“We believed we read the law right when no one else was,” said Spencer Jacobsen, director of operations at SDI.
Image via Pixabay / Okan Caliskan.
A federal court in South Dakota has awarded attorney fees and expenses to the Subrogation Division Inc. (SDI) for enforcing a landmark Graves Amendment case. The new decision, delivered in a 16-page statement in the SDI v Brown case, reimburses SDI $ 61,077.20 for enforcement, as announced in a decision reported last year. The amount at issue in the underlying lawsuit was $ 2,271.75.
The original decision in SDI against Brown was made in January 2020.
The case ruled that federal law prevented rental car companies from having ultimate responsibility for damage caused by their renters to third parties. His previous decision had enabled a renter to be reclaimed after the rental agency paid the damages, despite the fact that state law had previously denied it.
“This is another blow to those who would blame car rental companies for their tenants’ accidents,” SDI President and Founder David Purinton said in a statement. “The United States Congress said in the Graves Novella that you can’t do that, but not everyone got the message. This should help get the message across a little clearer to those who are actually responsible for causing harm to third parties with rental cars. “
SDI versus Brown
The Graves Amendment was incorporated into the law in 2005 as part of a major federal highway code. Its name is derived from its sponsor, Rep. Sam Graves (R-MO), who drafted the amendment.
The Graves amendment prohibits liability towards a rental company, unless the company itself is negligent or commits criminal misconduct. None of these appeared in SDI against Brown.
Brown rented a car from Overland West, a Hertz System licensee in Rapid City, South Dakota. During his rental period, Brown caused an accident with a third party. Overland West paid the third party’s claim under its deductible and then transferred its own claims to SDI. SDI, in turn, sought a recovery from Brown under its rental car deal.
When both Brown and his insurance company refused to pay, citing state law, SDI sued in federal court, invoking the Graves Amendment. The court joined SDI in enforcing the lease to require the tenant to reimburse Overland West for payment of the third party’s claim for damages. After SDI filed the damages claim, which Brown then paid, SDI filed for more than $ 60,000 in attorney fees under the lease in court.
Brown denied the motion, arguing that the court shouldn’t impose such a high fee in what Brown called an ordinary damage dispute. US District Judge Jeffrey L. Viken dismissed Brown’s argument and awarded SDI $ 61,077.20.
More at stake
As Viken outlined his decision, he found that there was more at stake in the litigation than just the controversial payment amount.
“The court believes that prior to the start of this lawsuit in South Dakota, there were few attorneys who may have heard of the Graves Amendment, much less were willing to try the wide range of affirmative defenses put forward by the defendants “, so wrote Judge Viken. “This is no ordinary insurance event.” He noted that the numerous defenses put forward by the tenant and his porter “set the lines of battle for the solution of this case”.
“The court believes that prior to the start of this lawsuit in South Dakota, there were few attorneys who may have heard of the Graves Amendment, much less were willing to try the wide range of affirmative defenses put forward by the defendants “, so wrote Judge Viken.
He also found that “the issues challenged in this case were unique and complex”. Spencer Jacobsen, director of operations at SDI, stated that SDI took the risk in conducting the litigation and that the award was merely a reimbursement of SDI’s expenses. “No courage, no fame,” Jacobsen said in the statement. “We believed we read the law right when no one else was. We took on it and it paid off. This will help landlords, tenants and insurers on both sides of these disputes find a clearer path forward when a tenant causes an accident that harms a third party. “
Founded in 2000, SDI handles cession requests from clients such as rental car companies, freight forwarders, third party administrators, self-insured trucks and other companies and government agencies.
Purinton said the effort is shared with his hometown legal team, who have been in his home for more than twenty years. “We have spent hundreds of thousands of dollars of our own money so others can follow,” Purinton said. “It’s good to see that it’s paying off.”
Judge Viken also recognized the effort when he ruled that “a lawyer with the requisite skills is most likely not available locally” in South Dakota.
The court deemed it “appropriate” that SDI retain its longtime attorney, whom the court identified as “an expert in the Graves Amendment litigation”, to lead this case. SDI hired a local attorney at its own expense to assist with handling the case.
Judge Viken quoted the SDI papers as stating that the Graves amendment “is not very well understood in the SDI industry,” but the SDI attorney “has worked with SDI for many years to provide the knowledge and expertise obtain necessary to adequately and effectively present the arguments of the Graves amendment. “The court added that SDI’s attorney” has particular expertise and knowledge of the interplay between the Graves Amendment and state law, “so” SDI logically chose him as an attorney in this case to keep”.
In 2012, PurCo Fleet Services, Inc., another Purinton company founded in 1993, prevailed in Koenig against PurCo, a landmark decision by the Colorado Supreme Court. PurCo provides risk management services for the rental car industry.
Like Brown, the Koenig decision came at the end of a long legal battle. Koenig found that downtime damage is a significant loss in property damage. Brown’s most recent decision came in the fifth year of the case. The Koenig case lasted seven years.