The Office of General Counsel issued the following opinion on December 11, 2003, representing the position of the New York State Insurance Department.
Re: Rental Car Company: Recovery of All Elements of Damage to Rental Car
Question Presented:
May a rental car company recover all elements of damage to a rental car, including physical damage, loss of use, diminution of value and administrative fees?
Conclusion:
N.Y. Gen. Bus. Law § 396-z provides, in pertinent part, that a rental vehicle company may hold an authorized driver liable for actual damage to, or loss of, a rental vehicle.
Facts:
The inquirer presents a general question with no specific factual situation.
Analysis:
The inquirer asked whether a rental car company may recover all elements of damage to a rental car, including physical damage, loss of use, diminution of value and administrative fees. The inquirer has not provided any facts from which such question emanates, therefore, the response herein will be general in nature.
Whether a rental car company may recover all elements of damage to a rental car is not an issue that is governed by the Insurance Law.1 Instead, such question is governed by New Yorks General Business Law,2 as well as the contractual terms of the rental agreement. N.Y. Gen. Bus. Law § 396-z, entitled: Rental Vehicle Protections, was recently amended by Chapter 656 of the Laws of 2002, and became effective on February 24, 2003. Specifically, Section 396-z provides, in pertinent part, as follows:
(3) Subject to the provisions of subdivisions six, seven, and nine of this section, a rental vehicle company may hold an authorized driver liable for actual damage to, or loss of, a rental vehicle, provided that (a) any claim for such damage shall be based on a physical survey by automation or after-hours which precludes such survey, in which event any claim must be made within ten days after return; and (b) any charge for repair of such damage shall be limited to actual and reasonable costs and shall be assessed and billed separately and apart from the rental agreement. For purposes of this subdivision, "returned by automation" means a return acknowledged by machine receipt and where there is no interaction with rental vehicle company personnel and "after-hours" return means a return after normal business hours and in which the keys and rental agreement are deposited in the rental vehicle company office.
(6)(a) A rental vehicle company may hold an authorized driver liable to the extent permitted under this chapter for physical or mechanical damage to the rental vehicle that occurs during the time the rental vehicle is under the rental agreement; provided, however, that a renter shall not be liable for mechanical damage unrelated to an accident, nor for any normal wear and tear or other mechanical damage that could reasonably be expected from normal use of the vehicle, except in instances where abuse or neglect by the driver is shown. For the purposes of this subdivision, "actual and reasonable costs" shall mean the repair price reduced by all discounts paid by the rental vehicle company to the repairer of the vehicle, including costs for towing, storage, and impound fees.
(d) Damages incurred by rental vehicle companies for the loss of use of a rental vehicle and related administrative fees shall not be recovered from authorized drivers.
For further information you may contact Associate Attorney D. Monica Marsh at the New York City Office.
1See, N.Y. Ins. Law § 3440(b) (McKinney 2000) and N.Y. Comp. Codes R. & Regs. tit. 11, §§ 60-1.1 60-1.6 (1996) (Regulation 35-A) which mandate that a motor vehicle liability policy insuring less than five private passenger motor vehicles shall, by endorsement, provide coverage for the obligation of the insured for actual damage to or loss of a rental vehicle.
2 The Department provides no opinion vis-à-vis Texas Law.