Restrictions on Collision Damage Recovery

Can a state limit the amount a rental company can collect for damage to its rented vehicle? If the debtor is the renter or other authorized driver, the answer is yes. At least nine states have enacted laws that limit your ability to collect from the renter or his insurance company.

This article examines the laws of those nine states, and the common law of the unregulated states, that affect collision damages, loss of use, administrative fees, theft, vandalism and other loss items. If your state does not regulate any of these areas, the common law presumably applies. The regulated states are California, Illinois, Indiana, Iowa, Missouri, New York, Nevada, Utah and Wisconsin.

Statutory limits on recovery, set out in the state statutes cited here, apply only to recoveries from renters and other authorized drivers. If a third party is responsible for damage, theft, vandalism, loss of use, towing and storage, or administrative fees involving a rental vehicle, the amount you may recover is governed by the general laws of the state in which the loss occurred.

If you are interested in this topic, read the Unregulated States section and the section for the states in which you operate. The article presumes that the renter did not purchase a damage waiver, and that a third party is not responsible for the damage to your vehicle.

Unregulated States
The promise that the renter must return the vehicle in the same condition as when rented is eminently enforceable. The cost of repairs, loss of use, administrative fees to cover claims processing, damages for theft and vandalism and items like towing and storage are all recoverable. Nonetheless, these responsibilities of the renter should be stated clearly in the rental agreement.

The common-law limit on collision damages for repaired vehicles is the actual cost of repairs, passing along to the customer all discounts received from the repair shop. It is a fraudulent act to charge the customer the estimated value of repairs, if the actual cost (after discounts) is lower.

The limit on recoveries for totaled vehicles is the actual cash value (ACV) of the vehicle on the date of repair. This amount is usually easily provable. Companies that rent older vehicles whose cost of repair exceeds ACV will be disappointed to discover that the renter’s insurance company will only pay ACV, not the full cost of repair.

CONTINUED:  Restrictions on Collision Damage Recovery
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