Rental car insurance is confusing. Before you rent, it is important to know if your insurance provides coverage for the rented vehicle, and under what circumstances that coverage may be limited. The answers to these questions may depend on the language of your own automobile insurance policy concerning “substitute vehicles.” To trigger a “substitute vehicle” clause, an important fact to consider is whether your car is “disabled” and “withdrawn from use,” rather than when you simply are concerned that it may be on the brink of becoming disabled or possibly in need of repair. If your rented car is involved in a car accident, questions may arise as to whether your own insurance policy will still cover you for a bodily injury liability claim (if you cause an accident, injuring someone), an uninsured motorist claim (if you become injured due to the fault of an uninsured driver) or an underinsured motorist claim (if the at-fault driver carries an insufficient amount of liability coverage to adequately cover your injury claim).
Your automobile insurance policy likely has a “Substitute Vehicle” clause, which provides coverage for a “temporary substitute vehicle” when the insured vehicle is not in “normal use” or has been “withdrawn from normal use.” When your rented vehicle meets the requirements of a “Substitute Vehicle,” the rented vehicle is covered to the same extent as your own vehicle. The public policy behind enforcement of substitute vehicle clauses is to prevent an insurance company from being liable for two vehicles while the insured has paid only one premium.
When is a vehicle considered withdrawn from normal use?
In Economy Fire and Casualty Company v. Dean-Colomb, the court held that a vehicle shall be considered withdrawn from normal use in the event of a breakdown, repair, servicing, loss, or destruction. Economy Fire and Casualty Company v. Dean-Colomb, 269 Ill.App.3d 603 (4th Dist. 1995). Illinois Courts have also found that damaged tires, a broken wheel bearing, or a flat tire also constitute “breakdowns” for Substitute Vehicle clauses. Similarly, if the insured is unable to get the covered vehicle to a shop for repairs, but seeks out a place to do the repairs, this may be enough for a court to determine that the vehicle was withdrawn from normal use, thus triggering coverage. Standard Mut. Ins. Co v. Sentry Ins. Of Illinois, Inc., 146 Ill.App.3d 905, 911 (1st Dist. 1986). However, simply fearing that your car may be unsafe for use without it being inoperable, or, before taking it to a shop for service, is legally insufficient to qualify for a coverage through the Substitute Vehicle Clause. Economy Fire and Casualty Company at 608.
Still, there are some ambiguities in the law. When the rental company has used another means of insuring their vehicle, there are no black letter rules for determining which policy is considered to be primary. The court may examine both the renter’s personal policy and any policy of the rental company. The provisions of each insurance policy will be interpreted in accordance with contract principles, and the court will then decide which policy is primary.
Many insurance policies also contain an “other insurance” clause, which makes that policy as an “excess” policy, and the other insurance as the “primary” policy. If both the renter’s personal policy and the rental policy contain “other insurance” clauses, the court will apply rules of insurance policy construction to determine which policy is primary.
How does a “Substitute Vehicle” clause affect UM/UIM coverage in Illinois?
A significant concern when renting a car is whether the insurance provided by the rental company covers the renter in the event of an accident with an “uninsured” or “underinsured” motorist. When a rental company elects to insure the vehicle through self- insurance, it is not required to cover uninsured/underinsured claims. This is because the rental company has not actually issued an insurance policy. In Robinson v. Hertz Corp., the renter did not have his own car insurance and was struck by an unidentified driver. Robinson v. Hertz Corp., 140 Ill.App.3d 687, 687 (3rd Dist. 1986). Because Hertz was self- insured, the court held that Hertz was not required to offer uninsured coverage to its renter. Id. at 688-89. This case demonstrates why having your own UM/UIM insurance coverage may be important. If you are injured by an uninsured or underinsured driver, the only way to protect your right to compensation may be through your own insurance carrier’s uninsured/underinsured coverage.