Alaska Superior Court ruled in favor of Alaska Rent-A-Car, an Avis franchise serving Alaska, regarding a case on loss-of-use damages. State Farm Automobile Insurance refused to pay the full loss-of-use damages on one of Alaska Rent-A-Car’s vehicles.
On May 17, 2012, Stephen Grabacki rented a 2012 Ford Focus from Alaska Rent-A-Car in Fairbanks, Alaska. After returning the vehicle, Alaska Rent-A-Car called Grabacki to notify him that the vehicle had been damaged while in his possession, according to the court document. The car was repaired and returned to the rental lot on May 23.
Grabacki had a car insurance policy through State Farm. Alaska Rent-A-Car issued a bill for $1,027.78, including $112 for loss-of-use damages, according to the court document. State Farm only issued $56 for the loss-of-use payment. After sending several letters for the remaining amount ($106), Alaska Rent-A-Car eventually sent the claim to collections.
According to court documents, State Farm tried to argue that since the claims are based on a rental contract, the appropriate measure of damages is lost profits. But this argument goes against the established Alaska precedent that loss-of-use damages is the correct form arising out of a rental vehicle contract.
On Jan. 17, 2014, State Farm and Grabacki filed for a declaratory judgment against Alaska Rent-A-Car. The judgment ordered the rental car company to produce sufficient documentation to prove the claimed loss.
“State Farm tried to argue that we were getting a profit out of loss of use,” says Peggy Grigsby, vice president at Alaska Rent-A-Car. “So, we had to go into court with documents showing this wasn’t true. It’s never been our intention to take advantage of loss of use; it’s only about covering the loss of not having that vehicle.”
In fact, Alaska Rent-A-Car didn’t charge Grabacki for the full amount of days the vehicle was out of service.
According to Grigsby, the company usually doesn’t charge the customer for weekend days or during the estimate process. “We don’t want our customers to be hurt by loss-of-use charges. We are very fair about it.”
On Aug. 5, 2015, the court granted summary judgment in favor of Alaska Rent-A-Car. Despite spending several years on this case and approximately $71,608 in legal fees, this is an important win for Alaska Rent-A-Car and the car rental industry.
“State Farm was trying to set a precedent on loss of use but failed,” says Grigsby. “There already is a precedent set in the state of Alaska that clearly recognizes loss of use. It was a big expense, but this win is another example to demonstrate the ruling of loss of use.”