Rental-Car Accidents in California: When Can the Rental Company Be Liable?

Midway rented a car to a customer who, three days later, was involved in a collision with Torin O’Brien. O’Brien pursued two theories against Midway: ownership-based liability under Vehicle Code sections 17150 and 17151, and negligent entrustment because Midway rented the car without verifying that the renter had automobile insurance. ²

The Court of Appeal affirmed summary judgment for Midway, holding that the Graves Amendment preempts ownership-based liability under section 17150 as applied to Midway and rejecting the asserted duty to investigate whether the renter already had automobile insurance. ²

The appellate court did not decide which driver caused the collision, and the opinion does not establish that the renter was uninsured; a failure to verify coverage is different from proof that none existed.

Section 17150 generally makes a vehicle’s owner liable for injury resulting from a negligent or wrongful act in the operation of the vehicle by someone using it with the owner’s permission. ³

The Graves Amendment, 49 U.S.C. section 30106(a), addresses harm to persons or property arising from the use, operation, or possession of a vehicle during a rental or lease. When its conditions are met—including the rental-business requirement and no negligence or criminal wrongdoing by the owner or an affiliate—it bars liability based on ownership. It does not protect every vehicle owner, every rental arrangement, or every claim. ⁴

Subdivision (b) preserves specified state financial-responsibility and insurance requirements. O’Brien rejected treating section 17150’s ownership-based liability as falling within that exception: the statute imposes liability because of ownership status, not a failure to meet an insurance requirement. The decision does not eliminate rental companies’ insurance obligations. ²⁴

Negligent entrustment concerns supplying a vehicle to someone the defendant knew or should have known was incompetent or unfit to drive, together with the other required elements, including causation. It is a claim about the company’s own conduct, not its ownership. ²

The narrow holding in O’Brien: failure to verify the renter’s existing automobile insurance did not establish negligent entrustment. Insurance status and competence to drive are different questions; the court pointed to no evidence of incompetency, inexperience, or recklessness known or knowable to Midway. ²

This does not mean a valid license always defeats negligent entrustment, that a rental company may ignore apparent impairment, or that every failure to investigate creates liability. The Graves Amendment also does not itself establish a negligence claim; a claimant must still prove an actionable claim under applicable law. ²⁴

Keep three questions separate: the driver’s responsibility; any independently supportable claim against the rental company based on its own conduct; and the insurance coverage that may fund a recovery.

O’Brien does not determine coverage under every rental agreement, rental-company policy, renter’s policy, or uninsured/underinsured-motorist policy, and it does not leave an injured person without a claim—the driver’s own responsibility remains a separate question.

Practical steps after a rental-car collision include preserving:

Our article on evaluating a personal-injury claim explains how these pieces fit into a case’s overall value.

O’Brien is not the first California decision on this protection. Tavares v. Zipcar, Inc. (2026) 118 Cal.App.5th 219, 236, previously addressed Graves Amendment preemption of ownership-based liability under section 17150. ⁵

O’Brien’s contributions are its treatment of the financial-responsibility exception and its refusal to recognize a duty to verify renters’ insurance, a question the court indicated belongs to the Legislature. ²⁶