Rental Cars
More Than Meets The Eye
Course # 71430
2 Hour Webcast
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FAIA Copyright 2011
“Rental Cars – More Than Meets The Eye”
This is me in
Death Valley
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Time to Get Rolling…
Bad
advice.
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Main Goals Today
 1. Show you what you agree to in a rental
car contract.
 2. Point out gaps in the PAP and BAP when
it comes to rental cars.
 3. Make the point that $25 a day for the
Loss Damage Waiver might not be a total
rip-off.
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A Few Questions First
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Our First Question
 In the past 12 months, have you rented a
vehicle for any reason?
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One of my Recent Rentals
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Car on dirt. We
will re-visit this
later!
Idiot about
to run. 124
degrees!
Idiot’s rental car.
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Our Next Question
 During your entire life, how many times do
you estimate you have rented a vehicle of
any type?
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Our Next Question
 Have you ever rented something big, like
what is shown here?
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Question
 Have you ever read the rental car contract
prior to renting?
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Our Next Poll
 When you rent a car, do you buy any of the
“insurance” offered?
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Question
 Have you ever rented a car, only to have it
damaged in some way?
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Class Content
 Rental car contracts
– What they say. What you can and can’t
do with that vehicle.
 “Protection” offered by rental car firms
– Why it may be a good deal
 PAP coverage analysis
 BAP coverage analysis
 Credit card coverage
 Horror stories
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Rental Car Contracts
WARNING: Every contract is different. Read YOUR contract!
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Who May Drive The Vehicle
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Company H
Who May Drive
 You
 Anyone else on the contract
 Anyone authorized under your CDP#
– Typically fellow employee, perhaps
spouse
 Valet parking attendant
 Anyone else in an emergency (defined)
 All operators must be at least age 25
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Company A
Who May Drive
 You
 Spouse/domestic partner
 If rented under corporate account, fellow
employee
 All drivers must be at least age 25 and
possess a valid license
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Company A
Who May Drive
 Who is missing from Company A?
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Company A
Who May Drive
 Who is missing from Company A?
ANSWER
Valet
Emergency
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Company D $
Who May Drive
 You
 Anyone on the contract
 If rented under your corporate account,
fellow employees
 Missing…
– Spouse, family members
– Emergency
– Valet parking attendant
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Company E




Who May Drive
You
Spouse
Anyone on the contract
Missing…
– Valet
– Emergency
– Fellow employee
– Kids/family members
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Prohibited Uses
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Company H
Prohibited Uses
 Operation by non-authorized driver
 Use outside the U.S.
 Failure to use seat belts, child seats
 Use off paved roads
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Sweatman’s BBQ
Dirt.
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Confession Time For Me!
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This is not Mars!
It’s Death Valley.
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Company H







Prohibited Uses
Leaving the keys in the car
Failing to close and lock all doors
Use while intoxicated or on drugs
Use in any type crime (drugs in car)
To tow or push anything
Speed contest
In driver training
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Company A







Prohibited Uses
Use by non-authorized driver
Tow/push anything
Speed contest
Use on unpaved roads
Drunk/high
While overloaded
Outside the U.S.
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Company D $
Prohibited Uses
 Similar to others, but…
 Carrying or loading anything on the vehicle.
“You might be a
redneck if…”
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Company E
Prohibited Uses
 Similar to others, but…
 Renter shall not remove seats from auto
 Vehicle shall not be used to store or
transport explosives or corrosives
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Damage to the Vehicle
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Company H
Damage to the Vehicle
 You are responsible for any and all damage
from any cause.
 Responsibility limited to “retail fair market
value,” less salvage, plus towing & storage,
plus an administrative fee, plus “reasonable
charges for loss of use.”
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Company A
Damage to the Vehicle
 You will pay us for all loss or damage to the
car, regardless of cause
 You will pay our estimated costs
 You will pay for loss of use of the car,
without regard to our fleet utilization, plus
an admin fee, plus towing & storage charges
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Company D $
Damage to the Vehicle
 You are absolutely liable and agree to pay us for
any loss or damage to the vehicle
 You are liable for:
– The full value of the vehicle
– Towing & storage
– Loss of use
Who defines what
full value is?
– Admin fee
– Pro-rata license plate fee
– Diminished value
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Company E




Damage to the Vehicle
“Fair Market Value”
Towing, storage, admin fees
Loss of use
Diminished value
Does the PAP
cover diminished
value?
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Company H
“Insurance” Offered
 Loss Damage Waiver
– $26.99/day
 Liability/UM Insurance Supplement
– $1 million -- $12.44/day
 Personal Effects Coverage
– $1,800 – Personal Property
– $2,500 Medical (per person)
– $175,000 ADD
 $5.50/day
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Company A
“Insurance” Offered
 Loss Damage Waiver. $27.99
 Personal Accident Insurance. $4.00
– AD&D $175K, medical $2,500
 Personal Effects Protection. $2.95
– $600 per person, $1,800 max
 Additional Liability. $14.43
– $1M, but no UM.
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If You DO Buy the “Insurance”..
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Company H
If You Do Buy…
 Use of the car in any prohibited manner will
void Loss Damage Waiver and cause you to
be responsible for loss or damage to the
car.
 Remember, prohibited uses…
– Non-authorized driver
– Off paved roads
– DUI
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Company D $
If You Do Buy…
 LDW does not apply if:
– You use the vehicle in violation of the
prohibited use section
– “You fail to remove & secure the keys, or
close & lock all doors & windows, and
the vehicle is vandalized
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PAP Coverages
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PAP Coverages
 Five coverages:
– Liability
– PIP
– Med-Pay
– UM
– Part D – Damage to Your Auto
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PAP Liability
 1. You or any "family member" for the
ownership, maintenance or use of any auto
or "trailer".
 “Take aways” later on…
 Any auto or “trailer”
– What is an auto?????
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“What Is An Auto”
 Webster’s…
– “A road vehicle driven by mechanical
power.”
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Is It An Auto - Test
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“Road vehicle driven by mechanical power?”
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“Road vehicle driven by mechanical power?”
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“Road vehicle driven by mechanical power?”
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Is This An Auto?
“Road vehicle driven by mechanical power?”
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“Road vehicle driven by mechanical power?”
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PAP Liability Exclusions
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“Car Business”
 6. While employed or
otherwise engaged in the
"business" of:

a.
Selling;

b.
Repairing;

c.
Servicing;

d.
Storing; or

e.
Parking;
 vehicles designed for use
mainly on public highways.
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“Business Use of Big Stuff”
 7. Maintaining or using any
vehicle while that "insured" is
employed or otherwise engaged
in any "business" (other than
farming or ranching) not
described in Exclusion A.6.
 This Exclusion (A.7.) does not
apply to the maintenance or use
of a:

a.
Private passenger
auto;

b.
Pickup or van; or

c.
"Trailer" used with
a vehicle described in a. or b.
above.
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Less Than Four Wheels
 We do not provide
Liability Coverage for
the ownership,
maintenance or use of:

1.
Any vehicle
which:

a.
Has fewer
than four
wheels;
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Non-ISO Cautions
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What is an Auto?
 Non-ISO cautions. Company A…
– “Auto” means a land motor vehicle:
– a. of the private passenger, pickup
body, or cargo van type;
– b. designed for operation principally
upon public roads;
– c. with at least four wheels; and
– d. with a gross vehicle weight rating of
12,000 pounds or less, according to
the manufacturer’s specifications.
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What is an Auto?
 Non-ISO cautions. Company B…
 “Non-owned auto means a private
passenger auto or utility auto….”
 “Utility auto” means a vehicle with a load
capacity of 2,000 pounds or less of the
pickup body, van, or panel truck type which
is not used for business purposes.”
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What is an Auto?
 Non-ISO cautions. Company C...
 “Car” means a self-propelled land vehicle
with four or more wheels, with a GVW of
10,000 pounds or less…and a motorhome if
such motorhome is listed on our
declarations page….
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PAP Liability - Primary/Excess
 From the PAP:
– OTHER INSURANCE
 ……However, any insurance we
provide for a vehicle you do not own,
including any vehicle while used as a
temporary substitute for "your covered
auto", shall be excess over any other
collectible insurance.
Some state statutes may change this.
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PAP Medical Payments
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Med Pay – Who Is An Insured
 B. "Insured" as used in this Part means:

1. You or any "family member":

a. While "occupying"; or

b. As a pedestrian when struck
by; a motor vehicle designed
for use mainly on public roads
or a trailer of any type.

2. Any other person while "occupying"
"your covered auto".
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Med Pay - Exclusions
 “Car business”
 “Business Use of Big Stuff”
 Less than four wheels
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Uninsured Motorists Coverage
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UM – Who Is An Insured
 B. "Insured" as used in this Part means:

1. You or any "family member".

2. Any other person "occupying" "your
covered auto".
Family Members
Mom, Dad,
and the kids
get UM in a
rental car.
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UM - Exclusions
 Not many out there
 These exclusions do NOT apply:
– “Car business”
– “Business use of big stuff”
– Less than four wheels
Remember: UM is state specific.
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UM – Stacking vs. Non-Stacking
 No unique differences for UM relating to a
rental vehicle
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Physical Damage
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The Grant of Coverage
 We will pay for direct and accidental loss to
"your covered auto" or any "non-owned
auto", including their equipment, minus any
applicable deductible shown in the
Declarations.
 If there is a loss to a "non-owned auto", we
will provide the broadest coverage
applicable to any "your covered auto" shown
in the Declarations.
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“Non-Owned Auto”
 Any private passenger auto, pickup, van
or "trailer" not owned by or furnished or
available for the regular use of you or any
"family member" while in the custody of or
being operated by you or any "family
member"; or…
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For physical damage…..Any private passenger auto, pickup, van or "trailer…”
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For physical damage…..Any private passenger auto, pickup, van or "trailer…”
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Question?
 Does the standard ISO PAP cover loss of
use charges… “down time?”
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Loss of Use Charges
 Expenses for which you become legally
responsible in the event of loss to a "nonowned auto". We will pay for such expenses
if the loss is caused by:

a. Other than "collision" ….

b. "Collision“…
 However, the most we will pay for any
expenses for loss of use is $20 per day.
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Why pay $25+ for Damage Waiver?
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#11 Deductible
 PAP deductible applies
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#10 Loss Valuation
 PAP pays ACV
– Rental car contract may say “full value”
– Diminished value
 $15,000 on an SUV !
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#9 Loss Settlement
 PAP carrier has “right to inspect” vehicle
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#8 Loss Payment
 Rental car firm may require immediate
payment
 Credit card may be charged
 Delay in payment by PAP carrier
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#7 Indirect Losses
 “Down Time”
– PAP covers $20/day
– One renter was hit with $2,000 in charges
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#6 Administrative Expenses
 Towing, storage, and appraisal fees
imposed by rental car firm
 PAP covers these, up to $600 maximum;
loss of use + admin fees = $600 max
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#5 Other Insurance
 PAP is excess in non-owned autos
 Credit cards are typically excess
– Excess vs. excess – how does it work?
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#4 Excluded Vehicles & Territories
 PAP covers private passenger auto, pickup,
van trailer
– No cycles, box trucks, motor homes
 $1,500 limit on non-owned trailers
 Territory is U.S., Canada, Puerto Rico,
territories & possessions
Not Covered by the PAP! Possible limited BAP coverage
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#3 Excluded Uses & Drivers
 Older PAPs exclude business use of nonowned pickup or van
 PAP may have driver exclusion
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#2 Additional/Future Costs
 Increased cost of PAP
– “Re-pricing” from preferred to standard
– CLUE hit
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#1 The Hassle Factor
 Life simplification!
– “Hello insurance agent…I’m calling you
from Alaska…and it’s not good news!”
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Bottom Line
 Loss damage waiver is expensive…
 …but it may be worth the price!
“I always buy
the LDW.”
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Question
 Are you any more likely to buy any of the
“insurance” from the rental car firm the next
time you rent?
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Time to Change Hats
 Take off the PAP hat
 Put on the BAP hat
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BAP Symbols





1. Any auto (Liability only)
2. Owned autos
7. Specifically described autos
8. Hired autos (Liability/Physical damage)
9. Non-owned autos (Liability only)
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Important Question
 When David rents a car for FAIA business,
who is renting…David or FAIA?
 Why is this important?
– “Who is an insured”
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“You” is the BAP named insured,
typically a corporation. If David
rents the car, did “you” hire
the car?
Very controversial.
Easy solution though…CA 20 54
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Performing duties
related to YOUR
business.
Makes an employee an
insured for liability, even if
auto rented in his/her name.
Still need Symbol 1 or 8.
Provides physical damage
coverage when employee
rents in own name
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Recommendation
Just do it!
 Always add the CA 20 54 to all BAPs
 Also, every BAP should include Symbol 8
for physical damage coverage.
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BAP Liability Coverage
Temporary Substitutes
 Symbol 7 for all coverages
 Company car in shop for repairs
 Insured rents a car as a “temporary substitute”
vehicle
 What is covered?
– Liability only
– Physical damage only
– Both
– Nothing
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BAP Liability Coverage
Temporary Substitutes
 The answer is:
 Only liability
– No physical damage coverage without
Symbol 8
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BAP Liability Coverage

Key point…
 Every BAP needs to have either Symbol 1
or Symbol 8 for liability
 And (at a minimum) Symbol 8 for physical
damage

….ALL THE TIME!
 I know…I have said this twice.
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BAP Liability Coverage
Primary/Excess
BAP Liability is primary.
Contractually assumed.
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Med Pay & UM
 Symbols available for use:
– Symbols 2, 3, 4, 7
 Therefore, no BAP med-pay or UM for a
rental car
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Physical Damage
 Symbol 8 required
 Does the carrier have a limit per vehicle?
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Physical Damage
Primary/Excess
 From the policy…
– For Hired Auto Physical Damage
Coverage, any covered "auto" you lease,
hire, rent or borrow is deemed to be a
covered "auto" you own. However, any
"auto" that is leased, hired, rented or
borrowed with a driver is not a covered
"auto".
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Physical Damage
Loss of Use
 Loss Of Use Expenses
 For Hired Auto Physical Damage, we will
pay expenses for which an "insured"
becomes legally responsible to pay for loss
of use of a vehicle rented or hired without a
driver, under a written rental contract or
agreement. However, the most we will pay
for any expenses for loss of use is $20 per
day, to a maximum of $600.
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BAP Policy Territory








7. Policy Period, Coverage Territory
The coverage territory is:
a. The United States of America;
b. The territories and possessions of the United States of America;
c. Puerto Rico;
d. Canada; and
e. Anywhere in the world if:
(1) A covered "auto" of the private passenger type is leased, hired,
rented or borrowed without a driver for a period of 30 days or less; and
 (2) The "insured's" responsibility to pay damages is determined in a
"suit" on the merits, in the United States of America, the territories and
possessions of the United States of America, Puerto Rico, or Canada
or in a settlement we agree to.
CA 20 54
Still need these!
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Credit Card Coverage
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Question
 Have you ever read your credit card
agreement as it relates to rental cars?
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Credit Card Coverage
 Warning!
 Each card is different
 Read the fine print!
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 Each one is different…
108
MasterCard







31 days or less
Physical damage coverage only
Excess coverage
You must decline LDW
Must pay for entire rental with the card
MSRP of $50,000 or less
Loss of use covered, as supported by fleet
utilization logs…
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MasterCard
 No pickups, full size vans, off road vehicles,
trailers, motorcycles
 Various excluded countries
 No coverage if rental agreement violated
 Void if DUI
 Rentals where LDW was purchased not
covered
 Admin fees, diminished value not covered
110
American Express
 Remember…..
 …each AMEX is different
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American Express






Optional service….Must sign up
$24.95 per rental
$100,000 for damage to car (Primary!)
$100,000 AD&D
$15,000 per person med-pay
$15,000 per person “contents”
112
American Express
 Covers rentals for up to 42 days
 Exclusions:
– Customized autos
– Antique autos
– Off road & cycles
– Campers/moving vans & trucks
– Trailers
– Certain countries (Aust. NZ, Jamaica…)
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Horror stories – claims
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Horror stories – claims
 Traveling doctor
$13,000 in damage.
90 days to resolve.
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Horror stories – claims
 Using “points” to rent/Amex card
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Horror stories – claims
 Using “points” to rent/Amex card
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Horror stories – Claims






The rolling tire…
Damage: $1,080
Loss of use $111(Denied)
Admin fee $101 (Denied)
Diminished value $120 (Denied)
Deductible: $500
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Horror stories – Claims
 Rock Climbing
– Hit & Run
– “Company H:” We will
be in touch!
– $4,400 damage
– $370 admin fee
– $620 loss of use
– $3,100 diminished value
 Customer refused to pay “Company H”
 Company H filed suit. Lawyers involved
 Four-day rental.
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Question
 When your customer calls next time about a
rental car, has this material helped you?
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Unauthorized Entity Issues
 Verify with the DFS:
– www.fldfs.com / www.myfloridacfo.com
– 1-800-342-2762 / 1-877-MY-FL-CFO
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Listen
up….
REAL
important!
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Electronic Option
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Rental Cars
71430
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Rental Cars
More Than Meets The Eye
Course # 71430
FAIA Copyright 2011
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