Malco Enterprises of Nevada, Inc., a Domestic Corporation v. Alelign Woldeyohannes

In an explicit effort to establish a uniform national standard for motor vehicle rental and leasing liability, Congress enacted the Graves Amendment, 49 U.S.C. § 30106, which expressly preempts state laws that impose vicarious liability on rental and leasing companies for the negligence of renters and lessees involved in accidents. Under Section 30106(a), “[a]n 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.” Id. Section 30106(b) excludes state “financial responsibility laws” from preemption. Courts have long held that Section 30106(a) mandates dismissal of state law claims seeking to hold rental or leasing companies liable for damages caused by renters and lessees. And, until the decision below, courts also held that statutes imposing vicarious liability—including through insurance provisions—are not “financial responsibility laws” that are excluded from preemption under Section 30106(b). In direct conflict with decisions of the Supreme Courts of Connecticut, Florida, Minnesota, and Rhode Island, as well as numerous federal decisions, the Nevada Supreme Court held that a state statute imposing vicarious liability on vehicle rental and leasing companies is a “financial responsibility law” and thus not preempted. The question presented is: Whether a state statute that imposes vicarious liability on rental and leasing companies through a provision governing insurance can evade Graves Amendment preemption under its exception for “financial responsibility laws.” (I)