A Rental Car Agreement may make you legally liable for all physical damage to the rental car. For practical reasons, the rental car company doesn’t care how damage occurs or who is at fault for an accident. 

They don’t want to get embroiled in disputes of fault or value. They just want their car back so they can keep renting it out – that’s their business! You promised to return their car back in the same condition you received it, or they hold you financially responsible. They are holding you (and your credit card) liable by contract – even if the accident isn’t your fault.

Here are some potential issues after an accident with a rental car:

• Loss of Rents - If the rental car is damaged, the repair time takes it out of service for rental use. The rental car agency may require reimbursement for their loss of rental income. This expense is not normally covered by the PAP.
• Diminution In Value – After an accident, the market or re-sale value of the car may be reduced as a consequence of the accident. The rental car agency may demand cash payment for this reduction in value. This expense is not normally covered by the PAP.
• Loss Valuation – the PAP values the repair or replacement of a damaged auto at “Actual Cash Value”. The rental car agreement may require “Full Value” including their acquisition and handling costs. After a loss a disagreement on valuation for settlement may expose you to uninsured costs.
• Loss Settlement - the PAP requires that the insurance company be allowed to inspect and appraise the damaged property before its repair or disposal. The rental car agency may choose to affect repairs immediately at expedited costs with higher cost materials and labor charges than allowed by the insurance company leaving you with the balance.
• Loss Payment – the rental car agency may require immediate payment for the loss and max out your credit card for all anticipated charges until your insurance company can make settlement. This may result in restrictions to your credit and ruin your vacation plans.

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  Administrative Expenses – the rental car agreement may require reimbursement for loss related expenses such as towing, storage, appraisal, claim adjustment, etc. None of these expenses are normally covered by the PAP.

For answers to other questions related to rental cars, you can find these other resources:

• What is “Collision Damage Waiver”?
• Should I Buy “Collision Damage Waiver”?
• What coverage is provided by my Personal Auto Policy?
• Are their alternatives to CDW from the rental car company?
• Or contact your American Insurance Agent to discuss the details of your specific policy.