a lawyer to analyze your situation and determine the parties you can pursue for compensation.

ConsumerShield educates consumers about their rights and helps them find legal representation. Contact us for a free case review and lawyer referral.