Car Insurance

Review what basic homeowners and auto policies provide

“Sending students overseas is ticket to a better image.” That’s the gist of a message delivered recently by Steven Uhlfelder, chairman of the J. William Fulbright Scholarship Board. Citing remarks by Senator Fulbright 50 years ago, he stressed that student ambassadors from our higher education system contribute to a better worldwide image of the United States. A powerful boost for young people who want Mom and Dad to endorse their wish to take such a trip! There is much that their parents should know about the insurance implications pertaining to foreign travel.

Risks for Americans abroad are similar to those at home, but there are limitations under basic insurance that must be recognized. College students are insureds under homeowners policies carried by their parents. The protection applies at home, at college and elsewhere. There are exceptions, such as their being married and having residences other than those associated with the college, as well as being insured separately.

Coverage limitations

There are limitations in basic insurance, however. Significant homeowners coverage limitations apply while students are abroad as they do while the student is in the United States or Canada. It is helpful for parents to discuss this with their insurance agent. A rundown of coverage particulars includes the following:Personal property coverage (C) in homeowners policies in general, including ISO and AAIS forms, protects the covered traveling student anywhere in the world within the limits specified in the policy declarations. Special limits or caps apply to specified types of valuable items or specific kinds of loss. Examples include: $1,500 or $2,500 for theft of jewelry or furs in any one occurrence, regardless of the number of pieces or items involved; $200 or $250 for loss of money; $1,000 or $1,500 in total for letters of credit, passports, manuscripts, tickets, stamps and related items. Because some insurers may apply variations in the special limits, it is important to check the policy.

Personal liability coverage, section II of a homeowners policy, does not set territorial restrictions with regard to claims against insureds while vacationing outside the United States. It is important to stress to the young traveler that details of personal liability claims must be reported to the insurer as promptly as possible in order to comply with policy notice requirements. Young people usually have limited experience with third-party claims other than those arising from the operation of automobiles. Telling them of other occurrences that have resulted in lawsuits will underscore the importance of being careful and avoiding or minimizing problems.

Time-honored examples have included the accidental poking of another person’s eye with an umbrella and the resultant serious injury. Another was injury to a woman who tripped over a young man’s legs when he extended them into the aisle of a bus. Others involved property damage to the interior of a hotel, motel or bed and breakfast. Another classic example is fire damage to furnishings and interior walls brought about by smoking in bed.

Problems are minimized when claims are reported as promptly as possible to the insurer, if not directly, then by way of the parents. If theft is involved, the insurer will want to know if the incident was reported to the local police. A copy of the police report should be provided to the insurer along with other claim papers.

A personal liability claim against the traveler is not as likely to occur as a property loss, but prompt reporting is essential. A suit against an insured for damages must be brought in the United States or the insurer must agree to a settlement.

Auto policies

Personal auto policies apply only in the United States, its territories and possessions, Puerto Rico, Canada, and while a covered car is being transported between parts thereof. Various policies contain some language variation, but the intent and effect is similar. Automobile insurance must conform to the laws and regulations of the host country.

Because automobile insurance is applicable only in the United States, its territories and possessions, and Canada, the best advice for the young traveler is not to operate a vehicle while abroad. The cost of local insurance for a rental car is generally prohibitive and the problems are not worth it. In addition, there is too much uncertainty about the application of insurance carried on a car borrowed from a foreign friend. Better to ride as a passenger or to walk and see the sights.

Protecting purchases made abroad

Stress the importance of keeping receipts for items of value that are purchased abroad as well as personal items. Not only are they needed for insurance claims for loss of such personal property, but they are also needed to confirm with Customs the value of property purchased abroad and brought into the United States.

As valuable and comforting as insurance protection is, simply avoiding loss of property can make the travel experience much more pleasant. Students should keep their rooms locked at all times-both when occupying them or when they are away. Laptop computers are a new target and require special care. Valuable jewelry and the like should not be taken on student trips; however, if a student wishes to do so, it would be wise to place such items in safe deposit boxes provided by many lodging establishments.

Many Government travelers rent cars while on temporary duty (TDY). The savvy government renter arranges his rental through the government-contracted travel agency and rents from a rental agency that participates in the Surface Deployment and Distribution Command’s
(1) (SDDC) Car Rental Agreement.
(2) That agreement provides coverage for the government renter in case the renter damages the rental vehicle. But what if the rental car is damaged as a result of a collision with a government vehicle (GOV), and the driver of the GOV, not the rental vehicle, is at fault?

Paragraph 9b of the SDDC Agreement provides that:

Notwithstanding the provisions of any Company vehicle rental
agreement executed by the Government renter pursuant to this
agreement, the Company hereby assumes and shall bear the entire risk
of loss of or damage to the rented vehicles (including costs of
towing, administrative costs, loss of use, and replacements), from
any and every cause whatsoever, including without limitation,
casualty, collision, fire, upset, malicious mischief, vandalism,
tire damage, falling objects, overhead damage, glass breakage,
strike, civil commotion, theft and mysterious disappearance….
(3) This provision does, however, exclude loss or damage resulting from eleven exclusions listed in the agreement. These exclusions generally cover loss or damage intentionally caused by the driver, illegal or improper acts, theft where the renter cannot produce the keys, and operation in unauthorized locations.

Lately, the U.S. Army Claims Service has received notice of several claims by rental agencies for damage to their rental vehicles rented under the SDDC Agreement that occurred as a result of collisions with GOVs. The rental agencies assert that the agreement prevents them from filing a claim against the renter, but not against the Government, when the GOV driver was at fault in the collision. Should claims offices pay these claims?

The answer lies in the terms of paragraph 9 of the SDDC Agreement and the law of the state where the accident occurred. Paragraph 9a of the SDDC Agreement provides that:

Notwithstanding the provisions of any Company rental vehicle
agreement executed by the Government employee when renting a vehicle
under the terms of this agreement, the Company will maintain in
force, at its sole cost, insurance coverage, or a duly qualified
self insurance program, which will protect the United States
Government and its employees using vehicles under this agreement
against liability for … property damage arising from the use of
the vehicle…. The conditions, restrictions and exclusions of the
applicable insurance for any rental shall not be less favorable to
the Government and its employees than the coverage afforded under
standard automobile liability policies. When more favorable
insurance terms are required under applicable state or foreign
country law, such terms will apply to the rental.
(4) The rental agencies’ position is that the insurance coverage applies only to the rental vehicle’s driver, and not to any other government employee. Thus, the agencies argue that they may hold the United States financially liable for the damage because a different government employee caused the damage. The rental agencies argue that, since the renter was blameless in the accident, the liability insurance and damage waiver provisions of the SDDC agreement do not apply.

This argument is fallacious. Paragraph 9b clearly states that the rental agency bears “the entire risk of loss of or damage to the rented vehicles … from any and every cause whatsoever, including … collision,” so long as none of the listed exceptions apply.
(5) There is nothing in this explicit and expansive provision that allows the rental agency to pursue the United States for damages to the rental vehicle. The rental agencies, in negotiating the SDDC Agreement, took pains to exclude certain instances from this coverage; they could easily have explicitly excluded loss or damage resulting from a collision with a GOV.

In addition, the insurance coverage provided in paragraph 9a of the SDDC Agreement explicitly covers “the United States Government and its employees,” not just the individual renter and other authorized users of the rental vehicle.
(6) As any claim for damage to the rental car arising from a collision with a GOV is a claim against the United States (if the GOV driver was acting within the scope of his duties), the SDDC Agreement’s reference to the “United States Government” includes not only the renter and other authorized users of the rental agency, but also the driver of the GOV.

Finally, the SDDC Agreement places the rental agency in the position of an insurer of the government driver and the United States for damages arising from the use of the rental vehicle. Under most state laws, an insurer may not file suit as a subrogee against its insured to recover damage paid to the insured.
(7)Claims offices who receive claims from rental agencies participating under the SDDC Agreement should deny the claims and cite the provisions of paragraphs 9a and b in the denial letter. In addition, claims offices should research the relevant state law on insurers’ subrogation rights against their insureds. Where, as in most states, the state law prohibits this practice, that law serves as another basis for denial of the claim. Douglas A. Dribben, Foreign Tort Claims Branch.

(1) Formerly the Military Traffic Management Command.

(2) Surface Deployment and Distribution Command, U.S. Government Car Rental Agreement No.

This report analyzes the worldwide markets for Car Rental Business in Millions of US$. The market for Car Rental in this report is analyzed both by Location (Airport, and Non-Airport), and by Sector (Leisure, Business, and Insurance Replacement). The report provides separate comprehensive analytics for the US, Canada, Japan, Europe, Asia-Pacific, Middle East, and Latin America. Annual forecasts are provided for each region for the period of 2001 through 2010. A ten-year historic analysis is also provided for these markets with annual market analytics. The report profiles 90 companies including many key and niche players worldwide. Market data and analytics are derived from primary and secondary research. Company profiles are mostly extracted from URL research and reported select online sources.

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Fitch Ratings has issued a presale report on Rental Car Finance Corp., discussing the rating analysis behind Fitch’s expected ‘AAA’ ratings on the class A notes. The securities are backed by a pool of rental fleet lease contracts secured by rental fleet vehicles. The transaction is expected to benefit from a note guaranty policy from Financial Guaranty Insurance Company.

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