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TO THE EXTENT VEHICLE AND TRAFFIC LAW SECTION 370 HAS BEEN INTERPRETED TO REQUIRE RENTAL-CAR COMPANIES TO PROVIDE PRIMARY LIABILITY INSURANCE COVERAGE TO RENTER-DRIVERS, SECTION 370 IS PREEMPTED BY THE FEDERAL “GRAVES AMENDMENT” (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Singas, affirming the Appellate Division, over a three-judge dissent, determined the federal “Graves Amendment (49 USC 30106),” which relieves rental-car companies of vicarious liability for the negligence of the renter-drivers, preempts Vehicle and Traffic Law 370 to the extent that section 370 has been interpreted to require rental companies to provide primary liability insurance coverage to renters. But section 370’s requirement that rental-car companies carry a specified minimum amount of insurance is not preempted by the Graves Amendment:

The Appellate Division [held] that “the Graves Amendment does not supersede Vehicle and Traffic Law § 370 insofar as it is a state law that requires rental car companies to carry a specified minimum amount of insurance for each of their vehicles” but “is superseded to the extent it requires a rental car company to ‘provide primary insurance to their renters up to the minimum liability limits provided by the statute’ ” … . The Court reasoned that “[t]o hold otherwise would rescue every vicarious liability claim up to statutory minimum insurance amounts and render the Graves Amendment’s preemption clause a nullity” … . The Court further held that section 370 does not reverse preempt the Graves Amendment under the McCarran-Ferguson Act, because the Graves Amendment “does not entirely ‘invalidate, impair, or supersede’ ” section 370 … . * * *

We note that the Graves Amendment does not free car rental companies from all liability arising from the use of a rented vehicle. On the contrary, it expressly permits States to impose liability on rental companies for damages arising from their own negligence or criminal wrongdoing (see 49 USC § 30106 [a] [2]). Nor does the Graves Amendment restrict New York’s ability to require rental companies to obtain insurance, no matter what kind, “for the privilege of registering and operating a motor vehicle” (id. § 30106 [b] [1]). Our decision today does not affect section 370’s requirement that car rental companies obtain insurance coverage for such other liability or for the privilege of registering vehicles in New York. Rather, we narrowly hold that the Graves Amendment preempts Vehicle and Traffic Law § 370 to the extent that it requires car rental companies to provide primary liability insurance to their renters up to the statute’s minimum liability amounts. Second Child v Edge Auto, Inc., 2026 NY Slip Op 02436, CtApp 4-23-26

Practice Point: The interpretation of Vehicle and Traffic Law 370 which required rental-car companies to provide primary liability insurance to renter-drivers has been preempted by the federal “Graves Amendment.”​

 

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