Rental Car Damage Waivers Revisited

Rental Car Damage Waivers Revisited

In 1998, the Tennessee state association published an article entitled the “Top 10 Reasons to Purchase the Rental Car CDW/LDW.” That article was reprinted in the Big “I” Virtual University in 1999, along with a consumer-friendly version that Big “I” member agencies could distribute to their customers. In the past 10 years, this article was reproduced probably thousands of times. Because of emerging issues with rental cars, this article has been revised (including the consumer version) and agents should replace their past editions with the updated one.

Specifically, three issues are addressed in more depth. First, loss of use charges appear to be substantially higher than in the past, sometimes reaching $2,000 or more—even when unused rental cars are sitting on the lot. Auto policies are usually limited in the amount of coverage included in the policy.

Second, diminished value charges are on the risk and included in almost every rental agreement in the marketplace. There have been documented cases of such charges in the range of $5,000 to $8,000. These diminution assessments are almost never covered by auto policies.

Third, there has been at least one case involving an on owned auto that was damaged by the driver to the tune of $37,000 where the carrier used the other insurance provision of the driver’s policy to deny the claim on the basis that his policy was excess over the primary coverage under the garage form. The garage insurer’s subrogation suit was denied under the driver’s liability coverage due to the care, custody or control exclusion.

For these and other reasons, insureds should be advised to purchase the damage waiver offered by the rental company. For a complete analysis, click here.

The BAP “Work You Performed” Exclusion

When a garage does repair work on an auto, it’s possible that negligent or defective work could result in subsequent damage. For example, a leaky oil change could result in the engine seizing, a slipping fan belt could cause overheating or an improperly repaired tire could cause an accident.

At issue is what part of that resulting damage is covered or excluded by the garage policy? The answer may depend on a lot of variables…and on the varying opinions of adjusters.

The first thing to keep in mind is that this is not the only exclusion that might apply to damage to the auto. For example, if the damage occurs while the insured has possession of the auto or is otherwise still working on it, the care, custody or control exclusion will probably apply and, at best, the insured would have to look to garage keepers for coverage.

Assuming, though, that the customer has taken possession of the vehicle, the “work you performed” exclusion only applies to the actual work performed by the insured. The exclusion says (with emphasis added): “’Property damage’ to ‘work you performed’ if the ‘property damage’ results from any part of the work itself or from the parts, materials or equipment used in connection with the work.”

Note the exclusion only applies to the work performed. If a faulty oil change results in valve damage when the engine overheats and seizes, the exclusion does not apply to the resulting damage because it was not part of the insured’s work.

To read the full article, including court case citations, click here.


Covering Loss of Income Due to Golf Course Weather Damage

High temperatures and drought conditions caused a golf course, despite mitigation efforts, to lose most of its greens. A severe storm downed dozens and dozens of trees on a golf course. In both situations, business income was reduced or suspended for several months. Is this covered under standard ISO forms?

ISO direct property forms cover trees, shrubs and plants for only minimal limits and perils with drought and windstorm not being covered perils for such damage to trees and greens, but what about business income coverage? Has there been damage to property on the premises? Do the special causes of loss form exclude these perils?

To learn the answers to these questions and more, click here.


Bill Wilson (bill.wilson@iiaba.net) is Big “I” director of the Virtual University, an online learning center for agents and brokers.