When a negligent party damages your rental vehicle, in most states there’s no question of your legal entitlement to loss-of-use. It’s a forgone conclusion that the party owes for compensatory damages. Unfortunately, when the renter is at fault, the issue is complicated by your desire to keep your customers happy.
In this article, we’ll identify some of the problems commonly experienced with recovery of loss-of-use. We’ll also show you how to integrate the solutions with your overall customer service-oriented approach to business. Accordingly, this article will be geared toward the renter’s (first party) contractual responsibility.
What is loss-of-use? According to the American Law Institute, ownership of personal property, such as an automobile, entitles the owner to compensation when that property is detained because of the negligence of another. Most rental contracts go a step further, making the renter of the vehicle contractually responsible for both physical damages and loss-of-use, regardless of fault. The value of this use is generally measured as what it would cost to procure a substitute — in other words, the property’s reasonable rental value for the period of the deprivation.
When someone damages a rental vehicle, the rental operator is deprived of the ability to use that vehicle. The lease payments continue while the repair shop controls its use. During the repair process, the vehicle is still depreciating. This economic shortfall is a real expense that’s suffered.
Regardless of the intended use of the vehicle — whether you intended to rent the vehicle, use it as a demo or display it on your lot — you are unable to do so while the vehicle sits at the repair facility. The rental operator is entitled to compensation for this form of loss. To that end, in addition to physical damages, loss-of-use is assessed and included in the damage claim.
Unfortunately, when trying to recover loss-of-use from the insurance industry, the rental operator frequently runs into a brick wall. It seems various members of the insurance industry view loss-of-use as though it’s not a real loss. If they don’t get an invoice for it, it doesn’t exist. As a result, some insurance companies have a difficult time justifying payment for loss-of-use.