Graves Amendment Car Rental Issue Outline for Fallback Arguments

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Graves Amendment Car Rental Issue

Outline for Fallback Arguments

The following is an outline to follow to seek recovery of

at least $10,000 in required insurance (or other financial

responsibility proceeds) against car rental companies and

possibly much more, even though the Supreme Court of Florida

has rejected our argument in Vargas v. Enterprise that the

provisions of § 324.021(9)(b)2 are within the financial

responsibility or insurance requirement exceptions to immunity

of car rental companies under the Graves Amendment. These

arguments were not briefed in Vargas and have not yet been ruled

upon by any appellate court in Florida, so they may help you keep

your cases against rental car companies alive.

The following are the exceptions to immunity under the

Graves Amendment for a non-negligent rental car company:

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(b) Financial responsibility laws. Nothing in

this section supersedes the law of any State or

political subdivision thereof—

(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 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)

As required by Section 324.011 and 324.051, Fla. Stat.

(2003), all operators of motor vehicles involved in crashes are

required to “show proof of financial ability to respond for

damages in future accidents.” Section 320.02(5)(b), Fla. Stat.

provides that “proof of compliance with financial responsibility

requirements [must be made] at the time of registration of any

such motor vehicle . . . [or t]he issuing agent shall refuse to

or if one of the other methods of proving financial responsibility

as set forth in S. 324.031 is not met.” These are requirements of

compliance with Florida’s financial responsibility laws as a

condition of licensing or registering a motor vehicle that bring

Florida law within the exception to federal preemption applicable

to “the law of any State or political subdivision thereof (1)

imposing financial responsibility or insurance standards on the

owner of a motor vehicle for the purpose of registering and

operating a motor vehicle.” See 49 U.S.C. §30106(b) (2005).

All car rental companies have had cars they own involved

in accidents before the accident involving your client. Such prior

accidents require the defendant to obtain liability insurance or

otherwise comply with financial responsibility requirements on

all vehicles it owns, not just on the car involved in that prior

accident. See § 324.051(2). Therefore, the rental company was

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required to comply with the applicable financial responsibility

requirements on the car involved when your client’s accident

occurred.

The question of how much insurance or other security a

rental car company must have in place is very complicated. The

starting place for the inquiry should be the first paragraph of §

324.031. The last sentence of that paragraph provides three ways

in which a vehicle owner may prove compliance with financial

responsibility, provided that the vehicle is not a “for-hire

passenger transportation vehicle.” I will address those three

methods of compliance first, and then return to deal with the

situation applicable if a rental car is found to be a “for-hire

passenger transportation vehicle.”

Under that last sentence of the first paragraph of §

324.031, the amount of financial responsibility a vehicle owner

must demonstrate depends on the manner in which the owner

satisfies the financial responsibility requirement. Under

subsection (1) of that statute, the owner may satisfy its financial

responsibility obligation by “holding a motor vehicle liability

policy as defined in §§ 324.021(8) and 324.151.” The required

amount for such a policy is $10,000.

Second, financial responsibility may be demonstrated by

posting a bond or a cash deposit. See §324.031(2) & (3). If those

forms of financial responsibility compliance are exercised, the

bond amount must be “equal to the number of vehicles owned

times $30,000, to a maximum of $120,000.” In addition, “any

such person other than a natural person, shall maintain insurance

providing coverage in excess of limits of

$10,000/$20,000/$10,000 or $30,000 combined single limits,

and such excess insurance shall provide minimum limits of

$125,000/$250,000/$50,000 or $300,000 combined single

limits.” Id. at (4). In other words, you could have an available

bond or certificate of deposit of $120,000, plus excess coverage

of $125,000, for a total available of $225,000. I assume that the

excess layer would be in between the first $10,000 available from

the bond or CD, with the balance from the bond or CD kicking-

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in again for damages over $135,000. Of course, you would have

the caps established by section 324.021(9)(b) to deal with.

The third way that the owner of a vehicle that is not a “for-

hire passenger transportation vehicle” can prove compliance

with these financial responsibility requirements is by

“[f]urnishing a certificate of self-insurance issued by the

department in accordance with s. 324.171.” § 324.031(4). One

way in which that self-insurance can be maintained by a

corporation which owns vehicles is for the owner to “[m]aintain

sufficient net worth, as determined annually by the department .

. . to be financially responsible for potential losses.” There is no

set cap on that amount of financial responsibility, as it depends

on factors including the amount of “excess insurance carried by

the applicant.”

The alternative self-insurance method is for the owner to

“[p]ossess a net unencumbered worth of at least $40,000 for the

first motor vehicle and $20,000 for each additional motor

vehicle.” Thus, a rental car company that owns 1,000 vehicles

would have to demonstrate a net worth of $20,040,000. There is

nothing in the statute to indicate that less than the entire amount

would be available to a single plaintiff, again being perhaps

limited by the caps in section 324.021(9)(b).

Next I will turn to another financial responsibility statute

which may apply to a rental company. §§ 324.031 & 324.032,

Fla. Stat. apply to “[t]he owner or operator of a taxicab,

limousine, jitney, or any other for-hire passenger

transportation vehicle.” Id. (emphasis added). The term “for

hire passenger transportation” is not defined in Florida statutes.

However, the plain meaning of those words would apply to a

short-term rental of a passenger motor vehicle. The rental car is

“for hire” in the sense that the renter must pay the lessor a fee to

There is a definition of the similar term “for-hire vehicle”

within § 320.01(15)(a), Fla. Stat. That definition would appear to

apply to rented vehicles. It “means any motor vehicle, when used

for transporting persons or goods for compensation; let or rented to

another for consideration.” (Emphasis added).

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use the vehicle. A rental car constitutes a road vehicle used for

“passenger transportation,” as opposed to hauling cargo.

The interplay between §§ 324.031 & 324.032 is extremely

confusing, but a skillful practitioner could make the argument

that the two statutes require a rental car company to provide

insurance of at least $125,000/$250,000/$50,000. The first

sentence of §324.031 seems to permit the owner of a for hire

passenger transportation vehicle to satisfy financial

responsibility requirements by purchasing only a $10,000 policy,

wherein that statute states that such an owner “may prove

financial responsibility by providing satisfactory evidence of

holding a motor vehicle liability policy as defined in s.

324.021(8) or s. 324.151, which policy is issued by an insurance

carrier which is a member of the Florida Insurance Guaranty

Association.” On the other hand, subsection (1)(a) of §324.032

seems to increase the insurance requirement for the owner of a

for-hire passenger transportation vehicle, by stating that

“[n]otwithstanding the provisions of s. 324.031 . . . [such an

owner] may prove financial responsibility by furnishing

satisfactory evidence of holding a motor vehicle liability policy,

but with minimum limits of $125,000/$250,000/$50,000.” Thus,

§324.032(1)(a) expressly increases the insurance requirement

from $10,000 permitted by §324.031(1).

The matter becomes more confusing, however, when

subsection (b) of §324.032 is considered. That section provides:

“A person who is either the owner or a lessee required to maintain

insurance under s. 324.021(9)(b) and who operates limousines,

jitneys, or any other for-hire passenger vehicles, other than

taxicabs, may prove financial responsibility by furnishing

satisfactory evidence of holding a motor vehicle liability policy

as defined in s. 324.031.” That provision takes us back to the

$10,000 insurance requirement referenced in §324.031.

It does not seem to make any sense to require limits of

$125,000/$250,000/$50,000 in subsection (1)(a), then permit the

owner to choose to only obtain a $10,000 policy under (b). One

argument that can be made is that subsection (1)(a) applies to

rental cars, because rental cars are “required to maintain

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insurance under s. 627.733(1)(b),” as stated in subsection (1)(a).

The lower limits under (b) must, therefore, be available only for

the owners of a for-hire passenger vehicle that is not required to

have insurance under 627.733 and is not a taxicab.

Subsection (2) of §324.032 also permits the owner of more

than 300 for-hire passenger transportation vehicles to comply

with financial responsibility by obtaining a certificate of self-

insurance pursuant to §324.171. As explained above, where self-

insurance is obtained, the owner has to establish sufficient net

worth “to be financially responsible for potential losses.” Thus,

there may well be much more in financial responsibility available

against a rental car company, even though we have not prevailed

in our argument that the limits of §324.021(9)(b) are applicable.

Conclusion

Everyone with cases against rental car companies should

move to amend their complaints to plead the foregoing as

financial responsibility exceptions to the Graves Amendment

that were not addressed in Vargas, because even though we lost

that case, we have to:

Keep Tryin!

Roy