By Greg Johnson. Does the federal Graves Amendment apply to insulate taxi-cabs from vicarious liability for the negligence of their drivers? The issue is obviously important in the twelve jurisdictions which by statute impose vicarious liability on the owner of motor vehicles for a permissive user’s negligence. In a previous post, I provided an overview of the Transportation Equity Act of 2005 (49 USC § 30106) (a/k/a “Graves Amendment”), a federal law which preempts state law imposing liability on vehicle owners engaged in the business of renting or leasing motor vehicles absent negligence on the part of the vehicle owner. (See “Leasing, Renting & Vicarious Liability: An Overview of the Graves Amendment”).

Whether the Graves Amendment applies to taxi-cabs was addressed in Kindard-Jennings v. Yellow Cab Co., 2013 WL 4046584 (Conn. Super. Ct. July 19, 2013). In that case, the plaintiff, who was injured in an accident by a taxi-cab owned by Yellow Cab, sued the taxi-cab driver and Yellow Cab alleging vicarious liability pursuant to Connecticut General Statutes § 14–154a. Yellow Cab sought dismissal based on the Graves Amendment. The preemption clause provides in relevant part: “An owner of a motor vehicle that rents or leases the vehicle to a person … shall not be liable under the law of any State … by reason of being the owner of the vehicle … 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 … 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 …”. 49 U.S.C. § 30106(a).

In Kindard-Jennings, the court held that taxi-cab companies are separate and distinct from the types of rental or leasing companies protected by the Graves Amendment and denied Yellow Cab’s motion to dismiss:

The defendants correctly argue that the Graves Amendment serves as a bar to vicarious liability claims against rental car companies and companies that are in the business of renting vans to the public. * * * No authority has been offered or found to support the defendants’ argument that the Graves Amendment extends beyond those defendants “engaged in the trade or business of renting or leasing motor vehicles” to bar a cause of action for vicarious liability against a taxicab company. In Hall v. ELRAC, Inc., supra, 52 App.Div.3d at 262, the First Department of the Supreme Court of New York Appellate Division “rejected [the] plaintiff’s argument that the Graves Amendment violates equal protection by favoring car rental companies over other vehicle owners, such as taxi owners, repair shop owners who provide loaner vehicles to customers, and car dealerships that allow test drives, who also allow others to operate their vehicles.” The First Department explicitly acknowledged the difference between car rental companies and “other vehicle owners, such as taxi owners,” thereby supporting the proposition that taxicab companies are separate and distinct from the types of rental or leasing companies protected by the Graves Amendment. For the above reasons, the Graves Amendment is inapplicable to the plaintiff’s vicarious liability claim against the defendant, Yellow Cab.

The Kindard-Jennings case makes sense.  Unlike leasing companies and rental car companies, taxi-cab companies are not “engaged in the trade or business of renting or leasing motor vehicles” as contemplated by the Graves Amendment. (49 U.S.C. § 30106(a)). The problems Congress attempted to address with the Graves Amendment involved businesses that leased or rented vehicles to the public.  As to vehicle lessors, vehicle owner liability statutes caused lessors to either cease leasing cars in states having such statutes, opting for more expensive balloon note structures, or spreading the cost of higher insurance premiums to lease customers nationwide.  The vehicle owner liability statutes had a similar adverse impact on the car rental industry. These economic activities of these two industries impacted the national market and affected interstate commerce. By eliminating vicarious liability, Congress believed there would be a reduction in insurance costs that would in turn result in a reduction of consumer prices and allow more companies to remain in business. The same cannot be said with regard to the taxi business which led the court in Hall v. Elrac, Inc., 52 A.D.3d 262, 859 N.Y.S.2d 641, 642 (2008), to differentiate rental companies from other vehicle owners, such as taxi owners, repair shop owners who provide loaner vehicles to customers, and car dealerships that allow test drives, who also allow others to operate their vehicles. Second, the distinguishing characteristic of the rentals and leases which were the focus of the Graves Amendment are those which involved the exchange of a charge or fee for the exclusive possession or control of the vehicle, which does not occur in the taxi-business.

Moreover, even if the Graves Amendment applied to taxi-cab companies and thereby shielded them from vicarious liability under owner liability statutes, it does not insulate taxi companies from other theories of liability not based on vehicle owner status. The preemption clause provides in relevant part: “An owner of a motor vehicle that rents or leases the vehicle … shall not be liable under the law of any State … by reason of being the owner of the vehicle … for harm to persons or property….” (49 U.S.C. § 30106(a) (emphasis supplied)).

In addition to owner vehicle statutes which impose vicarious liability, the negligence of a taxi-cab driver may be imputed to the taxi-cab company under alternative theories of liability.  I will be addressing those alternative theories in a subsequent post.

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