Flo from Progressive

In any industry -- including rental cars -- there are always what a programmer would refer to as edge cases. I lived within one, as I technically had a rental car from a vehicle manufacturer for a half year until an airbag fix was available for my personal car. Every 30 days, I went in and signed a "rental agreement" for the new car provided by the manufacturer and asked when a fix for my own car will be available. As it was technically a "rental car", my responsibility was primarily three-fold.

  1. Sign a new "rental agreement" every (approximately) 30 days. 
  2. Bring the car into a dealership's express service lane when any form of service is required. No financial responsibility for vehicle maintenance was one great aspect of having a rental car! 
  3. Maintain comprehensive coverage on my personal vehicle, as the car provided by Nissan was considered to be a "temporary substitute auto" under my own insurance policy while the vehicle I owned was undrivable.

My insurer even had an internal document reiterating that a car provided by a manufacturer due to the Takata airbag recall was covered as a personal automobile would be covered. So the rental agreements provided to me, combined with the document when I parked my own vehicle, validated that the vehicle in question is indeed a "temporary substitute auto". Temporary substitute autos are normally short-term and include the concept of service loaners.

Service Loaners in Indiana

Get a service loaner while your car's in for repair? You'll likely sign a rental agreement (even if the repair shop doesn't charge for the loaner). That rental agreement is a contract and recently came up in a dispute in the State of Indiana.  

Maria Riviera took her vehicle to Terry Lee Honda for service and Terry Lee Honda gave Riviera one its vehicles to use while hers was out of commission.  Riviera signed a “rental agreement for a temporary substitute vehicle” that recited a $35/day rental fee and provided that Riviera agreed to provide insurance for the courtesy car. While Riviera was driving the courtesy car, she was involved in a fender bender that caused minor damage to the car. 

A dispute then arose over whether Empire Fire and Marine Insurance Company, which insures Terry Lee Honda, or Progressive Southeastern Insurance Company, which insures Riviera, should pay for the damages.  Progressive filed a declaratory judgment action seeking a declaration that Empire’s coverage was primary because Riviera was a permissive driver of a loaned vehicle.  On Progressive’s motion for summary judgment, the trial court found that the car was actually a rental and denied Progressive’s motion for summary judgment.

So Ms. Rivera got caught in the middle of an insurance company spat, with her insurer denying responsibility for an admitted fender-bender after their customer signed a rental agreement with a dealership. Her insurance company (Progressive Southeastern*) lost the original case, where the company tried to claim that the car wasn't a rental (despite the contract). And this appellate court case was over a total of $328.45 -- could you imagine if this were a real claim?

* Glad I don't have Progressive Southeastern, which is part of the Progressive Group of Companies you see with Flo the spokesperson ... 

Progressive continued to claim that a rental contract where the renter or other party doesn't get charged a periodic rate is not a valid rental agreement (under Indiana statute), the driver was really just driving the dealership's car, and that all parts of the signed rental contract should be ignored. The companies appeal on the case might seem to be a limited application except ...  

Enterprise Holdings (owners of Alamo, Enterprise, and National) got rid of the franchising model in the United States. Alamo doesn't have a rewards program but a renter who redeems Enterprise Plus Points or National Emerald Club credits doesn't pay for the car -- there is a listed periodic rate on the contract but it is removed, just like on a courtesy loaner.

We're not attorneys but Enterprise Holdings can't pay itself for a "free rental", and the presence of a signed rental agreement seems to precisely parallel the courtesy loaner rental program being contested. A potential unintended consequence of Progressive's appeal is that free rental car award days may disappear in Indiana, and we hope that possibility is never contested in courts (whether in Indiana or anywhere else).

How was the case adjudicated by the Appeals Court? The judges found that the two insurance companies (Empire and Progressive) had previously signed an agreement to arbitrate any issue that related to concurrent coverage. And with that, the court decided to not even question whether the contract was a true rental. So the question of "can a car provided at no cost (loaner or award day) be considered a rental" will remain for another litigious day.

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