The New York Appellate Division recently ruled in the case of O'Hare v. Eddo, impacting how car dealerships may be held liable for accidents involving courtesy vehicles. The court upheld a lower court's decision that denied Towne Ford, Inc. summary judgment, which means the dealership could be held liable for injuries sustained by a pedestrian struck by a vehicle driven by one of its customers. This ruling is significant as it clarifies the application of vicarious liability laws in New York, particularly concerning the Graves Amendment, which limits liability for rental vehicle owners.
The case began when Kathleen O'Hare, acting as power of attorney for her husband, Daniel T. O'Hare, filed a lawsuit after he was injured in an accident involving a Mazda vehicle driven by Michael A. Eddo. Eddo was driving a car owned by Towne Ford as part of the Mazda Courtesy Vehicle Program, which provides customers with a vehicle while their own car is being serviced. O'Hare claimed that Towne Ford was vicariously liable for Eddo's actions under New York's Vehicle and Traffic Law § 388, which holds vehicle owners responsible for damages caused by their vehicles.
Towne Ford contended that it should not be held liable due to the Graves Amendment, a federal law that protects rental car companies from liability in certain situations. The dealership argued that it had effectively rented the vehicle to Eddo and was therefore entitled to the protections offered by the Graves Amendment. However, O'Hare countered that the dealership did not actually rent the vehicle since Eddo was not charged for its use.
The case reached the Appellate Division of the Supreme Court of New York after Towne Ford appealed a lower court's decision from May 5, 2025. The lower court had denied Towne's motion for summary judgment and partially granted O'Hare's cross-motion to dismiss Towne's defense based on the Graves Amendment. The appellate judges included Lindley, Bannister, Montour, Greenwood, and Hannah.
In its ruling on July 24, 2026, the court affirmed the lower court's decision. The judges determined that Towne Ford did not qualify for the protections of the Graves Amendment because it did not meet the definition of having “rented” the vehicle to Eddo. The court stated, "Towne does not qualify for the protection of the Graves Amendment inasmuch as the undisputed evidence... establishes that Eddo did not pay any rental charges nor any incidental fees related to the use of the vehicle." This interpretation of the law is crucial because it emphasizes that for a dealership to claim protection under the Graves Amendment, there must be a financial transaction involved in the renting process.
The ruling also highlighted the importance of interpreting the Graves Amendment narrowly. The court noted that the language of the statute must be understood in its ordinary context, which means that simply providing a vehicle for free does not constitute a rental agreement. The judges emphasized that the presumption against preemption applies, meaning that state laws like New York's Vehicle and Traffic Law § 388 should not be easily overridden by federal statutes.
The impact of this ruling is significant for car dealerships and their liability in similar cases. It clarifies that providing a courtesy vehicle without charging the customer does not exempt the dealership from liability for accidents involving those vehicles. This decision may influence how car dealerships structure their courtesy vehicle programs and their understanding of liability in the event of accidents.
Furthermore, this ruling could set a precedent for future cases involving the Graves Amendment and vicarious liability in New York. Dealerships may need to reevaluate their policies regarding courtesy vehicles to ensure they understand their legal responsibilities and potential liabilities.
Looking ahead, Towne Ford has the option to appeal this ruling. However, details regarding any pending appeals or related cases were not available in the court filing. The outcome of this case may prompt other dealerships to consider how they manage their courtesy vehicle programs and the legal implications of their operations.