The Loss of Use clause in your car rental agreement holds you accountable for lost income if you damage or total an agency’s rental car. This loss of use liability can extend while the car is off the lot―either in repair or while awaiting replacement. In other words, rental agencies cannot lease what they don’t have, and the customer can be held responsible for the lessor’s loss of earnings.
What is the loss of use clause?
Car rental agencies are in the business of renting their vehicles to make a profit. When a rental car sits on a repair lot or in the garage of a collision shop, the leasing agency loses money daily on their investment. And while you may be covered for the cost of repairs under an insurance policy—be it your own personal automobile policy or the agency’s add-on collision policy—it is more likely than not that neither policy will reimburse the rental car agency for unrealized profits.
Loss of use clause in foreign countries
Loss of use damage charges also occur while renting vehicles overseas. Before you sign a rental car agreement while abroad, find out if your personal auto insurance or the rider to your insurance policy covers loss of use charges occurring outside of the US.
How does the supply chain fit into the equation?
Prior to the pandemic, car parts and microchips were produced and shipped efficiently via the “just in time” global supply chain model. This model would distribute goods and products on time and according to need. It functioned amazingly well, holding down large inventories, provided that home and overseas manufacturers, transportation hubs, and shipping ports were functioning in tandem and without glitch.
Loss of Use Clause after the pandemic
Unfortunately, since the COVID pandemic took hold, we have since learned that vehicular computer chips, many of which come from China, are in short supply or unavailable. And the time to acquire these necessary parts can be extensive.
While many Chinese ports close and factories temporarily shutter for ongoing cases of COVID, the loss-of-use duration climbs in response. Meanwhile, vehicles stalled in repair or replacement are unavailable to lease — often for a substantial period. And every day that agencies lose potential fees from a lack of vehicle inventory, the lessor is responsible for the ongoing loss of earnings. This really adds up!
Indiana courts’ history of charges relating to the insurance loss of use clause
Indiana courts have addressed legal remedies available for car rental companies that experience damages due to the loss of use of their rental vehicles. The state calculates damages by the vehicle’s daily rental value. Weddle v I.R.C. & D. Warehouse Corp., 85 N.E.2d 501 (Ind. App. 1949). However, vehicle owners must make every attempt to mitigate the damages and recovery will be limited to a reasonable period of time. New York Cent. R. Co. v Churchill, 218 N.E.2d 372 (Ind. App. 1966).
But the obvious question becomes…In unusual times such as these, what would constitute a ‘reasonable period of time?’ Talk with your personal injury lawyer about this recent turn of events.
Loss of use coverage through your automobile policy
The obvious assumption is that you already have this coverage through your own automobile insurance policy. But the fact is that very few automobile insurance carriers provide coverage for the loss of use clause without adding a rider to their policy. If you have doubts about your existing policy or need to add a policy rider, call your agent. This is too important to overlook!
What does a loss of use automobile policy rider cover?
A loss of use automobile rider may limit your exposure should any of the following course of events occur.
- Accident
- Collision
- Theft
- Vandalism
- Fire
- Flood
Nevertheless, since all policies and waivers differ, I recommend you read the rider carefully, knowing in advance the maladies that may fall under the exclusions. And secondly, prior to accepting the keys to the rental vehicle, understand that reckless driving, and operating the vehicle while under the influence of alcohol or drugs, can void the protections of a policy rider or loss of use waiver.
The optional Loss of Use Waiver
When you lease a car from a rental agent, in addition to your daily fees and insurance, consider purchasing the optional loss of use damage waiver insurance (LDW). The LDW is not actually a policy, but a waiver sold by the car rental agency. This waiver is an agreement between you and the leasing company that they will not hold the leasing customer responsible for the loss of use clause should the vehicle incur damage or possible theft. The LDW can cost between $10 and $30 upward per day as an optional add-on to your rental agreement.
Loss of use coverage may be available from your credit card provider
Finally, loss of use coverage may be available to you under your credit card agreement. If you are fortunate enough to be a cardholder with this premium coverage, understand that you must make the purchase of the rental car with this credit card provider. Finally, read the provisions of the agreement before deciding if the coverage offered is as robust as a waiver purchased from the rental agency.
Ward & Ward Personal Injury Lawyers
If you need an attorney, talk with a personal injury lawyer who has experience with accidents involving rental cars. The attorneys at Ward & Ward Law Firm have over a century of combined experience in injury litigation and settlements. Call us today at (317) 639-9501 and ask for attorney Charlie Ward.
