Colorado High Court Agrees with PurCo: Loss-of-Use Damages Recoverable Regardless of Fleet Utilization

The Colorado Supreme Court has ruled in favor of PurCo Fleet Services in Koenig v. PurCo, an important loss-of-use damages case for the auto rental industry. In a 20-page decision handed down Sept. 10, the court ruled that “PurCo is entitled to recover loss-of-use damages irrespective of its actual lost profits.”

The ruling is historic for the car rental industry. While the case is binding specific to Colorado courts, it is expected to have an impact on the recovery of loss-of-use damages nationwide.

“This is a vindication for the rental car industry and property owners everywhere,” says David Purinton, owner and president of PurCo. “The court said there is an intrinsic loss to the owner when a car is damaged, no matter what else is happening in the fleet with other cars. That is the truth, as any owner can tell you.”

The ruling caps a seven-year battle for PurCo Fleet Services Inc., a risk management company specializing in car rental loss prevention. The decisions issued from the highest Colorado court and the intermediate court before that are believed to be the only reported cases in the United States dealing specifically with loss of use and administrative fees for a rental car.

The Case

The case started on Sept. 16, 2005, when Judith Koenig rented a car from the National Car Rental licensee at the Durango Airport in Colorado. While driving the car, she 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.

Koenig filed a request to dismiss the case without trial, which the trial court granted. The trial court ruled that PurCo could prevail on its loss-of-use damages claim only if it suffered actual lost profits. PurCo appealed.

The intermediate court of appeals agreed with the trial court’s conclusion that, in general, the appropriate measure of loss-of-use damages in a commercial setting is actual lost profits. But the court concluded the rental agreement in this case altered the measure of loss-of-use damages and held that PurCo was required to show certain loss prerequisites before it could recover.

Both PurCo and Koenig filed petitions to have the Colorado Supreme Court review the case, and the petitions were granted.

On review, the Colorado Supreme Court affirmed the court of appeals judgment but on different grounds that proved favorable to the rental car industry. The court held that loss-of-use damages in a commercial setting may be measured either by “reasonable rental value” or by actual lost profits. The court based its decision on the common law of damages reflected in the Restatements of the Law published by the American Law Institute and on its own prior case law decisions.

The state Supreme Court then vacated the court of appeals opinion on loss-of-use damages and loss prerequisites. In doing so, the court put its stamp of approval on PurCo’s longstanding position that loss-of-use damages are recoverable regardless of what else is going on in the fleet.

Reasonable Rental Value

“The ‘reasonable rental value’ standard has been the law for a long time, no matter what our detractors have said,” Purinton says. “This ruling confirms what we have always known to be true.”

The court has yet to determine “reasonable rental value” in this case. Even so, Purinton noted it is a simple determination, with the best evidence taken from the daily rate at the time the vehicle was damaged.

“The court made it easy to calculate,” Purinton says, adding that the ruling “will undoubtedly help owners, big and small, to recover real losses they are entitled to when renters return their cars damaged.”

In an appeals court ruling that went unchanged in the case, PurCo is entitled to the administrative fee as well, though the amount has not yet been determined.

This article was updated at 1:56 p.m. on Nov. 6, 2012, to reflect the article that was printed in Auto Rental News' November/December magazine issue. Click here to read those articles.

Comments

  1. Jason Taylor [ September 12, 2012 @ 04:13PM ]

    This is great news for the Car Rental Industry. Problem will be collecting it from the renter, since I am sure insurance companies wont pay it.

  2. Douglas [ September 12, 2012 @ 04:57PM ]

    You are probably correct Jason. It would be nice to one day hold the insurance companies liable for what we as consumers have to pay when......Oh Heck....When are we going to stand up to the Insurance companys?? If State Farm would have paid for the claim to begin with or for that matter, any insurance company, it would make alot of people happy.

  3. Peggy [ September 12, 2012 @ 07:09PM ]

    Congrats to PerCo, I hope the judge awards them repayment for all their legal fees. I could write a novel regarding State Farm's handling of LOU claims. Alaska has a supreme court ruling very similar to this one that also includes four ways of establishing the rental value. Even with this very clear ruling State Farm will only pay 50%. They intentionally put the customer in the middle hoping we will back down and waive the other 50%. Their actions have caused irreparable damage to our company and I would love to join forces with others who would like to stand up to the insurance companies.

  4. Sam Linder [ September 12, 2012 @ 07:20PM ]

    Congratulations to David Purintan, his company PURCO, & his legal team for helping us all by pursuing this matter to the highest court in CO. Unfortunately, just because one state Supreme Court ruled in this fashion does not mean that other courts in the U.S. will rule in the same manner. However, this ruling will help out the industry in the long run... David is a real "trailblazer" for the rental vehicle industry and is a very dedicated to getting fair justice for us all.

  5. Terry [ September 13, 2012 @ 05:17AM ]

    What will this do to Insurance rates?

  6. James [ September 13, 2012 @ 10:17AM ]

    Another good reason as a renter to buy insurance at the rental counter

  7. He7 [ September 13, 2012 @ 01:32PM ]

    Terry, perhaps the highly payed Insurance excecutives who previously made the decisions not to pay Rental company's for the past relative losses wouldn't mind taking less monatary compensation in order to keep the threat of rates from potentially changing. After all, we certainly pay for our mistakes, shouldn't they?

  8. mickeyrory [ April 18, 2015 @ 08:18PM ]

    Let's look at this from a consumer's (renter) perspective. The car rental companies do not even attempt to hold the insurance companies liable, even givn this ruling. Why? Because it is easer to turn to the consumer, point out that by the rental contract they are responsible for any charges the insurance companies do not pay. Is loss of use real? I mean that in the sense of a very real loss of revenue for the rental company precisely because the car was not available for rental. Had the car been available, common sense will tell us that it would have been rented and therefore because it was not, there was a very real "loss of use." Isn't this why there is denial of fleet logs to insurance companies and Visa, Mastercard, etc? Fleet logs either prove or disprove whether there was real loss.
    This ruling, however, removed this "real loss" and rewarded the rental companies money based on something else---“reasonable rental value” or by actual lost profits. So because of the denial of fleet logs we can assume that it is not actual lost profits but reasonable rental value. I think any consumer would agree that every every car in a fleet has a reasonable rental value, so based on this there is a "loss of use." The consumer, however, doesn't look at it in such a legal sense; we are too logical for such a view. If I have ten cars and consistently have three sitting on my lot unrented there is no loss of use. Only those in the car rental industry view things in the legal sense of the ruling. It seems that all would agree that the insurance companies are the ones not being held accountable. What then? The car rental companies turn to the consumer. The above article stated that, "the court has yet to determine 'reasonable rental value' in this case. Even so, Purinton noted it is a simple determination, with the best evidence taken from the daily rate at the time the vehicle was damaged." On a personal note, I am involved in an ongoing disagreement with a nat'l car rental chain that has deemed the reasonable rate to be nine dollars a day over the rate I had paid. I agreed that they had a loss of use and was willing to pay the same rate I had contracted for. However, they put me, or any consumer in the position of thinking that you're trying to "stick it to me." This type of behaviour can't help but reinforce in the consumers mind that the idea that this is a money maker for the company and not merely the recoupment of lost revenue for the specific reason of loss of us. It is, "get as much as you can mentality."

  9. Serge Covington [ July 1, 2015 @ 08:27PM ]

    In blaming the insurance companies for not wanting to pay for loss of use, recognize that in their insurance policies it clearly states that they will not pay this. You can cuss them for this or simply recognize that it is how they want to do business and if the policy holder agrees to their terms, then that's between the ins. co. and the policy holder. They also don't pay diminished value, nor do VISA, MasterCard and American Express. In the case with Hertz, it doubles my cost of car rental, but I buy it now. I turned to Enterprise whose insurance rates are much lower than those of Hertz.

  10. cris [ August 22, 2016 @ 10:05AM ]

    What a shame on insurance company and Purco for torturing customers to pay for accedental damage. PURCO most of the time charges unnecessary diminution values , rental usage charges and they ended up charge few thousands and I have seen many complaints on this company.

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