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DRIVERRENTAL RISKSPeter King discovers scary liability issues in rental car agreementsYOU KNOW WHERE youstand with car insurance.If your car is driven bysomeone who’s drunk,outside the conditions of theirrestricted licence, involved in astreet race or on a beach, your coveris gone and you are liable for anydamage they do. Other than that,if you crash with comprehensivecar insurance, you are covered foryour own loss (less the excess) andany loss to third parties, whetheryou’re at fault or not.You might think the same sort ofconditions apply when you drivea rental car, right? Wrong.Consider this scenario: you wake upin hospital to hear that a truck driversays you crossed the centre line andsmashed into his truck. There areno other witnesses. The Police havecharged you with careless drivingand, if you are convicted, under theterms of your rental car agreementinsurance exclusions, you will bepersonally liable for the rental car andthe quarter-million-dollar truck, aswell as the loss of income to the rentaland truck firms while the vehiclesare off the road. This is a true story.And it needn’t be so dramatic.You’re at a Give Way sign. Youcheck that everything’s clear, pullout and someone charges around anearby corner and ploughs into you.You say he was speeding; he saysyou didn’t give way. No one admitsresponsibility (as their insurancepolicies demand) but, lacking anyevidence that the other guy wasspeeding, the Police charge youfor failing to give way.Poor observation accounted for athird of the rental car injury crashes inthe past five years. Under many rentalcar insurance agreements your liability,along with your credit card, is – onceagain – wedged wide open. In fact, insome contracts, you agree to effectivelylet the rental firm decide how muchmoney to take off you indefinitely, todeal only with them, and to not everreverse any credit card charges.“Until rental carinsurance becomesmore transparent itwould pay to check theterms and conditionsof any offer, alongwith the price.“The clause that creates all theseproblems doesn’t look very dangerousby itself. All it says is that insuranceis excluded if the conditions of thehireage are broken. For things likedriving the car in a reckless manner,that seems reasonable. It’s the otherclause in the agreement whichcan cause grief. It’s the one thatcontractually obliges you to do whatyou must do anyway: obey the lawand follow the rules of the road.What this means is, if you havea crash due to carelessness (bydefinition almost every crash is dueto carelessness) or infringing anyof the hundreds of road rules, youset off the condition of vehicle hireinsurance exclusion. Some rentalcompanies make it more explicit:they specifically exclude insuranceon the basis of any traffic offence.The contractual obligation to thehirer to obey the road rules is not asneaky trick by rental firms. The NZTArequires rental car firms to ensure youagree not to break any road rules.The same rule requires firms to collectinfringements, so it was probablydesigned to collect from touriststempted to run up speed camerafines and then skip the country.But, that doesn’t explain why thereshould be an insurance exclusion.In fact, section 11 of the InsuranceReform Act 1977 basically demandsthat insurance should not be soriddled with exclusions that it ceasesto effectively be insurance. Somerental car terms and conditionsinclude reference to section 11,and customers should see this asa good sign. It means the rentalfirm actually has insurance.Karen Stevens is the insuranceombudsman. She sees plenty ofdisputes where people are deniedcover because they breach the termsof their ordinary car insurance. But,she has no cases involving rentalfirms, despite the fact there havebeen 1763 injury crashes involvingrental cars in the past five years.Half of them involved a driver onan overseas licence. The reasonis probably that the insuranceombudsman scheme is only availableto customers of insurance companiesand the word ‘insurance’ is notrestricted by law.Because it turns out there aretwo kinds of rental car firms –those that self-insure, and thosethat have insurance policies withregistered insurance companies.40 AA Directions Winter 2013