Misunderstood Personal Lines Issues (Part 2)
Page 5 of 7




Rental issues: cars, boats, etc.

The questions
  • Am I covered if I rent a car?
  • What if I rent a boat?

    Let's look at rental agreements...

    Sample Rental Agreement 1
    Use of the car:
    "I will not allow any use of the car to carry passengers or property for hire or to tow or push anything. I will not allow it in any test race or other contest and I will not allow its use for any illegal purpose or by any prohibited driver."

    The other driver must be at least 25 years old and a capable and licensed driver.

    Who else may drive the car:
  • Only someone in my immediate family who permanently lives with me;
  • My employer;
  • A regular fellow employee incidental to business duties; or
  • Someone who appears at the time of rental and signs an additional driver form may drive the car but only with prior permission

    Sample Rental Agreement 2
    Loss or damage to the car:
    I will pay you for all loss and damage to the car at the prevailing retail price, including loss of use plus any administrative charge regardless of who is at fault...my responsibility for accidental collision or upset damage will not exceed the amount in Box 42 (full value).

    If I have accepted the collision damage waiver option you will waive my responsibility and I will not have to pay anything. BUT...I will be responsible for the full amount of the damage if I or any additional driver:
  • Violate the terms of this agreement
  • Abuse the car
  • Lose or damage to the car:
  • Drive recklessly or while under the influence of alcohol or drugs
  • Fail to promptly report any loss or damage to the police and rental car agency
  • Have obtained the car through fraud or misrepresentation
  • Operate the car off paved roads

    Sample Rental Agreement 3
    Liability insurance:
  • Most require YOU to assume contractually the responsibility for liability.
  • No coverage for bodily injury to my family or the driver's family

    Indemnification:
    I also agree to indemnify you for any loss, liability or expense arising out of the use of the car that you may have which exceeds the limits of liability stated above or which results from any unauthorized use or a prohibited operation of the car.

    These three agreements give us a glimpse into rental car coverage.

    Most rental companies require you to provide coverage and to assume liability contractually. Enforceability of this requirement varies from state to state. If coverage is provided by the rental company, it is usually at the statutory limits. This coverage might not kick in if you violate the rental agreement.

    Liability to third parties can derive from customer's negligence and/or rental car company's negligence.

    Physical damage to a rental car, due to customer negligence or other reason such as theft or vandalism, can result in the loss of the use of the rental car and other charges.

    The answers

    Am I covered if I rent a car?
    Based on the ISO 6/98 policy, coverage applies to:
  • Liability of private passenger auto and use of a rented pick-up or van
  • Physical damage, but only as broad as the coverage on your covered vehicles. If there is no physical damage on the policy, then there is no coverage for rental cars.
  • Loss of use and other expenses, which are covered up to $20 per day (if collectible in state)

    Coverage applies while the rental vehicle is in the custody of, or being operated by, you or any "family member". This coverage is not subject to being voided by violation of rental agreement.

    Note: some non-ISO contracts exclude private passenger business use.

    Not subject to being voided by violation of rental agreement.

    The Loss Damage Waiver may increase rental costs by 20-25%, but may come in handy. The Loss Damage Waiver may be voided, however, by violation of the rental contract. Violations include:
  • Allowing an unauthorized driver to be behind the wheel
  • Operating the vehicle while legally intoxicated or influence of illegal drug (this may apply to prescription drugs, as well)
  • Hiring out the vehicle
  • Towing the vehicle
  • Driving with willful and wanton misconduct.
  • Driving on an unpaved road

    Some credit cards provide rental car coverage, which applies when certain conditions to be met. First of all, the rental must be charged to the credit card. Coverage from the credit card is in excess of other coverages, and may require rejection of the Loss Damage Waiver.

    Additional questions to ask when using your credit card for rental coverage:
  • Is there a difference between US rentals and European rentals?
  • Does it make a difference whether the card is personal or corporate?

    As an example, using a Gold Card for a Hertz rental, your responsibility for the car includes all loss, theft or damage, though you are not responsible for accidental fire or acts of nature. Coverage through the Gold Card includes the Actual Estimated Cost to repair (including all discounts), plus towing, storage, impound fees, and administrative charges. If you buy the Loss Damage Waiver or Collision Damage Waiver, it will be voided if you violated the rental agreement.

    What if I rent a boat?
    Your personal auto insurance could cover liability for the trailer towing the rented boat.

    Personal Umbrella policies often cover liability for non-owned watercraft, regardless of size. But beware: watercraft exclusions vary from company to company and may in fact be more restrictive than the underlying primary homeowners or watercraft policy.

    Watch out for liability assumed when renting jet skis and other personal watercraft. Often this exposure is not covered by any personal lines policy, nor is it available from the rental facility.

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    Not only are policy forms, clauses, rules and court decisions constantly changing, but forms vary from company to company and state to state. This material is intended as a general guideline and might not apply to a specific situation. The authors, LunchTimeCE, Inc., CEfreedom, and Insurance Skills Center, and any organization for whom this course is administered will have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of information contained in this course.