Renting a car? Beware of “coverage” that doesn’t cover you

When Kimberly Esquivel rented a car from Alamo in Orlando recently, she thought her credit card would cover her. She discovered how wrong she was by accident.

Like other car rental companies, Alamo offers optional collision insurance that pays for damages if a car is wrecked. But the insurance is pricey, and can effectively double the final cost of the car. Esquivel heard her credit card might cover her, so she called Discover to get the details.

I inquired about their insurance policy regarding rental cars while on vacation. The clerk said, “No problem, ma’am … just decline all of Alamo’s rental insurance, rent the entire car through Discover and you’ll be covered for up to $25,000″

Well that sounded pretty good. I asked about conditions and she replied that it would cover everything except in cases of gross negligence and acts of God, which was considered leaving the keys in a running car, hurricane, etc. OK, sounded like I was covered.

So Esquivel turned down Alamo’s insurance.

And you probably can guess what happens next. She had an accident.

Esquivel backed into a power pole and smashed the back window of her car.

She drove the car back to Alamo and filled out all the reports. And then she waited.

The final bill came to more than $1,000.

What the cheerful Discover agent on the phone did not tell me is that its insurance is secondary to your own. If your own insurance does not cover collision in rentals, which mine did not, then they would pick up the cost except administrative costs, towing, appraisal, storage and other fees assessed by the rental agency.

If she could do it over again, would she have bought the Alamo insurance? Strangely, no.

I’m usually quite careful and it’s never happened before, and it probably won’t again. But maybe I wouldn’t have been so blindsided by the $1,000 administrative cost.

How interesting. Esquivel is saying she’d rather roll the dice on her next rental than overpay for it.

We know that car rental insurance is almost pure profit to the agencies. Why not lower the cost of insurance a little, in order to cover drivers like Esquivel?

And, for that matter, me.

  • Victor

    I’m not sure I understand what happened. What difference does it make if the Discover Card insurance is secondary to her own? In any case, neither policy is willing to cover the $1,000 in administrative fees.

    And how is it that Alamo did $1,000 worth of “administration”? That sounds like gouging to me. Next time, I’ll administrate it for half that. Can’t be more than a few online forms to fill out, right?

    Remember the Alamo. Remember never to rent from them, that is.

  • Bob

    Esquivel may have a small court claim against Alamo here. $1k worth of “administration”? Just because Esquivel crashed Alamo’s car, that doesn’t mean Alamo gets a blank check from Esquivel. Alamo needs to mitigate her damages.

    A few hundred bucks sounds much more reasonable here for the tow, and other misc expenses. Esquivel should begin by sending a CMRRR letter to Alamo’s legal contact, asking why they failed to mitigate her damages, and offering $200 as payment in full.

  • Bill

    That’s unfortunate Discover’s coverage is “secondary”. I have just re-checked my visa card’s CDW and it is primary…as I thought.
    I’ve never rented from alamo and never intend to…especially after reading this.

  • http://www.claws-and-paws.com/ Douglas Muth

    I agree with the other commentors. $1,000 seems like a lot for “administrative fees”. I would fight that, in court if necessary.

  • Scott

    Included in these administrative fees are “loss of use” charges for the car rental company. They are not able to generate revenue while the car is being repaired so they will charge you for this.

  • Joe Farrell

    Loss of use is a property damage claim that EITHER primary or secondary insuracne will cover.

    The problem is that Alamo cannot prove that every single vehicle that could be rented was rented, meaning that the loss of use is zero. The reason why insurance companies will not pay is that the amount being sought is not reasonable nor customary.

    If insurance will not pay for a auto accident property damage claim then the claim is without merit. Pure and simple. Tell Alamo to blow smoke. If they refuse to go away, let them sue you. The chances of their winning is fairly low. Especially if it is a garden variety average rental car.

  • Ted – Phoenix Justice

    I am one of those that turns down the rental car company’s insurance some of the time. The reasons?

    1. When renting a non-SUV, I am able to purchase rental car insurance through AIG that provides $35,000 in accident coverage for around $7.00 a day, which is fairly reasonable. http://www.travelguard.com/

    2. When I need to rent an SUV or passenger van, I opt for the rental car company’s insurance. I know it adds around 35% to my rental costs, but since AIG doesn’t cover SUVs and my credit card covers only $25,000. No way in hell am I getting stuck for the cost of repairing an SUV or passenger van out of pocket!

  • J C

    Diners Club, now Diners/Master Card is primary. I’m sure there are others.

    Not a bad idea to have a primary card, even if just for car rentals.

  • http://singh.blogspot.com Jennifer Singh

    The way I see it, every day I drive my own car I’ve chosen to assume the risk of paying my $500 deductible out of pocket. I’ll readily assume the same risk when driving a rental car since my regular car insurance covers rentals. Sure, there will be some charges like “administrative fees” or “loss of use” fees that are explicitly UNcovered in case of an accident, but I won’t buy $25/day insurance to cover maybe $250 in fees. Insurance is supposed to protect me from losses that would devastate my financial situation. Overpriced coverage is useless for that purpose. (An earlier commenter suggested holding a credit card that offers primary coverage for car rentals… I think I’ll look into that.)

  • Ted Wong

    Coincidentally, I confirmed with my auto insurance carrier (MetLife) that they include rental car coverage in the US and Canada. I *assume* that that’s primary coverage, but maybe I should double-check.

    I am merely a customer of MetLife, not a shareholder, employee, shill, …

  • Kimberly

    Well my “displeasure” will not hold up in court since the information regarding insurance via credit card IS posted in the “deep dark depths” of legal language.

    You are unlikely to get that information from the credit card company UNLESS you ask that they read the full disclosure. When I inquired further I found the clerk had to look up the questions regarding the OTHER costs. She had no idea. She seemed quite surprised when she found the disclosure. I can guarantee you any “discounted” settlement would be eaten up in court costs.

    “Would have” and “Could have” are two different things. Sure it’s “unlikely” that for the 4 days the vehicle was in the shop (especially the fact that it was an SUV)…Alamo “would have” had the need to rent THAT vehicle. Chances are it was likely to simply sit in the garage all that time (or technically it would have still been rented to ME). But they ARE a business and as a business they do have the RIGHT to have their entire fleet available for rent at anytime. This would mean they should have “Could have” rights.

    They “terminated” my rental when I returned it. If they just charged me for the rest of the rental period (which was more than 4 days) that would have covered the bulk of it at less. Perhaps that will be the extent in which I can argue to get things lowered a little. Then there’s the Admin Fee and the Diminishment of Value.

    I know NOW what to ask for on other credit cards. Ask is your insurance Primary or Secondary? If it’s Primary READ the fine print and make sure that it covers, Loss of Use, Admin and Diminishment of Value…don’t trust the clerk.

    Personally I don’t really blame “Alamo”. I feel more let down by the credit card company. If they told me “up front” that they only carry Secondary Insurance when I inquired about their coverage and that their insurance would not cover etc, etc… Perhaps I would have checked into using a different card. But they wouldn’t have wanted that….would they?

    Be sure that with your insurance if it covers “rental car” that it’s not in support of renting a rental car when yours is in the shop due to an accident. That it’s collision of the rental car.

  • Joe Farrell

    If you have NO OTHER automobile insurance then the credit card company is primary. What the credit card insurance is designed to be, in reality, is gap coverage – where they pay what your primary carrier does not. If you do not have primary automobile insurance then the insurance carrier is primary coverage.

    That being said, loss of use means you need tp prove not only that you lost the use of the vehicle but what the damage is for that loss of use. For a car rental company it is not the rack rate rental for how many days it was not in service. You see, they have computer records, and those records can tell you every single rental. Every single one. How long, price, discounts, everything. I would look at the monthly time period and every 30 days how many days was the vehicle rented, and at what rate. The last 3 months ought to be sufficient. Then, you look at the month of the accident – and how long it was rented at what rate.

    Next, diminution of value. A little cross examination would discover a lot of truth here. When they wholesale a vehicle, do they disclose damage history? A quick perusal of their online sales of motor vehicles reveals that they do not disclose this information. If they fail to disclose and if all they do is wholesale the vehicles or return them to the manufacturer -there is no ‘diminution of value.’

    Quite honestly this type of business practice is probably illegal in 40 states, trying to get money for something which you never suffer damage from. Since it is a formalized business practice as evidenced by dedicated employees trying to scam every last dollar from you, it is a business practice that is patently unfair since it amounts to fraud.

    That being said, if your credit card insurance does not cover SUV’s – exactly what is an SUV? If a Jeep Wrangler is an SUV, is a Kia Sportage an SUV? Its based on a car frame. Is an SUV an SUV if people think it is an SUV? Unless there is a definition in the limitation language then you have a pretty good argument that the term is not defined and absent a clear limitation, there is no limitation.

    Yep, everyone hates lawyers. But they do come in handy once in a while in situations like this.