What You Need To Know About Claims

It’s a fact of life that claims happen.  As the rental operator, what do you need to know and what do you need to do?

First let’s start with what you, the rental operator, should do prior to a claim.

  1. At the beginning of each and every rental, you should collect the information for all drivers and their insurance.  If you don’t list a driver, they could be considered an “Unauthorized” driver and the claim could be denied.
  2. Have separate, detailed Check In/Out forms documenting any existing damage on the unit. Both you and the renter should sign off on these forms.  Many operators have gone digital, taking pictures of the unit with the renter in the photo.
  3. Have a detailed Walk Through form as a training check list. This will ensure that you didn’t miss anything and helps familiarize the renter with this particular vehicle’s features.  This form should also have you and the renter’s signature.
  4. Get signatures on the rental agreement and have the insured initial any pertinent sections.
  5. Make sure your renter knows what to do in the event of any accident.
  6. Do not send your vehicle out with potential safety issues or outstanding recalls. Sending a vehicle out on the road with a known, unfixed recall is illegal in many states.
  7. Do not allow the rental vehicle to tow anything. Your insurance covers your vehicle, not additionally towed objects.
  8. Make sure you have a current Auto ID Card in each vehicle you send out.

When an accident occurs, you should have procedures in place for your renters and staff to follow.

  1. Have the renter collect detailed information on any other vehicles involved, police information (what police department responded), exact location of the incident, the exact date of the incident, driver and insurance information.
  2. You should have procedures in place for local vs. long distance issues.
  3. Get photos of any damage as quickly as possible.
  4. You should make sure that if the damage is substantial or the integrity of the unit is compromised, that the unit can be secured in a way to prevent additional damage from occurring. DO NOT let your renter drive an unsafe vehicle.
  5. File the claim as soon as possible. Send the claims department as much information as possible.  Even though rental insurance is secondary, your insurance carrier must have the ability to assess the damage prior to any work being done.
  6. If your rental was obtained through a third-party reservation platform where your renter purchased additional insurance products or you sold a formal SLI product at the time of rental, include that information in the claim report.

Things to keep in mind when your vehicle comes back from a rental with damage:

  1. Normal wear and tear are NOT covered.
  2. Claims are defined by the specific incident that causes the damage. They are NOT defined by the rental period.  Therefore, if a rock breaks the windshield on your rental and the vehicle is returned with rear bumper damage too, the damage would be considered unrelated to each other and counted as two separate claims.  This means that your deductible would apply for each separate claim.
  3. Claims involving damage to your vehicle will be assessed minus your deductible amount. If the damage is under the deductible amount, no monies will be paid.
  4. Claims are appraised at ACV (Actual Cash Value).This means regardless that your 10-year-old vehicle is like brand new, it will still be appraised as a 10-year-old vehicle.
  5. If you’ve installed special equipment, keep your receipts, but keep in mind that these items will also be depreciated.
  6. Keep ALL maintenance records, especially when mechanical or safety parts are replaced. If a renter claims that the brakes were bad and caused the accident, but you had them replaced within the year, you need to be able to prove that you properly maintained the vehicle.

Nobody wants to have a claim.  Knowing how to handle them will ease the stress on your customers, staff and yourself.

Who Can Drive My Rental Vehicle?

Many renters believe that when you get a rental vehicle, their spouse/17 year old/next door neighbor/cousin can drive it too.  Most people don’t think twice about tossing them the keys.  But what happens if they are in an accident?  Are they covered?

The fast answer is “not always”.

Your state may have laws that permit a spouse to be an authorized driver regardless of whether or not they are present at the time of the rental.  Others believe it is defined by the wording in the rental agreement. Your rental contract should have clear definitions about who is considered an authorized driver, regardless of state regulations.  Your rental operation should not allow drivers under a certain age to use the vehicles (as permitted by law).  Rental agreements should state that all “authorized drivers” must be present at the time of the rental for them to be covered.  There can also be provisions for an “emergency driver”.  An emergency driver is someone not on the rental agreement who steps in and drives the vehicle in a true emergency situation, such as the renter becoming medically incapable.

What happens if someone in your renter’s family, not listed on the rental agreement, takes the keys without permission and gets into an accident or worse, steals the car?  Who is responsible for injury or damage to others?  It is important for your renter to read and understand the rental agreement.   Perhaps explain this at the time of the rental.  The renter may end up being fully responsible for damages to others and even damages to the rental vehicle outside of their personal insurance or your rental insurance. Sometimes their personal insurance will cover these expenses, but depending on the circumstances, they may not. Your insurance as the rental dealer works differently than personal insurance does and may exclude these types of coverage claims.

What if the renter purchases any additional insurance offered by your rental agency?  Most of these contracts also exclude coverage when an unauthorized driver causes the claim.

Another aspect of this issue is when an authorized driver participates in an activity that is either illegal or against any prohibited activity defined in your rental contract. Common prohibited activities can include racing, driving under the influence, off roading, etc.  These activities could, in essence, exclude them from any coverage under your rental policy, any additionally purchased insurance or their own personal insurance.

The bottom line is to make sure you and your renter understand these issues so you can have a successful operation.

Electronic Insurance ID Cards & Verification

With the electronic age in full swing, the era of having paper Auto ID cards is becoming extinct.  While not all states or insurance carriers have adopted the electronic ID card, many are moving towards it.  Additionally, many state DMVs are welcoming technology that allows law enforcement direct access to a system that will instantly verify insurance on a vehicle through its registration.

“According to the folks at Property Casualty Insurers Association of America, 11 states now have laws or regulations on the books that allow for electronic insurance cards to be used for both vehicle registration and when being pulled over by the police – Alabama, Arizona, Arkansas, California, Idaho, Kentucky, Louisiana, Minnesota, Mississippi, Virginia, and Wyoming.

In Colorado, drivers can use the e-cards for registration, but not for police pull-overs.

PCIAA says that the governors of Kansas and Indiana are expected to sign legislation in their states, while several other states – Florida, Georgia, Hawaii, Indiana, Iowa, Maine, Michigan, Missouri, Ohio, Oregon, Rhode Island, South Carolina, Texas, Utah, Washington, and Wisconsin – have pending legislation on the matter.”[1]

What does this mean when you rent a vehicle?  It means that the rental agency is still going to request your insurance information and you may still need a valid ID card as proof of insurance.

Some states require insurance carriers to “report” policy activity directly to the DMV or other state sponsored agency.  This reporting may be tied to the registration of the vehicle. Additionally, some states only require this reporting for personal insurance, but not for commercial policies.

How Does This Impact The Rental Community?

First of all, your renter may not have the traditional “Proof of Insurance” that you’re accustomed to. When you are gathering information from a renter with an electronic copy of their ID card, it may be beneficial to have them electronically forward a copy of that ID card to you for your files. In the event of an accident, you would still file a claim with your rental insurance policy, but still need to provide the renter’s insurance information so that the claims department can reach out to that carrier for any responsibility that they may have in the claim. In a towable RV situation, the liability follows the tow vehicle and as a rental operator, you absolutely need to have this information prior to releasing your travel trailer to the renter.

Secondly, it is important that you maintain ID cards in your vehicles to avoid your rental vehicle from getting impounded upon a traffic stop or accident.  Even though your rental policy is secondary to your renter’s personal insurance, the vehicle is registered in your business name and will require YOUR proof of insurance in the event of a traffic stop or accident. Just because your state does not require a paper ID does not mean that another will find an electronic copy acceptable and in a rental situation, how would you, the rental operator, continuously provide this information without a paper copy of your ID card? Additionally, in the states where law enforcement can verify insurance, many can only access personal insurance information, not commercial policy information.

All insurance carriers have the ability to produce a paper ID card, but the rental community also needs to adapt to changing environments.  Protect your rental operation by having proper proof of insurance from your renter and for your renter.  Nobody wants a negative review because a vehicle was impounded for lack of insurance proof, which could be costly.

CASE STUDY

A Massachusetts insurance website had this to say:  “Many other states require that drivers carry proof of insurance and require that insurance companies issue Auto Insurance ID Cards with policies.  However, most drivers in Massachusetts have not heard of such laws because they don’t exist in our state.  This can create stressful situations, which everyone would rather avoid, and it points out the challenges that inconsistencies between state laws can cause.

Recently, one of our customers had an accident while driving out of state, and the police officer asked for a proof of insurance card.  In Massachusetts, however, proof of insurance cards are not issued and vehicles aren’t required to carry them because this information is electronically available to law enforcement via the RMV.  Gladly, after some back and forth with the officer and providing other information, the person was allowed to leave the scene.  Unfortunately, some police officers may not be informed about our laws or be easily flexible about these differences between state insurance requirements.

When you think about it, the Massachusetts method is actually more accurate because police can verify updated RMV information rather than rely on paper documentation that may be out of date if a policy is cancelled. However, since laws vary among states, you as a driver need to be aware of the possible differences and be prepared in case you have a traffic violation or accident when driving your vehicle in another state.”

A renter can use a copy of their insurance policy with their registration, which lists the insurance company and notates that “No Insurance Card Required: Massachusetts’ law does not require an insurance card.” as proof of insurance.

 

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