Rental Car Liability
06/04/07 21:55 Filed in: Insurance
When you are on vacation, the last thing you want to do is spend time reading the fine print of your rental car agreement. But making sure you have proper insurance coverage against unexpected occurrences such as vehicle and pedestrian accidents or theft could make the difference between peace of mind and a costly headache down the road...
What You Should Know About Rental Car Liability
By Todd A. Smith
When you are on vacation, the last thing you want to do is spend time reading the fine print of your rental car agreement. But making sure you have proper insurance coverage against unexpected occurrences such as vehicle and pedestrian accidents or theft could make the difference between peace of mind and a costly headache down the road.
Many consumers believe that car rental companies will assume full responsibility for the cars they rent. In most states, car rental companies are not obligated to take responsibility for the actions of their rental drivers. But in 16 states -- Arizona, California, Connecticut, Delaware, Florida, Idaho, Iowa, Maine, Michigan, Minnesota, Nevada, New York, Oklahoma, Pennsylvania, Rhode Island, and Wisconsin, plus the District of Columbia -- car rental companies can be held responsible for the negligent actions of rental car drivers.
What does this obligation of responsibility (in legal terms known as vicarious liability) mean to consumers? It means, if a rental car driver in one of the places mentioned above drives recklessly and injures another driver or pedestrian and does not have adequate insurance coverage, the injured person can hold the rental car company responsible. This ability to hold the company responsible is especially important given that uninsured and under-insured drivers rent cars every day.
The U.S. Congress is considering legislation, sought by the rental car industry, that would do away with the rental car company's liability. So, if you were involved in an accident with a car renter with no insurance, you might never be able to hold anyone accountable.
Since most states do not mandate the liability of car rental agencies or demand that they require renters to have insurance, it is important for drivers to know the limits of their own insurance policies before renting a car. The issue of whether to buy a collision damage waiver is especially confusing.
The collision damage waiver (CDW) offered by the rental car company covers the cost of damage to the rental car if you are in an accident. But, it is not liability insurance. Rather, it's a provision of the rental agreement that addresses your responsibility for damages to the car and the rental agency's responsibility. The CDW fee is an added cost to the car rental.
The insurance-rating agency A.M. Best offers the following tips regarding CDW:
Check Your Existing Auto Insurance Policy:
Review your policy or call your agent before you rent a car. You don't want to pay extra money for coverage you already have. Most auto policies provide liability insurance if you injure someone in an accident. However, damages to the rental car are only covered under your policy's comprehensive and collision coverage. Make sure your auto policy includes this type of coverage.
Check Your Credit Cards:
Sometimes, your credit card will pay for damages to a rental car in the event of an accident. To be eligible, you probably would have to decline the CDW as well as charge the full amount of the rental car on your card. Make sure your credit card offers these services. Also make sure you understand all limitations and exclusions your credit card may issue such as limited rental contracts and approved rental dealers.
You can decline the CDW if you're certain your auto insurance or credit card applies. But, according to the A.M. Best website, buying the CDW could be the best solution for travelers who want peace of mind. The CDW costs about $8 to $11 (sometimes more) a day rather than $15,000 to $20,000 to replace a damaged rental car. The CDW also pays for "loss of use," which is what the rental company charges you for the money and time it loses if you damage/total its car. Most states do not cover loss of use under a personal auto insurance policy.
Navigating the twists and turns of car rental agreements and insurance is not easy, but it can be easier to understand if you investigate your options and obligations before you stand in line at the rental car counter. Make sure you are covered for accidents and thefts, especially if you are renting a vehicle in a state that enables car rental agencies to shift responsibility for unforeseen events on to you, the driver.
By Todd A. Smith
When you are on vacation, the last thing you want to do is spend time reading the fine print of your rental car agreement. But making sure you have proper insurance coverage against unexpected occurrences such as vehicle and pedestrian accidents or theft could make the difference between peace of mind and a costly headache down the road.
Many consumers believe that car rental companies will assume full responsibility for the cars they rent. In most states, car rental companies are not obligated to take responsibility for the actions of their rental drivers. But in 16 states -- Arizona, California, Connecticut, Delaware, Florida, Idaho, Iowa, Maine, Michigan, Minnesota, Nevada, New York, Oklahoma, Pennsylvania, Rhode Island, and Wisconsin, plus the District of Columbia -- car rental companies can be held responsible for the negligent actions of rental car drivers.
What does this obligation of responsibility (in legal terms known as vicarious liability) mean to consumers? It means, if a rental car driver in one of the places mentioned above drives recklessly and injures another driver or pedestrian and does not have adequate insurance coverage, the injured person can hold the rental car company responsible. This ability to hold the company responsible is especially important given that uninsured and under-insured drivers rent cars every day.
The U.S. Congress is considering legislation, sought by the rental car industry, that would do away with the rental car company's liability. So, if you were involved in an accident with a car renter with no insurance, you might never be able to hold anyone accountable.
Since most states do not mandate the liability of car rental agencies or demand that they require renters to have insurance, it is important for drivers to know the limits of their own insurance policies before renting a car. The issue of whether to buy a collision damage waiver is especially confusing.
The collision damage waiver (CDW) offered by the rental car company covers the cost of damage to the rental car if you are in an accident. But, it is not liability insurance. Rather, it's a provision of the rental agreement that addresses your responsibility for damages to the car and the rental agency's responsibility. The CDW fee is an added cost to the car rental.
The insurance-rating agency A.M. Best offers the following tips regarding CDW:
Check Your Existing Auto Insurance Policy:
Review your policy or call your agent before you rent a car. You don't want to pay extra money for coverage you already have. Most auto policies provide liability insurance if you injure someone in an accident. However, damages to the rental car are only covered under your policy's comprehensive and collision coverage. Make sure your auto policy includes this type of coverage.
Check Your Credit Cards:
Sometimes, your credit card will pay for damages to a rental car in the event of an accident. To be eligible, you probably would have to decline the CDW as well as charge the full amount of the rental car on your card. Make sure your credit card offers these services. Also make sure you understand all limitations and exclusions your credit card may issue such as limited rental contracts and approved rental dealers.
You can decline the CDW if you're certain your auto insurance or credit card applies. But, according to the A.M. Best website, buying the CDW could be the best solution for travelers who want peace of mind. The CDW costs about $8 to $11 (sometimes more) a day rather than $15,000 to $20,000 to replace a damaged rental car. The CDW also pays for "loss of use," which is what the rental company charges you for the money and time it loses if you damage/total its car. Most states do not cover loss of use under a personal auto insurance policy.
Navigating the twists and turns of car rental agreements and insurance is not easy, but it can be easier to understand if you investigate your options and obligations before you stand in line at the rental car counter. Make sure you are covered for accidents and thefts, especially if you are renting a vehicle in a state that enables car rental agencies to shift responsibility for unforeseen events on to you, the driver.