First, let’s look at what a rental company may hold our customer responsible for in the event of a loss involving a rented vehicle, under the law and the rental contract’s language. The rental contract often obligates the renter to pay for items not covered under the policy. The two most common and costly are diminished value and administrative fees. First party collision and comprehensive coverage’s do not cover these. Also, rental companies often pursue undocumented or artificially calculated loss of use-related loss of income. This may be disputed and is sometimes less than fully covered under the policy’s first party transportation expense coverage, particularly when all the rental company’s vehicles are not rented out or when the rental company provides insufficient documentation of having suffered a real loss of income. We have seen examples of coverage gaps, particularly related to diminished value, where thousands of dollars have been charged directly to the customer’s credit cards, a charge often difficult to ever have reversed. Some customers say, “I have full coverage.” Diminished value, the biggest uncovered exposure, is specifically excluded in our Family Auto Policy, and is not a covered first party loss under any of our other policies. The policy also affords no coverage for payment of administrative fees that a rental company may seek. Some loss of use may be covered; however the rental company would have to document their loss of use for us to consider payment for it under transportation expense, a coverage not designed to match that exposure at all. The rental contract may automatically entitle the rental company to large amounts for loss of use, diminished value, admin fees, and possibly even total loss related costs for fairly minor damages not anywhere near the vehicle’s total value, with no requirement that they have to substantiate these charges before they can collect them from the renter.
In summary, when a customer rents a vehicle and asks, “Should I purchase the collision damage waiver the most accurate answer is “Yes, you should, if you want to make sure that you so not experience any difficulties or coverage gaps in the event of a collision or comprehensive loss.” The purchase of this coverage should eliminate practically and costs, including those discussed, should a rental vehicle be damaged. No doubt about it, CDW can sometimes be pretty expensive. But the uncovered costs that a policyholder may face if a loss occurs can be far greater. Having a conversation with the customer about this exposure helps them understand what risks they take upon themselves if they decide not to purchase this coverage.
(This summary was jointly written by the ERIE Claims & Law departments)