The Graves Amendment is a federal law, 49 U.S.C. § 30106, that stops you from holding a rental or leasing company liable in New York just because it owned the vehicle involved in a crash. In practice, the Graves Amendment in New York means that if a renter causes an accident, your claim runs against the driver and the driver’s insurance, not against Hertz, Enterprise, Budget, or whichever company the car came from. The company can still be sued, but only for something it did wrong itself.
Before 2005, the answer was very different. New York Vehicle and Traffic Law § 388 made every vehicle owner financially responsible for injuries caused by anyone driving the car with permission, express or implied.1New York State Senate. New York Vehicle and Traffic Law 388 – Negligence in Use or Operation of Vehicle Attributable to Owner That gave injured people a direct line to the deep insurance policies of rental fleets. Congress cut that line for commercial lessors when it passed the Graves Amendment.
What the Graves Amendment Actually Does
The statute says that a vehicle owner engaged in the trade or business of renting or leasing motor vehicles is not liable under any state law, solely by reason of being the owner, for harm arising out of the use of the vehicle during the rental or lease period.2Office of the Law Revision Counsel. 49 USC 30106 – Rented or Leased Motor Vehicle Safety and Responsibility Two conditions have to be met: the owner is in the business of renting or leasing, and the owner was not negligent and did not commit criminal wrongdoing.
Federal law outranks conflicting state law, so the Graves Amendment preempts VTL § 388 as applied to rental and leasing companies. The New York Court of Appeals confirmed this in 2026 in Second Child v. Edge Auto, Inc., stating that “the Graves Amendment clearly preempts Vehicle and Traffic Law § 388, which explicitly imposes vicarious liability on rental car companies for accidents caused solely by their renters.”3New York Courts. Second Child v Edge Auto, Inc. – 2026 NY Slip Op 02436
Who Counts as a Protected Rental or Leasing Company
The protection covers owners, and their affiliates, that are engaged in the trade or business of renting or leasing motor vehicles.2Office of the Law Revision Counsel. 49 USC 30106 – Rented or Leased Motor Vehicle Safety and Responsibility Traditional rental brands clearly qualify, and so do long-term leasing operations. Renting does not have to be the company’s main line of work. A home improvement store that rents trucks or a dealership that hands out courtesy cars during service can qualify, as long as the arrangement is a real commercial transaction.
“Affiliate” is defined as a person or entity that directly or indirectly controls, is controlled by, or is under common control with the vehicle owner.4Office of the Law Revision Counsel. 49 USC 30106 – Rented or Leased Motor Vehicle Safety and Responsibility Parent companies, subsidiaries, and sister companies in the same corporate family can all claim the shield.
Private lending is a different story. If a neighbor loans a personal car to a friend, that is not a rental business, and the Graves Amendment has no role. The owner remains on the hook under VTL § 388.
Car-Sharing Platforms
Coverage of peer-to-peer car-sharing services like Turo is less settled. The statute does not define what being “engaged in the business of renting or leasing” looks like for a platform. At least one New York court has treated an on-demand car-sharing service as a rental for Graves Amendment purposes, pointing to the driving charges, mileage fees, and taxes paid by customers. The answer in a given case may turn on how closely the platform resembles a conventional rental versus a casual loan between individuals, and the defense should be expected to be contested.
When the Shield Does Not Apply
The Graves Amendment is not blanket immunity. It falls away whenever the vehicle owner’s own negligence or criminal conduct contributed to the harm.2Office of the Law Revision Counsel. 49 USC 30106 – Rented or Leased Motor Vehicle Safety and Responsibility Two situations come up most often.
Negligent Maintenance
A rental company that ignores reported mechanical problems or skips routine maintenance can be sued directly if that failure causes a crash. Imagine a customer reports squealing brakes, the car goes back on the lot without inspection, and the brakes later fail. The claim at that point is not about who owned the car. It is about the company’s own failure to keep the vehicle safe, and courts treat that as direct negligence by the owner, which the statute’s exception covers.
Negligent Entrustment
Renting to someone the company knows, or should know, is unfit to drive also strips away the protection. Handing keys to a customer with a visibly suspended or revoked license, or to someone who is obviously intoxicated, are the classic examples. The standard is what a reasonably prudent business would do. A company that runs no license checks and performs no screening takes real risk, because a plaintiff only has to show that a basic check would have surfaced the danger.
Criminal misconduct by the company or its employees also removes the bar. If an employee falsifies vehicle inspection records or participates in insurance fraud tied to the rental, there is no Graves Amendment defense.
What New York Still Requires: The Savings Clause
The Graves Amendment contains a savings clause that preserves certain state insurance requirements. Under 49 U.S.C. § 30106(b), the federal statute does not supersede state laws imposing financial responsibility or insurance standards on vehicle owners for the privilege of registering and operating a motor vehicle, or state laws imposing liability on rental and leasing companies for failing to meet state insurance requirements.2Office of the Law Revision Counsel. 49 USC 30106 – Rented or Leased Motor Vehicle Safety and Responsibility
In Second Child v. Edge Auto, Inc., the Court of Appeals drew the line this way. The Graves Amendment preempts VTL § 370’s requirement that rental companies provide primary liability insurance to renters, because that obligation was tied to the vicarious liability the federal law wiped out. But it does not preempt § 370’s requirement that rental companies carry a minimum amount of insurance on their vehicles.3New York Courts. Second Child v Edge Auto, Inc. – 2026 NY Slip Op 02436 Rental companies in New York still have to insure their fleets. They no longer have to extend that coverage to protect renters against vicarious liability claims.
For an injured person, this is a meaningful change. Before Second Child, the rental company’s policy could sometimes be reached as primary coverage. Now, the renter’s own insurance is likely the first source of recovery.
Private Vehicle Owners Are Still Liable Under VTL § 388
A common misunderstanding is that the Graves Amendment eliminated owner liability in New York across the board. It did not. VTL § 388 still applies in full to any vehicle owner who is not in the business of renting or leasing.1New York State Senate. New York Vehicle and Traffic Law 388 – Negligence in Use or Operation of Vehicle Attributable to Owner Lend your car to a friend, a neighbor, or a family member, and you are personally liable if that person causes a crash. Permission can be express or implied, and courts read it broadly.
How to Actually Recover After a Rental Car Crash
With the rental company shielded from ownership-based liability, the first target for an injured person is the driver who caused the crash and that driver’s insurance.
New York requires every motorist to carry minimum liability insurance of $25,000 for bodily injury to one person, $50,000 for bodily injury to two or more people, and $10,000 for property damage per accident.5New York Department of Financial Services. How Much Auto Insurance Must I Carry Those minimums are low. A serious crash can produce medical bills, lost wages, and pain-and-suffering claims that dwarf a $25,000 policy limit. Legislation has been proposed in the New York Assembly to double these minimums, but as of early 2026 the current limits remain in effect.
When the at-fault driver’s insurance is thin or missing, your own policy becomes the backstop. New York law requires every auto policy to include uninsured motorist (UM) coverage at the same minimums as liability coverage. Supplementary uninsured/underinsured motorist (SUM) coverage can be purchased in amounts up to your own bodily injury liability limits.5New York Department of Financial Services. How Much Auto Insurance Must I Carry Carrying higher SUM limits is one of the most practical steps a New York driver can take to prepare for exactly this situation.
Other Possible Sources of Recovery
The driver’s personal policy is rarely the only option. Several other avenues may be open:
- Direct negligence claims against the rental company for poor maintenance or for renting to an unfit driver. The Graves Amendment does not apply, and the company’s own insurance is in play.
- Employer liability if the driver was operating the rental within the scope of employment. The Graves Amendment protects vehicle owners, not the driver’s employer, so respondeat superior can still reach the employer.
- The rental company’s minimum fleet insurance preserved under Second Child. It no longer extends as primary coverage to the renter, but it may still be accessible in some claim configurations.
- Supplemental liability coverage purchased from the rental counter, or coverage provided through a credit card benefit used to pay for the rental.
Building a full recovery after a rental car crash in New York usually means stacking coverage layers rather than naming the rental brand and relying on its size. The investigation starts with the driver’s policy, works through any employer relationship, checks for owner negligence, and catalogs every available policy before the realistic picture of available compensation comes into focus.