The Office of General Counsel issued the following opinion on July 14, 2003, representing the position of the New York State Insurance Department.
Re: Request for Reconsideration: Rental Vehicle Coverage Opinion dated April 7, 2003
Question Presented:
Is rental vehicle coverage, mandated by N.Y. Ins. Law § 3440(b) (McKinney 2000), subject to the liability limits in an automobile insurance policy?
Conclusion:
No. Rental vehicle coverage, mandated by N.Y. Ins. Law § 3440(b) (McKinney 2000), is not subject to the liability limits in an automobile insurance policy.
Facts:
In a May 19, 2003 electronic mail to the Department, the inquirer presented and asked that we consider several arguments against the conclusion reached in the April 7, 2003 opinion. In essence, that opinion concluded, among other things, that rental vehicle coverage is not subject to the liability limits in an automobile insurance policy.
Analysis:
N.Y. Ins. Law § 3440(b) (McKinney 2000) states:
(b) Subject to subsection (d) of this section, every motor vehicle liability insurance policy which insures less than five private passenger motor vehicles registered in this state shall by endorsement, provide coverage for the obligation of the insured for actual damage to, or loss of, vehicles (including loss of use) rented by an insured in the United States, its territories or possessions and Canada under a rental agreement with a term of thirty continuous days or less, regardless of where within those areas such rental vehicle is registered, rented, or operated, subject to such maximum coverage limitations as the superintendent may by regulation prescribe or any other applicable limits in the policy, whichever is higher. The term "rental vehicle" shall be used as defined in section one hundred thirty-seven-a of the vehicle and traffic law, if a private passenger motor vehicle and not used for the transportation of persons or property for hire.
Section 3440(b) authorizes rental vehicle coverage as a separate coverage that must be offered with a liability policy. N.Y. Comp. Codes R. & Regs. tit. 11, §§ 60-1.1-60-1.6, (1996) (Regulation 35-A), entitled Minimum Provisions for Automobile Liability Insurance Policies, was subsequently promulgated by the Superintendent to interpret the provisions for automobile insurance policies. Specifically, Section 60-1.5, provides that "every motor vehicle liability insurance policy insuring at time of issuance or renewal less than five private passenger motor vehicles registered in this State shall provide, in the form prescribed by subdivision (h) of this section, separate rental vehicle coverage for the insureds obligation for actual damage to, or loss of, a rental vehicle, including loss of use, rented by the insured in the United States, its territories or possessions, and Canada under a rental agreement with a term of 30 continuous days or less, regardless of where such rental vehicle may be registered, rented or operated." (emphasis added). Subdivision (h) of Regulation 35-A specifically provides, in pertinent part, that:
For each such policy, this endorsement provides coverage for the insureds obligations in the event of actual damage to, or loss of, any rental vehicle, including loss of use, rented by the insured anywhere in the United States, its territories or possessions, and Canada under a rental agreement with a term no longer than thirty continuous days, regardless of where such rental vehicle may be registered, rented or operated.
Thus, the rental vehicle coverage is separate and is not subject to the liability limits under the policy. Coverage thereunder must be for the "actual" damage to or loss of the vehicle. Neither Section 3440(b), nor Regulation 35-A, permits an insurer to set a limit to the rental vehicle coverage.
The Department received and considered the arguments that the inquirer presented in a May 19, 2003 correspondence to the Department. However, the Departments position, that the rental vehicle coverage is a separate coverage that is not subject to the liability limits in an automobile policy, remains unchanged.
For further information you may contact Associate Attorney D. Monica Marsh at the New York City Office.