Founders Ins. Co. v. Walker, 2015 IL App (1st) 141301
Car Rental Insurance: Waiving coverage could leave you waving goodbye to your bank account.
Insurance companies are pushing the “pick-your-own-plan” or “you-pick-the-price, we-pick-the-coverage” idea to consumers as a smart and simple way to lower insurance costs. They reduce their premium in exchange for dropping certain coverages. Alternatively, comprehensive plans provide much wider coverage by charging a higher premium. The discounted non-comprehensive plans are certainly viable options to consider to cut rising insurance premiums for some, but in the case of Sybil Morrison, it ended up leaving her without coverage.
Sybil rented a car from Enterprise and, like many of us often do, waived the insurance offered by Enterprise. Sybil had a non-comprehensive insurance plan with Founders. She bought, among other things, liability insurance that covered bodily injury and property damage, but contained an exclusion provision for rentals. She did not purchase the physical damage coverage, which would have included collision coverage.
On May 6, 2012, the car Sybil rented was damaged in a hit-and-run accident. She made a claim with Founders, which was denied because Sybil’s plan did not include collision insurance. Sybil and Enterprise argued that the claim should be covered under the liability coverage. Founders disagreed, reasoning that liability coverage protects the insured against injury and loss to others whereas collision insurance protects loss or injury to the insured’s own vehicles. Because Sybil did not purchase collision insurance she was not entitled to coverage. Additionally, even if Sybil’s claim falls under liability coverage, the section contains a rental property exclusion provision.
The Court held that Sybil’s claim should have been covered under the liability coverage, but that the exclusion provision precluded insurance coverage for damages to rental cars. The Court explained that liability coverage typically includes damage to other’s property and not damage to the insured’s own car. In other words, liability coverage should cover the insured in instances when she can be sued for damages (i.e. held liable). One cannot sue themselves for damages, so typical liability coverage does not apply to damages to one’s own car.
This instance being atypical in that the damaged car was not the insured’s own car but belonged to Enterprise. Enterprise could, and in-fact did, sue Sybil for damages to that car. Sybil could be held liable for damages and therefore this claim should have been covered by the liability insurance. However, the exclusion provision still applied and coverage was properly denied.
The Court, additionally, pointed out that exclusion provisions’ purpose is to allow for lower insurance premiums in exchange for minimal liability coverage. They continued that Sybil could have avoided this loss simply by either purchasing a more comprehensive insurance plan from Founders or purchasing insurance from Enterprise.
Before waiving rental car insurance, make sure you have coverage. Otherwise, you could end up with the repair bill for the car.
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