Short-term Vehicle Rental and At-Fault Accident: Protecting Policyholders
Consumers who had an accident while driving a short-term leased vehicle contacted Groupement des assureurs automobiles after having to pay for the repairs. What they all had in common was that they were at fault for the accident and had not taken out the collision damage waiver offered by the leasing company. This situation was also observed with temporary replacement vehicles loaned by garage owners.
The owners of these leased or loaned vehicles (lessors) are not required to file a claim with their own insurer. This means they can send the invoice for repair to the lessees. The repair bill can sometimes be high.
Two coverage options
There are two options for covering damage caused to a short-term leased vehicle following an at-fault accident. They are:
Purchase endorsement Q.E.F. No. 27 – Civil liability resulting from damage caused to vehicles of which named insured is not owner
This endorsement provides civil liability coverage for any vehicle not owned by the policyholder provided he respects the features that describe it (e.g., private passenger vehicle). The endorsement covers temporary replacement vehicles1 as well as short-term leased vehicles. Note that this endorsement provides for a maximum amount of compensation.
This endorsement can be offered to a policyholder who does not have coverage under Section B for his own vehicle. Since Q.E.F. No. 27 is a civil liability endorsement, it covers the policyholder (individual) and is distinct from his vehicle and its underlying coverage. In addition, the policyholder can insist on using his Q.E.F. No. 27 to repay the cost of the damage to the leased vehicle.
Use the coverage for temporary replacement vehicles under Section B of Q.P.F. No. 1 – Owners’ Form
This coverage applies only if the policyholder has coverage under Section B of his QPF 1, but does not have Q.E.F. No. 27.
- If the lessor has Section B coverage, the lessee’s insurer will only pay compensation that corresponds to the difference between the deductible under its insured’s policy and the lessor’s deductible. For example, if the lessor has a deductible of $5,000 and the lessee has a deductible of $500, the lessee’s insurer will reimburse the lessor $4,500, even if the damage to the temporary replacement vehicle exceeds this amount.
- If the lessor does not have Section B coverage, the lessee’s insurer must then cover the full cost of the damage to the temporary replacement vehicle.
In short, policyholders will be better protected if they have a Q.E.F. No. 27, which can be offered even if they do not have coverage under Section B.
1Any vehicle used temporarily to replace a designed vehicle that cannot be used for one of the following reasons: breakdown, repairs, maintenance, loss, destruction, sale or vehicle inspection