Earlier this month, a federal court handed down a Graves Amendment decision in SDI v. Brown that is significant to the car rental industry. The case was brought by David Purinton, who has a long history of championing rental car damage recovery cases. But the case was not brought by the usual litigant in these cases, PurCo Fleet Services, Inc. It was his other company, Subrogation Division, Inc. (SDI).
Who is SDI? And how did it come to be a player in this new rental car damage recovery decision?
“Twenty years ago, Scottsdale Insurance, a Nationwide company, approached me at a Car Rental Show,” Purinton explained. “They asked me how PurCo might be able to assist in pure subrogation efforts, recovering payments already made on damage claims from responsible third parties and renters.”
“This was very similar to PurCo’s core business, but with an insurance company as the client rather than a car rental company,” Purinton continued. “Liability recovery was not in the picture for us at that point.”
But it soon would be. “I had others at the same time asking if we would use our dedication for recovery to help them on subrogation files,” he said. “After giving it some thought, I created SDI as a separate company to fill that need.”
Purinton installed Sean Woolf, a Purco employee, as SDI’s first dedicated employee and manager in 2000.
“Sean Woolf was perfect for the position,” Purinton said, “and he has managed it ever since. He knows subrogation inside and out. It’s the ideal pairing with PurCo’s business – work that in some ways is fundamentally different but at the same time complementary of what PurCo does every day.”
Expanding to Rental
The Nationwide relationship continued to blossom. So did SDI’s business, which expanded over time to include other carriers, third-party administrators, self-insured trucking and other companies, and even governmental agencies.
It was a natural progression, then, to start helping rental car company clients, including those who were already PurCo clients. One example was Overland West, the largest Hertz licensee in the U.S.
“Overland West was a client of Nationwide’s,” said Woolf. “We were already subrogating Nationwide files, and PurCo was already recovering Overland West files. But Overland West itself had subrogation needs, too, because it was paying out claims that it wasn’t fully recovering from responsible parties. We saw an opportunity there to help, so we did.”
Among the claims SDI was subrogating were third-party claims rental car companies were paying out on damages caused by renters.
Enter the Graves Amendment, a federal act signed into law in 2005 prohibiting liability against a rental car company based solely on a renter’s use of the rental car. SDI saw its clients losing money on those claims when the law prohibited it. Specifically, renters and their representatives were advancing state law arguments when federal law provided the governing rule.
“We decided to take a stand,” Woolf said. “Graves Amendment was the law, but responsible parties didn’t know about it or didn’t understand it or simply refused to follow it. So we undertook to educate them.”
Taking a Stand
That wasn’t exactly easy. Purinton said he felt like SDI was the proverbial voice crying in the wilderness.
“We received significant pushback,” Purinton said. “We knew we were right, but no one else could see it, or they didn’t want to see it. Even our own clients didn’t believe it. So we looked for a case to prove our point.”
That case came in the form of the dispute underlying Brown v. SDI. The renter caused a collision with a third party in an Overland West car, through no fault of the rental car company. Overland West covered the loss under its deductible, then assigned its claim to SDI. But because of the state’s primary insurance laws, the renter and his carrier took the position that Overland West was stuck with the bill.
“We made a good-faith attempt to persuade them that the federal Graves Amendment overrode state law on this point,” Woolf said. “Its language clearly says that a rental car company cannot ultimately be responsible for damages caused solely by a renter. We asserted our claim in subrogation. When they continued to deny the claim, we decided this was the case to show the world that we had been right all along.”
The result: SDI filed suit in federal court as assignee and subrogee of Overland West’s claim. The rest, as they say, is history.