Rental Car Roulette

Now for another kind of scam… or gamble.  Imagine standing at your favorite rental car agent’s desk.  Hopefully, this is the last stage of a long insurance claim ordeal.  Yours was one of a row of parked cars sideswiped by another, a rental car, hijacked for a joy ride and gone out of control into a sidewalk café.  Sadly, worst tragedy was injuries to a number of restaurant patrons; who, though they saw the car coming, could hardly leap out of its path.  One pedestrian was hospitalized, intensive care… she may not make it. 

Happily, you have full Collision coverage.  Sure, it’s $1000 deductible; but your claims adjuster hopes eventually to recover that for you from the poor guy who actually rented the wayward vehicle.  At least, so they said. Meanwhile, your car is in the shop awaiting repairs, and you face a decision now regarding rental of a substitute… already late for work.

Yes, you really should sit down and read the contract first.  Why worry about the rental agency’s offer to waive physical damage expenses?  Your policy covers Liability AND Collision damage, also Other-Than-Collision damage. To include waivers, it almost doubles the rental expense.  Will your insurer pay for that also?  They even say that when rental expense is charged to your credit card, it might cover your deductible. You didn’t buy that New/Leased car “gap” coverage; anyway, rental cars are by definition “used”, so you think. And these rental agreements are all standard, right? They must be designed to accommodate your own personal insurance.

WRONG… Take it from me, longtime insurance agent.  We used to coach clients when to buy the rental agency’s waiver, to avoid the worry of coughing up their deductible on the spot.  But that was when subject to a tight travel schedule, lest delay of an insurance claim cause you to miss a scheduled flight.  No more! 

I discovered recently that rental car agreements have changed.  Only one way to be fairly certain your own insurance satisfies:  Get a copy of the company’s contract and ask your insurance agent to review it.  (That’s assuming, of course that you have a personal insurance agent who offers the service.)  Problem is planning for such in advance and persuading the rental agent to release a copy.  Good luck.  And there surely won’t be time in a pinch—like now, clock ticking and supervisor threatening to dock pay for delay in showing up for your shift.

No, these days we must recommend that clients always purchase the physical damage waiver, and even the rental agency’s liability extension.  This is because their contract will often obligate a renter to indemnify the owner (rental company) for all potential financial damages, including that caused by someone else… even an unauthorized driver or a criminal.  And any “gap” in value between new replacement cost, repair expense or street value: what if your policy doesn’t cover that?  Even if your insurance includes Loss of Use, fat chance that the rental company’s claim for income lost will match what your insurer calculates as “reasonable” time to repair or replace the car.

So then, let’s fast forward.  Your car was parked.  You weren’t driving; but even if you had been sitting behind the wheel, this “accident” is deemed not your fault. What if it was your car pushed into that pedestrian? Legal liability couldn’t be yours. That obligation must fall upon the criminal driver, or maybe owner of the offending car; else the renter of that car… anyone but you.  But if a rogue judge decides you must share the fault, your insurance would cover, right?

That’s right… up to your Liability coverage limit.   But as it turns out, it is only a Collision claim.  Though your $1000 deductible remains on the table… had to pay that up front to the body shop.  Leastways, now you have your car back.

Now rewind… Who was “at fault”?  Well, the carjacker, of course.  He was arrested, charged for driving drunk, as well as grand theft for stealing the rental car and assaulting the renter.  But that guy is jailed, awaiting trial. He’s a loser, will never pay.  Word is that the rental car company is denying liability, as their client (the renter) agreed by contract to fully indemnify them for all damages and claims, as well as legal defense expenses.  Even if he had purchased their physical damage waiver, or their liability insurance… the carjacker was an unauthorized driver, which invalidates all that. 

So, claims and bills are rolling in from injured parties, from the restaurant owner, city property assessments, rental company’s legal defense; and of course, rental car replacement and subsequent rental income lost.

Renter of that car gets the total bill, hundreds of thousands of dollars.  His insurance policy limits Liability and legal defense to $100,000.  Though assaulted, he wasn’t badly injured… Good thing, as his auto policy Medical wouldn’t cover that anyway.  So how much of total claims will his own insurer pay?

Hold your seat… Nothing!

Sorry, one’s own insurance covers only those third party claims for which the policyholder or permissive driver is ‘legally liable’.  A carjacker is not a covered driver.  Nor was the renter responsible under civil law; therefore his own liability insurance may not be triggered.  He is obligated rather by commercial contract for claims brought against the rental company.  And there’s the rub.  Far better (?!) had it been the renter driving drunk or fallen asleep, otherwise legally at fault; for then, at least, his own liability insurance would apply, to a point.

So, renter beware!  It may be a very dangerous gamble when you decide to forgo expense of rental car liability insurance extensions and damage waivers.  Yes, a carjacking seems unlikely.  But what if a driver listed on the rental contract is sick or intoxicated and a friend or family member offers to drive instead? I got notice once that my car was involved in an accident. I knew it was never there. Someone copied a license plate wrong.  What if the car you rent is misidentified as party in an accident, or maybe a road-rage incident; and it costs the rental company time/money to defend? So the accident wasn’t your fault, and it may take some time to prove it.  Doesn’t matter to the rental company.  They want their car replaced now, lawyers retained now.  Maybe their car failed mechanically, and they truly believe you are to blame somehow.  

Solution? Buy their waiver, and the car gets towed back to their building.  No argument, no further expense, no unexpected billings later.

Again, it depends upon the actual rental agreement.  Drive smart. Rent smarter.