Long Island Rental Car
Accident Lawyer

Legal Analysis

The Graves Amendment: What It Means for Your Case

The single most important legal concept in any rental car accident case is the Graves Amendment, 49 U.S.C. §30106. Enacted by Congress in 2005, this federal law preempts state vicarious liability laws — including New York’s Vehicle and Traffic Law §388 — and provides that a rental car company or other commercial lessor of motor vehicles is not liable for harm arising solely from the operation of a leased or rented vehicle. In plain terms: you generally cannot sue Enterprise, Hertz, or Budget simply because one of their rental cars was involved in a crash.

Before the Graves Amendment, New York’s Vehicle and Traffic Law §388 imposed owner liability on vehicle owners — including rental companies — for the negligent operation of their vehicles by anyone who used them with permission. This made rental companies deep-pocket defendants in auto accident cases. Congress eliminated this exposure for the commercial rental industry through the Graves Amendment, protecting companies that are in the business of renting vehicles and are not otherwise at fault.

The Graves Amendment has two critical requirements that must both be satisfied for the immunity to apply: (1) the defendant must be engaged in the trade or business of renting or leasing motor vehicles; and (2) the defendant must not be independently negligent or otherwise at fault. This second requirement is where rental company liability still exists. If Enterprise, Hertz, Budget, Avis, or any other rental company was independently negligent — through faulty vehicle maintenance, renting to an unlicensed or impaired driver, or other affirmative acts of negligence — the Graves Amendment does not shield them. They face direct liability for their own conduct.

For victims of rental car crashes on Long Island, this framework means that your primary path to recovery runs through the at-fault driver’s personal auto insurance and, if applicable, the rental company’s own Excess Coverage Liability (ECL) policy. For a full overview of how vehicle owner liability and insurance coverage work in broader car accident cases, see our car accident lawyer page.

When the Rental Car Company Is Still Liable

Despite the Graves Amendment’s broad immunity, rental car companies face direct liability when their own negligent acts or omissions contributed to the crash. The two most significant exceptions are negligent maintenance and negligent entrustment.

Negligent maintenance occurs when a rental company fails to keep its fleet in reasonably safe operating condition, and that failure causes or contributes to an accident. Rental companies operate large vehicle fleets and are responsible for performing routine inspections, maintaining brakes and tires, replacing worn components, and addressing flagged defects before returning a vehicle to service. When a vehicle is rented out with known defects — worn brake pads, tires below minimum tread depth, faulty steering, malfunctioning headlights — the rental company is independently negligent and the Graves Amendment does not apply. Fleet maintenance logs, inspection checklists, and repair records are key evidence in these cases. Our firm subpoenas these records immediately upon being retained, before they can be altered or selectively purged.

Negligent entrustment occurs when a rental company rents a vehicle to a driver it knew or should have known was unfit to operate it. Under New York DMV regulations, rental companies are required to verify that a renter holds a valid driver’s license. Renting to a driver with a suspended license, a revoked license, an expired license, or no license at all constitutes negligent entrustment. Similarly, renting to an obviously impaired individual or to someone who disclosed conditions that should have disqualified them can expose the rental company to direct liability. When we obtain the rental agreement and DMV records for the at-fault driver, we verify whether the rental company fulfilled its licensing verification obligations.

Beyond these two categories, rental companies can also face liability for negligent hiring of their own staff (if a company employee caused the crash while repositioning a vehicle) and for violations of specific federal or state safety regulations applicable to the commercial rental industry. A thorough rental car accident investigation evaluates all of these angles before concluding that the Graves Amendment fully bars recovery from the rental company.

Insurance Coverage in Rental Car Accident Cases

Coverage in rental car accident cases is almost always layered, and identifying the right sequence of coverage is one of the most important tasks your attorney handles. The following insurance sources may apply depending on whether you were hit by a rental car, whether you were driving the rental car, and what coverage each party carries.

The at-fault driver’s personal auto insurance is the primary source of recovery for victims hit by a rental car. Most standard personal auto policies in New York extend liability coverage to vehicles the insured is driving with the owner’s permission — which includes rental cars. This means the driver who rented the car is covered under their own policy for the harm they cause to others. Determining the at-fault driver’s policy limits is the first critical step.

The rental company’s Excess Coverage Liability (ECL) policy is a secondary coverage layer that some rental companies maintain for renters who have declined additional insurance at the counter. The ECL policy typically provides coverage above and beyond the renter’s personal policy and sits above the minimum required by New York DMV. Under New York law, rental vehicles must carry a minimum level of liability coverage; this requirement is separate from the ECL policy and ensures a baseline of compensation is available.

New York no-fault insurance (PIP) under Insurance Law §5102 applies to rental car accidents just as it does to any other motor vehicle accident in New York. No-fault covers the injured party’s medical expenses and a portion of lost wages up to the policy limit, regardless of who was at fault. If you were a passenger in the rental car, you pursue no-fault benefits through the rental car’s insurer or through your own policy. If you were in another vehicle hit by the rental car, you pursue no-fault through your own insurer.

Credit card Collision Damage Waiver (CDW) coverage, offered by premium credit cards, covers damage to the rental vehicle itself but does not typically provide third-party liability coverage. Relying on a credit card CDW as your primary protection when driving a rental car can leave you exposed to personal liability for injuries caused to others. CDW coverage also typically excludes certain vehicle types, off-road use, and business-use rentals.

Uninsured/Underinsured Motorist (UM/UIM) coverage in your own auto policy is an important backstop when the at-fault rental car driver carried no insurance or insufficient limits. UM/UIM coverage is optional in New York but strongly recommended. If the at-fault driver was uninsured or carried minimum limits ($25,000/$50,000) and your injuries are serious, your own UM/UIM coverage can bridge the gap to full compensation. For more on how insurance coverage works in all types of car accident cases on Long Island, see our car accident lawyer page.