How to Explain Loss of Use to an Insurance Company

Jury duty, root canal, a visit from the in-laws — for car rental operators, any of these might be more palatable than trying to recover loss-of-use damages and resulting administrative fees from an insurance company.

And yet, many car rental companies consistently recover loss of use by understanding the right way to approach the conversation with the insurance company. And, as of 2012, car rental companies have the backing of the ruling in PurCo v. Koenig, a historic loss-of-use case in Colorado.

“There were lessons learned from the Koenig case that can help every car rental company recover damages they are owed,” says David Purinton, president of PurCo Fleet Services, a risk management company specializing in car rental loss prevention. Purinton championed the cause in PurCo v. Koenig. “There is no reason to walk away from those damages when they are real and recoverable.”

This article is designed to arm you with the tools needed to recover for the lost use of your rental vehicles.

Know Who You’re Dealing With

First, it’s important to understand how an insurance adjuster works. In addition to making an accurate assessment of damage to a car, part of an adjuster’s job entails asking the rental company to prove its losses.

“Understand that asking about loss of use is a reasonable, rational and expected question from adjusters,” says Purinton. “It is their right to ask. We need to have patience with that.”

Purinton says it’s important to understand the difference between liability adjusters and collision adjusters, as each will treat loss of use differently. When dealing with a third party that hit your rental car, you’d deal with a liability adjuster. There are no deductibles or terms and conditions.

On the other hand, a claim generated by the renter would be handled under the renter’s collision policy or a non-owned auto provision. These claims are subject to terms and conditions of the non-owned auto portion of the collision coverage, as well as a deductible. It’s in the non-owned auto provision of collision coverage that specifies whether loss of use is allowed or not.

“Ultimately, some renters do not have complete collision coverage,” Purinton says, “so if the rental isn’t covered at all, it certainly won’t cover loss of use.”

There are some nuances, though. Certain states require insurers to cover the obligation of a rental car under liability policies without a deductible. It’s important to understand the laws of the different states involved when dealing with such claims.

The Koenig Case

On Sept. 10, 2012, the Colorado Supreme Court ruled in favor of PurCo Fleet Services in PurCo v. Koenig, finding that “PurCo is entitled to recover loss-of-use damages irrespective of its actual lost profits.” The decision capped a seven-year battle for PurCo.

“The ruling is historic for the car rental industry,” says Steve Christiansen, lead litigation counsel for PurCo in the Koenig case. “Colorado’s decision is the only reported case in the United States dealing specifically with loss of use for a rental car in the modern era.”

Christiansen says that while the case is binding specific to Colorado courts, its value is enormous as it sets precedent for other courts who may be called on to decide similar issues.

The case started in 2005 when Judith Koenig rented a car from the National Car Rental licensee at the Durango-La Plata County Airport in Colorado. Koenig hit a deer and damaged the vehicle. PurCo — the damage recovery company working with the licensee — demanded payment from Koenig for the damage, as well as loss-of-use damages and a contractual administrative charge. Koenig’s insurer, State Farm, paid for the damage to the car but refused to pay PurCo for loss of use or the administrative fee charge. PurCo then filed suit to collect the unpaid amounts.

After the protracted battle of court cases and appeals, the Colorado Supreme Court’s decision put its stamp of approval on PurCo’s long-standing position that loss-of-use damages are recoverable regardless of what else is going on in the fleet. Koenig’s insurance carrier ultimately paid PurCo the $378 owed for loss-of-use and administrative fees — plus more than $260,000 in attorney’s fees and costs PurCo had spent in fighting the battle.

CONTINUED:  How to Explain Loss of Use to an Insurance Company
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Comments

  1. Kevin Lowry [ April 24, 2014 @ 05:04PM ]

    I operate a claims collection service for the transportation industry. TranSubro stands for transportation subrogation. We ALWAYS get loss of use for our clients. We have found caselaw similar to Koenig across the Country. We can help you recover loss of use on claims which have been closed for years. Call 888-659-2204 or visit our website TranSubro.com . We will reach into your filing cabinets and pull out fists full of cash! There is no fee unless we collect, and we will collect. WE NEVER FAIL.

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