The Office of General Counsel issued the following informal opinion on July 16, 2003, representing the position of the New York State Insurance Department.
Re: Rental Vehicles
1. May a rental vehicle company request the person to whom the vehicle is rented for the name of his or her motor vehicle insurer?
2. In the event of damage to a rental vehicle, is the person to whom the vehicle is rented responsible for the entire value of the vehicle or is his or her responsibility limited to $100?
1. There is no law prohibiting rental vehicle companies from requesting a person, to whom the vehicle is rented, to provide the name of his or her motor vehicle insurer.
2. In the event of damage to a rental vehicle, the person to whom the vehicle is rented may be held responsible for the actual and reasonable costs to repair the vehicle by the rental vehicle company, subject to certain limitations set forth in N.Y. Gen. Bus. Law § 396-z.
The inquirer frequently rents cars. Recently, the rental vehicle company has been asking for the name of the inquirers automobile insurer when he rents a vehicle, and pressuring him to buy optional vehicle protection. The inquirer has not indicated whether or not he is covered by a motor vehicle insurance policy.
N.Y. Gen. Bus. Law § 396-z, entitled: Rental Vehicle Protections, was recently amended by Chapter 656 of the Laws of 2002, which became effective on February 24, 2003. Specifically, § 396-z provides in pertinent part:
3. Subject to the provisions of subdivisions six, seven, and nine of this section, a rental vehicle company may hold an authorized driver liable for actual damage to, or loss of, a rental vehicle, provided that: (a) any claim for such damage shall be based on a physical survey and shall be made upon the return of the rental vehicle, unless returned by automation or after-hours which precludes such survey, in which event any claim must be made within ten days after return; and (b) any charge for repair of such damage shall be limited to actual and reasonable costs and shall be assessed and billed separately and apart form the rental agreement. For purposes of this subdivision, "returned by automation" means a return acknowledged by machine receipt and where there is no interaction with rental vehicle company personnel and "after-hours" return means a return after normal business hours and in which the keys and rental agreement are deposited in the rental vehicle company office.
6.(a) A rental vehicle company may hold an authorized driver liable to the extent permitted under this chapter for physical or mechanical damage to the rental vehicle that occurs during the time the rental vehicle is under the rental agreement; provided, however, that a renter shall not be liable for mechanical damage unrelated to an accident, nor for any normal wear and tear or other mechanical damage that could reasonably be expected from normal use of the vehicle, except in instances where abuse or neglect by the driver is shown. For the purposes of this subdivision, "actual and reasonable costs" shall mean the repair price reduced by all discounts paid by the rental vehicle company to the repairer of the vehicle, including costs for towing, storage, and impound fees.
(b) The total liability of an authorized driver under paragraph (a) of this subdivision for damage to a motor vehicle shall not exceed the lesser of:
(i) the actual and reasonable costs that the rental vehicle company insured to repair the motor vehicle or that the rental vehicle company would have incurred if the motor vehicle had been repaired, which shall reflect any discounts, price reductions, or adjustments available to the rental vehicle company; or
(ii) the fair market value of the motor vehicle immediately before the damage occurred, as determined in the applicable market for the retail sale of the motor vehicle, less any net disposal proceeds.
7.(a) No rental vehicle company shall require any security, deposit, or charge for damage in any form, by credit card or otherwise, during the term of the rental agreement or pending resolution of any dispute.
(b) No rental vehicle company shall require a deposit or an advance charge against the credit card of an authorized driver, in any form for damages to a rental vehicle which is in the authorized drivers possession or control.
(c) No rental vehicle company shall require any payment to the rental vehicle company, upon the authorized drivers return of the vehicle in a damaged condition, until after the cost of the damage to the vehicle and liability therefor is agreed to between the rental vehicle company and the authorized driver or is determined pursuant to law; provided, however, that a rental vehicle company is not precluded from presenting a claim to the authorized driver pursuant to other provisions of this section.
(d) Causes of action concerning the existence of, liability for, and extent and cost of damage to the vehicle shall, where appropriate, be commenced by a rental vehicle company in a commercial claims part in accordance with the limitations and jurisdiction of the appropriate court act.
9. No rental vehicle company shall hold any authorized driver liable for any damage to, or loss of, a rental vehicle, as provided by this section, unless the rental vehicle company prominently discloses, on the rental agreement, in at least ten point bold fact display, the nature and extent of such liability and such drivers rights and responsibilities under this section.
Prior to the amendment, N.Y. Gen. Bus. Law § 396-z (3) provided that "a rental vehicle company may hold an authorized driver liable for actual damage to, or loss of, a rental vehicle caused by such authorized driver, up to a maximum of one hundred dollars." Thus, except for a few exemptions, in New York a rental vehicle company was barred from holding an authorized driver or renter liable for an amount above $100.00 regardless of the actual damage or loss to the vehicle.
Among other things, the recent amendment to N.Y. Gen. Bus. Law § 396-z(3) removed the $100.00 limit for actual damage to, or loss of, a rental vehicle caused by a renter or authorized driver. This amendment only affects vehicles rented in New York. As a result, unless the renter or authorized driver is covered under a personal motor vehicle policy or other insurance policy such as a credit card account group policy under N.Y. Ins. Law § 3442 (McKinney 2003), or purchased the "optional vehicle protection" that the rental vehicle company is now permitted to sell, such renter or authorized driver may be held fully responsible for the actual damage he or she causes to a rental vehicle.
Pursuant to N.Y. Ins. Law § 3440(a) (McKinney 2003) and N.Y. Comp. Codes R. & Regs. Tit. 11, § 60-1.5 (1996) (Regulation 35-A), every motor vehicle liability insurance policy insuring less than five private passenger motor vehicles that are registered in New York shall provide a separate rental vehicle coverage for the insured's obligation for actual damage to, or loss of, a rental vehicle, including loss of use, rented by the insured anywhere in the United States under a rental agreement with a term no longer than thirty continuous days, regardless of where such rental vehicle may be registered, rented or operated. Assuming the renter of the vehicle has a motor vehicle liability insurance policy, the rental vehicle coverage which is a separate endorsement in such policy, would be triggered. This rule also applies to policies issued by the New York Automobile Insurance Plan.
There is no limit to the amount of coverage that must be provided under the rental vehicle coverage endorsement. Moreover, rental vehicle coverage is not limited by the property damage liability limits of an insured's policy. Please note that N.Y. Comp. Codes R. & Regs. tit. 11, § 60-1.5(f) (1996) dictates that the protection provided under the rental vehicle coverage "shall not be provided elsewhere in the policy." Therefore, if a policy limit is $50,000.00 and the actual damage to a rental vehicle is $60,000.00, the insurer would be required to pay the $60,000.00 to the rental vehicle company, despite the $50,000.00 liability limit in the underlying policy.
If a renter or authorized driver is not covered under a motor vehicle insurance policy he or she could explore coverage under an account group policy. N.Y. Ins. Law § 3442(d)(2) permits group coverage in connection with a credit card, debit card or checking account for obligations to persons engaged in the business of renting or leasing motor vehicles, for loss or damage to a motor vehicle rented or leased from that person. This benefit applies only to leases or rentals that do not exceed 31 consecutive days (except that in connection with corporate credit cards, the period shall not exceed 45 consecutive days). Except in regard to corporate credit cards, the coverage shall be excess over any other valid and collectible insurance if the vehicle is used inside the United States, its territories or possessions. For corporate credit cards, the coverage may be primary. By "corporate credit card," we mean a card issued to an employee where the employer has contracted with the credit card company to provide credit cards to the person's employees primarily for business use. Please note that the primary coverage under a corporate credit card may extend to non-business use, subject to the actual terms of the policy. Hence, there may be some cases where personal rentals may provide primary coverage.
Regarding the rental vehicle company pressuring the inquirer to buy optional vehicle protection, N.Y. Gen. Bus. Law § 396-z(2)(b) states that a rental vehicle company shall not sell optional vehicle protection unless the authorized driver agrees to the purchase of such protection in writing at or prior to the time the rental agreement is executed.
For further information you may contact Special Counsel Athan Shinas at the Albany Office.