What is the Administrative Fee?

The renter, additional renter, authorized driver and a responsible third party are responsible to pay for the administrative fee.

The rental contract holds the renter of the vehicle responsible for all loss or damage to the vehicle despite fault. The contract language specifically provides for the administrative fee. The presumption is that the bailee of the property had a duty to keep the property safe and in the same condition in which they received it. When the property is returned damaged, the presumption is that the damage occurred while the renter had the property. The rental contract is not written to place an undue and unfounded burden on the renter, but rather to enforce the common law presumption that the bailee is responsible for all damage to the property in their care.

• Hertz, "Your responsibility will not exceed the full value of the car at the time it is lost or damaged, less its salvage value, plus actual towing, storage and impound fees, an administrative charge and a reasonable charge for loss of use."

• National, "I will pay you for all loss, or estimated damages to the vehicle including loss of use, claim processing fees and administrative charges, as permitted by law."

• Budget, "Regardless of fault, renter is responsible for all other loss of and damage to the vehicle and all related expenses, plus Budget's loss of use and an administrative charge for expenses associated with processing the loss and damage claim."

• Dollar, "Your liability will not exceed the full value of the vehicle, actual towing and storage charges, loss of use and reasonable administrative fees allowed by law."

• Avis, "I'll also pay loss of use based on reasonable downtime or as specified by law. Plus a reasonable administrative fee determined by you or specified by law."

The law recognizes this contract as a valid service agreement, and the terms are enforceable. If damage occurs during the rental period, then the renter is responsible to pay an administrative fee.

If a third party negligently damages the rental vehicle then they are responsible to put the injured party or parties in the position that they would have been in if the injury had never occurred. Under the theory of indemnification the third party has a duty to make the injured party whole. This responsibility is to both the driver of the vehicle as well as the owner of the vehicle.

The damages that the rental agency are allowed to collect are intended to put the rental agency where they would have been of the accident or damage had never happened. They are to receive no more and no less than what would compensate them and make them whole for this loss.

The most basic principle of tort law is to make the claimant whole or to return him to his prior status before the tort.

As the renter or additional driver, if you have insurance coverage for rental vehicles, your policy may or may not have coverage for the administrative fee. A responsible third party's policy will pay for what they become legally liable for. Since the administrative fee is a proper element of the claim, the liability policy should cover this item.

Some credit cards offer a card member benefit which may provide coverage for the administrative fee. Whatever the card member benefit will cover does not effect what the renter owes for the administrative fee.

Our experience with the American Express program is that they will not cover the administrative fee.

The American Express agreement states, "The Plan does not cover, and benefits will not be paid for: costs attributed to the Rental Company's normal course of doing business." American Express Guide to Car Rental Loss and Damage Insurance, 2000.

We routinely received letters from American Express that state, "Administrative fees are only reimbursable when accompanied by proof of payment and are only reimbursable for expenses considered outside the normal course of doing business."

It has been our experience that Visa Travel Assist will pay a reasonable administrative fee.

It has been our experience that MasterCard does not cover administrative fees.

The member benefits plan states, "What is not covered:…administrative or other fees charged by the rental car company. Presenting the Benefits that Make Your Gold MasterCard Smart Money, 1996. The fee is specifically excluded from the benefit program.

It has been our experience that Diner Club will pay a reasonable administrative fee.

"Ordinary course" means "a usual and necessary activity that is normal or incidental to the business." The rental agency is in the business of renting vehicles. When a car is damaged, the rental agency is forced to deal with the responsibilities and duties of processing a damage claim, which are well outside of its normal course of business.

An insurance company plans for, anticipates, and even builds its entire business around the process of collecting premiums to pay for damages and the cost of processing damages. A rental agency would not incur any cost related to adjusting and collection activities if its vehicle had not been damaged. Adjusting is not an incidence of renting, rather it is an incidence of negligence or a specific injury, and its costs may be charged under the law to the renter or wrongdoers. If no injury occurs, no work is required, and no costs incurred.

The administrative fee includes many different factors (see "what the fee includes") which can not be quantified on a bill. Employees times, phone calls, mail costs and negotiation sessions are too complex and speculative to be billed out for the purposes of American Express. Furthermore, the rental agency can not create a fictitious invoice simply for American Expresses purposes.

The rental contact holds the renter responsible for all loss or damage to the vehicle despite fault.

The rental contact does not govern the third party. It is tort law which requires the third party to pay the administrative fee. However, if the third party fails to pay the fee and the renter is required to make payment to the rental agency, then the renter may have a cause of action against the third party. This is due to the fact that the renter would not have had this damage if it had not been for the negligence of the third party.

The administrative fee covers all costs and expenses of processing the damage claim.

The life of a damage claim begins either when the damage occurs or when the damage is discovered. In the case of known damage, such as a renter v. deer accident, the renter will call the rental agency to inform them of the accident and will usually request a new vehicle. An employee has to take the phone call, arrange for the towing of the damaged vehicle, arrange for the renter to be picked up or a new vehicle delivered to them. All of these costs are incurred before the vehicle is even returned to the rental lot. In the case of unreported or unnoted damage, the renter, the return agent or the service agent will notice the damage. A report of some kind is made to document the damages. A manager will verify the damage to the vehicle and arrange to have the damage repaired.

In all claims, phone calls are made to the renter to determine what happened and how they would like to take care of the claim. Insurance companies are contacted as well as the card member benefits programs. The manager has to evaluate the claim and determine if the damage is attributable to the current renter and verify if the renter is responsible for the damage.

Once the damage is documented and the claim is determined to be valid the claim then has to be established either at the rental agency or with a third party administrator. This entails obtaining the estimate, pulling the rental agreement, obtaining the damage report or inspection slips, taking photos and creating the accident folder. Then the repairs must be scheduled and the vehicle taken to the shop. Or in the case of a total loss, salvage bids must be obtained the disposal of the salvage must be arranged.

Then the work on the claim begins. Contacting the renter and there insurance to inform them that the claim is being pursued after the initial investigation. Sending the proof of the claim to the renter, insurance company, credit card member benefit program or other collectable source. Follow up calls, further documentation and the progression of the claim all take additional administrative costs. Correspondence with the collectible source is an additional cost. There is the time involve din creating the letters, the actual paper supplies and postage as well as the expertise in working these types of files. Education of the renter, insurance and credit card benefits program about the rental contract and all of the elements of the claim are also costs of working the claim. If the renter disputes the claim, then the claim must be reevaluated and the dispute responded to. Finally, the negotiation and finalization of the payment of the claim will take more correspondence, phone calls, emails and faxes.

While all of this is going on there is also the work on back end of the claim that is being done. The estimate, towing bill, and impound fees must be paid. Police reports may have to be obtained. Appraisal may need to be obtained and the fees be paid. The payment for the claim also must be collected and properly applied to the claim and credit given for bills paid on the appropriate vehicle.

The life of a claim is long and involves many tasks. Tasks that cost time, money and energy. Tasks that would not have been incurred if the damage had never occurred. All of these elements of the Administrative fee are compensable parts of the damage claim.

Several states have specific statutes allowing the collection of administrative fees for rental car damage claims.

California passed a statute which creates a scale for the administrative fee based on the amount of damages. "The administrative charge described in paragraph (7) of subdivision (b) shall not exceed (A) fifty dollars ($50) if the total estimated costs for parts and labor is more than one hundred dollars ($100) up to and including five hundred dollars ($500) up to and including one thousand five hundred dollars ($1,500), and (C) one hundred fifty dollars ($150) if the total estimated cost for parts and labor exceeds one thousand five hundred dollars ($1,500). No administrative charge shall be imposed if the total estimated cost of part and labor is one hundred dollars ($100) or less". CA Civil 1936.

In Indiana the legislature has passed a more aggressive statute to compensate the rental agency for the administrative fee. The administrative charge described in section 13(7) of this chapter may not exceed: (1) ten percent of (10%) of the total estimated costs for parents and labor, if the damage is one thousand five hundred dollars (1,500.00 or less: or (2) the amount specified in subdivision (1) plus seven and one-half percent (7 ½%) of the amount in excess of one thousand five hundred dollars ($1,500), if the total estimated costs for parts and labor exceeds one thousand five hundred dollars ($1,500). IN ST 9-25-6.They have based the fee on the percentage of the estimate. Again, the statue is very clear as to the right to charge and collect an administrative fee.

The Iowa legislature simply allows the collection of an administrative fee. It does not give a specific amount for the fee, but it is important to note that the fee is not prohibited. The only limitation given is that the fee must be reasonable and be related to the costs associated with processing the damage claim. \"Administrative fees shall be limited to the reasonable administrative costs associated with processing the damage claim.\" IA St §516D.4 (i).

In Nevada they have adopted the identical statute. An administrative charge pursuant to paragraph (g) of subsection 1 of NRS 482.31535 must not exceed: (A) fifty dollars ($50) if the total estimated costs for parts and labor is more than one hundred dollars ($100) up to and including five hundred dollars ($500) up to and including one thousand five hundred dollars ($1,500), and (C) one hundred fifty dollars ($150) if the total estimated cost for parts and labor exceeds one thousand five hundred dollars These two states have passed these consumer protection statutes to protect the renter and limit the amount that can be charged for the administrative fee. It is clear that the administrative fee is allowed and is a proper compensation under these statutes

North Carolina has addressed this issue as well. The statute does not give a detailed fee schedule but rather indicates that the renter is responsible for the administrative as provided for in the contract. Here again, the fee is allowed under the statute as well as the contract. "'property damage' means damage or loss to a rented vehicle in excess of two hundred fifty dollars ($250), including loss of use and any costs or expenses incident to the damage or loss, for which the renter is legally obligated to pay." NC St § 58-36-80.

The Texas code takes a broad look at the administrative fee allowing the payment of the "costs and expense incident to the damage". This administrative fee is part of the definition of damages. It is clear that the legislature wanted the rental agency to be allowed to charge and collect the administrative fee. "'Damage' means any damage or loss to a rented vehicle, including theft or loss of use and any cost and expense incident to that damage or loss regardless of any negligence that might be involved in the damage or loss." TX CIV ST Art. 9026.

In the state of Utah the statute defines damages and includes in the definition administrative fees. Here again the legislature limits the collection of the fee to costs and expenses in order to keep the fee related to the costs associated with processing the damage claim. "'Damage' means any damage or loss to the rented vehicle resulting from a collision, including loss of use and any costs and expenses incident to the damage or loss." U.C.A. 31A-22-311.

The administrative fee is derived from a sliding scale which is based on the amount of the damage repair evaluation.

The law requires the fee to be reasonable within the industry.

PurCo has chosen to align its fees with state statues which dictate administrative fees specifically for damage to rental vehicles. These statutes permit rental agencies to mitigate their damages by reducing the burdensome costs of producing detailed analysis of costs in processing the claim witch is directly attributable to the negligence of the insured. This flat fee system is an equitable and fair system to determine the fee.

The administrative fee which are permitted by California Civil Code 1936 and Nevada Revised Statute 482.3153 are based on a sliding scale according to the damage repair evaluation. These two states cap the administrative fee at $150, however these statute are aged and do not reflect current costs in claims adjusting. Indiana Code 24-4-9-4 allows a fee of 10% for the first $1,500 of damage and 7.5% for any amount over $1,500, without a cap. Fees for major damage can easily exceed 1,000.

PurCo has equitably chosen a middle position and created a sliding scale based on the damage repair evaluation beginning at $0 and capping at $250. Looking at the amount of work put into the claim and the amount of administrative fee imposed, this schedule is very reasonable and fair to both parties.