Mind the Gap
Is additional coverage needed when renting a car or moving truck?
This month we will explore the personal auto policy and answer questions that all personal lines producers and account managers will be asked over the course of their careers: “Does my policy cover rental cars?” and, “What about coverage for moving trucks?”
You might think these questions are fairly basic and easy to answer; however, you need to take a close look at your carriers’ policy forms before assuming there is automatic coverage for either of these situations.
Don’t automatically assume that your carriers’ forms contain the same language as ISO policies.
It’s easy to get confused by the terminology, exclusions, and coverage carve-backs that can apply in situations like this.
For starters, is a rental car considered a “newly acquired auto”? By definition it is not. The ISO PP 00 01 (01 05) form reads:
K. “Newly acquired auto”
1.“Newly acquired auto” means any of the following types of vehicles you become the owner of during the policy period
A list of vehicles follows, but for the sake of this discussion it doesn’t matter. A person who rents a vehicle is not becoming the owner of it; therefore, it isn’t a “newly acquired auto.”
Where else might coverage be found? Let’s skip the definitions and go straight to the liability insuring agreement:
A. We will pay for “bodily injury” or “property damage” for which any “insured” becomes legally responsible because of an auto accident.
The policy then clarifies who is the “insured”:
B. “Insured” as used in this Part means:
- You or any “family member” for the ownership, maintenance or use of any auto or “trailer”.
There it is! The policy provides liability coverage for the insured’s use of any auto, so use of a rental car is indeed covered—at least from a liability perspective. What about physical damage?
If we skip ahead to Part D of the personal auto policy (Coverage for Damage to Your Auto), we will see potential coverage under the insuring agreement:
A. We will pay for direct and accidental loss to “your covered auto” or any “non-owned auto,” including their equipment, minus any applicable deductible shown in the Declarations.
“Non-owned auto”? This sounds promising and is defined as:
C. “Non-owned auto” means:
- Any private passenger auto, pickup, van or “trailer” not owned by or furnished or available for the regular use of you or any “family member” while in the custody of or being operated by you or any “family member”.
There we have it! We now have confirmed that the personal auto policy provides coverage for rental cars. However, we still have another outstanding question: “What about moving trucks?”
The PP 00 01 (01 05) doesn’t specifically mention the word “truck,” so we will need to do some additional research to determine whether this policy will cover the rental of a moving truck.
The policy does refer to Gross Vehicle Weight (GVW) Rating. So we can start there. Specifically, under the “newly acquired auto” definition, coverage is included for:
b. A pickup or van, for which no other insurance policy provides coverage, that:
(1) Has a Gross Vehicle Weight Rating of 10,000 lbs. or less
As previously noted, however, “newly acquired auto” means you need to become the owner of one of these vehicles during the policy period, so this isn’t applicable.
If we circle back to the liability provision that provides coverage for rental cars, we see that the insured is covered for the “ownership, maintenance, or use of any auto or trailer.” Is a 26-foot moving truck considered an “auto”? Most likely not.
The same kind of logic can be applied to the physical damage portion of the policy because that section references “any private passenger auto, pickup, van or trailer.”
As should be the case any time you’re uncertain whether there is intended coverage for an unclear situation, always check your underwriting manuals and/or consult your underwriter!
Why it matters
Don’t automatically assume that your carriers’ forms contain the same language as ISO policies. As we’ve seen in past columns, not all policies are created equal.
For example, one of our personal auto carriers will cover moving trucks as long as they fall under a certain weight. Liability is addressed in the “covered person” definition, which is broadened to include coverage for:
- “You or any “family member” for the ownership, maintenance or use of any auto (including a motorhome, truck or motorcycle) or trailer”.
This carrier provides physical damage coverage for trucks under the property damage liability portion of the policy. The situation is addressed in the exclusions section, and the following carve-back is provided:
This Exclusion (A.3.) does not apply to “property damage” to:
b. Any of the following types of vehicles not owned by or furnished or available for the regular use of “you” or any “family member”:
(4) Trucks less than 26,000 pounds gross vehicle weight.
Therefore, if the truck has a GVW of 26,000 pounds or less, the insured is covered for physical damage to the vehicle.
Another insurer we represent does not cover rental cars at all. For this reason, it is vitally important to research how each of your carriers handles this situation.You don’t want to give incorrect information to your clients.
You might be asked if your client’s policy covers loss of use coverage for a car that he or she is about to rent. The PP 00 01 (01 05) provides coverage for “Expenses for which you become legally responsible for in the event of loss to a ‘non-owned auto.’” That coverage includes loss of use at $20 per day.
Another of our carriers offers an endorsement that broadens this coverage. The endorsement includes coverage for “the loss of profits, not to exceed the normal rental fee, which would have been earned if the rented vehicle had not been damaged.” Several conditions apply, and the limit of liability for this coverage is $1,000 per occurrence.
Solutions
The initial solution for any of these situations is relatively straightforward: If your client’s auto policy doesn’t include the coverage he or she needs, recommend purchasing the coverage offered by the rental agency. It’s not worth your time to quote policies with other carriers just to ensure that a rental car or moving truck is covered—especially if the auto insurance is packaged with another line of business, such as homeowners, condo, or renters insurance.
Another potential solution is to ask your client if he or she has any credit cards that provide coverage for rented vehicles. The burden will be on your client to determine what the card does and doesn’t cover, so don’t attempt to give any advice on this.
Don’t make any assumptions about what your clients’ personal auto policies cover and exclude. It may be helpful to create a chart that lists all of your auto insurance carriers along with how they handle situations like this. Make sure you list what coverage is provided by endorsements, as they can broaden coverage for any of these situations.
Having an easy-to-reference chart will save you time as well as a potential E&O claim for giving your clients incorrect coverage information.
The author
Marc McNulty, CIC, CRM, is vice president of insurance operations at The Uhl Agency in Dayton, Ohio, and has been with the agency for 15 years. He divides his time among sales, marketing, technology and operational duties. Marc also serves as chairman of NetVU’s Young Professionals Chapter. You can reach Marc at marcmcnulty@uhlagency.com
