Q: I've heard of claims against rental operations alleging negligent entrustment. What is this, and how can I protect myself?
A: Negligent entrustment is essentially when the rental company hands over the keys to someone not qualified to drive that vehicle. Examples include a customer who wants to rent a sports car and does not know how to drive a manual transmission, or if a renter has alcohol on his or her breath at the counter.
The best way to protect against negligent entrustment is to exercise due diligence and implement proper counter practices. If someone rents a truck with a lift and that lift injures someone, was the renter instructed on how to operate the lift properly?
If the rental company has 15-passenger vans, has the renter or any other drivers been instructed on proper operation to avoid such things as rollovers?
In other words, when the renter leaves the lot, is he or she capable of operating the vehicle in a proper and safe manner? If not, liability may well fall back to the rental company, not the renter.
— Adam Weisman, underwriting manager of commercial auto products at Philadelphia Insurance Companies
Q: I've noticed that prepaid insurance plans sold on travel websites are lowering our chances of selling insurance at the counter. How can I compete?
A: The growing prevalence of prepaid insurance plans may be difficult to overcome initially, as renters have already purchased a plan before arriving at the counter. But when they do show up, your counter staff has an opportunity to educate them as to the limitations of this type of coverage.
For instance, the policy purchased online is only good for the length of the booked rental, making extensions beholden to bringing the car back into the rental location. In general, car rental companies could keep more coverage in-house by coming up with new products to meet customers’ needs.
Selling a partial damage waiver (where allowed) appeals to customers who do not ordinarily purchase coverage but would want to cover their own insurance deductibles.
For instance, a $9.95 per day offering would come with a $3,000 waiver for loss or damage. Rental companies could also assess risk factors and offer a discount off the full price of loss damage waiver (LDW) to good drivers.
— Leslie Saunders, owner and president, Leslie Saunders Insurance: Insurance, Benefits and Training
Q: What is CDW if it's not insurance?
A: A damage waiver — also referred to as collision damage waiver (CDW) and LDW — is a rental company’s agreement to waive the right to recover from an authorized driver for all or part of any damage or loss to a rented vehicle in exchange for per-day fee.
Instead, the rental company will be responsible for paying for the repair of the vehicle and absorbing other costs incurred, such as diminished value and loss of use.
CDW is not an insurance product because it does not shift the risk of loss from one party (the rental company) to another (an insurance company). In addition, CDW is not subject to state insurance regulations. However, approximately 25 states regulate the offer and sale of CDW through separate statutory schemes.
Typical regulations require contractual and posted signage disclosures to advise renters that the purchase of CDW is optional and that it may duplicate the renter’s coverage from other sources. These regulations also set maximum daily prices and limit exclusions to CDW protection.
— Leslie Pujo, attorney/owner, LaPlaca Pujo, PC
Q: A renter reported an accident with our rental vehicle, but her boyfriend was driving when the accident happened and he wasn't on the rental agreement. How do I protect against this in the future?
A: Your first and best line of defense in a situation like this is clear, concise rental guidelines and well-trained rental agents. Teach your employees to ask questions and gather information at the time of the rental. Make sure they have a good understanding of the terms and conditions of your rental contract.
If someone other than the renter is going to drive, require that individual to be present at the time of rental so he or she can be added to the contract. As well, have your employees emphasize that only the renter and authorized additional drivers can drive the vehicle.
— Alexis Wagner, underwriter, Mile High Markets
Q: What are some ways we can prevent car theft and lower our conversions?
A: Car theft can be mitigated with products such as tiger teeth, in-vehicle GPS tracking systems and extra fencing around the location, as well as hiring additional security guards.
But don’t lose sight of your No. 1 defense item: your rental agents and service teams. In many cases, an educated and aware operations team can lower your risk significantly.
To help raise awareness about theft and create urgency, communicate to the staff how thin the margins on car rental truly are. Advise them that the conversion of one $45,000 vehicle could mean the difference between being in the black or red.
Find common denominators of fraudulent renters. Walk-up renters who are overzealous to purchase coverage and other incremental products are more prone to purchase them to soften the risk-management senses of rental agents.
Customers who peruse your lot looking for specific makes, models and color types prior to renting should raise some red flags. Renters with an abundance of additional drivers that overextend should also draw some attention.
In many cases, your operation is not the only one being targeted. Car thieves often work in teams and target multiple locations. Ensure that your management team is communicating to your local authorities to ensure that your entire rental car community is aware of activities.
Work through your police force and communicate through them to your competitors to avoid any anti-trust, slander or misrepresentation claims.
— Ken Stellon, managing partner, Frontline Performance Group
Q: I have commercial automobile liability coverage for my rental cars, but how do I protect my business from a situation where a customer falls on my premises and claims it is my fault?
A: Rental car operators typically spend their time and money focused on potential vehicle accidents. While less common, a “slip-and-fall” incident has the potential to create a serious liability claim.
A busy rental location can be a high traffic area that is complicated by moving vehicles, luggage in walkways and distracted travelers. When a fall and injury occurs, it is common to look for someone to blame.
Carrying commercial general liability insurance will provide coverage for these types of damages. But be sure to follow these procedures to try to avoid visitors slipping in the first place: Assign managers to inspect the property regularly. Make repairs to uneven pavement, steps and potholes. Clearly mark pedestrian walkways and be sure they are well-lit.
Every location has unique hazards. Discuss possible risk management techniques for your premises with your broker, who can help in this area.
Remember, if an incident does occur — even though you’re not at fault — it is how the situation is handled that could determine the customer’s next course of action.
Be sympathetic but don’t admit liability. When appropriate, consider a “good-faith” gesture in the form of an upgraded vehicle or credit to the current rental or a future rental.
— Teresa Quale, executive director, Sonoran National Insurance Group
Q: I understand there is an increasing number of uninsured and underinsured motorists. What can I do to avoid losses associated with them?
A: The first step is to verify that the renter has automobile insurance in place and with coverage that applies to the use of a rental vehicle. Expenses for uninsured damage to the rental car itself can be mitigated through the sale of loss damage waiver, or can be transferred via an insurance product like renter’s collision protection.
With regard to third-party liability, there are other risk transfer solutions, such as renter’s liability insurance (in states where applicable) and/or supplemental liability insurance.
It is important to note that proper licensing is required for the sale of some of these products, so consult with your agent on the steps to obtain these licenses.
— Alexis Wagner, underwriter, Mile High Markets
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