New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Howard Mills
Superintendent

The Office of General Counsel issued the following opinion on November 22, 2006, representing the position of the New York State Insurance Department.

Rental vehicle coverage for diminution of value and administrative fees.

Question Presented:

An insured is involved in an accident while driving a motor vehicle rented in Florida. He files a claim under the rental vehicle endorsement to his New York personal auto policy. The rental vehicle company makes a claim for actual damage to the vehicle, diminution in value and administrative costs. The insurer agrees to pay for the actual damages but refuses to make payment for the diminution in value or administrative costs. The rental vehicle company is seeking to hold the insurer liable for these damages. What is the extent of the obligation of the insurer under a rental vehicle endorsement to a New York personal auto insurance policy for damage to a rented vehicle?

Conclusion:

The insurer is liable for the insured’s obligations resulting from the damage to the rented vehicle.

Facts:

An insured is involved in an accident while driving a motor vehicle rented in Florida. He files a claim under the rental vehicle endorsement to his New York personal auto policy. The rental vehicle company makes a claim for actual damage to the vehicle, diminution in value and administrative costs. The insurer agrees to pay for the actual damages but refuses to make payment for the diminution in value or administrative costs. The rental vehicle company is seeking to hold the insurer liable for these damages.

Analysis:

N.Y. Ins. Law § 3440(b) (McKinney 2006) states in pertinent part:

(b) Subject to subsection (d) of this section, every motor vehicle liability insurance policy which insures less than five private passenger motor vehicles registered in this state shall by endorsement, provide coverage for the obligation of the insured for actual damage to, or loss of, vehicles (including loss of use) rented by an insured in the United States, its territories or possessions and Canada under a rental agreement with a term of thirty continuous days or less, regardless of where within those areas such rental vehicle is registered, rented, or operated, subject to such maximum coverage limitations as the superintendent may by regulation prescribe or any other applicable limits in the policy, whichever is higher. The term "rental vehicle" shall be used as defined in section one hundred thirty-seven-a of the vehicle and traffic law, if a private passenger motor vehicle and not used for the transportation of persons or property for hire.

N.Y. Comp. Codes R. & Regs. tit. 11,pt. 35-A (h) (Regulation 35-A), contains the rental vehicle endorsement to be provided by the insurer to the insured; and the policy accordingly so states:

This endorsement provides coverage for the "insured's" obligations in the event of actual damage to, or loss of, any "rental vehicle", including loss of use, rented by the "insured" anywhere in the United States, its territories or possessions, and Canada under a rental agreement with a term no longer than thirty continuous days, regardless of where, within those areas, such "rental vehicle" may be registered, rented or operated.

The insurer’s responsibility is to represent the insured and either indemnify the insured or dispute the claim. If the insurer chooses to indemnify the insured, then the insurer must cover all of the insured’s obligations resulting from damage to the rental vehicle. Therefore, the insurer would be responsible for the diminution of value and administrative fees if the rental vehicle company is entitled to recover these losses under Florida Law.

For further information you may contact Supervising Attorney Sam A. Wachtel at the New York City Office