PurCo V. Koenig: A Win for the Industry
In a historic ruling for the car rental industry, the Colorado Supreme Court has ruled that "PurCo is entitled to recover loss-of-use damages irrespective of actual lost profits." (See the original story here, outlining the case and implications for the car rental industry.)
So what are the top ways to recover loss of use and adminstrative fees?
1. Always follow your state laws and be sure your rental agreement reflects those laws exactly.
2. Understand the difference between recovery from a renter (your customer) and anyone else who might have damaged your car.
- When recovering from your customer, you must follow your rental agreement. Trying to recover items not spelled out in the rental agreement gets many car rental companies in trouble, from the majors down to independent operators.
- When recovering from a third party (anyone who is not your customer) the terms of the rental agreement don’t necessarily apply to them. Be sure you understand any limits placed on that recovery effort by local or state laws.
3. Use the Koenig case to bring legitimacy to your request for loss-of-use and administrative fees.
- It is the only case in the history of the United States specifically dealing with loss-of-use and administrative fees involving a vehicle rental company. Even if you are not in Colorado, this case can assist you.
4. When your claim is denied — ask for the reason in writing.
- When an insurance company tells you “we may owe loss of use in Colorado, but not here in Kentucky,” reply to them that you have supported your claim citing authoritative case law, and ask them to do the same in issuing your denial. You have the right to know how the company supports its position in denying your administrative fee or its demand for 100% utilization.
- We are not aware of any case law that can support an insurance company’s “show me all your cars were on rent” demand.
5. Understand the rules that insurance companies in your state must follow.
- Research your states’ good faith negotiation laws. If you feel an insurance company is trying to rip you off, do not hesitate to file an insurance department complaint against them.
6. Understand your responsibility and duty to mitigate your damages — and then actually do it!
- If you can get your car into the body shop today to keep loss of use to a minimum then do so.
7. Document what you are charging and why.
- In both the loss-of-use and administrative fee areas of the Koenig case, we were given the right to recover. We now need to prove the amounts we were trying to recover were reasonable. We should prevail on the reasonableness requirement because we have completely documented the file. (In addition, the other side has pled that the amount should be zero — a pretty easy threshold to beat.)
- This may sound like a no brainer, but because of the volume of claims a car rental operator has, sometimes you may get into a routine of just preparing the bill and sending it out. But audit everything. Double check everything. This is not necessarily a problem for a recovery on a simple $500 dent, but it is still important. Why did you charge 7.5 days loss of use? Why did you charge the $100 administrative fee? How did you calculate the diminution of value? You can’t wing it; you have to have your ducks in a row.
8. Understand that loss of use and administrative fees are not profit centers.
- To believe that they are profit centers, or to function in a way that makes the rest of the world believe they are, is fighting against all that the Koenig case can give us.