Florida Supreme Court Rejects Vicarious Liability for Car Rental Firms

The Florida Supreme Court has ruled that motor vehicle leasing companies in the state cannot be held liable for accidents with their rented vehicles they did not cause.

The state’s high court agreed with lower courts that a federal law shields car leasing firms from so-called “vicarious” liability by preempting a state law that holds some leasing firms responsible for damages up to $500,000.

Vicarious liability theory holds a party liable even when it is not involved in an accident. A 2005 federal law, known as the Graves Amendment because it was sponsored by Rep. Samuel Graves, R-Mo., prohibits a state from imposing vicarious liability on rental car companies. However, it exempts from this prohibition any leasing firms that fall under a state “financial responsibility” law.

Florida has a law holding some rental car companies vicariously liable for up to $500,000 in damages in certain situations. It applies only in cases of short-term leases and only if the person who leases or drives the rented vehicle is uninsured or has limits below $500,000.

Florida law states that a short-term lessor (leasing a motor vehicle for a period of less than one year) is considered the owner of the motor vehicle for determining liability up to $100,000 per person and up to $300,000 per incident for bodily injury and up to $50,000 for property damage. If the lessee or the operator of the motor vehicle is uninsured or has insurance with limits less than $500,000 combined property damage and bodily injury liability, then the short-term leasing company shall be liable for up to an additional $500,000 in economic damages only.

Lawyers for an accident victim argued that this state law qualified as a financial responsibility law for purposes of the Graves Amendment exemption and thus short-term lessors in Florida could not benefit from the federal prohibition on vicarious liability.

However, lawyers for a car leasing firm argued that the state law did not qualify as a true financial responsibility law. Thus the state law was not exempted and the leasing firm was protected by the federal prohibition.

The provision on short-term lessors was added to Florida law in 1999 in a tort reform package. Under it, short-term lessors were still subject to vicarious liability. State law had previously eliminated all vicarious liability for longer-term lessors.

The state’s high court opinion, written by Justice James E.C. Perry, said that the federal law clarifies that although states may not impose vicarious liability on rental car companies, they may still require insurance or its equivalent as a condition of licensing or registration.

But, the court said, the Florida law does not require insurance or its equivalent as a condition of licensing or registration. It also does not require a lessor to meet any financial responsibility or liability insurance requirements under state law.

Florida’s law is “neither a financial responsibility law nor an insurance requirement,” according to the court, because while it caps liability, it does not require either proof of financial resources or the purchase of insurance.

“Rather, [the state law] preserves Florida common law vicarious liability by deeming short-term (less than one year) lessors to be ‘owners’ for vicarious liability purposes, while limiting their exposure to damages for such claims. Therefore,” Perry wrote, “it conflicts with and is thus preempted by the Graves Amendment.”

The ruling came in a case against Enterprise Leasing Co., which issued a short-term vehicle lease to Elizabeth Price. Price’s son, Jimmy Middleton, crashed the rental vehicle into a vehicle driven by Rafael Vargas. Vargas filed suit against Price, Middleton and Enterprise. The count against Enterprise claimed the firm was vicariously liable under Florida’s law.

Vargas did not contend that Enterprise was negligent, that its lease of a vehicle to Price was improper, or that it was in any way at fault for the accident.

Enterprise asserted that under the federal Graves Amendment, it had no liability.

Both a Palm Beach County trial court and the Fourth District Court of Appeal agreed with Enterprise and rejected the vicarious liability claim by Vargas. The Fourth District certified the issue to the state Supreme Court as a question of great public importance because several similar cases in Florida have been on hold pending a final ruling.

In 2008, a federal court, the 11th U.S. Circuit Court of Appeals in Atlanta, also ruled Florida’s law was preempted. This new Florida Supreme Court ruling applies only to state courts.

Chief Justice Charles T. Canady and Justices R. Fred Lewis, Peggy A. Quince and Ricky Polston concurred in the majority decision.

Justice Jorge Labarga dissented, arguing that Florida’s law can be “fairly interpreted as a financial responsibility statute, and such an interpretation is appropriate even in the absence of an express mandate of bodily injury liability and property damage insurance or similar coverage.”

Justice Barbara J. Pariente recused herself from the case.

The case is Rafael Vargas v. Enterprise Leasing Company.