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Mouse over for answers to the questions. Those with right arrows can be expanded by clicking.
What is the Before and After Method of Measuring Damages?
The law provides that whenever property is damaged the injury will be measured by the value of the property immediately before the accident less the value of the property immediately after the accident.
Why am I paying for a new car when the rental vehicle that I damaged can be fixed?
The rental contract holds you responsible for all loss or damage to the vehicle despite fault. This includes the cost of restoring the vehicle to the condition that it was in prior to the accident.
Sometimes repairs alone will not put the vehicle into the pre-accident condition. When a vehicle is heavily damaged but is not a total loss the most effective way to measure all of the damages is to take the value of the vehicle immediately prior to the accident less the value of the vehicle immediately after the accident. This is called the before and after method of measuring damages.
Why doesn't the rental agency want to fix the vehicle?
Large repairs take a very long time and often include large supplements. Therefore the original estimate does not indicate what it will really cost to fix the vehicle.
When a vehicle is severely damaged, it is often difficult or impossible to find all of the damage before any repairs are started. Once a vehicle is torn down, often hidden damage is found. This will generate supplements that will increase the costs of repair. Sometimes the rental agency has started to repair a vehicle and then finds extensive additional damages and realizes too late that they should have totaled the vehicle in the first place. Large repair jobs are not always done completely the first time around. The shop may have to make adjustments and the rental agency may find more damage or difficulties after the car is returned. Some large repairs will require two or three trips in to the shop. Likewise, big repairs take a very long time. If the rental agency has to put a car in the shop for four to six weeks, not only are they losing the opportunity to use the vehicle, but they are forced to make payments of the unusable vehicle while it is in the shop. Lengthy repairs are very costly and the rental agency wants to avoid these types of situations.
Additionally, if the vehicle requires frame repair, then it is no longer safe to operate. The frame is a structural part of the automobile. If it is cut or bent in any way the steel is no longer as strong as it was at the time of construction. The manufacturer indicates that a straightened frame is no longer in line with factory specifications and they can not guarantee its safety. When the frame is out of alignment, even by the smallest fraction, the rest of the car will also be out of alignment. This can cause extensive damage and injury if there is a subsequent accident. The rental agency can not take that risk.
Another reason not to repair rental vehicles is if they are a 'program vehicle'. Rental agencies can buy vehicles from manufactures on a special program. They purchase so many cars at a time and the manufacturer guarantees that they will buy back the vehicles from the rental agency. There are many rules to the program. For instance the vehicles can only have so many miles on them. The vehicles have to be kept for a certain period of time, and most critical to this discussion, the vehicles can not have sustained damages over a certain amount usually $2,500. If the vehicle you rented and damaged sustains $5,000 worth of damage not only can the rental agency not turn it back in on the program but they must pay off the car immediately.
The proper of measure of damages is the value of the vehicle immediately before the injury less the value of the vehicle immediately after the injury.
The before and after measure of damages is used to provide an equitable relief to injured parties. When a vehicle is a total loss, the injured party is given the fair market value of the vehicle. This puts him in the same position he was before the injury. When a vehicle is damaged less than its total destruction, the vehicle is repaired to make the owner whole again. But if repairs will not restore the vehicle it to its prior value, the owner is not made whole by the repair cost alone. The law will not treat these types of injuries differently in terms of recovery. In all instances the vehicle must be returned to its pre-accident value or an inequity would exist. One party would be made whole only because his injury was more severe than the other. It is an injustice to not completely restore the lesser-damaged individual.
The Restatement of Torts 2d § 928 sets forth the standard for measuring harm to chattels. "When one is entitled to a judgment for harm to chattels not amounting to a total destruction in value, the damages include compensation for (a) the difference between the value of the chattel before the harm and the value after the harm or, at his election in an appropriate case, the reasonable cost of repair or restoration, with due allowance for any difference between the original value and the value after repairs, and (b) the loss of use."
The general rule of before and after value was intended for heavy damage which is repairable but which significantly decreases the value of the vehicle. Clearly, when a new vehicle sustains damage which exceeds one-half of its value, it will never recapture its prior value. Repairs may outwardly give the vehicle its prior appearance, but close observation will always reveal its compromised character. Because we are required by law to disclose the existence and extent of prior damage, even the stigma of damage alone, especially damages over $7,000 for a vehicle valued at $14,755, will significantly reduce the value of this vehicle. Any denial is either profound display of ignorance of vehicle valuation or blind posturing for the sake of the bottom line. The application of the before and after rule was intended for just such a hit.
Below is a sampling of case law throughout the county which addresses the proper measure of damages for injury to property.
The general rule for the measurement of damages in the state of Ohio is the difference between the before and after accident values. See, Allstate Insurance Company v. Reep, 454 N.E.2d 580 (Ohio Appraisal Fee. 1982); Robbins Motor Transportation, Inc. v. Key GMC Truck Sales, Inc., 381 N.E.2d 1329 (Ohio 1978); Pettijohn v. Clark, 277 N.E.2d 455 (Ohio App. 1971); Falter v. City of Toledo, 158 N.E.2d 893 (Ohio 1959), and Hayes Freight Lines, Inc. v. Traver, 73 N.E. 2d 192 (Ohio 1947). Nothing in any Ohio case law makes repair the exclusive remedy or mandates the cost of repair measure. Cost of repair is a fine alternative when it makes the claimant whole. When it contravenes that most basic of all principles of tort, which is to indemnify the injured party, it is an improper measure.
"The damage sustained by an automobile in a collision may be established by showing the reasonable cost of repairs necessary to restore it to its former condition although the general rule is that the measure of damages to personal property is the difference between its market value immediately before and immediately after the injury. This rule is subject to the limitation that the cost of repairs must be less than the diminution in market value due to the injury. The plaintiff should not benefit by the loss. Where the automobile is totally destroyed, the measure of damages is its reasonable market value immediately before destruction. There can be no recovery beyond such value for mere repairs. Falter v. City of Toledo, 158 N.E.2d 893 (Ohio 1958) citing to Gass v. Agate Ice Cream, Inc., 190 N.E. 323, 324."
In the case of Standard Accident Insurance Co. v. Richmond 297 S.W. 879, the court looked at the standard for repairs. "Appellant contends that it was only required to pay the cost of restoring the car to substantially the same condition it was in before the injury. That is true, if the words 'substantially the same' mean a condition which made the car equal in value to what it is was before the injury." The theory of indemnification requires that Avis be made whole by giving the value of what was lost. The measure of before and after accomplishes this task by looking at the value of what the injured party had immediately prior to the harm and then evaluating the value of what they had immediately following the harm inflicted upon them.
The court in Northwestern National Insurance Company v. Cope, 448 S.W. 2d 717, similarly stated that "It would not be restored to the same condition if the repairs left the market value of the automobile substantially less than the value immediately before the collision."
Pasadena State Bank v. Isaac, is the defining case on the issue of diminution of value in the state of Texas. The Supreme Court outlined the rule for measuring damages to personal property as the difference in the market value immediately before and immediately after the injury. The court further stated, "this principle of law is of such universal application that it would be trite to cite authorities from the many jurisdictions that follow the rule.
Recognizing that different fact patterns may require a variation on the general rule, the court relied on the Restatement of the Law of Torts Vol. 4 §928 which states:
Where a person is entitled to a judgment for harm to chattels not amounting to a total destruction in value, the damages include compensation for
(a) the difference between the value of the chattel before the harm and the value after the harm or, at the plaintiff's election, the reasonable cost of repair or restoration where feasible, with due allowance for any difference between the original value and the value after repairs...
Therefore, if the property is repairable, the injured party may elect to repair the property and recover the difference in value rather than collecting the measure of damages from the before and after method. see also Jones v. Wallingsford, 921 S.W. 2d 463 (Tex.App. Eastland 1996) and Carson v. Bryan, 523 S.W. 2d 711 (Tex.App. Amarillo 1976).
It is well-established Oregon law that the proper measure of damage to a vehicle is the difference between the vehicle value before and after the accident. See, Costley v. Holman, 68 P.2d 614 (Or. App. 1980), Powell v. Hartman, 587 P.2d 506 (1978); State v. Crace, 554 P.2d 628 (Or. App. 1976). That effectively resolves the issue, for that is the measure of damage by which the responsible party is required to adjust this claim under Oregon law. The rationale behind the before-and-after measure of damage is that mere repairs will not make the injured party whole because its property is no longer worth what it was. The rental agency has the right to be put back into the same situation that it was in prior to the accident.
The dramatic effect of the diminution claim is illustrated in Farmers v. R.B.L. Investment Company, 675 P.2d 1381 (Ariz. 1983). In that case, the court stated that in "major accidents", the proper measure of damages is the difference between the value of the vehicle before and after the accident. Where the injured party has elected to repair the vehicle, it may then recover the diminished value. In Farmers a dealership's automobile was damaged. The vehicle was worth $16,415. The repairs cost $3,122.63. The dealership then sold the vehicle for $13,500. The court awarded the difference in value which amounted to $2,915.
Farmers further supports the before and after measure citing Mesa City v. Lesueur 21 Ariz. 532, 190 P. 573, 576. "The measure of damages for injuries to personal property less its destruction is the difference in the value of the property immediately before and immediately after the injuries." The argument that the court supports is clearly outlined by the appellant;
"It is very clear that an automobile loses value when it is damaged. The appellant in Farmers points out the common sense realities of diminution of value. "an automobile that has been in a major accident is worth less than an identical automobile that has not been in an accident, suggesting that one need only examine their own biases as a consumer to acknowledge a disparity in the price they would be willing to pay for either vehicle. They further argue that where the choice is between an automobile that is "new" versus one that was new but was in an accident and is now repaired, the disparity is magnified."
The law in Arkansas provides that when personal property is damaged, the measure of those damages is the difference in the value of the property immediately before the injury and immediately after the injury. See Ark. St. 27-53-401. The reasoning behind this rule is that sometimes a vehicle can be repaired, yet still lose some of its value due to the damages.
Colorado case law supports both the concept of diminution of value and before and after as a measure of damages. Airbore, Inc v. Denver Air Center, 832 P.2d 1086 (Colo. Ct. App. 1992) sets forth the basis for diminution of value in Colorado. An injured party is entitled to be made whole by the tort-feasor. If a vehicle sustains damages, which after repairs can not be put back to its prior condition, then the owner has not been made whole. The court unequivocally states, "In addition to the reasonable costs of repairing the property, the plaintiff is entitled to the decrease in market value to the property as repaired."
Duggan v. Board of County Commissioners of the County of Weld, 747 P.2d 6 (Colo. Ct. App. 1987) explains that the proper measure of damages for an automobile damaged in a collision is the difference between the value of the vehicle immediately prior to the accident and the value of the vehicle immediately following the accident.
In the state of Utah the courts have adopted the before and after rule to measure damages to damaged property. The case of Hill v. Varner, 290 P.2d 448 the court restated the principle of indemnity citing to Park v. Moorman Mfg. Co., 241 P.2d 914, "The fundamental principle of damages is to restore the injured party to the position he would have been in had it not been for the wrong of the other party."
The case of Hill v. Varner goes on to explain the formula for measuring damages by citing to, Angerman Co., Inc. v. Edgemon, 209 P. 169, "The proper measure of damages for injury to personality not entirely destroyed is the difference between its value immediately before and immediately after injury."
The reasoning behind this rule is that sometimes a vehicle can be repaired, yet still lose some of its value due to the damages. The court looked to the case of Metcalf v. Mellen, 192 P. 676, to expound on this concept. "In some instances, proper repair will restore the market value of the property, but the plaintiff can recover not only the reasonable cost of repairs, but also depreciation in market value, if any, after repair."
The Supreme Court of Virginia in Averett v. Shircliff, 237 S.E. 2d 92 adopts the rule determining the proper measure of damages to motor vehicles. It is outlined in the jury instructions below. The law clearly provides for diminution of value.
"The court instructs the jury that in the valuation of personal property, which has been damaged but not destroyed, the measure of damages is the difference between the market value of the property immediately before and immediately after the property was damaged. The Court further instructs the jury that an exception to this rule is that where personal property can be restored by repairs and the repairs would be less than the diminution in value because of the injury, the amount recoverable is the reasonable cost of restoring the property to its former condition. Thus, if you believe from the preponderance of the evidence that the car involved could not be restored to its former condition by repairs, the measure of damages is the difference between the market value of the car immediately before and immediately after the accident. And if you believe from a preponderance of the evidence that the car involved could be restored to its former condition by repairs, the measure of damage is the reasonable cost of repairs, with reasonable allowance for depreciation."
When is it ok to repair the vehicle and when is it ok to replace the vehicle?
Under what circumstances will mere repair make the claimant whole? Common reason suggests that the cost of repair method of valuation is to be used in two situations: 1) minor damage wherein the vehicle can be restored to its prior condition and value, and 2) low value vehicles with high cost repairs where it makes no sense to repair. Under what circumstances will mere repair cost fail to make the claimant whole? The answer: 1) when a vehicle is a total loss, and 2) when a vehicle can not be restored to its prior condition and prior value. Judge Whiteside, in this concurring opinion in Allstate Insurance Company v. Reep, 454 N.E.2d 580 (Ohio Appraisal Fee. 1982);, commented: "Costs of repair of the damaged property is a substitute measure of damages if: (1) it mitigates rather than enhances damages computed by the difference-in-market-value test; and (2) it restores the damaged property to the same condition and same value it had before the injury." Allstate, 454 N.E.2d at 582. This sensible requirement harmonizes with the principle of making the claimant whole. Certainly there is no mystery behind the rationale.
How do you determine how much to charge me for the value of the vehicle prior to the accident?
The before and after measure states that we begin with the fair market value of the vehicle immediately prior to the accident.
Both the rental contract and negligence law requires that the rental agency be put back into the position that they would have been if the damage had not occurred. The question is what value will appropriately put them back in to this position.
Fair market value is defined as "The amount at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts." Black's Law Dictionary
The purpose of determining fair market value is to ensure that the injured party is made whole or put in the position that they would have been in if the damage had not occurred. The inured party can not receive a windfall due to their damages. The goal is to determine what the property is worth in the open market.
How do you determine the Fair Market Value?
PurCo will evaluate the Manufacturer's Suggested Retail Price (M.S.R.P. ), the Kelly Blue Book Value, the National Automobile Dealers Association (N.A.D.A.), or the M.S.R.P. less a mileage depreciation. There are various ways to determine the Fair Market Value of the vehicle. Used car guides can be implemented to determine a value. However if the vehicle is too new to be in the guide this will not be applicable. The M.S.R.P. can also be implemented if the vehicle is brand new. C.C.C. are also available but are traditionally low as the data is recovered by inquiring the lowest amount that the dealership would sell the car for. This does not fill the definition of Fair Market Value.
This value is not connected to the amount originally paid for the vehicle. That figure can only demonstrate what the value was to the parties involved at the time of purchase. The fair market value is also not connected to the amount that the injured party owes on the vehicle. Clearly, any amount owed on the vehicle only demonstrate what someone was willing to loan with the vehicle as collateral.
Both the rental contract and negligence law requires that the rental agency be put back into the position that they would have been if the damage had not occurred. The question is what value will appropriately put them back in to this position. "Whether the retail or wholesale price will govern when calculating damages depends on the replacement market available to the injured party." 4 J. Nates et al., Damages in Tort Actions §37.01 [1][b], at 18 (1994).
In the case of United Truck Rental v. Kleenco Corp., 929 P.2d 99 (Hawaii App. 1996) the court looked at replacing a rental truck and determined that the retail value was the appropriate value.
"Because United was a rental company it is not strictly a consumer or a trailer….There was no evidence that a single vehicle replacement could be purchased by United at the wholesale price. Hence the evidence supports the conclusion that unless United was buying in 'bulk' the wholesale market was not available to it. As a result the market price which would accurately or as precisely as possible compensate United for its stolen truck, under these circumstances, was the retail market price. See Richards, 10 Haw.App at 623, 880 P.2d at 1238-39 ("All of the difference measures for damages to personal property are merely guides to common sense, and the question in each case is ultimately a question of fully compensating the injured party. Thus, the various measures should be adjusted as required to meet the goal of compensation. It follows then that no mechanical rule can be applied with exactitude in the assessment of property damage and each case must rest on its own facts and circumstances as supported by the proof in the record.)
The rental agency is limited to the wholesale price only if they can replace the vehicle at the time of injury with a wholesale price. Since your clients can not regularly replace their vehicles at a wholesale price, then in order to put them in the position that they would have been in if the accident had not occurred, they will have to be compensated with a retail value of the property lost.
When a vehicle is damaged and repaired, it may not retain its pre-accident condition. When there is a loss in value due to an accident it is called diminution of value.
Section 928 of the Restatement (Second) of Torts provides that compensation for damage to personal property can include "the reasonable cost of repair or restoration, with due allowance for any difference between the original value and the value after repairs". Comment (a) indicates that the risk of repairs not restoring the item to its original value is placed on the one who caused the damage. Under such circumstances, the owner may recover not only repair costs, but the difference in the value of the property before the damage and the value after repairs.
How does diminution of value fit in with the before and after method of measuring damages?
The before and after measure of damages is intended to compensate the injured party for all of the damages sustained. When you use the before and after method, the injured party will be fully compensated for all damages including the diminution of value. Diminution is a separate damage, but can be compensated by using the before and after method of damages.
What is "substantially the same condition"?
In Littlejohn v. Elionsky, 130 Conn. 541, 36 A.2d 52 (Connecticut. 1944) the court stated, “The correct rule is well stated in Hawkins v. Garford Trucking Co., Inc., 96 Conn. 337, 341, 114 A. 94, 96: 'Our rule is that, when the injury is less than a complete loss * * * the measure of damages is the difference in value between the property before and after the loss, with interest from date of loss. And when the property injured may be repaired, if the repairs will substantially restore the property to its former condition, the cost of such repairs will ordinarily furnish proper proof of the loss.' In the instant case there was no claim of proof that the automobile was restored to substantially its former condition, except as it may be indicated by the claim that the car was repaired. The ordinary meaning of repair is to restore to a sound or good state after injury. Webster's New International Dictionary, 2d Ed. The finding is, therefore, to be construed as equivalent to one that the defendant offered evidence that the car could be and was restored to a sound or good state. This falls short of a claim that the repairs had put the car in substantially the same condition as before the collision. For example, a new car may be badly damaged and be repaired so as to put it in a sound or good state, and yet be worth much less than before the collision. The clause quoted from the Hawkins case, supra, 'if the repairs will substantially restore the property to its former condition,' is an integral part of the rule, and not mere tautology. The court was justified in ignoring the defendant's claim as to repairs, for if it had mentioned the matter it would have had to say something like this: 'There is evidence that the car was repaired at an expense of $400, but you cannot take that as the measure of damages, because there is no evidence that these repairs restored the car substantially to its former condition.'“
What does the law say about diminution?
Below is a sampling of case law which explains the diminution of value issue
Farmers Ins. Co. of AZ v. R.B.L. Investment Co., 138 Ariz. 562, 675 P.2d 1381 (Ariz. Ct. App. 1983). The owner of a negligently damaged motor vehicle would be compensated for damages for the loss in fair market value above and beyond the cout of repair.
Airborne, Inc. v. Denver Air Center, Inc., 832 P.2d 1086 (Colo. Ct. App. 1992). The plaintiff is entitled to damages for the decrease in market value to property as repaired, in addition to the reasonable costs of repairing the property.
Bayboro Marine, Inc. v. MacFarlane, 484 So.2d 1380 (Fla. Dist. Ct. App. 1986). The owner of a chattel partially destroyed by the negligence of another may recover the reasonable cost of repair or restoration with due allowance for any irreparable and permanent loss in value.
Alonso v. Fernandez, 379 So.2d 685 (Fla. Ct. App. 1980). Where personal property is harmed, the owner is entitled to damages including the reasonable cost of repair or restoration where feasible, with due allowance for any difference between the original value and the value after repairs.
Giles Lafayette, Inc. v. State Farm Mut. Auto. Ins. Co., 467 So.2d 1309 (La. Ct. App. 1985), writ not considered 472 So.2d 911. Generally, recovery in cases of damage to automobiles is limited to the cost of repair, but additional damages may be recovered on proof of diminution of value by virtue of the vehicle having been involved in an accident.
Volkswagen of America, Inc. v. Robertson, 713 F.2d 1151 (5th Cir. 1983). Under Louisiana law the cost of repair plus the "as-repaired" depreciation in market value is the correct measure of damages.
Thomas v. Global Boat Builders & Repairmen, Inc., 482 So.2d 1112 (Miss. 1986). Fair compensation to recover the loss on personal property which has been damaged encompasses the cost of repairs plus the depreciation, if any, following the repairs.
Wright v. Edison, 619 S.W.2d 797 (Mo. Ct. App. 1981). If repairs are made to personal property such as an automobile, and after the repairs are made the item is still not as valuable as it was before the injury, the owner may recover in addition to the cost of repairs such amount as will equal the difference between the value of the item before the injury and after the repairs were made upon it.
Rook v. John F. Oliver Trucking Co., 556 S.W.2d 200 (Mo. Ct. App. 1977). A person whose car was damaged in a collision may recover both for the cost of repairing the car and for the difference between the market values of the car before the collision and after the repairs.
Fanfarillo v. East End Motor Co., 172 N.J. Super. 309, 411 A.2d 1167 (N.J. Super. Ct. App. Div. 1980). An appropriate measure of damages for a damaged automobile was the cost of repair and the depreciated value of the vehicle.
Hale v. Basin Motor Co., 110 N.M. 314, 795 P.2d 1006 (1990). If repairs fail to restore personal property to its original fair market value, the owner may recover the difference.
Hill v. Varner, 4 Utah 2d 166, 290 P.2d 448 (1955). In some instances, proper repair will restore the market value of an automobile, but the plaintiff can recover not only the reasonable cost of the repairs, but also depreciation in market value, if any, after repairs.
Ellis v. King, 184 W.Va. 227, 400 S.E.2d 235 (1990). If the owner of a vehicle which is damaged and subsequently repaired can show diminution in value, then recovery is permitted for that diminution in addition to the cost of the repair.
Hawes v. Germantown Mut. Ins. Co., 103 Wis. 2d 524, 309 N.W.2d 356 (Wis. Ct. App. 1981). The trial court properly found that even after repairs had been made the market value would be impaired, and compensation for that diminution of value was proper in addition to the cost of repairs where the repairs, when made, would not restore the property to its pre-damaged value.
Definitions of Common Legal Terms
What is a tort?
What is a contract?
What are damages?
What is an injury?
What constitutes a loss?
What is Market Value?
A tort is "a wrong; a private or civil wrong or injury resulting from a breach of a legal duty that exists by virtue of society's expectations regarding interpersonal conduct. The elements of a tort are: the existence of a legal duty owed by the defendant to a plaintiff, reach of that duty and a causal relation between the defendant's conduct and the resulting damage to the plaintiff." Barrons Law Dictionary 493 (3ed 1991)
A contract is "a promise, or a set of promises, for breach of which the law gives a remedy, or the performance of which the law is some way recognizes as a duty. The essentials of a valid contract: a proper subject matter, consideration, mutuality of agreement and mutuality of obligation. A transaction involving two or more individuals whereby each becomes obligated to the other, with reciprocal rights to demand performance of what is promised by each respectively. The total legal obligation which results from the parties' agreement as affected by law." Barrons Law Dictionary 97 (3ed 1991)
Damages are "monetary compensation which the law awards to one who has been injured by the action of another; recompense for a legal wrong such as a breach of contract or a tortious act. There are various measures used for calculation damages, including diminution of value and cost of competition." Barrons Law Dictionary 117 (3ed 1991)
An injury is "any wrong or damage done to another, either in his person, rights, reputation, or property. Unlike the ordinary meaning of injury (that which damages the body), a legal injury is any damage resulting from a violation of a legal right, and which the law will recognize as deserving of redress." Barrons Law Dictionary 238 (3ed 1991)
A loss is "the act of losing or the thing lost; synonymous with "damage"; as used in an insurance policy, "a state of fact of being lost or destroyed, ruin or destruction; and where a policy requires notice of a loss, refers to the date that a fraud was discovered." Barrons Law Dictionary 284 (3ed 1991)
Market value is "the price that goods or property would bring in a market of willing buyers and willing sellers, in the ordinary course of trade. It cannot be determined on the basis of a price that would be acceptable to a buyer or seller operating under pressures or constraints….Market value is generally established on the basis of sales of similar goods or property in the same locality." Barrons Law Dictionary 291 (3ed 1991)
How do you determine how much to charge me for the totaled vehicle?
Your contractual responsibility is for the full value of the vehicle. We determine the Fair Market Value for the vehicle prior to the accident and charge this amount.
Both the rental contract and negligence law requires that the rental agency be put back into the position that they would have been if the damage had not occurred. The question is what value will appropriately put them back in to this position.
How do you determine how much to charge me for the totaled vehicle?
Your contractual responsibility is for the full value of the vehicle. We determine the Fair Market Value for the vehicle prior to the accident and charge this amount.
Both the rental contract and negligence law requires that the rental agency be put back into the position that they would have been if the damage had not occurred. The question is what value will appropriately put them back in to this position.
Fair market value is defined as "The amount at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts." Black's Law Dictionary
The purpose of determining fair market value is to ensure that the injured party is made whole or put in the position that they would have been in if the damage had not occurred. The inured party can not receive a windfall due to their damages. The goal is to determine what the property is worth in the open market.
What do you use to determine the Fair Market Value?
PurCo will evaluate the Manufacturer's Suggested Retail Price (M.S.R.P. ), the Kelly Blue Book Value, the National Automobile Dealers Association (N.A.D.A.), or the M.S.R.P. less a mileage depreciation. There are various ways to determine the Fair Market Value of the vehicle. Used car guides can be implemented to determine a value. However if the vehicle is too new to be in the guide this will not be applicable. The M.S.R.P. can also be implemented if the vehicle is brand new. C.C.C. are also available but are traditionally low as the data is recovered by inquiring the lowest amount that the dealership would sell the car for. This does not fill the definition of Fair Market Value.
This value is not connected to the amount originally paid for the vehicle. That figure can only demonstrate what the value was to the parties involved at the time of purchase. The fair market value is also not connected to the amount that the injured party owes on the vehicle. Clearly, any amount owed on the vehicle only demonstrate what someone was willing to loan with the vehicle as collateral.
Both the rental contract and negligence law requires that the rental agency be put back into the position that they would have been if the damage had not occurred. The question is what value will appropriately put them back in to this position. "Whether the retail or wholesale price will govern when calculating damages depends on the replacement market available to the injured party." 4 J. Nates et al., Damages in Tort Actions §37.01 [1][b], at 18 (1994).
In the case of United Truck Rental v. Kleenco Corp., 929 P.2d 99 (Hawaii App. 1996) the court looked at replacing a rental truck and determined that the retail value was the appropriate value.
"Because United was a rental company it is not strictly a consumer or a trailer….There was no evidence that a single vehicle replacement could be purchased by United at the wholesale price. Hence the evidence supports the conclusion that unless United was buying in 'bulk' the wholesale market was not available to it. As a result the market price which would accurately or as precisely as possible compensate United for its stolen truck, under these circumstances, was the retail market price. See Richards, 10 Haw.App at 623, 880 P.2d at 1238-39 ("All of the difference measures for damages to personal property are merely guides to common sense, and the question in each case is ultimately a question of fully compensating the injured party. Thus, the various measures should be adjusted as required to meet the goal of compensation. It follows then that no mechanical rule can be applied with exactitude in the assessment of property damage and each case must rest on its own facts and circumstances as supported by the proof in the record.)
The rental agency is limited to the wholesale price only if they can replace the vehicle at the time of injury with a wholesale price. Since your clients can not regularly replace their vehicles at a wholesale price, then in order to put them in the position that they would have been in if the accident had not occurred, they will have to be compensated with a retail value of the property lost.
Loss of use is for the downtime of the vehicle. When the rental vehicle is damaged the rental agency can not use the vehicle, and the rental agency has a right to be compensated for the loss of use of their property.
Loss of use is a property right to which any owner of property is entitled. It is based on the principle that an owner of property has the right to use that property in whatever lawful manner that they choose. When an owner of property suffers damage for which another party is responsible, the owner is entitled to be compensated fully for the injury. Compensation for a harm to property includes the amount of damages to property and loss of use.
Section 928 of the Restatement (Second) of Torts provides that damage for harm to chattels includes damages for the loss of the use of the chattel. Section 931 discusses loss of use damages. Comment (b) provides that "[t]he owner of the subject matter is entitled to recover as damages for the loss of the value of the use, at least the rental value of the chattel or land during the period of deprivation. This is true even though the owner in fact has suffered no harm through the deprivation, as when he was not using the subject matter at the time or had a substitute that the used without additional expense to him."
Loss of use is for the downtime of the vehicle. When the rental vehicle is damaged the rental agency can not use the vehicle, and the rental agency has a right to be compensated for the loss of use of their property.
Loss of use is a property right to which any owner of property is entitled. It is based on the principle that an owner of property has the right to use that property in whatever lawful manner that they choose. When an owner of property suffers damage for which another party is responsible, the owner is entitled to be compensated fully for the injury. Compensation for a harm to property includes the amount of damages to property and loss of use.
Section 928 of the Restatement (Second) of Torts provides that damage for harm to chattels includes damages for the loss of the use of the chattel. Section 931 discusses loss of use damages. Comment (b) provides that "[t]he owner of the subject matter is entitled to recover as damages for the loss of the value of the use, at least the rental value of the chattel or land during the period of deprivation. This is true even though the owner in fact has suffered no harm through the deprivation, as when he was not using the subject matter at the time or had a substitute that the used without additional expense to him."
The Right to Recover Loss of Use Damages:
Hannah v. Brown, 400 So. 2d 410 (Ala. Civ. App. 1981). The loss of the use of a personal automobile during the reasonable period of repair is an element of recoverable damages in addition to the difference between the before and after reasonable market value.
Fryar v. Sanders, 301 Ark. 379, 784 S.W.2d 168 (1990). An automobile owner was entitled to reasonable damages for the loss of use of a vehicle, even though the vehicle was completely destroyed.
Koninklijke Luchtvaart Maatschaapij v. United Technologies Corp., 610 F.2d 1052 (2d Cir. 1979). The theory behind allowance of damages for loss of use of a damaged vehicle is that it is not the actual use, but the right to use, that is compensable and that is true whether the damaged property was employed in a commercial enterprise or used for pleasure. Under New York and Connecticut law, the owner of a commercial vehicle may recover loss of use damages based on rental value without proving that he suffered an actual financial loss and without proving that he needed a substitute vehicle to cover the loss of the damaged vehicle.
Hamacher v. Decker Livestock, Inc., 536 N.E.2d 304 (Ind. Ct. App. 1989). A claim for loss of use of personal property during the period of repair is a proper damage element in a suit for injury to personal property. The ordinary measure of loss of use damage is the fair rental value of the item.
Long v. McAllister, 319 N.W.2d 256 (Iowa 1982). The State Motor Vehicle Damage Rules are to be modified to permit full compensation, including loss of use damages.
Herzig v. Larson-Sawchak, 464 N.W.2d 754 (Minn. Ct. App. 1991). The owner of a commercial vehicle may recover damages for the loss of use of that vehicle while it is being repaired.
In Re Commodore Hotel Fire and Explosion Cases, 324 N.W.2d 245 (Minn. 1982). When a chattel is damaged, the damages include compensation for loss of use.
Riddle v. Dean Machinery Co., 564 S.W.2d 238 (Mo. Ct. App. 1978). Ownership of property carries with it the right to use or control the use of that property, and therefore one who has been wrongfully deprived of the use of property has had a loss of one of the valuable rights or interests in property. Generally, damages for wrongful deprivation of the use of property are to be measured by its rental value.
Rosenberg v. Pritchard Servs., Inc., 774 F.2d 293 (8th Cir. 1985). Missouri law permitted an award of damages in a negligence action for office furnishings, other personal property, and for loss of use of personal property arising from a building fire.
Camaraza v. Bellavia Buick Corp., 216 N.J. Super. 263, 523 A.2d 669 (N.J. Super. Ct. App. Div. 1987). Damages for tortious damage to an automobile may include loss of use of the automobile during the time reasonably required to complete repairs, where the owner is temporarily deprived of the use of the automobile.
Stuart v. National Indem. Co., 7 Ohio App. 3d 63, 454 N.E.2d 158 (1982). Damages for loss of use are recoverable for the interval necessary to accomplish repairs in an action for tortious damage to a motor vehicle.
Kinter v. Claverack Rural Elec. Co-op, 329 Pa. Super. 417, 478 A.2d 858 (1984). Damages may be recovered for the loss of use of personal property whether or not the property is repairable.
Corporate Air Fleet of Tenn. v. Gates Learjet, Inc., 589 F. Supp. 1076 (D. Tenn. 1984). Ownership of an item of property carries with it the right to use, or to control the use of, that item of property and, therefore, when a defendant tortiously injures an item of property, a valuable right or interest is lost, namely, the right to use the property. Tennessee law permits recovery for loss of use in a case of a repairable chattel whether the chattel was used for commercial or pleasure purposes.
How to Determine Loss of Use Damages.
Badillo v. Hill, 570 So.2d 1067 (Fla. Dist. Ct. App. 1990). An appropriate measure of loss of use damages is the cost of renting a replacement during the period of repairs, regardless of whether or not one actually was rented.
Northamerican Van Lines, Inc. v. Roper, 429 So.2d 750 (Fla. Dist. Ct. App. 1983). In cases involving the loss or interference with the use of a person's property, damages are measured by the amount necessary to rent a similar article, regardless of whether the article is actually rented.
Hamacher v. Decker Livestock, Inc., 536 N.E.2d 304 (Ind. Ct. App. 1989). A claim for loss of use of personal property during the period of repair is a proper damage element in a suit for injury to personal property. The ordinary measure of loss of use damage is the fair rental value of the item.
Persinger v. Lucas, 512 N.E.2d 865 (Ind. Ct. App. 1987). Damages for loss of use of personal property are measured by the reasonable value of the loss of use for the reasonable amount of time required for repair or to obtain a replacement. Generally, reasonable value is measured by the fair or reasonable rental value of like property in the market area.
Ashland Pipeline Co. v. Indiana Bell Tel. Co., 505 N.E.2d 483 (Ind Ct. App. 1987). Damages for loss of use are measured by fair rental value, but may be measured by lost profits where profits are ascertainable.
Public Serv. Co. of Ind., Inc. v. Bath Iron Works Corp., 773 F.2d 783 (7th Cir. 1985). Loss of use damages may be measured by the fair rental value of the property.
Jay Clutter Custom Digging v. English, 393 N.E.2d 230 (Ind. Ct. App. 1979). The proper measure of damages because of deprivation of the use of property is its fair rental value during the time that the injury existed.
Nisbet v. Yelnik, 124 Ill. App. 3d 466, 464 N.E.2d 230 (Ind. Ct. App. 1979). The measure of loss of use damages when the plaintiff has been deprived of the use of personal property is the reasonable rental value of similar property for the period of deprivation.
Nolan v. Auto Transporters, 226 Kan. 176, 597 P.2d 614 (1979). Loss of use is the value of renting a substitute vehicle while repairs are being made.
Romco, Inc. v. Broussard, 528 So.2d 231 (La. Ct. App. 1988), writ denied 533 So.2d 356; Earl Williams Constr. Co. v. Thornton & Brooks, Inc., 501 So.2d 1037 (La. Ct. App. 1987), writ denied 504 So.2d 881. Damages for loss of use are measured by the rental cost of a substitute vehicle.
Riddle v. Dean Machinery Co., 564 S.W.2d 238 (Mo. Ct. App. 1978). Ownership of property carries with it the right to use or control the use of that property, and therefore one who has been wrongfully deprived of the use of property has had a loss of one of the valuable rights or interests in property. Generally, damages for wrongful deprivation of the use of property are to be measured by its rental value.
Lenz Constr. Co. v. Cameron, 207 Mont. 506, 674 P.2d 1101 (1984). Loss of use damages are measured by the reasonable rental value of a comparable vehicle, regardless of whether one is rented.
Mountain View Coach Lines, Inc. v. Storms, 102 A.D.2d 663, 476 N.Y.S.2d 918 (1984). The owner of a bus which was damaged in an accident by the negligence of another was entitled to loss of use damages notwithstanding that the owner did not hire a substitute vehicle.
Martin v. Hare, 78 N.C. App. 358, 337 S.E.2d 632 (1985). A person whose pleasure vehicle has been damaged need not actually rent a substitute vehicle to recover loss of use damages.
Gillespie v. Draughn, 54 N.C. App. 413, 283 S.E.2d 548 (1981), review denied 304 N.C. 726, 288 S.E.2d 805. The measure of damages for loss of use would be the cost of renting a similar vehicle during a reasonable time for repairs.
Holmes v. Raffo, 60 Wash. 2d 421, 374 P.2d 536 (1962). The right to compensation for loss of use is not dependent upon the owner having rented a substitute automobile while his own was being repaired.
United States v. Redland, 695 P.2d 1031 (Wyo. 1985). Fair rental value is the measure of damages where a property owner has lost the use of his property.
Who has to pay the loss of use?
The renter, additional renter, authorized driver and a responsible third party are responsible to pay for the loss of use.
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 loss of use. 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."
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. This includes the loss of use charges. 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 if 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.
Will my insurance pay the loss of use?
As the renter or additional driver, if you have insurance coverage for rental vehicles, your policy may or may not have coverage for the loss of use. A responsible third party's policy will pay for what they become legally liable for. Since the loss of use is a proper element of the claim, the liability policy should cover this item.
What if I have a credit card member benefit?
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.
It has been our experience that American Express states that they state that they have coverage for loss of use but will not pay loss of use charges.
The American Express agreement states, "The Plan reimburses a Card member for payments for damage to or theft of a Rental Auto…The Plan also covers reasonable towing storage and loss of use charges (meaning loss of revenue to a Rental Company due to the loss or disablement of a vehicle)." American Express Guide to Car Rental Loss and Damage Insurance, 2000.
We routinely received letters from American Express that state, "Loss of use will only be considered when the fleet and or a specific class of vehicles (full size, midsize, etc.) is fully utilized and documentation can be provided to support the claim. Payment will be considered only if the specific vehicle type has at least 85% utilization."
Rental agencies account for their vehicles on a utilization log. This log tells them how cars are being used. It's primary purpose is to show how many cars are being rented. This log does not show each and every car is being used or all of the possible uses for the car.
Is utilization relevant to loss of use?
No, since utilization only shows what vehicles are on rent and what vehicles are not, it only shows one use for the vehicle. Rental companies have many uses for their vehicles and the loss of use is to compensate the owner of the vehicle for the lost opportunity to use that vehicle is what ever manner that they choose.
What uses does the rental agency have for their vehicles?
While vehicles are an income asset, agencies have paid good money to have a large selection and supply of vehicles for their customers. The rental agency uses these vehicle for many diverse reasons. Vehicles are provided as part of employee compensation. Vehicles may be provided to corporate shareholders as well. Agency's may provide vehicles for complimentary or promotional purposes or awarded as employee perks or bonuses. All of these vehicles would be used but present no rental value to the company. Other promotional values exist: balloons in front of the station, for golf tournament use, etc. Rental companies also need adequate fleet variety and number for marketing purposes such as promotional upgrades. This goes to the heart of customer service which is integrally related to their business reputation. When agencies have inadequate numbers of cars or vehicle model types, their customer service and reputation is jeopardized.
Why should I pay the rental agency loss of use when they have other cars to use?
Your damage claim is about the one car that was damaged. The rental agency purchased that piece of property and has the right to use that piece of property. When the vehicle is damaged, the owner is deprived of their right to use that piece of property in whatever manner that they see fit.
Many courts have looked at this issue. In American Telephone & Telegraph Company v. Connecticut Light & Power Company, 470 F.Supp 105 (US District Court of Connecticut 1979) the court explained, "…The value of an article to its owner…lies in his right to use, enjoy, and dispose of it. These are the rights of property which ownership vests in him, and whether he, in fact, avails himself of his right of use, does not in the least affect the value of his use…His right of user, whether for business or pleasure, is absolute, and whoever injures him in the exercise of that right renders himself liable for consequent damage…quoting from Cook v. Packard Motor Car Co., 92 A at 418, 88 Conn at 603 (Wheeler, J. Concurring)
It has been our experience that Visa Travel Assist will pay a reasonable amount for loss of use.
It has been our experience that MasterCard states that they state that they have coverage for loss of use but will not pay loss of use charges.
The member benefits plan stats, "Coverage will be provided for reasonable and customary loss of use charges that are substantiated by a fleet utilization log and imposed by the rental car company for the period of time the car is being repaired." Presenting the Benefits that Make Your Gold MasterCard Smart Money, 1996.
It has been our experience that Diner Club will pay a reasonable amount for loss of use.
Why do I have to pay if the accident was someone else's fault?
The rental contact holds the renter responsible for all loss or damage to the vehicle despite fault. We always attempt to collect from the at fault third party first, but if they fail to pay for the damages, you are responsible under the contract.
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 loss of use 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.
Why am I being charged this amount for loss of use?
The case law concerning the amount of loss of use damages universally requires that loss of use be allowed for a reasonable period of time. Our formula has been designed to generate a reasonable charge for loss of use. Our loss of use formula is determined by a three-part formula which calculates the number of days that the vehicle was out of service multiplied by the daily rental rate on the contract.
First, for purposes of the formula, one day is equal to four labor hours, representing the average number of hours that a vehicle is worked on per day. It is reasonable to assume that a vehicle has waiting time in the shop. This can be due to paint drying, waiting for parts, or just downtime in the course of the shops cycles. In the normal course of a days work in a body shop the technician will not take one vehicle and work on that vehicle without interruption for the entire 8 hour day. Therefore it is completely reasonably to use the 4 hour figure to determine a work day on the damaged vehicle.
Second, two weekend days are added for every five repairs days, assuming that every repair beings on a Monday to allow for the fewest weekends possible. Obviously if the vehicle will be in the shop over the weekend, then the rental agency can not use it during that period and no work is being done on the repair. You have made the choice to theoretically being all repairs on a Monday. This ensures that you will not use a weekend to "create" additional loss of use.
Third, three administrative days are allowed to obtain an estimate, take the vehicle to the shop and retrieve the vehicle. The repair of the vehicle is from the time that the owner is deprived of the use until the property is repaired and returned to the owner. As long as the amount of time is reasonable the rental agency has a right to be compensated for these administrative days.
Is there a statute in my state or the state that I rented in the regulates loss of use?
Some states have specific regulations for car rental companies and others allow common law to dictate damages to rental vehicles.
Alabama has a statute regarding rental cars but does not list anything specific about loss of use. AL ST §32-15-(1-8).
Alaska has a statute regarding rental cars and allows for loss of use. Alaska also requires that damage to rental cars be covered under your personal liability policy if you live in Alaska. AK ST s 28.35.026.
Arizona has a statute regarding rental cars but does not list anything specific about loss of use.
Arkansas does not have a rental car statute, but they do have a statute which addresses loss of use and allows these damages in all instances of damage to a motor vehicle. A.R.S. §28-324, §13-1806.
California has a rental statute and allows loss of use damages. They are to be measured by the number of hours off of the repair estimate divided by 8 hours to equal on day. Or in the alternative the rental agency can charge the actual amount of days that the repair takes. C.A. Civil §1936.
Colorado has a statute regarding rental cars but does not list anything specific about loss of use. C.R.S.A. § 6-1-(201-205).
Connecticut has a statute regarding rental cars but does not list anything specific about loss of use. C.G.S.A. § 38a-335.
Delaware has a statute regarding rental cars but does not list anything specific about loss of use. DE ST TI 21 s 6104.
DC does not have a rental statute.
Florida has a statute regarding rental cars but does not list anything specific about loss of use.
Georgia does not have a rental statute.
Hawaii has a statute regarding rental cars but does not list anything specific about loss of use. HRS s 437D-(8.5-19).
Idaho does not have a rental statute.
Illinois has a rental statute but does not list anything specific about loss of use.
Indiana's rental statute allows for the collection of loss of use. The statute dictates that loss of use should be 80% of the actual number of days multiplied by the daily rental rate. IN ST 24-4-9
Iowa's rental statute allows for the collection of loss of use. The statute allows loss of use to be measured by the hours required for repair as outlined in the estimate divided by an 8 hour day and multiplied by the daily rental rate. I.C.A. § 516D.5
Kansas has a statute regarding rental cars but does not list anything specific about loss of use. K.S.A. § 50-654.
Kentucky does not have a rental statute.
Louisiana has a statute regarding rental cars but does not list anything specific about loss of use. LSA-R.S. 22:2091
Maine does not have a rental statute.
Maryland has a rental statute which allows the collection of loss of use. MD INSURANCE s 19-512 Code
Massachusetts has a statute regarding rental cars but does not list anything specific about loss of use. M.G.L.A. 90 § 32E 1/2
Michigan does not have a rental statute.
Minnesota has a rental statute which allows the collection of loss of use. This statute used to require 100% utilization and has since been repealed. M.S.A. § 72A.125.
Mississippi does not have a rental statute.
Missouri has a rental statute which allows loss of use not to exceed the reasonable estimate for the for actual income lost. MO ST 407.735
Montana does not have a rental statute.
Nebraska does not have a rental statute.
Nevada has a rental statute and allows loss of use damages. They are to be measured by the number of hours off of the repair estimate divided by 8 hours to equal on day. Or in the alternative the rental agency can charge the actual amount of days that the repair takes. N.V.ST 482.3155
New Hampshire does not have a rental statute
New Jersey does not have a rental statute.
New Mexico has a statute regarding rental cars but does not list anything specific about loss of use. NMSA 1978, s 59A-32-20
New York has a rental statute which limits the collection of damages to 100$ in some circumstances. The statue allows for the collection of loss of use according to the percentage of utilization of the fleet. McKinney General Business Laws 396z.
North Carolina has a statute regarding rental cars but does not list anything specific about loss of use. NC ST s 58-36-80
North Dakota's rental staute allows for loss of use in the amount of 60% of the actual downtime multiplied by the rental rate. N.D.ST 26-1-40-17.1
Ohio does not have a rental statute.
Oklahoma does not have a rental statute.
Oregon has a statute regarding rental cars but does not list anything specific about loss of use. FIND CITATION
Pennsylvania does not have a rental statute.
Rhode Island does not have a rental statute.
South Carolina has a statute regarding rental cars but does not list anything specific about loss of use. SC ST s 56-31-20
South Dakota does not have a rental statute.
Tennessee has a statute regarding rental cars but does not list anything specific about loss of use. TN ST s 56-7-1110
Texas has a rental statute which allows for the collection of loss of use. TX CIV ST Art. 9026
Utah's rental statute allows the collection of loss of use. U.C.A. §31A-22-(311-312).
Vermont does not have a rental statute.
Virginia has a statute regarding rental cars but does not list anything specific about loss of use. VA ST s 59.1-207.29
Washington has a statute regarding rental cars but does not list anything specific about loss of use. WA ST 46.04.465
West Virginia does not have a rental statute.
Wisconsin is the only state in the country which does not allow the collection of loss of use from the renter. WI ST 344.57
Wyoming does not have a rental statute.
What have the courts said about loss of use?
The majority position across the country is that loss of use is an injury that must be compensated for as part of the damage claim.
The following is a sample of case law on the topic of loss of use.
Hannah v. Brown, 400 So. 2d 410 (Ala. Civ. App. 1981). The loss of the use of a personal automobile during the reasonable period of repair is an element of recoverable damages in addition to the difference between the before and after reasonable market value.
Fryar v. Sanders, 301 Ark. 379, 784 S.W.2d 168 (1990). An automobile owner was entitled to reasonable damages for the loss of use of a vehicle, even though the vehicle was completely destroyed.
Koninklijke Luchtvaart Maatschaapij v. United Technologies Corp., 610 F.2d 1052 (2d Cir. 1979). The theory behind allowance of damages for loss of use of a damaged vehicle is that it is not the actual use, but the right to use, that is compensable and that is true whether the damaged property was employed in a commercial enterprise or used for pleasure. Under New York and Connecticut law, the owner of a commercial vehicle may recover loss of use damages based on rental value without proving that he suffered an actual financial loss and without proving that he needed a substitute vehicle to cover the loss of the damaged vehicle.
Hamacher v. Decker Livestock, Inc., 536 N.E.2d 304 (Ind. Ct. App. 1989). A claim for loss of use of personal property during the period of repair is a proper damage element in a suit for injury to personal property. The ordinary measure of loss of use damage is the fair rental value of the item.
Long v. McAllister, 319 N.W.2d 256 (Iowa 1982). The State Motor Vehicle Damage Rules are to be modified to permit full compensation, including loss of use damages.
Herzig v. Larson-Sawchak, 464 N.W.2d 754 (Minn. Ct. App. 1991). The owner of a commercial vehicle may recover damages for the loss of use of that vehicle while it is being repaired.
In Re Commodore Hotel Fire and Explosion Cases, 324 N.W.2d 245 (Minn. 1982). When a chattel is damaged, the damages include compensation for loss of use.
Riddle v. Dean Machinery Co., 564 S.W.2d 238 (Mo. Ct. App. 1978). Ownership of property carries with it the right to use or control the use of that property, and therefore one who has been wrongfully deprived of the use of property has had a loss of one of the valuable rights or interests in property. Generally, damages for wrongful deprivation of the use of property are to be measured by its rental value.
Rosenberg v. Pritchard Servs., Inc., 774 F.2d 293 (8th Cir. 1985). Missouri law permitted an award of damages in a negligence action for office furnishings, other personal property, and for loss of use of personal property arising from a building fire.
Camaraza v. Bellavia Buick Corp., 216 N.J. Super. 263, 523 A.2d 669 (N.J. Super. Ct. App. Div. 1987). Damages for tortious damage to an automobile may include loss of use of the automobile during the time reasonably required to complete repairs, where the owner is temporarily deprived of the use of the automobile.
Stuart v. National Indem. Co., 7 Ohio App. 3d 63, 454 N.E.2d 158 (1982). Damages for loss of use are recoverable for the interval necessary to accomplish repairs in an action for tortious damage to a motor vehicle.
Kinter v. Claverack Rural Elec. Co-op, 329 Pa. Super. 417, 478 A.2d 858 (1984). Damages may be recovered for the loss of use of personal property whether or not the property is repairable.
Corporate Air Fleet of Tenn. v. Gates Learjet, Inc., 589 F. Supp. 1076 (D. Tenn. 1984). Ownership of an item of property carries with it the right to use, or to control the use of, that item of property and, therefore, when a defendant tortiously injures an item of property, a valuable right or interest is lost, namely, the right to use the property. Tennessee law permits recovery for loss of use in a case of a repairable chattel whether the chattel was used for commercial or pleasure purposes.
Badillo v. Hill, 570 So.2d 1067 (Fla. Dist. Ct. App. 1990). An appropriate measure of loss of use damages is the cost of renting a replacement during the period of repairs, regardless of whether or not one actually was rented.
Northamerican Van Lines, Inc. v. Roper, 429 So.2d 750 (Fla. Dist. Ct. App. 1983). In cases involving the loss or interference with the use of a person's property, damages are measured by the amount necessary to rent a similar article, regardless of whether the article is actually rented.
Hamacher v. Decker Livestock, Inc., 536 N.E.2d 304 (Ind. Ct. App. 1989). A claim for loss of use of personal property during the period of repair is a proper damage element in a suit for injury to personal property. The ordinary measure of loss of use damage is the fair rental value of the item.
Persinger v. Lucas, 512 N.E.2d 865 (Ind. Ct. App. 1987). Damages for loss of use of personal property are measured by the reasonable value of the loss of use for the reasonable amount of time required for repair or to obtain a replacement. Generally, reasonable value is measured by the fair or reasonable rental value of like property in the market area.
Ashland Pipeline Co. v. Indiana Bell Tel. Co., 505 N.E.2d 483 (Ind Ct. App. 1987). Damages for loss of use are measured by fair rental value, but may be measured by lost profits where profits are ascertainable.
Public Serv. Co. of Ind., Inc. v. Bath Iron Works Corp., 773 F.2d 783 (7th Cir. 1985). Loss of use damages may be measured by the fair rental value of the property.
Jay Clutter Custom Digging v. English, 393 N.E.2d 230 (Ind. Ct. App. 1979). The proper measure of damages because of deprivation of the use of property is its fair rental value during the time that the injury existed.
Nisbet v. Yelnik, 124 Ill. App. 3d 466, 464 N.E.2d 230 (Ind. Ct. App. 1979). The measure of loss of use damages when the plaintiff has been deprived of the use of personal property is the reasonable rental value of similar property for the period of deprivation.
Nolan v. Auto Transporters, 226 Kan. 176, 597 P.2d 614 (1979). Loss of use is the value of renting a substitute vehicle while repairs are being made.
Romco, Inc. v. Broussard, 528 So.2d 231 (La. Ct. App. 1988), writ denied 533 So.2d 356; Earl Williams Constr. Co. v. Thornton & Brooks, Inc., 501 So.2d 1037 (La. Ct. App. 1987), writ denied 504 So.2d 881. Damages for loss of use are measured by the rental cost of a substitute vehicle.
Riddle v. Dean Machinery Co., 564 S.W.2d 238 (Mo. Ct. App. 1978). Ownership of property carries with it the right to use or control the use of that property, and therefore one who has been wrongfully deprived of the use of property has had a loss of one of the valuable rights or interests in property. Generally, damages for wrongful deprivation of the use of property are to be measured by its rental value.
Lenz Constr. Co. v. Cameron, 207 Mont. 506, 674 P.2d 1101 (1984). Loss of use damages are measured by the reasonable rental value of a comparable vehicle, regardless of whether one is rented.
Mountain View Coach Lines, Inc. v. Storms, 102 A.D.2d 663, 476 N.Y.S.2d 918 (1984). The owner of a bus which was damaged in an accident by the negligence of another was entitled to loss of use damages notwithstanding that the owner did not hire a substitute vehicle.
Martin v. Hare, 78 N.C. App. 358, 337 S.E.2d 632 (1985). A person whose pleasure vehicle has been damaged need not actually rent a substitute vehicle to recover loss of use damages.
Gillespie v. Draughn, 54 N.C. App. 413, 283 S.E.2d 548 (1981), review denied 304 N.C. 726, 288 S.E.2d 805. The measure of damages for loss of use would be the cost of renting a similar vehicle during a reasonable time for repairs.
Holmes v. Raffo, 60 Wash. 2d 421, 374 P.2d 536 (1962). The right to compensation for loss of use is not dependent upon the owner having rented a substitute automobile while his own was being repaired.
United States v. Redland, 695 P.2d 1031 (Wyo. 1985). Fair rental value is the measure of damages where a property owner has lost the use of his property.
Is loss of use the same as loss of profits?
No, loss of profits is a different damage. Loss of use deals with the property right to use your property in what ever manner that the owner deems fit. Loss of profits is the inability to make money on your property.
In American Telephone & Telegraph Company v. Connecticut Light & Power Company, 470 F.Supp 105 (US District Court of Connecticut 1979) the court held that loss of use is a right associated with the rights of ownership. It should not be compared with loss of profits and should be proven with a degree of certainly and reasonableness. One possible way to measure loss of use damages is the rental value less overhead costs saved.
"At the outset, a distinction should be drawn between loss of profits and loss of use. Loss of profits would be measured by the amount of profit that a plaintiff could prove would have been generated had the plaintiff not been deprived of the use of the property, less the amount of profit actually generated during the deprivation. Loss of use, on the other hand, is the loss of an incident of ownership the right to use."
…The value of an article to its owner…lies in his right to use, enjoy, and dispose of it. These are the rights of property which ownership vests in him, and whether he, in fact, avails himself of his right of use, does not in the least affect the value of his use…His right of user, whether for business or pleasure, is absolute, and whoever injures him in the exercise of that right renders himself liable for consequent damage…quoting from Cook v. Packard Motor Car Co., 92 A at 418, 88 Conn at 603 (Wheeler, J. Concurring)
Footnote 2 "Ownership of an item of property carrier with it the right to use, or to control the use of, that item of property. Therefore, where the defendant tortiously injures, destroys, or takes an item of property, there has been a loss of one of the valuable rights or interests in property the right to use the property. Awarding plaintiff only the cost of repair or the decrease in market value fails to recognize that he has lost the use of the property item during the time reasonable needed to repair or replace it…" 22 Am.Jur.2d Damages 152 (1965)
Why is lost profits the wrong measure of this damage?
Lost profits is to difficult to determine and is usually not allowed by the courts.
In National Dairy Products Corporation v. Jumper, 241 Miss. 339, 130 So.2d 922 (1961), the court stated, "The weight of authority is that, except in special circumstances, loss of profits cannot be considered as a measure of such damages. Such an element usually contains considerable speculation and conjecture. 4 A.L.R. 1361; 5A Am.Jur., ibid., Sec. 1116 25 C.J.S. Damages § 83, p 602; Annotation 169 A.L.R. 1074 (1947). A more precise and easily defined measure for loss of use of a commercial vehicle is the rental or useable value of the property during the period the owner has been deprived of it. This is the generally recognized criterion. Damages for loss of use should be measured by the cost of hiring another vehicle while the repairs are being made. The rental value of a replacement vehicle may be recovered even though no to her was actually procured during the interval. 5A Am.Jur., ibid., Sec. 1115."
In Southern Crate & Veneer Company v. McDowell, 293 S.E. 2d 541, 163 Ga.App. 153 (Georgia 1982) the court held, "Generally expected profits of a commercial business are too uncertain and speculative to be awarded. One exception would be if the type of business made the calculation of the history of profits readily ascertainable."
Loss of Use Contrasted With Lost Profits:
Maryland Casualty Co. v. Florida Produce Distribs., Inc., 498 So.2d 1383 (Fla. Dist. Ct. App. 1986). When the measure of damages properly involves the loss of use of property used in a business, "profits" allegedly lost because of the loss of use of the property is a concept subject to too many variables to be properly used as a measure of the value of the loss of use, and the best evidence of lost use value of property is the actual or theoretical reasonable rental value of similar property.
Chlopek v. Schmall, 224 Neb. 78, 396 N.W.2d 103 (1986). An award of damages for loss of use of a commercial vehicle in the amount of loss of profit until the vehicle could be replaced was improper, as the proper measure was the fair rental value of property of a like or similar nature or the amount actually paid for rental.
Robbins Motor Transp., Inc. v. Key GMC Truck Sales, Inc., 56 Ohio App. 2d 165, 381 N.E.2d 1329 (1978). When a vehicle has been negligently damaged in part and is capable of being repaired within a reasonable period of time, the owner may recover two elements of damage: loss in value, measured by the difference in the value of the vehicle immediately before and immediately after the damage; and the loss of use of the vehicle for such reasonable period of time as is necessary to make the repairs, measured by the reasonable rental value of a vehicle of like kind. It is reversible error to use the gross earnings of the damaged vehicle or the reasonable value to the owner himself.
Wheatland Irrigation Dist. v. McGuire, 562 P.2d 287 (Wyo. 1977). Any approach to damages for loss of use is a speculative and fruitless venture when based upon profitability of operation. Rental value is a practical measure to be used in determining damages for loss of use of property.
What is the Administrative Fee?
The administrative fee is designed to compensate the rental agency for the costs associated with processing the damage claim.
The renter, additional renter, authorized driver and a responsible third party are responsible to pay for the administrative fee.
What is the renter and authorized driver’s responsibility?
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.
What does the rental contract say?
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."
What is the at fault third party’s responsibility?
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.
Will my insurance pay the administrative fee?
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.
What if I have a credit card member benefit?
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.
Did you rent with American Express?
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."
What is the normal course of doing business?
"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.
How is an insurance company different from the rental agency?
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.
Why doesn't the rental agency have proof of payment for their administrative costs?
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.
It has been our experience that Visa Travel Assist will pay a reasonable administrative fee.
Did you rent with MasterCard Gold?
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.
Did you rent with a Diners Club Card?
It has been our experience that Diner Club will pay a reasonable administrative fee.
Why do I have to pay if the accident was someone else's fault?
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.
What does the administrative fee cover?
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.
Are there any laws that govern the administrative fee issue?
Several states have specific statutes allowing the collection of administrative fees for rental car damage claims.
What does the California Code say?
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.
What does the Nevada Code say?
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.
What does the Indiana Code say?
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).
What does the North Carolina Code say?
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.
Why am I being charged this amount for the administrative fee?
The administrative fee is derived from a sliding scale which is based on the amount of the damage repair evaluation.
What is your administrative fee scale?
Damage Repair Evaluation |
Administrative Fee |
$0.00 - $250.00 |
$100.00 |
$251.00 - $500.00 |
$150.00 |
$501.00 - $750.00 |
$200.00 |
$751.00 - $1,500.00 |
$300.00 |
$1,501.00 - $2,500.00 |
$400.00 |
$2,501.00+ |
$500.00 |
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.
The contract says I am not responsible for Acts of God or Nature. What is an act of Nature?
An act of nature or an act of God is defined in Barron's Law Dictionary as, "the result of the direct, immediate and exclusive operation of the forces of nature, uncontrolled or uninfluenced by the power of man and without human intervention, which is of such character that it could not have been prevented or avoided by foresight or prudence."
The definition given above clearly states that the act of nature must occur exclusively by the forces of nature and have no possible intervention by man. An intervention of man would break the chain of events necessary to establish an Act of God.
If the act occurred exclusively by the forces of nature, and without any intervention or possible avoidance by a human, then it is quite clearly an act of God. If the damage is based on human intervention then it is not an act of God. An example of an act of God is a tornado or an earthquake. These types of natural disasters occur without any control or interference from a human.
Will my personal insurance pay for the damage claim?
Your coverage will depend on your insurance policy and the state you live in.
Some states require that rental car damages be covered under your liability policy an some require that your comprehensive and collision policy cover the rental car damages. States with no requirement allow the insurance company to sell policies with or without rental car coverage.
Alaska allows rental agencies to cover rental cars under liability.
Minnesota requires all rental cars to be covered under liability.
North Dakota requires all rental cars to be covered under liability.
New York requires all rental cars to be covered under liability.
Rhode Island requires all rental cars to be covered under liability.
Texas requires all rental cars to be covered under liability.
Maryland requires all rental cars to be covered under comprehensive and collision.
Massachusetts requires all rental cars to be covered under comprehensive and collision.
Will my personal insurance pay for the damage claim?
Your coverage will depend on your insurance policy and the state you live in.
Some states require that rental car damages be covered under your liability policy an some require that your comprehensive and collision policy cover the rental car damages. States with no requirement allow the insurance company to sell policies with or without rental car coverage.
Alaska allows rental agencies to cover rental cars under liability.
Minnesota requires all rental cars to be covered under liability.
North Dakota requires all rental cars to be covered under liability.
New York requires all rental cars to be covered under liability.
Rhode Island requires all rental cars to be covered under liability.
Texas requires all rental cars to be covered under liability.
Maryland requires all rental cars to be covered under comprehensive and collision.
Massachusetts requires all rental cars to be covered under comprehensive and collision.
Liability Insurance is "coverage for all sums that the insured becomes legally obligated to pay because of bodily injury or property damage, and sometimes other wrongs to which an insurance policy applies." Barron's Dictionary of Insurance Terms 257 (3ed 1995)
Liability is a " legal obligation to perform or not perform specified act(s). In insurance the concern is with the circumstance in which (1) one party's property is damaged or destroyed, or (2) that party incurs bodily injury as the result of the negligent acts or omissions of another party. Liability insurance is designed to provide coverage for exposure on either a business or a personal basis." ." Barron's Dictionary of Insurance Terms 256 (3ed 1995)
If I am covered by my liability policy will I have any out of pocket costs?
The renter becomes legally liable for all elements of the rental contract. When damage occurs the renter is responsible to pay for all damage to the vehicle including but not limited to, the physical damages, loss of use, administrative fee and any diminution of value. If the claim is covered under a liability policy, then that policy should cover all elements of the damage claim. However, if the insurance denies payment of any portion of the claim, the renter is not relieved of their contractual responsibility.
Collision Insurance is "coverage providing protection in the event of physical damage to the insured's own automobile (other than that covered under comprehensive insurance resulting form collision with another inanimate object." Barron's Dictionary of Insurance Terms 87 (3ed 1995)
Comprehensive Insurance is "coverage in automobile insurance providing protection in the event of physical damage (other than collision) or theft of the insured car. For example, fire damage to an insured car would be covered under the comprehensive section of the personal automobile policy." Barron's Dictionary of Insurance Terms 94 (3ed 1995)
Do I have to contact my insurance company if I have a card member benefit?
Most card member benefits provide secondary coverage for the damage claim so you will have to submit the claim to your insurance carrier before they will make any payment. Check with your card member program to determine if they provide primary or secondary coverage.
Primary Insurance is "property or liability coverage that provides benefits (usually after a deductible has been paid by an insured) up to the limits of a policy, regardless of other insurance policies in effect." Barron's Dictionary of Insurance Terms 371 (3ed 1995)
Secondary Insurance (or Excess Insurance )is "policy that pays benefits only when coverage under other applicable insurance policies has become exhausted." Barron's Dictionary of Insurance Terms 150 (3ed 1995)
Why am I responsible for damage I did not do?
Based on the risk of damages the rental agency asks the renter to sign a contract which holds them responsible for all loss or damage to the vehicle despite fault. 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.
"At common law, the rental of a motor vehicle creates a bailment for the mutual benefit of the parties. Davis v. M.L.G. Corp., 712 P.2d 985, 987-88 (Colo. 1986). A bailment is "a delivery of personal property by one person to another in trust for a specific purpose, with an express or implied contract that the property will be returned or accounted for when the specific purpose has been accomplished or when the bailor reclaims the property." Davis, 712 P.2d at 988. see citation from United Truck Rental v. Kleenco Corp. 929 P.2d 99 (Hawaii App. 1996).
Why am I responsible for damage I did not do?
Based on the risk of damages the rental agency asks the renter to sign a contract which holds them responsible for all loss or damage to the vehicle despite fault. 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.
"At common law, the rental of a motor vehicle creates a bailment for the mutual benefit of the parties. Davis v. M.L.G. Corp., 712 P.2d 985, 987-88 (Colo. 1986). A bailment is "a delivery of personal property by one person to another in trust for a specific purpose, with an express or implied contract that the property will be returned or accounted for when the specific purpose has been accomplished or when the bailor reclaims the property." Davis, 712 P.2d at 988. see citation from United Truck Rental v. Kleenco Corp. 929 P.2d 99 (Hawaii App. 1996).
How can I be held responsible for damages found to the vehicle after I have left?
The renter is responsible for all loss or damage to the vehicle despite fault which occurs during your rental period.
The rental agency has to know what the vehicle looked like at the end of the rental period. Therefore, when you turn in the vehicle, the rental agency must have an opportunity to fully inspect the vehicle to determine its condition at the time of return.
How does the rental agency know what damages are on the vehicle?
Car rental damages are recorded through a series of inspections and documentation by both the renter and the rental agency. Damages can be a large portion of rental agency costs; therefore, the agency is particularly careful in keeping accurate records of all damages to their vehicles. Vehicles are inspected at the time of rental and return by several different people at several different places to ensure accurate documentation.
Due to the nature of the business and the necessary speed of service, many of these inspections take place without the renter. However, the renter has an opportunity to inspect the vehicle themselves when the pick it up and return it. Typically, after the renter returns the keys and receives a receipt the vehicle is taken to the service area to be washed and prepped for the next renter. It is not feasible for the renter to wait for an employee to wash and service the vehicle.
The reality is that damages happen and often it is impossible to determine how they happened. Parking lot "dings", windshield cracks, and bumper scratches are more often a mystery than not. The rental agency is aware that even the most well meaning renter will have damages occur during their rental through no fault of their own. Often damages occur without the renter ever knowing about them, but these damages are still real. Damages that are found in the routine of processing the rental vehicles are clearly the responsibility of the renter.
How is the vehicle prepared for rental?
After the return of the vehicle, generally, the rental vehicle is taken to the back lot and pulled up to the fuel island and fueled for the next rental. The fluids and tires are checked and filled if necessary. Then they are pulled into the vacuum bay and the interior is cleaned thoroughly. Next the vehicle is driven through the car wash. After being washed the car is wiped down and a final check of the car takes place. The car is put in the ready line and is cleared for rental. If at any time during this process damage is found to the vehicle, it will be pulled from the ready line, tagged for damage and will be inspected by a manager. How when and where the damage is found is noted and put into the damage claim file.
The rental agency may have offered a damage waiver at the time of rental. The waiver can be titled by several different names, some agencies call the waiver CDW, PDW, LDW or DW. If the renter accepts the waiver and complies with the terms of the contract, then they will not be responsible for damage claims to the rental vehicle.
Whenever a rental agency rents a vehicle, they ask the renter to sign a contract which holds them responsible for all damages to the vehicle despite fault including but not limited to the physical damages, loss of use of the vehicle, administrative fee and all other related costs. The rental agency offers the sale of a waiver to all renters, which they call "loss damage waiver". For the consideration of the stated fee and full compliance with the rental contract, the rental agency will waive their right to collect for damage claims against the renter. Loss damage waiver is simply a waiver of the right to collect for an otherwise contractual right.
The rental agency may have offered a damage waiver at the time of rental. The waiver can be titled by several different names, some agencies call the waiver CDW, PDW, LDW or DW. If the renter accepts the waiver and complies with the terms of the contract, then they will not be responsible for damage claims to the rental vehicle.
Whenever a rental agency rents a vehicle, they ask the renter to sign a contract which holds them responsible for all damages to the vehicle despite fault including but not limited to the physical damages, loss of use of the vehicle, administrative fee and all other related costs. The rental agency offers the sale of a waiver to all renters, which they call "loss damage waiver". For the consideration of the stated fee and full compliance with the rental contract, the rental agency will waive their right to collect for damage claims against the renter. Loss damage waiver is simply a waiver of the right to collect for an otherwise contractual right.
Does loss damage waiver work like insurance?
Loss damage waiver is not insurance, and is not underwritten by any insurance policy. The loss damage is simply a waiver of a right to collect the damage claim. The waiver will only be enforced if the renter complies with all terms of the rental agreement. The damage waiver does not work like a collision policy, where the insured can act in an improper manner and cause the accident and still be paid for the damages to their vehicle. There is no policy which backs the damage waiver to turn to for payment.
I have the damage waiver, but I am being asked to pay. Why?
Loss damage waiver does not relieve the renter of any and all responsibility without limitations. The renter is still required to drive safely, not violate the contract and comply with the contract requirements. The rental agency expects and requires that the renter will act in a responsible manner and comply with the terms and conditions of the contract.
Loss damage waiver is sold for the purpose of protecting the average prudent driver. This is based on the idea that despite how careful and cautious a driver may be, accidents still happen. The renter can protect themselves by purchasing the waiver and then driving safely, making wise decisions, and complying will all terms of the contract. Loss damage waiver is not sold to protect a driver from any harm despite their own actions. It is not intended to cover the individual who has a conscious disregard for the vehicle and acts in a imprudent and unreasonable manner. Certainly, it is clear that when the rental agency rents a vehicle and sells loss damage waiver they are not giving the renter a license to use their property in a rash, reckless or abusive manner.
The damage waiver is a conditional agreement between the renter and rental agency. The renter accepted the damage waiver and agrees to comply with all of the terms of the contract. In exchange for these conditions the rental agency agrees to waive their right to pursue any damage claims against the renter. The rental agencies requirement to waive any damage claims against the renter is conditional upon their compliance with the terms of the rental contract. When the renter fails to comply with one of the terms of the contract then they have voided the damage waiver and the rental agency is not bound by the waiver.
The public policy argument behind the damage waiver is to protect the average prudent driver. This is based on the idea that despite how careful and cautious a driver may be, accidents still happen. The renter can limit their financial responsibility by purchasing the waiver and then driving safely, making wise decisions, and complying will all terms of the contract.
The law would not require the rental agency to take on the undue burden or waiving damage claims against renters who have mistreated the vehicle. It would be an injustice to allow the renter to disregard the terms of the contract and force the rental agency to absorb all of the losses that occur due to the failure to comply with the rental agreement. The damage waiver is not sold to protect a driver from any harm despite their own actions. It is not intended to cover the individual who has a conscious disregard for the vehicle and acts in a imprudent and unreasonable manner. When a rental agency rents a vehicle and sells loss damage waiver they are not giving the renter a license to use their property in a rash, reckless or abusive manner and the law does not require the rental agency to protect theses types of actions by the renter.
