This week I’ve published three blog posts. Two of them are about rental cars, this being one of them. For anyone who has read the many rental car insurance articles I’ve written over the years, you know that I am a strong advocate for buying the rental car agency’s loss damage waiver (LDW). There are things covered by the LDW that are not covered by an auto policy (e.g., diminished value) and things usually covered by an auto policy that are not covered by an LDW (e.g., impaired driving). BUT, are there things that aren’t covered by either the LDW or an auto policy?
If you buy the LDW (and you should), you must make sure you do not violate the rental agreement. All rental car agreements have prohibited uses of the vehicle, one of which is allowing an unauthorized driver to operate the vehicle. I’ve been told that some rental car companies make an exception for parking valets, though I’ve apparently never used one of those companies. Some companies only cover the named individual(s) on the rental agreement while some may also include automatic coverage for a spouse or coworker. I’ve never rented a car where the rental agreement included coverage for valet parking.
So, if you rent from a company that considers a valet to be an unauthorized driver, you have likely violated the rental agreement and voided your LDW. But, of course, if you have an auto policy with physical damage coverage, that coverage extends to a rental (or any nonnowned) auto. Probably. Or maybe. If It’s not an ISO personal auto policy, it might not, depending on the type of vehicle you’re renting or the use. Auto insurance is NOT a commodity and there are policies in the marketplace with limited coverage for nonowned autos.
But even if you have an ISO policy, is there coverage?
When I do seminars or webinars about rental car issues, I give an example of how valet parking of a rental might not be covered by EITHER the LDW or a personal auto policy. This is what the current ISO PAP says with regard to physical damage coverage on a nonowned auto [emphasis added]:
“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’;”
Since neither you nor family members are operating a nonowned auto while it is being valet parked, the question is whether the auto is still in the “custody” of you or a family member. Does custody exist from the time you take possession of the vehicle at the rental car company until you return it or does custody only exist while the vehicle is in your direct and immediate care, custody or control?
Two risk management options: Avoidance or the ‘IMAHANH’ Doctrine
The late, great Don Malecki never could get a straight answer from insurers on this, so he never valet parked a rental car. When I talk about this, I use the example of Mama’s Fish House, an exclusive restaurant on the beach in Maui that only has valet parking…and where two salads and ice teas cost me $70. When my wife insisted that I take her there, I explained the LDW/insurance issues. So, of course, as a result of my brilliant and compelling case for not valet parking the rental car, I valet parked the rental car and took my chances. I didn’t want THAT mama to be unhappy with me.
So, does the rental car LDW and/or your personal auto insurance cover damage to a rental car while being valet parked? Respectively, probably not and maybe not. Perhaps the prudent risk management technique here is Avoidance…don’t valet park a rental car. But, if the ‘IMAHANH’ Doctrine (“If Mama Ain’t Happy, Ain’t Nobody Happy”) prevails, hopefully the valet parking service has garagekeepers or equivalent coverage.
Bill Wilson
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How is the you defined in an ISO PAP?
Named insured and resident spouse
Bill,
There is another funding source for rental car damage. Chase credit cards offer physical damage coverage for rental cars. I assume they do this because many rental car companies charge the card when there is a wreck, and they figured out it was cheaper to just offer this coverage.
I’d love to hear your thoughts on the quality of this coverage.
Jared, comments based on their web site:
https://www.chase.com/content/chasecom/en/card-benefits/benefit-details/freedom_vp/arcdw_secondary_v1.html
Excess coverage over your auto insurance (which probably says it’s excess coverage over any other source of recovery). Specifically excludes expenses covered by your or your employer’s auto policies.
Says it covers “collision or theft” (though later it says “physical damage”…the rental agreement will usually make you liable for ANY damage beyond normal wear and tear.
Covers the “ACV” of the car but that term is not defined and Chase’s opinion of what constitutes ACV may differ from the rental company.
Covers “valid” loss of use charges…this is often a point of contention and may hinge on records the rental company does not want to share.
There is no mention of coverage for diminished value, one of the main reasons I buy the LDW because this charge is frequently in the hundreds of dollars and sometimes thousands.
The only way to know what is and isn’t covered is to carefully review the actual Chase coverage, not a web site summary. It’s been a while since I’ve done this but I’ve never seen a credit card that covers what the LDW does.
Bill,
Here are the details for the coverage.
https://cdn.f9client.com/api3/file/1130010/inline/BGC10726Freedom_FreedomUnlimitedVP_INTERIM.pdf?__gda__=exp=1533609571~acl=/api3/file/1130010/inline/BGC10726Freedom_FreedomUnlimitedVP_INTERIM.pdf*~hmac=aa233ec5ce1f155ecb235281628e3a463fbddfe2f62ae3192b9595174f3c55f6
This specifically mentions that it’s secondary coverage and that it picks up the loss of use. No mention of diminished value. Do you know if all the rental car companies charge diminished value, or just certain ones?
Thanks for your responses!
Jared, I get an error message when i click that link. Every rental agreement I’ve read in recent years makes the renter responsible for diminished value.