Subsection (a) preempts any state law that imposes liability on lessors “by reason of being the owner of the motor vehicle.” When a statute’s language is clear, courts must enforce it according to it terms. United States v. Ron Pair Enterprises
(1987) 489 U.S. 235.
This federal statute preempts conflicting state laws, and it unambiguously prohibits liability of persons and companies engaged in the business of renting or leasing vehicles to others based solely on owning the motor vehicle whose operator negligently caused a loss. As a result, rental companies are not vicariously liable under state vehicle ownership statutes for their renters’ negligence.
Graves (b)(1) and (b)(2) exempts from preemption state laws that impose:
- financial responsibility or insurance standards on the owner of a motor vehicle for the privilege of registering and operating a motor vehicle; or
- 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.
49 U.S.C. § 30106(b)(1)-(2).
The importance of the Graves Amendment is clear. States may require insurance or its equivalent as a condition of licensing or registration or may impose such a requirement after an accident or unpaid judgment. 49 U.S.C. § 30106 (b)(1).
In addition, states may suspend the license and registration of, or otherwise penalize, a vehicle owner who fails to meet the requirement, or who fails to pay a judgment resulting from a collision. 49 U.S.C. Section 30106 (b)(2).
However, they may not impose such judgments against rental car companies solely based on the negligence of their lessees. 49 U.S.C.§ 30106 (a).
