Business Insurance

Don’t rent trouble

By Chelan David

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Jim Kapnick
President
Kapnick Insurance Group

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When renting vehicles for business use, it is important to fully understand your insurance coverage.

Coverage varies from one rental agency to the next, so it’s vital to be familiar with potential risks and how to protect against them.

Recently, rental agreements have evolved, which creates possible pitfalls for auto renters.

“Each year, the liabilities assumed under rental agreements expand,” says Jim Kapnick, president of Kapnick Insurance Group.

Smart Business spoke with Kapnick about how to minimize risk when renting a car for business purposes, how liabilities have expanded in recent years and how to proceed in the case of an accident.

How can companies minimize their risk when renting cars?

If possible, work with one corporate-approved rental company. This will establish that the rentals are for business use and that the business is renting the vehicle, not the employee. Review the contracts from at least three rental car companies and choose the one that best suits you. This will allow you to make informed decisions regarding accepting or rejecting the Loss Damage Waiver (LDW) or Collision Damage Waiver (CDW) and properly structuring your business automobile insurance policy.

Also, include hired car physical damage coverage on your business automobile policy.

What are some basic rental procedures that should be followed when traveling for business?

• List both the business name and your personal name on the rental agreement.

• List the business address, not your home address, on the contract.

• Do not purchase gas from the rental agency. Rather, fill the vehicle prior to returning it.

Should drivers reject or accept the insurance offered by rental car companies?

In our opinion, the coverage under most rental agreements is unreliable since there are provisions in every rental contract that can void coverage. For example, coverage is often voided if you have a single drink before driving, if an unauthorized driver is operating the vehicle, or if the car is taken on unpaved roads. For this reason, we have been advising our clients to purchase hired car physical damage on their business auto policy and reject the ‘insurance’ offered when you rent a car.

What are the limitations of personal auto policies and credit card coverage in regards to rental car insurance?

Some personal insurance policies will not cover an SUV, van or pickup truck being used for business. Plus, a personal automobile policy won’t cover if physical damage coverage is not provided — a likely case if the person drives an older vehicle. Also, the claim will be handled on the personal automobile policy, which will be on the driver’s loss record and might result in premium surcharges and/or cancellation of coverage.

Typically, with credit card coverage, if you violate any terms of the rental agreement, the credit card coverage is voided when you need it most. Many credit cards exclude rented SUVs, and some exclude any weather-related damage, like flood or hail.

How have liabilities assumed under rental car agreements expanded in recent years?

At one time, renters were responsible only for actual damage to or theft of the vehicle. Over the years, the rental car companies added ‘loss of use.’ As a result, if the car is in the shop for two weeks after an accident, you, the renter, are liable for the revenue the rental car company has lost. Plus, storage fees may be passed on to you. In addition, some agreements require that you pay for ‘diminution of value.’ This is the reduction in resale value for a vehicle that has been in an accident. These two items typically are not covered on insurance policies, so unless you purchase the LDW or CDW offered by the car rental company, these amounts will be your responsibility.

How should a driver proceed in the event of an accident?

The same rules apply as an accident in an owned vehicle:

• Stay calm and don’t argue with others involved in the accident.

• Call an ambulance if anyone is injured. Assist those injured, but do not administer first aid unless you are qualified.

• Call the police, and do not discuss what happened with anyone except the police.

• Do not admit responsibility for the accident or sign a statement.

• Report the claim to your insurance carrier representative.

JIM KAPNICK is president of Kapnick Insurance Group. Reach him at (888) 263-4656 x132 or Jim.Kapnick@kapnick.com. Kapnick Insurance Group is a member of Assurex Global, an international network of insurance and employee benefit brokers.