The Graves Amendment's Stay In Florida, DD, 3/08

Defense Digest

Florida - Automobile

The Graves Amendment's Stay In Florida
By Pablo B. Morla, Esq.*

On August 10, 2005, federal and state vicarious liability laws by virtue of the enactment of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users ("SAFETEA-LU"). Specifically, provisions codified at 49 U.S.C. § 30106 - commonly referred to as the Graves Amendment - expressly preempt state laws that impose vicarious liability on lessors of motor vehicles where the vehicles are involved in an accident and the lessor has no fault. In Florida, the Graves Amendment radically changed the status of law as to this form of vicarious liability that was part of Florida's dangerous instrumentality doctrine.

Plaintiffs lawyers have made attempts to challenge the applicability of the Graves Amendment in Florida. Of most recent debate, they have argued that Florida Statute § 324.021(9)(b)(2), which imposes caps on the liability of a motor vehicle lessor, is not preempted by the Graves Amendment because it is a financial responsibility statute. As discussed below, this argument has failed, and the Graves Amendment is in full force and effect and is presently enjoying its stay in the Sunshine State.

In order to reach the conclusion that the Graves Amendment survives the above challenge, we must first understand Florida's vicarious liability scheme. Florida's vicarious liability doctrine, otherwise known as the "dangerous instrumentality doctrine," as to lessors of motor vehicles, is largely a creature of common law. The Florida Supreme Court first applied this doctrine to motor vehicles in 1920 in Southern Cotton Oil Co. v. Anderson, 86 So. 629 (Fla. 1920). Specifically, 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." Estate of Villanueva ex rel. Villanueva v. Youngblood, 927 So. 2d 955 (Fla. 2d DCA 2006). In 1959, the Florida Supreme Court further extended the doctrine to lessors, making them vicariously liable for the lessee's negligent operation of the vehicle. Susco Car Rental System v. Leonard, 112 So. 2d 832 (Fla. 1959).

Forty years later, in 1999, the Florida Legislature codified Florida Statute § 324.021(9)(b), which created an exception to the doctrine. In short, Florida Statute § 324.021(9)(b) provides that short-term (less than one year) lessors of automobiles are vicariously liable only up to $100,00 per person and up to $300,000 total for bodily injury and up to $50,000 for property damage. That law remained undisturbed until the Graves Amendment, which provides, in pertinent part:

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).

49 U.S.C. § 30106(a). It further provides that it does not supersede any state's law (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 [lessors of] motor vehicles for failure to meet the financial responsibility or liability insurance requirements under state law." 49 U.S.C. § 30106(b)(1) and (2).

The language of the Graves Amendment is the starting point in interpreting its effect on Florida law. See Community for Creative Non-Violence v. Reid, 490 U.S. 730, 739 (1989) (stating that "[t]he starting point for [the] interpretation of a statute is always its language"). Further, "courts must presume that a Legislature says in a statute what it means and means in a statute what it says there." Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 253-54 (1992). Accordingly, if the language of the Graves Amendment is unambiguous, "judicial inquiry [would be] complete." Id. at 254.

Neither the Graves Amendment nor any other provision of the SAFETEA-LU Act defines "financial responsibility laws." In that regard, Congress's intent was to give that term its ordinary meaning. See Consolidated Bank, N.A. v. United States Dep't of Treasury, 118 F.3d 1461, 1464 (11th Cir. 1997) (holding that, absent a statutory definition of a term, the common usage of the words apply). According to Blacks Law Dictionary, the term "financial responsibility act" means a "state statute conditioning license and registration of motor vehicles on proof of insurance or other financial accountability." Blacks Law Dictionary at 663 (8th edition, 1994). In that regard, "financial responsibility laws" require an owner and/or operator of a motor vehicle to possess and have proof of minimum levels of insurance.

Florida Statute § 324.021(9)(b)(2) speaks in terms of liability and limits of damages for such liability. It does not impose liability upon lessors for failure to meet any insurance requirements. Moreover, it does not impose any insurance requirements and does not even mention the term "financial responsibility." Instead, it merely provides that an entity engaged in the business of leasing motor vehicles that is sued under a theory of vicarious liability will only be liable for up to $350,000 - regardless of whether that entity has any insurance in place. In that regard, Florida Statute § 324.021(9)(b)(2) is not a financial responsibility law that would be the basis of a cause of action. Accordingly, it is not exempt from the Graves Amendment. Garcia v. Vanguard Car Rental USA, 2007 U.S. Dist. LEXIS 15335.

Based on the above discussion, the Graves Amendment preempts Florida law and completely abolishes vicarious liability of rental companies for the negligence of their renters. This, however, may lead to an increase in direct negligence claims for, among other things, lack of maintenance, repair, and other defective conditions the rental companies that the Graves Amendment was designed to protect. For more information on the application of the Graves Amendment in Florida, please feel free to contact Edward F. Gagain, III, Esq. at (813) 472-7804 - efgagain@mdwcg.com; or Pablo B. Morla, Esq. at (813) 472-7817 - pbmorla@mdwcg.com.

*Pablo is an associate in the firm's Tampa, Florida office. His practice is focused on general liability defense litigation, particularly in the areas of product and premise liability. He can be reached at pbmorla@mdwcg.com or (813) 472-7817.