RENTAL CAR COMPANY INSURANCE PRIMARY OR EXCESS CHART (00217542).DOCX

Work Product of Matthiesen, Wickert & Lehrer, S.C. Last Updated: 4/4/2022

MATTHIESEN, WICKERT & LEHRER, S.C.

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RENTAL CAR COMPANYS’ LIABILITY INSURANCE PRIMARY OR EXCESS IN ALL 50 STATES

Claims and subrogation professionals must be familiar with the law in a particular state which affects whether a rental car

company’s liability policy or the renter’s personal auto liability policy will be primary when the renter causes an accident

resulting in personal injury or property damage. This area of the law creates a great deal of confusion because many

consumers are unsure what is covered by their own personal policy when they rent a car and are asked if they want to

buy insurance or the collision damage waiver.

Four Types of Insurance Offered by Car Rental Companies

Collision Damage Waiver (CDW). This isn’t insurance. Rather, CDW is an agreement with the car rental company by which

it gives up or waives its right to recover damages or to the rental vehicle or repair costs from the renter. Without the

waiver, the car rental company would have the right under the rental agreement to recover any damages to the rented

vehicle from you, even if you were not at fault in the accident. A vehicle owner (including a car rental company) has the

right to recover the value of the vehicle or repair costs, together with loss of use, diminished value, administrative fees,

towing charges, and even pro-rated license and registration fees. See HERE for a chart detailing the law in all 50 states

regarding the recovery of sales tax by a vehicle owner when a vehicle is totaled, and click HERE for a chart detailing the

law in all 50 states regarding the recovery of diminution in value by a vehicle owner when a vehicle has been in an accident.

If a CDW is purchased, the car rental company’s right to recover these damage items from the renter under the terms of

the car rental agreement is waived. These damages would then be covered under the car rental company’s own auto fleet

insurance policy if the renter is involved in a collision. In short, the CDW prevents the renter from being contractually liable

for damage to the car in the event of a collision. This coverage can cost as much as $30 per day, or 25% to 40% of the base

rental price. Some states have limited the amount a car rental company can charge, but most do not. A CDW does not

necessarily protect the renter from having to pay. Note that the CDW does not protect the renter if he or she has violated

the Rental Agreement’s Terms and Conditions, and it does not protect the renter from a lawsuit by third parties involved

in collisions with the renter. See SLI below.

Loss Damage Waiver (LDW). LDW is the same as CDW, above.

Supplemental Liability Insurance (SLI). While CDW protects the renter from first-party contractual claims for damages by

the car rental company, it does not protect the renter from third-party liability when the renter is involved in a collision

with a third party. SLI provides you with additional liability insurance while driving the rental car. It pays for property

damage and medical expenses incurred by other individuals in a car accident you cause while driving the rental vehicle.

While you may have liability coverage which applies under your personal auto insurance policy, the limits may be low. This

coverage provides an umbrella policy over and above your own liability limits and may protect you in certain

circumstances. It should be noted that many auto policies often do not provide liability coverage while in other countries

so this coverage may be necessary under those circumstances. This coverage provides liability insurance which protects

or covers other people’s property damage and injuries in an accident.

Personal Accident Insurance (PAI). Unlike SLI, this insurance covers medical, ambulance, and death benefits for the renter

and his/her passengers. A renter’s personal health insurance coverage will likely provide greater benefits and coverage

than PAI.

Personal Effects Coverage. This is coverage provided by the car rental company which covers the theft of possessions from

the rental car. It usually provides a limit of liability.

Work Product of Matthiesen, Wickert & Lehrer, S.C. 2 Last Updated: 4/4/2022

Liability Insurance Primary or Excess

The following chart concerns itself only with liability insurance provided by the car rental company. Car rental companies

do not require a renter to have liability insurance, but liability coverage is still necessary in order to operate a vehicle in

every state except New Hampshire. (Note: In Virginia, a vehicle owner is not required to carry liability insurance on a

vehicle if he pays a $500 Uninsured Motor Vehicle fee to the Virginia Department of Motor Vehicles). Car rental companies

have no obligation to advise you of this or check to see if a renter has liability insurance coverage, and they cannot

mandate that a driver purchase same. Car Rental companies are required by law (in every state except California) to

provide the state-mandated liability limits for the rental car. However, in many cases this liability coverage may be

considered secondary to the primary coverage provided by your personal auto policy.

Liability Shifting, Vicarious Liability, and the Graves Amendment

Several states have vicarious liability statutes which make the owner of a motor vehicle automatically liable for the actions

and negligence of permissive users of the owner’s vehicle. Under common law, the owner of a motor vehicle is not liable

for injuries caused by the negligence of another person driving the owner’s vehicle (i.e., vicariously liable) unless the driver

was acting as an employee or agent of the owner, or there is a vicarious liability statute at play. California, Connecticut,

Florida, Idaho, Iowa, Maine, Michigan, Minnesota, Nevada, New York, Rhode Island and the District of Columbia all have

forms of vicarious liability statutes. Under these statutes, an owner who gives authority to another to operate the owner’s

vehicle, by either express or implied consent, has a non-delegable obligation to ensure that the vehicle is operated safely.

For instance, New York has a typical vicarious liability statute in § 388 of the New York Vehicle and Traffic Law, which reads

as follows:

Every owner of a vehicle used or operated in this state shall be liable and responsible for death or injuries to person

or property resulting from negligence in the use or operation of such vehicle, in the business of such owner or

otherwise, by any person using or operating the same with the permission, express or implied, of such owner.

These vicarious liability statutes had become very expensive for car rental companies during the 1990’s and the major car

rental companies began changing their rental contracts to make the renter’s own insurance policy primary. Effective

August 10, 2005, however, Congress passed the Graves Amendment to the Federal Highway Bill, H.R. 3, codified at 49

U.S.C. § 30106. It provides as follows:

An owner of a motor vehicle that rents or leases the vehicle to a person shall not be liable under the law of any State

or political subdivision thereof, by reason of being the owner of the vehicle, for harm to persons or property that

results or arises out of the use, operation, or possession of the vehicle during the period of the rental or lease, if: (1)

the owner is engaged in the trade or business of renting or leasing motor vehicles; and, (2) there is no negligence or

criminal wrongdoing on the part of the owner.

The Graves Amendment preempted any state law to the contrary and provided relief to car rental companies. Whether

or not the company’s liability policy was considered primary or excess when a rented vehicle was involved in a collision

once again was determined by the rental agreement and applicable state law.

Challenges to state laws requiring that a car rental company provide liability insurance arose following the Graves

Amendment. In Subrogation Division, Inc. v. Brown, 2020 WL 211260 (D. S.D. 2020), a federal court discussed the impact

of the Graves Amendment’s saving clause on the issue of whether the car rental company’s liability policy was primary or

excess. That clause provides:

Nothing in this section supersedes the law of any State or political subdivision thereof--

(1) imposing financial responsibility or insurance standards on the owner of a motor vehicle for the privilege of

registering and operating a motor vehicle; or

(2) imposing liability on business entities engaged in the trade or business of renting or leasing motor vehicles for

failure to meet the financial responsibility or liability insurance requirements under State law.

In Brown, Overland West, Inc. rented a vehicle to Brown, who was involved in a crash with a vehicle owned by Dan

Claymore and insured for the minimum liability limits by Farmers (21

Century Indemnity Insurance Company). Brown’s

rental agreement stated that he agreed to indemnify Overland for “any and all loss, liability, claim, demand, cause of

action, and attorneys’ fees…” It also stated that Brown’s liability insurance would be “primary” in the event of an accident.

Overland’s liability carrier paid damages to Claymore and sought to recover those damages from its renter, Brown, and

Work Product of Matthiesen, Wickert & Lehrer, S.C. 3 Last Updated: 4/4/2022

Century. Overland brought a Motion for Summary Judgment arguing that the Graves Amendment preempted South

Dakota’s Supreme Court decision in Auto-Owners Ins. Co. v. Enterprise Rent-A-Car Co., 663 N.W.2d 208 (S.D. 2003), which

held that the state’s omnibus statute placed the duty to provide primary coverage on the car rental company up to the

state’s minimum limits, and § 32-35-70, which required the owner of a vehicle had the responsibility to provide liability

coverage. The federal judge in Brown issued a decision stating that the Graves Amendment, which states that no

commercial rental vehicle owner can be held liable under the law of any State by reason of being the owner of the vehicle,

for damages arising out of the use, operation, or possession of the vehicle during the period of the rental, preempted

South Dakota law. The court addressed the Graves Amendment’s savings clause but noted that the state’s rental insurance

laws did not fit within its preemptive powers. It neither imposed financial responsibility on the owner of a motor vehicle

nor imposed liability on a car rental company. The judge ruled that the Graves Amendment states that rental companies

like Overland “shall not be liable” under state law for damages incurred by renters. While states may require rental

companies to carry insurance, the judge held they “may not require rental companies to be vicariously liable for damages

incurred solely by renters through insurance law or otherwise.” Consequently, the state law requirement that Overland

pay the Claymore damages was preempted by the Graves Amendment and Overland could seek reimbursement from

Brown. The court observed that the intent of the Amendment was to relieve rental car companies of just this type of

liability, regardless of what state law says.

The following chart deals with whether the liability insurance policy provided by the car rental company is considered

primary or secondary to the renter’s personal auto policy and the liability coverage it provides.

ALABAMA: No case or statutory law. Terms of rental agreement and renter’s liability policy should be compared to

determine which is primary.

ALASKA: No case or statutory law requiring a car rental company’s policy to be primary. Terms of rental agreement and

renter’s liability policy should be compared to determine which is primary. Usually, the owner’s insurance provisions will

be compared with the driver’s insurance provisions and both will be responsible for a policy limits pro rata share of the

limits when conflicting excess clauses are involved, as opposed to equal shares. Columbia Mut. Ins. Co. v. State Farm Mut.

Auto. Ins. Co., 905 P.2d 474 (Alaska 1995).

ARIZONA: Car rental company’s liability policy is primary up to the state’s minimum financial responsibility limits. Ariz.

State. § 28-2166C. Exception exists if the rental agreement states otherwise in 10-pt. font, it is acknowledged by the renter,

and this is revealed to the renter at the time a reservation is made online by the renter.

ARKANSAS: Arkansas requires the liability policies of car rental companies to be excess. Ark. Code § 27-19-713(l). Every

auto liability policy must “extend” primary liability coverage to temporary substitute vehicles rented or leased from a

rental company as defined in § 23-64-202(d)(2)(C).

CALIFORNIA: California is the only state in which car rental companies do not automatically provide liability coverage as

part of its car rental agreement. Some companies may provide the minimum primary liability protection to international

renters with driver’s licenses that show an address outside the U.S. A renter may need to provide their own liability

coverage when renting in California. In general, U.S. residents are usually covered by their own personal auto coverage,

but renters must be sure they have the minimum level of liability insurance required in California from their own insurance

company. If not, they may have to purchase liability insurance through the car rental company.

If the car rental company obtains liability insurance that describes or rates the rental vehicle and the rental agreement

provides for coverage, its coverage is primary. Cal. Ins. Code § 11580.9(d); Enterprise Rent-A-Car Co. v. Workman’s Auto

Ins. Co., 58 Cal.App.4th 1543, 68 Cal.Rptr.2d 725 (1997). If the car rental company obtains liability coverage (or self-insured

certificate) which does not describe or rate the rented vehicle, then the coverage is excess to the renter’s policy. Mercury

Casualty v. Hertz Corp., 59 Cal.App.4

414, 69 Cal.Rptr.2d 9 (1997).

If the car rental company is self-insured, that self-insurance is excess to the renter’s personal auto coverage. Cal. Ins. Code

§ 11580.9; Enterprise Rent-A-Car v. Workmen’s Auto Ins., 68 Cal.Rptr.2d 725 (Cal. 1997); Mercury Casualty v. Hertz, 69

Cal.Rptr.2d 9 (Cal. 1997); Interinsurance Exchange v. Spectrum Investment Corp., 258 Cal.Rptr. 43 (Cal. 1989). However, if

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the car rental agreement agrees to provide liability coverage, even a self-insured car rental company will be primary.

United Services Auto. Assn. v. Snappy Car Rental, Inc., 74 Cal.App.4

461 (Cal. App. 1999).

COLORADO: The auto policies of the renter and car rental company must be compared to see which provides primary as

opposed to secondary liability coverage. When the car rental company’s policy promises primary coverage, it must provide

at least up to the minimum limits of financial responsibility. Allstate Ins. Co. v. Frank B. Hall & Co. of California, 770 P.2d

1342 (Colo. App. 1989). If both policies contain “excess insurance” clauses, they will share equally in a loss on a co-primary

basis until the policy with the lower limits is exhausted. Allstate v. Avis Rent-A-Car, 947 P.2d 341 (Colo. 1997). If the renter’s

policy provides “excess” insurance but the car rental policy provides “umbrella” coverage, the personal policy will be

considered primary. Frank B. Hall, supra. A rental car company’s liability policy will be primary unless the rental agreement

states that the coverage is excess to all other coverage. U.S.F.& G. v. Budget Rent-A-Car Systems, Inc., 842 P.2d 208 (Colo.

1992).

CONNECTICUT: Each policy issued to an individual covering an auto shall contain a conspicuous statement specifying

whether the policy provides liability, collision or comprehensive coverage for damage to a rented private passenger motor

vehicle and, where the policy provides such coverage, the limit of the coverage and whether any deductible amount

applies. Conn. Stat. § 38a-335(b).

The car rental agreement can shift primary liability to the renter. Where the rental agreement says that if SLI is not

purchased, this effectively makes the renter’s personal liability coverage primary. Self-insurance can be “other insurance.”

Hertz Corp. v. Federal Ins. Co., 713 A.2d 820 (Conn. 1998); Farmers Texas County Mutual v. Hertz, 923 A.2d 673 (Conn.

2007).

DELAWARE: Car rental companies are required to carry the minimum limits of liability insurance. If the owner fails to do

so, it is jointly and severally liable with the renter for any damages caused by the renter’s negligence. A judge will allow a

hearing and if the car rental company has these minimum limits, it will be dismissed from the suit. Del. Stat. § 6101(a)(d).

When a car rental company maintains the required minimum liability coverage, primary liability will be shifted to the

renter’s personal auto policy. Del. Stat. § 6102; Stewart v. Selner and Agency Rent-A-Car, 1989 WL 5186 (Del. Super. 1989).

This is true even when the car rental company is self-insured. United Service Auto. Ass’n v. Avis Rent-A-Car, Inc., 2005 WL

3416299 (Del. Super. 2005).

DISTRICT OF COLUMBIA: The District's Compulsory/No-Fault Motor Vehicle Insurance Act, requires that the actual owner

of a vehicle provide primary liability coverage for any vehicle operated in the District of Columbia. Sharp v. Ward, 2004

WL 1835102 (D.C. Super. 2004); D.C. Stat. § 50-1301.08.

FLORIDA: A car rental company’s liability coverage is primary unless the rental agreement sets forth the following in 10-

pt. font: “The valid and collectible liability insurance and personal injury protection insurance of any authorized rental or

leasing driver is primary for the limits of liability and personal injury protection coverage required by §§324.021(7) and

627.736, Florida Statutes.” This shifting provision operates only when there is coverage to which liability can be shifted.

Shivers. v. Enterprise Leasing Co., 950 So.2d 494 (Fla. App. 2007); Rosati v. Vaillancourt, 848 So.2d 467 (Fla. App. 2003).

GEORGIA: The car rental company is excess to the liability coverage of the renter. Ga. Code § 40-9-102; A. Atlanta Autosave

v. Generali, 498 S.E.2d 278 (Ga. App. 1999). Under § 40-9-102, the renter’s liability coverage is primary in the case of

liability arising from the use of the rental car. Jordan v. Spirit Rent-A-Car, 555 SE.2d 734 (Ga. App. 2001). Where an accident

is the fault of an additional renter authorized to drive the vehicle, but not a signatory to the rental contract, the court held

that the carrier for the additional driver was not obligated to cover the loss. Thompson v. Enterprise Leasing Company of

Georgia, 522 S.E.2d 670 (Ga. App. 1999); Zurich American Ins. Co. v. General Car & Truck Leasing System, Inc., 574 S.E.2d

914 (Ga. App. 2002).

HAWAII: The car rental company’s (referred to as “U-drive rental business” and requires less than six-month lease/rental

period) liability policy will be excess to a renter’s liability policy only if all of the following are satisfied: (1) the car rental

company provides any person injured in the accident with the name and address of the operator or renter, along with any

information available to the rental company as to the name and address of any insurer under any liability policies

applicable to the operator or renter; (2) a suit may be filed and service upon the responsible operator or renter can be

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made; and, (3) an insurer responds on behalf of the operator or renter to the suit. Haw. Stat. § 431:10C-305.5. In cases

where the rental company’s liability insurance is primary because any of the above three circumstances have not been

satisfied, a rental company may nevertheless recover from the renter or operator, or their insurers, any amounts the

rental company paid out as a result of the accident, including reasonable attorney’s fees.

IDAHO: If the owner of the motor vehicle receives compensation from or on behalf of the operator for the temporary use

of the vehicle, the owner’s insurance shall be primary, and the operator’s insurance shall be secondary or excess. Idaho

Stat. § 49-1212(11)(b).

ILLINOIS: Owners of rental vehicles must demonstrate financial responsibility by obtaining insurance coverage for these

vehicles. 625 I.L.C.S. § 5/9-101; 215 I.L.C.S. § 5/143a. However, compulsory insurance does not mean primary insurance.

Illinois’ financial responsibility requirements of its Vehicle Code and the financial responsibility statutes applicable to

owners of rental vehicles for hire do not prevent car rental companies from including rental contract terms that shift

primary liability under insurance policies covering the lessee. Neither the Vehicle Code nor public policy requires car rental

companies’ insurers to provide primary liability coverage. State Farm Mut. Auto. Ins. Co. v. Hertz Claim, 789 N.E.2d 407

(Ill. App. 2003).

INDIANA: The renter’s policy is primary. Ind. Stat. § 27-8-9-9. In a case where the renter agreed to have his insurance be

primary by consenting to a rental contract which provided that lessor’s liability insurance was excess over any other

liability insurance coverage available from the lessee, applicable after coverage under such other available insurance.

However, if the renter’s personal policy excludes coverage for rented cars, the rental company’s liability policy may be

primary. Safe Auto Insurance v. Enterprise, 889 N.E.2d 392 (Ind. App. 2008).

IOWA: No case or statutory law. Terms of rental agreement and renter’s liability policy should be compared to determine

which is primary.

KANSAS: A car rental company can exclude liability coverage from rental vehicles. Kan. Stat. § 40-3107(h). The car rental

company’s liability coverage is primary where the renter’s personal policy excludes coverage for vehicles rented from a

“car business.” State Farm v. Winney, 923 P.2d 517 (Kan. 1996). If both policies provide “excess” coverage, the loss will be

prorated equally up to the limit of the lower policy. Western Cas. & Sur. v. Universal Underwriters Ins. Co., 657 P.2d 576

(Kan. 1983). Also, a car rental company which self-insures will not be considered primary if the renter’s policy is an excess

policy. Farm Bureau v. Enterprise Leasing, 58 P.3d 751 (Kan. App. 2002).

KENTUCKY: The car rental company’s policy is primary up to $10,000 for economic loss suffered by a driver or occupant

of a rented vehicle. For all other liability, it is not primary. Ky. Stat. §§ 304.39-030, 040, and 050. If the car rental company’s

policy has an escape clause stating that its coverage is non-existent when other coverage is in place, and where the renter’s

policy contained an excess clause, the escape clause of the car rental company’s policy is determinative and the renter’s

policy is primary. The renter’s insurance company was also to a duty to defend its insured. Empire Fire and Marine v.

Everett Haddix, 927 S.W.2d 843 (Ky. App. 1996).

LOUISIANA: A car rental company is required to maintain the minimum financial responsibility amounts of liability

coverage on all rental vehicles. The car rental company’s liability insurance is secondary when the renter has other valid

and collectible coverage. Auto insurers are also required to extend personal auto liability coverage to rental or temporary

substitute vehicles. La. R.S. § 1296. If a renter opts to purchase supplemental insurance for a rental vehicle, such as a

policy typically offered by rental car companies, the supplemental coverage is the primary insurer in the event of an

accident.

MAINE: A car rental company and the renter are both jointly and severally liable for any damage or injuries caused by the

negligence of the renter or a permissive driver. Me. Stat. 29-A § 1652. However, this statute is preempted by the Graves

Amendment. 49 U.S.C. § 30106(b). A personal auto policy must provide coverage for damage to a covered rental vehicle.

Me. Stat. 24-A § 2927.

In Enterprise Rent-A-Car Co. of Boston, LLC v. Maynard, 2012 WL 1681970 (D. Me.2012), Maynard rented car from

Enterprise, declined supplemental liability insurance, and agreed in the rental contract to indemnify Enterprise from all

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losses. Maynard allowed Scotty Beausejour to drive the vehicle and Beausejour struck and injured Thomas Webster.

Webster sued Beausejour and also demanded payment from Enterprise, who assumed the defense of the case. Enterprise

demanded a defense and indemnity from Maynard, who had no other valid and collectible insurance. Enterprise settled

with Webster for $260,000, after incurring $17,401.67 in attorneys’ fees. Enterprise then sought indemnity from Maynard

and filed a Motion for Summary Judgment arguing that the simple rental contract required Maynard to indemnify it.

Maynard claimed Enterprises’ settlement was made as a “volunteer” because they were not liable to Webster, but

Enterprise claimed it was liable because under § 1611 it was self-insured. Maynard also argues that the rental contract

was unconscionable. The federal judge ruled that even though the contract required Maynard to reimburse Enterprise,

Enterprise must have “incurred” the loss in order to be reimbursed. Section 1652 doesn’t do that because it is preempted

by the Graves Amendment.

MARYLAND: As of January 1, 2020, a car renter’s personal auto insurance is primary. Md. Transp. Code § 18-102; Code of

Md. Reg. § 11.18.01.03; Rentals Unlimited Inc. v. Aetna Casualty & Surety Ins. Co., 647 A.2d 1278 (Md. App. 1994). The

only exception is if the rental vehicle is a “replacement vehicle”, defined in § 18-102(a)(2)(i) as:

…a vehicle that is loaned by an auto repair facility or a dealer, or that an individual rents temporarily, to use while a

vehicle owned by the individual is not in use because of loss, as “loss” is defined in that individual’s applicable private

passenger automobile insurance policy, or because of breakdown, repair, service, or damage.

Another exception is if the renter’s insurance is provided by the Maryland Automobile Insurance Fund. Md. Transp. Code

§ 18-102(a)(2)(ii). A person in the business of renting or leasing motor vehicles, trailers, or semitrailers must file with the

Financial Responsibility Division of the Administration, for each vehicle rented or leased, a copy of the liability insurance

policy or proof of Maryland self-insurance certification. Code of Md. Reg. § 11.18.01.03(A).

MASSACHUSETTS: Car rental companies must maintain liability insurance on their rented vehicles in the amount of the

minimum financial responsibility limits required. Mass. Stat. 90 § 32E. The liability insurance provided by a car rental

company is primary. Alamo Rent-A-Car, Inc. v. Matchem, 2000 WL 16763 (Mass. Super. 1999). Escape clauses or “super-

escape clauses” are not favored in Massachusetts. Premier Ins. Co. of Massachusetts v. Empire Fiore and Marine Ins. Co.,

2002 WL 58465 (Mass. Super.2002).

MICHIGAN: Under Michigan No-Fault Act, a car rental company must provide primary liability coverage to renters. Mich.

Stat. § 500.3101; State Farm Mutual Automobile Ins. Co. v. Enterprise Leasing Co., 549 N.W.2d 345 (Mich. 1996). A rental

contract may lower the liability limit requirement of the owner’s insurer, as long as the owner’s insurer remains primary

and provides coverage equal to or above the minimum amounts required by the No-Fault Act. Ryder Truck Rental, Inc. v.

Auto-Owners Ins. Co., Inc., 597 N.W.2d 560 (Mich. App. 1999). Any coverage provided by the car rental company above

the minimum limits it was required by statute to provide was not primary because it was not “valid and collectable

insurance” available to the insured. Church Mutual Ins. Co., v. Save-a-Buck Car Rental. Co., 151 F.Supp.2d 905 (W.D. Mich.

2000). Under No-Fault Law, a person suffering damage must first claim benefits from the vehicle owner, and then from

the vehicle operator. Mich. Stat. § 500.3125.

MINNESOTA: As of August 1, 2007, a car rental company’s liability coverage is excess to the renter’s personal auto policy.

Minn. Stat. § 65B.49(5a). This law requires any auto policy to extend its benefits to the operation of rented vehicles. The

policy must also cover loss of use.

MISSISSIPPI: No case or statutory law dealing specifically with car rental companies. Terms of rental agreement and

renter’s liability policy should be compared to determine which is primary. Although State Farm Mut. Auto. Ins. Co. v.

Universal Underwriters Ins. Co., 797 So.2d 981 (Miss. 2001) said that a customer driving an auto dealer’s car during repair

work was not an insured under the liability coverage of the dealer’s garage policy, this case appears to have been

superseded by statute in 2004 when Mississippi passed § 63-15-4 and first made insurance on motor vehicles mandatory.

Section 63-15-4(2) provides that “insured parties shall be responsible for maintaining the insurance on each motor

vehicle.” This provision vests the responsibility of providing insurance on the person with an insurable interest in the

property. The general rule that anyone who derives a benefit from property or would suffer loss from its destruction has

an insurable interest in the property has been applied to motor vehicle insurance. Universal Underwriters Gr. v. State

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Farm, 931 So.2d 617 (Miss. App. 2006). This would seem to support the argument that the car rental company’s insurance

should be primary.

MISSOURI: A car rental company’s policy is secondary to the coverage provided by the renter’s policy. Escape clauses in

rental agreements are enforceable, and the renter’s insurance is primary. Irvin v. Rhodes, 929 S.W.2d (Mo. 1996). Every

liability policy must extend coverage to vehicles loaned as demonstration vehicles or while the insured’s vehicle is out of

use due to repair. Mo. Stat. § 379.201. A car rental company’s liability carrier is primary if the renter’s policy excludes from

vehicles owned by a car business. Geisner v. Budget Rent-A-Car, 967 S.W.2d 95 (Mo. 1998).

MONTANA: No case or statutory law dealing specifically with car rental companies. Terms of rental agreement and

renter’s liability policy should be compared to determine which is primary.

NEBRASKA: No case or statutory law dealing specifically with car rental companies. Terms of rental agreement and renter’s

liability policy should be compared to determine which is primary. Where both policies are “excess”, the car rental

company’s policy will be considered “primary.” Bituminous Cas. Corp. v. Andersen, 171 N.W.2d 175 (Neb. 1969).

NEVADA: No case or statutory law dealing specifically with car rental companies. Terms of rental agreement and renter’s

liability policy should be compared to determine which is primary. The car rental company’s policy will be primary when

both it and the renter’s policy contain “other insurance” clauses. Alamo Rent-A-Car v. State Farm, 953 P.2d 1074 (Nev.

1998). There is nothing in Nevada’s statutory scheme governing short-term vehicle lessors that establishes priority of

coverage between a rental agency and the renter’s own auto liability insurer. A short-term car rental company is jointly

and severally liable with the renter and his permissive drivers, if the car rental company does not provide the required

minimum liability coverage. Nev. Stat. § 482.305. If a plaintiff accepts a settlement from the renter’s policy, he cannot

then also recover the limits of the car rental company’s policy. Hall v. Enterprise Leasing Company-West, 122 Nev. 685

(Nev. 2006).

NEW HAMPSHIRE: No case or statutory law dealing specifically with car rental companies. Terms of rental agreement and

renter’s liability policy should be compared to determine which is primary. Mandatory liability coverage provided by the

car rental company does not have to be primary. Progressive Northern Ins. Co. v. Enterprise Rent-A-Car Co. of Boston, Inc.,

149 N.H. 489 (N.H. 2003).

NEW JERSEY: No case or statutory law dealing specifically with car rental companies. Terms of rental agreement and

renter’s liability policy should be compared to determine which is primary. New Jersey law requires the car rental company

to have liability coverage. N.J. Stat. § 45:21-2. If both policies contain excess insurance clauses, they will share the loss

equally up to the statutory minimums, and then pro-rata thereafter. Ambrosio v. Affordable Auto Rental, 704 A.2d 572

(N.J. 1998).

NEW MEXICO: No case or statutory law dealing specifically with car rental companies. Terms of rental agreement and

renter’s liability policy should be compared to determine which is primary. When a vehicle owned by a licensed auto

dealer is loaned without a fee to a person for demonstration purposes, as a temporary substitute for that person’s vehicle

while it is being serviced or repaired, the driver’s insurance is primary, and the dealer’s policy is excess. N.M. § 59A-32-23.

However, if a car rental company is self-insured, it can shift primary liability for at least the minimum limits to the renter

by prominently disclosing this in the rental contract. N.M. Admin. Code § 12.4.16.

NEW YORK: A car rental company’s liability insurance is primary up to the minimum limits. N.Y. Comp. Codes, Rules and

Reg. Tit. 11 § 60-1.1. The Vehicle and Traffic Law also requires car rental companies to provide primary insurance. N.Y.

Veh. & Traf. § 370; ELRAC v. Ward, 96 N.Y.2d 58, 748 N.E.2d 1, 724 N.Y.S.2d 692 (N.Y., 2001). A car rental company can

also require indemnification from a renter for that portion of damages which exceeds the minimum liability limits. Morris

v. Snappy Car Rental, 637 N.E.2d 253 (N.Y. 1994).

NORTH CAROLINA: Two North Carolina statutes require a car rental company to provide liability coverage for the renters

of its vehicles. The first obligates vehicle owners to secure liability insurance that insures permissive users. N.C. Stat. § 20-

279.21(b)(2). The second requires car rental companies to obtain liability insurance that insures the owner and renters of

vehicles from any liability imposed by law. N.C. Stat. § 20-281. The minimum limits of insurance required by these statutes

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are identical. An insurance policy complies with § 20-281 if it provides the coverage described in § 20-281, subject to the

condition that no coverage is provided if other liability insurance, in the amount required by statute, is provided by a

different policy. It then becomes a process of comparing other insurance clauses. When both policies contain clauses

stating that each will cover minimum financial limits and a pro rata share of any excess damages, both insurers will share

the loss on a pro rata basis. Jeffreys v. Snappy Car Rental, Inc., 493 S.E.2d 767 (N.C. App.1997). Where self-insured car

rental company’s liability coverage is subject to condition that no coverage is provided if other insurance is provided by

different policy, this complies with the statute requiring lessors in business of renting vehicles to provide liability coverage

for lessee. Hertz Corp. v. New South Ins. Co., 497 S.E.2d 448 (N.C. App. 1998).

NORTH DAKOTA: A car rental company’s liability coverage is secondary to the insurance of the renter. N.D. Stat. § 26.1-

40-17(2). A federal case to the contrary suggests that the state applies only to garagekeepers’ policies and not car rental

companies. Travelers Indem. Co. v. American Motorist Ins. Co., 766 F.Supp. 804 (N.D. 1991).

OHIO: A car rental company is allowed to enter into a contract with a renter whereby the renter agrees to be solely

responsible for maintaining proof of financial responsibility or use of the motor vehicle during the rental period. Ohio Stat.

§ 4509.101. An excess clause in the car rental agreement versus an excess clause in the driver’s policy means a pro rata

sharing of liability coverage. Progressive Max Ins. Co. v. Empire Fire & Marine Ins., 2001 WL 881306 (Ohio 2001).

OKLAHOMA: A car rental company which purchases liability coverage is not liable for the renter’s negligence. Okla. Stat.

tit. 47 § 8-101. If the car rental company is self-insured, however, it is jointly and severally liable with the renter for damage

to third parties. Okla. Stat. tit. 47 § 8-101. When a vehicle is loaned by a dealer, the customer’s policy is primary. 47 Okla.

Stat. § 580.2. The vehicle owner may enter into a rental/lease agreement by which the renter assumes responsibility for

loss for any liability.

OREGON: The personal policy of the renter is primary, and the policy of the car rental company is secondary. Or. Stat. §

30.135. A self-insured car rental company is also excess. Or. Stat. § 806.130; 30.135 (test drivers and car rental companies).

PENNSYLVANIA: Every policy must state whether it covers rental vehicles. Pa. Stat. 75 P.S. § 1725. No case or statutory

law dealing specifically with car rental companies. Terms of rental agreement and renter’s liability policy should be

compared to determine which is primary. If both policies are excess, the loss will be shared equally by the insurers.

Continental Casualty v. Aetna Casualty, 33 Pa. D. & C.2d 293 (Pa. Common Pleas 1963).

RHODE ISLAND: The renter’s policy is primary unless otherwise stated in the rental agreement in 10-pt. type on the face

of the rental agreement. R.I. Stat. § 31-34-4(b).

SOUTH CAROLINA: Car rental company’s policies are primary, including those who are self-insured. Southern Home Ins.

Co. v. Burdette’s Leasing, 234 S.E.2d 870 (S.C. 1977). The same is true for dealer’s garage liability coverage. Travelers

Indem. Co. v. Dees, 235 F. Supp. 515 (S.C. 1964).

SOUTH DAKOTA: With regard to “automobile service agencies” (businesses engaged in selling, repairing, servicing, storing,

or parking motor vehicles), § 58-23-4 provides:

§ 58-23-4. Primary and excess coverage on vehicle loaned by automobile service agency.

When an automobile insurance policy is in force for anyone engaged in the business of selling, repairing, servicing,

storing, or parking motor vehicles and the person or organization allows the use of a vehicle with or without

consideration to any other person or organization and the vehicle is involved in an accident out of which bodily injury

or property damage to third persons or damage to the insured vehicle arises, the following automobile insurance

policies shall be applicable:

(1) In the event no other automobile insurance policy is in force at the time of the accident for the person or

organization using the vehicle, the coverage provided by the motor vehicle owner’s automobile policy shall extend

to the borrower in the event the owner’s automobile insurance policy extends coverage to said borrower.

(2) In the event that another automobile insurance policy is in force for the person or organization using the

vehicle, any coverage provided by the motor vehicle owner's automobile insurance policy shall be excess coverage

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only but limited by the terms of the owner's applicable automobile insurance policy. The coverages in the policy

afforded the person or organization using the vehicle shall be primary.

If the renter does not have insurance, then the car rental company’s policy is primary. However, one decision seems to

question this. In Auto-Owners Ins. Co. v. Enterprise, 663 N.W.2d 208 (S.D. 2003), the court held that the policy of a self-

insured car rental company was primary, and the renter’s personal auto policy was excess. The decision seemed to suggest

that because the state has an omnibus statute, the car rental company was primarily liable.

In Subrogation Division, Inc. v. Brown, 446 F.Supp.3d 542 (D.S.D. 2020), the court discussed primary vs. secondary coverage

considerations concerning rental cars and federal preemption under the Graves Amendment. No commercial rental

vehicle owner can be held “liable under the law of any State ... by reason of being the owner of the vehicle” for damages

“arising out of the use, operation, or possession of the vehicle during the period of the rental.” 49 U.S.C. § 30106(a).

Overland (Hertz) rented a vehicle to Brown. The rental agreement provided that Brown would indemnify Overland and

Brown’s “valid and collectible automobile liability insurance” “will be primary” in the event of an accident. Brown’s

negligence caused an accident with Claymore resulting in $2,271.75 in damages to Claymore’s vehicle. Overland’s carrier

paid the damages and Overland reimbursed its carrier because it was within the deductible. The court’s reasoning is

essentially that “vicarious liability” becomes implicit whenever a renter’s insurance company seeks to avoid primary

coverage using a “shift” in financial responsibility imposed under state law. The renter’s insurer (21st Century Insurance)

has not appealed this published decision. Brown had the state’s minimum insurance with 21

Century, which assigned its

right to Subrogation Division, Inc.(SDI), which sued Brown seeking to recover the $2,271.75. SDI raised the Graves

Amendment as the central theme of its complaint and the parties vigorously dispute its application to this case. In South

Dakota, “[a]n owner’s policy of liability insurance ... shall insure the person named therein and any other person as insured,

using any insured vehicle or vehicles with the express or implied permission of the named insured[.]” S.D.C.L. § 32-35-70.

“This statute clearly requires that an automobile owner provide coverage for those who use the vehicle with either express

or implied permission.” The court held that “vicarious liability” becomes implicit whenever a renter’s insurance company

seeks to avoid primary coverage using a “shift” in financial responsibility imposed under state law. By requiring Overland's

insurance—and ultimately Overland—to primarily cover the Claymore damages, Auto-Owners forces Overland to be

vicariously liable for Mr. Brown's torts. This is the precise result barred by the Graves Amendment. The Amendment states

rental companies like Overland “shall not be liable” under state law for damages incurred by renters.

TENNESSEE: When the car rental agreement provides that coverage for the vehicle must be provided by the renter, the

agreement controls. Tenn. Stat. § 56-7-1101(c).

TEXAS: No case or statutory law dealing specifically with car rental companies. Terms of rental agreement and renter’s

liability policy should be compared to determine which is primary. However, a self-insured car rental company is not

considered to be “other valid and collectible insurance” unless, and then to the extent that, the policy does not provide

the minimum liability limits. Hertz Corp. v. Robineau, 6 S.W.3d 332, 333 (Tex. App.--Austin 1999).

A car rental company may provide its renters with optional damage waivers, relinquishing liability for all or a part of any

damage to a rented vehicle from authorized drivers. Rental agreement must contain a required disclosure notice (language

provided in statute) in at least a 10-pt. font regarding mandatory charge notice, prohibitions, and stating that the damage

waiver is not insurance.

UTAH: The renter’s policy is primary if it is valid and collectible. Utah Code § 31A-22-314. Compare this statute, however,

with a case in which the court said that because of the use of the word “primary” in subsection (2) of 31A-22-344, (which

was removed with a 2007 amendment) it would be inconsistent to permit Enterprise to provide no insurance. Li v. Zhang,

120 P.3d 30 (Utah App. 2005). The 2007 amendment made it clear that rental companies must maintain minimum liability

limits on each rental vehicle, but if the renter has valid and collectible liability coverage, that coverage will be primary.

VERMONT: A car rental company is required to have liability insurance covering its rental vehicles. Vt. Stat. 23 § 800(a). A

self-insured car rental company is not primary where the rental contract says it is secondary to other insurance. Champlain

Casualty Co. v. Agency Rent-A-Car, Inc., 716 A.2d 820 (Vt. 1998).

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VIRGINIA: Car rental companies are required to provide primary liability coverage to renters. USAA Cas. Ins. Co. v. Hertz

Corp., 578 S.E.2d 775 (Va. 2003).

WASHINGTON: No case or statutory law dealing specifically with car rental companies. Terms of rental agreement and

renter’s liability policy should be compared to determine which is primary. If the driver is intoxicated, the renter’s

insurance is primary. PEMCO v. Hertz, 800 P.2d 831 (Wash. 1990). A “super-escape clause” in a rental contract making

liability coverage provided by a self-insured car rental company inapplicable until after exhaustion of all auto liability

insurance and/or any other protection or indemnification, whether primary, excess, or contingent, was enforceable and

made the liability coverage of the lessee’s policy primary despite its “excess clause” making its coverage excess over any

other valid and collectible insurance with respect to non-owned auto. N.H. Indem. Co. v. Budget Rent-A-Car Sys., Inc., 64

P.3d 1239 (Wash. 2003).

WEST VIRGINIA: The renter’s personal auto policy is primary. However, any liability insurance purchased for additional

consideration from the car rental company is primary to other available insurance. W.V. Stat. § 33-6-29.

WISCONSIN: Section 344.52 (vehicle rented in Wisconsin) and § 344.52 (vehicle rented outside of Wisconsin) state that

while car rental company liability coverage for rented vehicles is mandatory, it is not primary. The Wisconsin Supreme

Court has said that even with Wisconsin’s omnibus statute, the policy provided by a car rental company is secondary to

the insurance purchased by the renter. Buckett v. State Farm Mut. Auto. Ins. Co., 1988 WL 23174 (Wis. App. 1988). Persons

who rent autos for compensation are required to file a bond or policy of insurance with the Department of Transportation.

The bond or policy provides that the insurer shall be liable for damages caused by negligent operation of the motor vehicle.

Any person who fails to comply with § 344.51 is liable to the extent that they would have been liable had this section been

complied with. However, this policy is secondary. A self-insured car rental company’s insurance might be considered

primary if the renter’s policy provides excess coverage only. Boatright v. Enterprise Rent-A-Car, 570 N.W.2d 897 (Wis. App.

1997).

WYOMING: No case or statutory law dealing specifically with car rental companies. Terms of rental agreement and

renter’s liability policy should be compared to determine which is primary.

These materials and other materials promulgated by Matthiesen, Wickert & Lehrer, S.C. may become outdated or superseded as time goes by. If

you should have questions regarding the current applicability of any topics contained in this publication or any of the publications distributed by

Matthiesen, Wickert & Lehrer, S.C., please contact Gary Wickert at (800) 637-9176 or gwickert@mwl-law.com. This publication is intended for the

clients and friends of Matthiesen, Wickert & Lehrer, S.C. This information should not be construed as legal advice concerning any factual situation

and representation of insurance companies and\or individuals by Matthiesen, Wickert & Lehrer, S.C. on specific facts disclosed within the

attorney\client relationship. These materials should not used in lieu thereof in anyway.