TT Talk - Vicarious Liability rears its Head again - in New York


  • Date: 24/11/2006
  • Source: TT Talk

Harry Higham of TM(A) has sent us this item on a recent - and disturbing - case in New York. vehicles. Congressional authority to do so is said to be based on the previously noted Commerce Clause. Under the Act, such lessors can only be charged with their own negligence or criminal wrongdoing, if any. On August 10, 2005, President Bush signed the Act into law.

"Vicarious liability is the legal principle whereby one person, usually an employer, is held responsible to a third party for property damage or bodily injury caused by the negligence of another person, usually an employee, without the first person being negligent himself. The principle was designed to ensure that there was a party of substance whom the third party could sue, rather than leaving him simply with his remedy against the 'employee', who - in the eyes of the law, was unlikely to be a person of means!

In the State of New York as in three other jurisdictions, the State of Minnesota, Washington, D.C and the Commonwealth of Puerto Rico, this principle is applicable to what are termed automobile or road accidents.

In the State of New York, under section 388 of the New York Vehicle and Traffic Law, the owner of a motor vehicle can be held liable to an injured party for the negligent acts of the driver of the vehicle, who has the owner’s permission to drive it, even though such owner was not itself negligent. This rule has had a long history of application in situations where, although there is nothing wrong with the vehicle itself, its owner is held liable where the driver (if he is using the vehicle with the permission of the owner) commits a negligent act leading to injury to a third party. A classic situation has been an accident involving a negligent driver using an automobile rented from a company whose business it is to rent motor vehicles to customers.

In the world of containers and chassis, the principle is applicable to a lessor who leases chassis to ocean carriers who, as part of the intermodal transportation of ocean containers, interchange them with a trucker or haulier to carry out the transport of the containers and their cargoes on land.

For a number of years, leasing companies have been lobbying for a change in the application of the vicarious liability principle by modifying the laws of those jurisdictions that apply it in order to immunize lessors from the effects of its application. They have argued that such application of the principle has affected their ability to compete fairly in interstate commerce because of variances in the laws of the states, some of whom apply the vicarious liability principle and most of whom who do not. Thus, they complain the Commerce Clause of the United States Constitution, which grants to Congress the power to regulate Interstate Commerce, is being ignored to their detriment.

In an attempt to overcome this perceived problem on a nationwide basis, Congress was persuaded to pass the Safe, Accountable, Flexible, Efficient, Transportation Equity Act: A Legacy for Users ("SAFETEA-LU"), a massive federal spending bill with an amendment thereto offered by Missouri Congressman Sam Graves. The Graves Amendment sought to pre-empt and negate all state laws imposing vicarious liability on companies leasing or renting out motor

In a case entitled GRAHAM V. DUNLEY AND NILT, INC. commenced on March 16, 2006 in the Supreme Court of the State of New York, County of Queens, concerning an automobile accident which occurred on June 17, 2005, the plaintiff sued the driver of the other vehicle and its owner, an automobile lessor named Nissan Infiniti, LT ("NILT").

As the Supreme Court of each county in the State of New York is the trial court, defendant NILT attempted to have the complaint against it dismissed by motion on the basis of the Graves Amendment to the federal SAFETEA-LU law.

The trial court denied the motion on the basis that SAFETEA-LU was unconstitutional in that Section 388 of New York's Vehicle & Traffic Law is a state statute in derogation of the state’s common law, that is, an enactment of the legislature of the State of New York establishing vicarious liability as a principle of New York State’s substantive law of torts and therefore has nothing to do with interstate commerce and the Commerce Clause of the U.S. Constitution. In effect, the trial court has said that Congress cannot restrict the application of the law of a state which forms the basis of the state’s right to protect its citizens in connection with the commission of a tort under its laws.

Whether or not a trial court of the State of New York has the right so to rule and whether it is a proper ruling, will no doubt be raised through the appellate system of the State of New York, perhaps even to its highest court, the Court of Appeals. It is also very possible that any further appeal of the ruling will enter the appellate sphere of the Federal Courts including that of the United States Supreme Court.

In the meantime and for the present, in the State of New York, lessors of motor vehicles - including chassis - do not have immunity from the application of the principle of vicarious liability, which Congressman Graves intended, in lawsuits brought in the State of New York, based on similar facts.

As regards chassis lessors who are TT Club members, their vicarious liability under Section 388 is insured by the Club within its third party liability cover."

24 Hour Claims Hotline
+44 7000 882582

Through Transport Mutual Insurance Association Limited and TT Club Mutual Insurance Limited, trading as the TT Club. TT Club Mutual Insurance Limited, registered in the UK (Company number: 02657093) is authorised by the Prudential Regulation Authority and regulated in the UK by the Financial Conduct Authority and Prudential Regulation Authority. In Hong Kong, TT Club Mutual Insurance Limited is authorised and regulated by the Hong Kong Insurance Authority, in Singapore by the Monetary Authority of Singapore and in Australia by the Australian Prudential Regulation Authority. In the United States, TT Club Mutual Insurance Limited is approved as a surplus lines insurer in all states and is accessible through properly licensed surplus lines brokers. The registered offices are: 90 Fenchurch Street, London, EC3M 4ST.

Through Transport Mutual Insurance Association Limited, registered in Bermuda (Company number: 1750) is authorised and regulated in Bermuda by the Bermuda Monetary Authority and is authorised in the UK by the Prudential Regulation Authority and regulated in the UK by the Financial Conduct Authority and Prudential Regulation Authority.

The UK VAT Identification number for Through Transport Mutual Insurance Association Limited is: GB 564 5244 35 and for TT Club Mutual Insurance Limited is: GB 564 3375 30. The Italian VAT Identification number for TT Club Mutual Ltd is: 03627210101.