KEY TAKEAWAYS

• New York’s Appellate Division addressed the interplay between the Graves Amendment and New York Vehicle & Traffic Law section 370.

• The court held that while Graves does not preempt VTL 370’s requirement that rental car companies maintain a specified minimum amount of insurance for each of their vehicles, it does preempt the requirement that such insurance must “inure to the benefit” of renters.

• Therefore, rental car companies in New York are not statutorily required to extend minimum limits liability insurance to their renters.

Important news from New York’s Appellate Division.

In Second Child v. Edge Auto, Inc., 236 A.D.3d 499 (1st Dep’t 2025), the court addressed the interplay between the Graves Amendment and New York Vehicle & Traffic Law section 370, which requires that rental car companies maintain a specified minimum amount of liability insurance for their vehicles and that the company’s insurance “inure to the benefit” of its rental customers.

VTL 370 thus, purportedly, requires rental car companies to extend their liability insurance to their renters up to the minimum limits, which also triggers a duty to defend because that insurance is primary. If that sounds inconsistent with the Graves Amendment, it’s because it is. The court in Second Child reasoned that “Requiring [rental car companies] to primarily insure and indemnify [their customers] is the precise result barred by the Graves Amendment.”

Plaintiff, a renter, argued that preemption under the Graves Amendment is inapplicable because the amendment expressly provides that it does not supersede state law “imposing financial responsibility or insurance standards on the owner of a motor vehicle.” But the court rejected that argument as one of form over substance: “This is a distinction without a difference. . . . The form in which state law attempts to impose vicarious liability, whether under vicarious liability statutes or under primacy of insurance coverage statutes, does not matter. To 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 held that although the Graves Amendment does not preempt VTL 370’s requirement that rental car companies maintain a specified minimum amount of insurance for each of their vehicles, it does preempt the requirement that such insurance must “inure to the benefit” of renters.

Thanks to the Graves Amendment, rental car companies in New York are therefore not statutorily required to extend minimum limits liability insurance to their renters.

For more information, please contact Goldberg Segalla partner Robert M. Hanlon Jr. or our firm’s Transportation practice group.