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Rental Vehicles, Covered or Not
The holiday season is here and everyone is caught up in the excitement of the moment. Some folks are traveling to exotic places for a getaway and others across several states to visit loved ones. During this time of year, our potential for the need to rent a vehicle increases tremendously. Most of us may think we already have coverage when, in fact, we may not.

The standard auto rental agreement has many elements that relate to insurance coverage and how it will be applied. It would be wise to familiarize yourself with the specifics before executing the agreement.

The typical exposures one assumes in a rental situation are:

(1) third-party liability to persons who are injured or whose property is damaged as a result of the negligence of the renter,

(2) contractual liability created by the rental agreement in which the renter agrees to indemnify the rental agency for claims brought by third parties, and

(3) liability for damage to the rental vehicle arising either from the renter's negligence or through that part of the rental agreement in which the renter agrees to return an undamaged vehicle to the rental agency.

Some rental agreements hold the renter responsible for fire and theft damage to the vehicle, and many agreements even hold the renter responsible for damage caused by weather-related perils. In addition to the actual damage, most rental agreements hold the renter responsible for loss of use of the vehicle and other charges such as appraisals and loss adjustment expenses. Some agreements also make the renter responsible for the replacement cost of the vehicle or the "diminished value" of the auto even after repairs are made.|

Most personal auto policies are written on a Texas Personal Auto Policy (Texas PAP) or an ISO Personal Auto Policy (ISO PAP). When you cause an accident, primary liability coverage for the injury or damage suffered by the other party is found in the liability section of the renter's personal auto policy (Texas or ISO). If the rental company provides primary liability coverage, then the PAP will be excess. The named insured and any family members, as defined by the policy, are covered while using any auto. Since the word "auto" is not defined in the PAP, coverage applies when renting any type or size of vehicle for personal use, even a large truck.

Note that if you rent a pickup, van, utility vehicle, or truck for business purposes, the Texas PAP does not cover any liability arising out of its use unless the rental vehicle is a temporary substitute as defined by the policy. The ISO PAP covers liability arising out of the use of a rented private passenger auto, pickup or van for business purposes, but not a rented truck other than a pickup or van.

With respects to contractual liability, the PAP's insuring agreement states that the company will pay damages for bodily injury or property damage the insured becomes legally responsible for because of an auto accident. The hold harmless provision in a typical rental contract requires the renter to be legally responsible for bodily injury or property damage claimed against the rental company as a result of an accident, the PAP covers this assumption of liability.

The Texas PAP covers damage to a rented vehicle in the liability section of the policy which includes loss of use or other damages claimed by the rental company and is covered with no deductible. The ISO personal auto policy covers damage to a rented vehicle in the physical damage section of the policy.

Some of us may rely on insurance coverage provided by one of our credit card companies when renting a vehicle. It would be wise, however, to check the terms and conditions of the coverage to make sure it meets the requirements of the rental agreement. Typically, credit card coverage is for physical damage only and may not provide protection for bodily injury and property damage you cause to a third party.

Regarding coverage for autos rented in foreign countries, there is no coverage provided on the PAP due to the territorial restrictions of the policy.

We welcome any questions you may have regarding the above information. You can contact me at 281.570.2000 or visit our website at

This article was provided for informational purposes only and should not be considered in any way as legal advice.
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