Federal law shields car dealer in courtesy-car accident

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A car dealership could not be held vicariously liable to a pedestrian struck by a courtesy vehicle, the Massachusetts Supreme Judicial Court ruled in June.

A New Jersey Mercedes Benz dealer lent a customer, defendant Oke, a courtesy car while Oke's car was being repaired. After traveling to Boston (an apparent excess of the radius permitted by the courtesy-car contract), Oke left the key in the ignition, engine running, and his wife, Steele (no relation), in the passenger seat, while he attended to business. When a parking official demanded that the car be moved, Steele's attempt to do so resulted in collision with, and serious injury to, the pedestrian-plaintiff.

The laws of many states permit an injured person to pursue the owner of a vehicle in vicarious liability, regardless of the owner's fault. In a 2005 federal highway bill, Congress preempted and disallowed no-fault vicarious liability when the vehicle owner is a rental company. According to FindLaw, Congress was troubled by the likes of a $21m vicarious liability award against Budget in New York. The statutory language, "the Graves Amendment," was named for Rep. Sam Graves (R-Mo.), who estimated that vicarious liability awards cost car rental companies some $100m annually, a cost passed on to consumers.

The Supreme Judicial Court ruled that the Graves Amendment protected the New Jersey car dealer. The courtesy-car arrangement was part of the transaction for car service, the court reasoned, so akin to a rental agreement.

The court thus dismissed claims against the car dealer. However, reversing, the court remanded the plaintiff's claim against Oke for negligent entrustment. The trial court must resolve a question of fact, the court opined, before the negligent entrustment claim can be adjudicated. The plaintiff plausibly alleged that Oke had, under the circumstances, implicitly authorized Steele to move the car if necessary.

The surviving claim based on negligent entrustment provides a worthwhile reminder that, upon other facts, the Graves Amendment does not let car rental companies off the hook for liability theories in negligence, such as negligent entrustment and negligent maintenance.

The case is Garcia v. Steele, No. SJC-13378 (Mass. June 27, 2023) (FindLaw). Justice Dalila Argaez Wendlandt wrote the court's unanimous opinion.