What is "extra driver" charge?
Silence DoGood
What is the "extra driver" fee as part of auto rental for?
Would the primary renter avoid liability for damage caused by the
extra driver? If the drivers are married to each other, is there any
reason to pay this fee if they travel together and switch off driving?
Mike Jacobs
> What is the "extra driver" fee as part of auto rental for?
Some companies charge extra if more than one person will be operating
their vehicle. Not all companies make an extra charge, but AFAIK they
ALL want to have the complete list of permitted drivers in hand,
before you drive off their lot.
They do this because, by law in most states, the rental company is
obligated to provide LIABILITY insurance covering the vehicle's driver
- and having two (or more) drivers means more exposure, thus more risk
to the insurance company (or the self-insured rental company) than
with just one driver. Same as with your personal auto policy.
Also, the company just wants to KNOW the names, and get drivers
license information from, all the people who may be driving THEIR car
while it is let out to the renter. They have the right to limit the
car's operation so that it is driven only by people to whom they
directly give permission to do so, and to forbid the renter/bailee
from giving his own permission to anybody else to do so without the
company's knowledge.
Note, this liability coverage (for injury caused to 3rd parties) is
separate from the "collision damage waiver" (CDW) which most rental
companies offer to renters for an extra charge, which (if accepted)
would waive the company's right to sue the renter for collision damage
to THEIR OWN vehicle while it was bailed to the renter (regardless of
who was driving).
> Would the primary renter avoid liability for damage caused by the
> extra driver?
ISTM if someone drives negligently and causes injury to a 3rd party
(or property damage to someone else's vehicle, or a state-owned
guardrail, or whatever) the liability coverage _for_that_driver_ is
what would pay for the loss. Any personal auto policy covering that
driver would be "excess" to the rental company's own coverage that
runs with the vehicle, if it were for a higher coverage limit (or, if
the law of the state where the injury happens and/or where suit is
brought permits "stacking" of separate policies additively).
Don't mix this up with the bailee's (named renter's) responsibility to
the bailor (rental company) for damage to the rented vehicle itself.
In a "bailment" situation (which a car rental is one example of),
tangible property of an owner (bailor) is handed over to someone else
(called a "bailee") for safekeeping or for some other purpose - but
safekeeping of the property is always part of the duty of the bailee,
even if he gets to use it for his own purposes too. This duty
applies WITHOUT REGARD to whether the bailee himself caused the damage
- if you borrow something from someone, and it breaks while in your
possession and control, you owe them a repair or replacement, even if
the breakage was not your fault. The CDW waives, for an extra fee,
the bailor's right to enforce its damage claim against the bailee. In
some states, the renter/bailee's own personal auto policy will provide
collision coverage on the rented car in place of the renter's own car,
but will of course apply any deductible that is written into the
personal auto policy's collision coverage. In such a case, the only
advantage of buying the CDW is to avoid the deductible, and some
renters are willing to take that (smaller) risk instead of paying the
(relatively hefty compared to the small risk) CDW fee. If there is
no applicable collision coverage, though, IMO the CDW is a good idea,
since otherwise, the renter could be personally on the hook for up to
the full value of the rented car - up to several tens of thousands of
dollars - if it is totalled in a wreck.
> If the drivers are married to each other, is there any
> reason to pay this fee if they travel together and switch off driving?
There's no reason they should NOT have to pay that fee, if they do
intend for both of them to drive. If the couple fraudulently (or
innocently) tells the rental company that, frex, only Wifey will be
driving, but Hubby decides to take the wheel for part of the journey,
both Hubby and Wifey could be in deep doo-doo if Hubby has a wreck.
The fact that 2 drivers are married to each other in no way obviates
their duties to the bailor and certainly doesn't get them extra
liability coverage for the unlisted driver - Hubby would be lucky if
his own auto policy even covers him in that instance.
Don't take the risk. It's not worth it. Or, find a rental company
that does not charge extra if there are other drivers - but then you
STILL need to tell the company ALL the people who you may allow to
drive their car while it is in your possession.
--
This posting is for discussion purposes, not professional advice.
Anything you post on this Newsgroup is public information.
I am not your lawyer, and you are not my client in any specific legal
matter.
For confidential professional advice, consult your own lawyer in a
private communication.
Mike Jacobs
LAW OFFICE OF W. MICHAEL JACOBS
10440 Little Patuxent Pkwy #300
Columbia, MD 21044
(tel) 410-740-5685 (fax) 410-740-4300
Deadrat
4756-b004-f...@l13g2000yqb.googlegroups.com:
>
> What is the "extra driver" fee as part of auto rental for?
Extra profit for the rental company.
> Would the primary renter avoid liability for damage caused by the
> extra driver?
What do you think? Hint: car rental companies have been writing contracts
to rent cars for a long time.
> If the drivers are married to each other, is there any
> reason to pay this fee if they travel together and switch off driving?
Yes, it's a violation of your contract. For specific penalties for
allowing an extra driver behind the wheel, read the contract. A quick look
at a Hertz contract finds that there are limits on liability for damage
except when an unauthorized person is driving. In which case, the sky's
the limit. Can you say "consequential damages"?
Rich Carreiro
> What is the "extra driver" fee as part of auto rental for?
It's for the right to be able to have a driver other than
the primary renter drive the car.
Presumably car rental companies have realized that enough
people would like to have drivers in addition to themselves
drive the car that said people are willing to pay to be able
to do that, and so the rental companies charge the fee.
It doesn't have to be "for" anything (and likely isn't,
other than for the company's bottom line).
> Would the primary renter avoid liability for damage caused by the
> extra driver?
Read the rental contract. It could provide for individual liability,
it could provide for joint-and-several.
> If the drivers are married to each other, is there any
> reason to pay this fee if they travel together and switch off driving?
First, many (most?) car rental companies don't apply the fee for
spouses -- no fee is required for the spouse of the renter to be
authorized to drive the car.
Second, the reason to pay it is because if it's not paid (when
it is required by the company) the spouse is not an authorized
driver and you are subject to whatever penalties are in the contract
for allowing a non-authorized driver to drive the car, in addition
to whatever state criminal and civil ramifications there may be to an
unauthorized driver driving a rented car.
--
Rich Carreiro rlc-...@rlcarr.com
slide
> On Sep 10, 1:34 pm, Silence DoGood <Silence_DoG...@angelic.com> wrote:
>> What is the "extra driver" fee as part of auto rental for?
>
>
>
> obligated to provide LIABILITY insurance covering the vehicle's driver
> - and having two (or more) drivers means more exposure, thus more risk
> to the insurance company (or the self-insured rental company) than
> with just one driver. Same as with your personal auto policy.
>
I don't get this part of it. Since only one driver is at the wheel at
any given time, the exposure is that of one driver - not two. Frex, my
wife and I both have clean driving records. I don't see how the rental
car is more likely to cause damage to persons or properties no matter
which one is driving. If one is a worse driver, then the exposure in sum
is no more than the worst driver. AFAIK, rental companies do not assess
charge based on driving record anyway. We're all pooled.
I do understand that the rental company wishes to know the name, vitals
and driver license number for all drivers but the rationale behind the
added fee (if the OP is correct) escapes me.
Seth
Mike Jacobs <mjaco...@gmail.com> wrote:
>On Sep 10, 1:34�pm, Silence DoGood <Silence_DoG...@angelic.com> wrote:
>> What is the "extra driver" fee as part of auto rental for?
>
>Some companies charge extra if more than one person will be operating
>their vehicle. Not all companies make an extra charge, but AFAIK they
>ALL want to have the complete list of permitted drivers in hand,
>before you drive off their lot.
>
>They do this because, by law in most states, the rental company is
>obligated to provide LIABILITY insurance covering the vehicle's driver
>- and having two (or more) drivers means more exposure, thus more risk
>to the insurance company (or the self-insured rental company) than
>with just one driver.
I don't see that. The risk is dependent on the total hours (or miles)
driven, and the quality of the driver(s). It seems to me that there's
less risk in having two drivers trade off than having one driver get
very tired and keep driving.
I can see basing the charge on the quality (driving record, age, etc.)
of the _worst_ authorized driver.
>Note, this liability coverage (for injury caused to 3rd parties) is
>separate from the "collision damage waiver" (CDW)
Which appears to be insurance (and, indeed, some states have so
ruled). (If you think it isn't, what's the difference between
insurance that covers the damage to the vehicle, and a CDW?)
> If there is
>no applicable collision coverage, though, IMO the CDW is a good idea,
>since otherwise, the renter could be personally on the hook for up to
>the full value of the rented car - up to several tens of thousands of
>dollars - if it is totalled in a wreck.
Rental companies have a habit of charging much more than that: first,
they start with the list price (rather than actual cost); then they
try adding "loss of use" (full rental charge for the time it takes to
repair/replace the car, even if it wouldn't have been rented and
certainly not at full price during some of that period). This can
sometimes be negotiated down without a lawsuit.
>> If the drivers are married to each other, is there any
>> reason to pay this fee if they travel together and switch off driving?
>
>There's no reason they should NOT have to pay that fee, if they do
>intend for both of them to drive.
Some rental companies don't charge an extra fee for spouses.
Seth
Stan
A probable economic factor is that with more drivers, the car may be
driven farther, so this charge is a back-door way to charge for extra
mileage.
A second factor is simple capitalism; specifically, if I have
something you want (in this case, you want my permission to let
someone else drive my car), even if it costs me nothing extra or is
worth nothing to me, if you want it, you'll still have to pay for it
(think of the set of "proofs" of wedding pictures).
I've seen rental car agreements that allow for a spouse (and nowadays
a domestic partner as well) or co-worker, if the rental was arranged
by a business, to drive without an extra driver charge, but (1) the
extra drivers still need to be present when the car is rented and run
through their approval check, and (2) this is not an industry
standard; meaning, not all companies will waive an extra driver charge
under these conditions.
Finally, if the car is being driven by someone who isn't an
"authorized driver", any CDW or other supplemental insurance you
bought is void. The rental car company will probably still be
required to cover state-minimum liability coverage (which can be
zero), but it's possible they'll try to recover what they had to pay
(I believe car rental companies typically self-insure, so they are
paying the actual claim, and not just an insurance premium). Also, if
that unauthorized driver tries to get his own insuror involved, they
will probably try to deny coverage on the grounds that he was
operating the car without the permission of the owner (disclaimer,
IANAL).
Mike Jacobs
> In article <047ee391-bd41-4f79-9832-898de7fb3...@m11g2000vbl.googlegroups.com>,
> Mike Jacobs �<mjacobs...@gmail.com> wrote:
>
> >On Sep 10, 1:34�pm, Silence DoGood <Silence_DoG...@angelic.com> wrote:
> >> What is the "extra driver" fee as part of auto rental for?
> >- and having two (or more) drivers means more exposure, thus more risk
> >to the insurance company (or the self-insured rental company) than
> >with just one driver.
>
> I don't see that. �The risk is dependent on the total hours (or miles)
> driven, and the quality of the driver(s). �It seems to me that there's
> less risk in having two drivers trade off than having one driver get
> very tired and keep driving.
You're being too logical, Seth, looking at "risk" in a purely
mathematical, probabilistic, pick-a-number-between-zero-and-one way,
and referring solely to the likelihood of a particular event
happening. In that sense, you're right, it may even be less "risk"
to have 2 drivers taking turns on a long-haul trip. But that's not
what "risk" means to an insurer; a "risk" is a discrete obligation to
indemnify a particular person ("the insured") or particular piece of
property ("the insured premises" or "the insured goods") against a pre-
determined list of possible casualty events (i.e. the "covered" events
- fire, theft, collision, whatever else might be covered by a
particular policy) for which the underwriter can charge a set fee, all
as may be regulated by his state's insurance laws. The insurer is
entitled to charge a certain minimum, per driver, for that coverage
even if both drivers have equally spotless records. As noted by many
posters in this thread, not all rental companies _do_ charge extra for
extra drivers; but if they do, that is the rationale. Of course, any
surcharge for having a _bad_ driving record (not likely in the case of
a car rental, but yes likely on your personal auto policy) would be
_on_top_of_ the base rate for a good driver, _not_ "starting from
zero" or whatever the calculated, probabilistic risk of a particular
event happening on that particular trip might be.
As another example, many rental companies forbid you to take their car
OUT OF THE STATE where it was rented, unless you tell them in advance
and (maybe) pay an extra fee. That is because they have to comply
with the state insurance laws of every state where you may bring their
car. These requirements should not be taken lightly and ignored,
since the rental company can disclaim coverage for a loss if it occurs
while the renter was violating one of the provisions of the rental
contract (giving the wheel to an unauthorized driver, or driving the
car in an unauthorized state).
> I can see basing the charge on the quality (driving record, age, etc.)
> of the _worst_ authorized driver.
As someone else noted, rental companies don't really get into that -
AFAIK their check-in procedure does no more than confirm that you are
a duly licensed driver, without looking into your traffic ticket or
accident history. But, your personal auto underwriter _does_ often
take those driving-record facts into consideration in determining how
much to charge for "the risk" they are undertaking for a particular
driver.
> >Note, this liability coverage (for injury caused to 3rd parties) is
> >separate from the "collision damage waiver" (CDW)
>
> Which appears to be insurance (and, indeed, some states have so
> ruled).
Wrongfully so, if looked at purely logically, IMO, but arguably
correct on public policy grounds, i.e. that state's lawmakers decided
that the rental company is in the _business_ of handing out these CDWs
on a repetitive, regular basis, for a fee, and should be regulated in
doing so, in setting rates, etc. as if they were engaging in the
insurance business.
But, purely from a POV of what a CDW _is_, it is not "insurance" in
the sense that insurance is always a contract in which an indemnitor
(the "insurer") undertakes to indemnify the policyholder and/or other
persons listed in the policy (the "insureds") for some risk of loss
which one or more of _the_insureds_ might suffer - either, some
casualty to the insured's OWN property, or death or disability or
illness occurring to the insured, or (in a liability policy) the risk
of the insured being legally compelled to pay a 3rd party claimant for
accidental (i.e., non-intentional, but still caused by actionable
negligence on the insured's part) injuries which the insured caused to
that 3rd party (or to the 3rd party's property) and for which the
insured may be liable in tort.
There is no "third party" in the CDW situation - the rental company is
simply agreeing, for a fee, to waive ITS OWN claim for damage to ITS
OWN property while that property is in the possession of the renter.
That is no different in theory than the pre-injury waivers that a
soccer mom signs when enrolling her kid on a team, or that a scuba
diving student signs when he takes a class, or that any other
POTENTIAL PLAINTIFF signs (whether or not for an extra fee or, if
plaintiff is the customer receiving services or goods from the
potential defendant, for an extra discount from the non-waiver rate)
and which clearly does not convert the soccer mom into an "insurer" of
her kid's team's coaches simply because she agrees not to sue them if
her kid gets injured.
>�(If you think it isn't, what's the difference between
> insurance that covers the damage to the vehicle, and a CDW?)
Insurance is a contract of indemnity, which is always at least a 3-
party situation if the person paying for the coverage is not the owner
of the vehicle = you've got the insurer, the vehicle owner i.e. the
rental company, and the insured person i.e the individual renter.
Insurance is thus, by definition, coverage provided by someone
_other_than_ the vehicle's owner himself. In contrast, a CDW is a
contract signed by the owner of the vehicle that simply agrees to
waive the signing owner's own potential future claim for damage to his
own property against the person paying for that waiver (and against
other permitted drivers while in the renter's possession).
> > � If there is
> >no applicable collision coverage, though, IMO the CDW is a good idea,
> >since otherwise, the renter could be personally on the hook for up to
> >the full value of the rented car - up to several tens of thousands of
> >dollars - if it is totalled in a wreck.
>
> Rental companies have a habit of charging much more than that: first,
> they start with the list price (rather than actual cost); then they
> try adding "loss of use" (full rental charge for the time it takes to
> repair/replace the car, even if it wouldn't have been rented and
> certainly not at full price during some of that period). �This can
> sometimes be negotiated down without a lawsuit.
Sure, all of that's true - but I didn't want to get into that side
issue on this thread, at least initially. The "full value" of a
total loss property damage claim is set by state tort law but,
usually, includes not only the actual FMV of the destroyed goods (or
the repair or replacement cost, whichever is less), but also damages
for loss of use before it can be replaced, as well as other
consequential and incidental damages. If the goods can be repaired
and are not a total loss, the owner may claim not only the cost of
repair, but also the "diminution in value" of the goods compared to
similarly aged and used goods of like quality and condition, which
have _not_ ever been damaged and subsequently repaired. While this
may sound arcane, it is a relatively simple matter for a professional
appraiser to determine how much a history of a prior collision repair
diminishes the value of a particular used car vs. others of the same
make, model, and condition that were never wrecked.
> >> If the drivers are married to each other, is there any
> >> reason to pay this fee if they travel together and switch off driving?
>
> >There's no reason they should NOT have to pay that fee, if they do
> >intend for both of them to drive.
>
> Some rental companies don't charge an extra fee for spouses.
Right, as I and several other posters also noted. Persons who don't
like these extra fees should vote with their feet and move to the next
rental counter over, at the airport, or should move the ruler down the
yellow page ad to the next company listed and dial them next, or
should click on the next suggested company that came up on an online
search. If the companies that charge these fees lose enough business,
they are more likely to change their policies. But this is a LEGAL
newsgroup, so we were discussing whether it is even LEGAL for them to
charge such fees. It is.
Robert Bonomi
slide <dryads...@xxxxyahoo.com> wrote:
>> On Sep 10, 1:34 pm, Silence DoGood <Silence_DoG...@angelic.com> wrote:
>>> What is the "extra driver" fee as part of auto rental for?
>
>any given time, the exposure is that of one driver - not two.
Incorrect analysis. A vehicle with two authorized drivers will very probably
be operated _more_ hours than a vehicle with only one driver.
For an extreme case, consider an over-the-road long-haul truck. Law prohibits
one driver from operating more than 10 (or 12) hours without at least 10
contiguous hours 'off'. This sets a maximum of 12/14 operating hours per day.
But with two drivers, the truck can be rolling 24 hrs/day.
Given that -- all else being equal -- the risk of being in an accident is
linearly related to the number of hours of operation, the 2-driver vehicle
is _twice_ as likely to be involved in an accident than the 1-driver one
*STRICTLY* because it operates twice the number of hours.
With insurance rates based only on the calendar period -- not the miles
driven, an insurer would need to charge *double* the premium for the 2-driver
vehicle, just to break even on payouts.
The same logic holds with multiple drivers for a passenger car -- although
the increase in usage is typically substantially less than 'double'.
Barry Gold
>>> What is the "extra driver" fee as part of auto rental for?
>Mike Jacobs wrote:
>> They do this because, by law in most states, the rental company is
>> obligated to provide LIABILITY insurance covering the vehicle's driver
>> - and having two (or more) drivers means more exposure, thus more risk
>> to the insurance company (or the self-insured rental company) than
>> with just one driver. Same as with your personal auto policy.
slide <dryads...@xxxxyahoo.com> wrote:
>I don't get this part of it. Since only one driver is at the wheel at
>any given time, the exposure is that of one driver - not two. Frex, my
>wife and I both have clean driving records. I don't see how the rental
>car is more likely to cause damage to persons or properties no matter
>which one is driving.
I can think of two reasons:
1. With only one driver, the number of hours/miles the car is driven
is limited by the amount of driving one driver can do. You need to
take time off to sleep, and you may have other things to do than drive
-- business to take care of, museums to tour, whatever. During that
time, the car is parked and therefore much less likely to be involved
in an accident. But with two (or more) drivers, it is possible to
switch off and drive almost continuously. Or you may go to that
business conference while your wife goes sightseeing -- and again, the
car gets driven more than if it was just you. Or turning it around,
say that she is the primary driver. She spends the day touring, while
you attend that business conference at the hotel. But then in the
evening, when she may be too tired to go out, you get behind the wheel
and run some errands -- maybe to Kinkos to run off some charts for a
presentation, maybe to do a little touring of your own. Either way,
it's extra hours and miles on the road.
2. The value of a thing is what that thing will bring in an
arms-length transaction. People are willing to pay the extra-driver
charge, so they add it on. It *must* be fair value, because nobody is
holding a gun to your head and forcing you to pay it.
ANother way of looking at it: the rental car business is pretty
competitive. There are at least 3 major players: Hertz, Avis/Budget,
and Alamo/National/Enterprise. Price typically plays a major role in
the customer's selection of who to rent from.
So, the rental company can charge $X and add on an extra charge if you
want more than one person to drive, or they can charge $X+Y and allow
extra drivers for free. A lot of their business comes from business
men, who travel alone. If they include the extra driver fee ($Y) in
their standard daily fee, they are at a disadvantage compared with
other companies that charge only $X but levy an extra fee for an extra
driver.
This is not that dissimilar to the airline business. THe airline can
fold the cost of luggage handling, meals, etc. into the fare, or they
can charge a lower fare and charge extra for the other services. For
many years, they _did_ include all that, partly because they wanted to
project a "flying is fun" image. And getting nickled and dimed -- not
to mention getting to pay $6 or more for a barely edible sandwich and a
can of coke -- is not "fun" by most people's definition.
But nowadays, flying is all about price -- very similar to the car
rental business in some ways.
Me, I care about the extras. If I rent a car at all, I choose a car
rental company that doesn't charge extra for adding your spouse
(several only charge for a non-spouse added driver). And I don't fly
at all, because things have reached the point where flying is closer
to torture than to fun.
2.
--
Barry Gold, webmaster:
Conchord: http://www.conchord.org
Los Angeles Science Fantasy Society, Inc.: http://www.lasfsinc.org
Mark A
news:h8lh7b$3si$1...@news.eternal-september.org...
> I don't get this part of it. Since only one driver is at the wheel at
> any given time, the exposure is that of one driver - not two. Frex, my
> wife and I both have clean driving records. I don't see how the rental
> car is more likely to cause damage to persons or properties no matter
> which one is driving. If one is a worse driver, then the exposure in sum
> is no more than the worst driver. AFAIK, rental companies do not assess
> charge based on driving record anyway. We're all pooled.
>
> I do understand that the rental company wishes to know the name, vitals
> and driver license number for all drivers but the rationale behind the
> added fee (if the OP is correct) escapes me.
The extra driver charge is probably based on statistical information that
for rentals where there is more than one designated driver, they are
involved in more accidents. Insurance rates are usually determined by actual
statistical underwriting, and not necessarily based on "logic."
Seth
Mark A <no...@nowhere.com> wrote:
>The extra driver charge is probably based on statistical information that
>for rentals where there is more than one designated driver, they are
>involved in more accidents. Insurance rates are usually determined by actual
>statistical underwriting, and not necessarily based on "logic."
Rental car companies go to great efforts to avoid having anything to
do with insurance (that's why "collision damage waiver"). They aren't
always successful (NY decided that if it looks like insurance, smells
like insurance, and quacks like insurance, . . .)
And many types of insurance are not based on "actual statistical
underwriting"; consider medical malpractice insurance (which is not
based at all on the experience with that doctor).
Seth
Barry Gold
>> >Note, this liability coverage (for injury caused to 3rd parties) is
>> >separate from the "collision damage waiver" (CDW)
>On Sep 14, 10:37�am, se...@panix.com (Seth) wrote:
>> Which appears to be insurance (and, indeed, some states have so
>> ruled).
Mike Jacobs <mjaco...@gmail.com> wrote:
>But, purely from a POV of what a CDW _is_, it is not "insurance" in
>the sense that insurance is always a contract in which an indemnitor
>(the "insurer") undertakes to indemnify the policyholder ...
>for some risk of loss
>which one or more of _the_insureds_ might suffer -
>There is no "third party" in the CDW situation - the rental company is
>simply agreeing, for a fee, to waive ITS OWN claim for damage to ITS
>OWN property while that property is in the possession of the renter.
While I agree with most of your article, I think you're wrong about
this one. There are two economic theories behind insurance:
1. "Spreading the risk": If your house were to burn down tomorrow, the
loss would probably be financially devastating. But if you consider a
group of 100,000 people, you can be pretty sure that while _some_ of
those people will have their house burn down, you can also figure that
not all of them will. And in fact, you can predict how many houses
will burn down to 2 or 3 decimal places.
So everybody pays the _average_ yearly risk of having their house burn
down, which is pretty small (typically less than 1 in 1000) and
affordable. That large risk (losing several $100,000) is pretty
tolerable when spread among 100,000 people.
2. "Selling the risk". You have something you don't want: risk. You
"sell" that risk to the insurer, who buys it from you. The risk has a
negative value, so you pay money to the insurer.
CDW/LDW isn't that different. If you have an accident while driving
the rental car, you could end up having to pay $10,000 or more to
replace the car (plus "loss of use"). That's a pretty big risk. So
you "sell" that risk to the rental car company. The fact that the
rental company is "insuring" the loss of its own property doesn't
change the fact that _you_ (the renter) face the risk of that loss.
Or you can look at it as spreading the risk among all the drivers who
rent from that company. Either way, it looks a lot like insurance,
economically.
Legally, of course, might be a different story. But different states
can (and do) have different rules about whether CDW/LDW is "insurance"
for regulatory purposes.
Stuart A. Bronstein
> And many types of insurance are not based on "actual statistical
> underwriting"; consider medical malpractice insurance (which is not
> based at all on the experience with that doctor).
Most insurance isn't primarily based on experience with the insured.
Do you have to have died before to get life insurance?
Insurance is normally initially based on general actuarial
information. If the individual's specific history indicates a higher
or lower risk, the premium may be adjusted, but that's a minor part
of the calculation.
In the health care debate now they are trying to eliminate all or
some of that kind of thing (called "community rating") so that
everyone is charged the same premium.
Gordon Burditt
>and driver license number for all drivers but the rationale behind the
>added fee (if the OP is correct) escapes me.
There doesn't need to be a rationale behind an added fee. Especially
if it's not optional. They charge "because they can".
Some car dealerships put a charge on a new car invoice for
heavily-in-demand models cryptically called "ADP", which if you
ask, stands for "Additional Dealer Profit".
I believe one dealer got exotic (and this may have been more a
publicity stunt than anything else) and decided to charge for:
Additional Dealer Profit
Big Dealer Profit
Crapload of Dealer Profit
Dollars of Dealer Profit
Extra Dealer Profit
Full Dealer Profit
Gross Dealer Profit
Heap of Dealer Profit
....
Yet More Dealer Profit
Zombie Dealer Profit
and on top of these, charged extra for calculating each of these
numbers. He also charged extra for each page of invoice beyond the
first, and these itemized fees usually added an extra page. But
they were all disclosed to the customer.
Mark A
news:h8sej7$h17$1...@reader1.panix.com...
> Rental car companies go to great efforts to avoid having anything to
> do with insurance (that's why "collision damage waiver"). They aren't
> always successful (NY decided that if it looks like insurance, smells
> like insurance, and quacks like insurance, . . .)
>
> And many types of insurance are not based on "actual statistical
> underwriting"; consider medical malpractice insurance (which is not
> based at all on the experience with that doctor).
>
> Seth
Whether or not you think rental car companies are avoiding calling it
insurance, their historical experience with multiple designated drivers (all
other factors being equal) is what causes them to charge more, not abstract
logical analysis. If you don't want to call it "insurance underwriting" that
is OK with me, but their extra fees are based on the same type of
statistical analysis used by insurance underwriters that show higher
accident rates (or maybe just more miles driven and hence more wear and tear
on the car) when there are multiple designated drivers..
Although the history of the one insured person may be one factor that is
considered even in the insurance business, the statistical underwriting I am
talking about is based on all the other demographic categories other besides
the history of the person insured. That could be age, sex, marital status,
etc in addition to number of designated drivers. I am sure that you are
aware that some companies charge more or even prohibit drivers under a
certain age because of the historical analysis they did back when a person
of legal age was allowed to rent a car.
Below are the age restriction rules and rates for National Car Rental. Some
states have overridden these rules by passing specific legislation, in which
cases National Car rental just charges more money to compensate. These rules
are based on the same principles of insurance underwriting (historical
analysis of rentals to younger drivers) and not merely based on abstract
"logic":
The primary renter of the vehicle must be 25 years of age, or for select
corporate contracts and international tour accounts, the minimum age is 21.
Rental rates may be higher for renters under age 25.
Certain specialty and larger sized vehicles may not be rented to younger
drivers.
Some locations maintain maximum age limits.
18 years of age is the minimum for military or government personnel
traveling on official orders under government rates. Government or military
leisure travel though is 21 years old, and rate may be higher for under age
25. (U.S. only)
New York state: The minimum age for NY is 18 years of age. A $60.00 per day
additional charge applies to 18-20 aged renters and a $23.50 per day
additional charge applies to 21-24 aged renters.
Michigan: The minimum age for MI is 18 years of age. A $28.00 per day
additional charge applies to 18-20 aged renters and a $14.00 per day
additional charge applies to 21-24 aged renters.
slide
> In article <h8lh7b$3si$1...@news.eternal-september.org>,
> slide <dryads...@xxxxyahoo.com> wrote:
>>> On Sep 10, 1:34 pm, Silence DoGood <Silence_DoG...@angelic.com> wrote:
>>>> What is the "extra driver" fee as part of auto rental for?
>> I don't get this part of it. Since only one driver is at the wheel at
>> any given time, the exposure is that of one driver - not two.
>
> Incorrect analysis. A vehicle with two authorized drivers will very probably
> be operated _more_ hours than a vehicle with only one driver.
>
It's not an incorrect analysis although others have also come to your
conclusion. Just as easily I can say you are incorrect because two
drivers will be safer than one because they'll spell each other.
You will have to prove that two drivers drive further than one to claim
I"m wrong here. OTOH, there is little question that two drivers will
spell each other making for safer driving than one driver.
My personal experience does not support you. When we rent, we always say
two drivers due to the ability to change off. That's our only motive.
How many really rent cars to take off on long distance marathons like
some sort of Cannonball Derby? I think very few.
Mark A
news:zsqdnRIH2LYhZi_X...@posted.internetamerica...
> There doesn't need to be a rationale behind an added fee. Especially
> if it's not optional. They charge "because they can".
The charges are based on actual historical experience with multiple
designated drivers as opposed to single drivers. They can easily calculate
the differences in miles driven, accidents, and other financial factors from
their historical databases.
Mike Jacobs
> Mike Jacobs <mjacobs...@gmail.com> wrote:
> >But, purely from a POV of what a CDW _is_, it is not "insurance" in
> >the sense that insurance is always a contract in which an indemnitor
> >(the "insurer") undertakes to indemnify the policyholder ...
> >for some risk of loss
> >which one or more of _the_insureds_ might suffer -
> >There is no "third party" in the CDW situation - the rental company is
> >simply agreeing, for a fee, to waive ITS OWN claim for damage to ITS
> >OWN property while that property is in the possession of the renter.
>
> While I agree with most of your article, I think you're wrong about
> this one.
I look forward to the discussion.
> There are two economic theories behind insurance:
>
> 1. "Spreading the risk": If your house were to burn down tomorrow, the
> loss would probably be financially devastating. But if you consider a
> group of 100,000 people, you can be pretty sure that while _some_ of
> those people will have their house burn down, you can also figure that
> not all of them will. And in fact, you can predict how many houses
> will burn down to 2 or 3 decimal places.
There are other ways to "spread the risk" (or, more accurately, re-
assign the risk) besides buying insurance. A co-op or condo
building, frex, may assess all its unit owners for the cost of repairs
to a part of the common area that really affects only one of the units
(this time). Is this "insurance?" It _is_ a form of pooled risk in
which every participant takes a small share. But no, the co-op in
doing so is not "engaged in the business of insurance", since this
risk-pooling is incidental to its main purpose, i.e. it is a group of
people who want to buy and maintain their housing co-operatively.
Nor does the fact that it is a co-op, alone, exempt it from insurance
regulation. Many insurance companies are in fact co-ops or "mutual"
companies (where every policyholder is deemed to own a share of the
enterprise) rather than stock companies. Nor is the crucial fact
simply whether they regularly engage in the business of buying and
selling risk - stockbrokers and collectibles dealers and casinos do
that, all the time. Also, you might argue, do people who buy tickets
to watch the trapeze act at the circus, or a NASCAR race, in hopes of
seeing a crash. Finally, every single civil suit for damages ever
settled out of court amounts to the sale and purchase of a risk, i.e.
the defendant buys the claimant's claim for a definite dollar amount
rather than incur the risk of a (possibly lower, but possibly much
higher) verdict that would be entered if the case went to trial, and
the claimant does so from the same motivation (to have a definite
dollar amount in hand instead of risking getting nothing at trial).
We would be kidding ourselves if we denied that all of the above
people - stockbrokers, gamblers, trapeze artists, as well as
plaintiffs and defendants in civil lawsuits - all "play the odds"
which they have calculated to exist under their circumstances, and
then buy and sell that risk. Hell, you could almost say that
EVERYTHING in life involves risk - but that doesn't make everything we
do "insurance."
Rather, what makes something "insurance" in the legal sense is exactly
what I described above, that it is a free-standing contract of
indemnity (not merely an incidental clause in some other kind of
contract where the indemnitor is a participant) between an indemnitor
(the insurer) and an indemnitee (the insured) stating that, if and
when the indemnitee experiences some particular listed "loss event,"
an undesirable casualty of some type whose risk of occurring can be
fairly accurately calculated (with knowledge of which the insurer can
set the "premium" to be charged for purchasing that risk), the
indemnitor will reimburse him for it. And, what also makes it "the
business of insurance" subject to state regulation is that the
indemnitor is not doing this on a casual, one-off basis, but is
engaged in the repeated business of buying similar risks from a fairly
large number of policyholders, enough so that the risk is not merely
being transferred from one party (indemnitee) to another (indemnitor),
but so that a statistically reliable number of similar risks are being
pooled by the insurer, acting as indemnitor to that large group of
separate indemnitees.
If a company is doing THAT, it is "engaged in the business of
insurance" as defined and regulated in most states. Such regulation
typically seeks both to make sure that the rates being set (both as to
dollar amount, and method of calculating) are fair, and also that the
company has a large enough pool of risk so that an unusually high but
statistically foreseeable "run" of bad luck is not likely to
completely drain the resources of the company and leave some claimants
high and dry when the company goes bankrupt because of having to pay
out on earlier claims. How big a pool of risk is "big enough" to
allow a company to engage in the "business of insurance" is a matter
subject to actuarial determination, just as is the issue of how much
premium is "high enough" to cover each risk, given the size and
characteristics of the overall risk pool.
Many business contracts of numerous kinds - whether between 2
sophisticated businesses or between a business and a lay consumer -
have provisions that "spread the risk" or re-assign the risk, without
thereby being converted into a contract of insurance. Frex, if you
buy goods "FOB factory" you, the buyer, assume the risk of any damage
to those goods after they leave the factory loading dock (unless you
and the shipping company reach some _other_ understanding regarding
risk of damage in transit, which MAY OR NOT amount to a contract of
insurance, depending on how it is worded), while if the purchase
contract says "FOB destination" the seller bears the risk of all loss
until he delivers the goods to your door. Construction contracts also
often contain indemnity clauses in which, frex, a subcontractor agrees
to indemnify a general, and the general agrees to indemnify the owner,
against third party claims for loss arising from the performance of
the subject contract. Those contracts do not constitute agreements of
"insurance" either, although they are clearly, in part, contracts of
indemnity.
Basically, what it comes down to is, the business of "insurance" is
whatever the insurance regulatory body in a given state says it is.
Sometimes, things that "look like, smell like, quack like" insurance
get regulated, and sometimes they don't.
> So everybody pays the _average_ yearly risk of having their house burn
> down, which is pretty small (typically less than 1 in 1000) and
> affordable. That large risk (losing several $100,000) is pretty
> tolerable when spread among 100,000 people.
Sure. It's useful IMO to understand how the business of insurance
got started - and the risk of fire in dense urban areas was one of the
prime sources of the idea, leading initially to fire insurance co-
operatives and later to stock companies engaged in the same business.
The other early source of the idea was the business of overseas
trading, in which (by the beginning of the modern era, after the
Renaissance) the cost of buying and equipping even one large ship, let
alone purchasing enough goods in a distant port to fill its hold, had
become too much for almost any individual investor/merchant. Thus,
we initially saw the rise of the idea of a "society" or "company" or
"party" (all of which originally meant the same thing business-wise
that they do today socially, i.e. a group of colleagues or friends
getting together) who would pool their resources to engage in a joint
enterprise, eventually becoming recognized in law as a separate legal
"person," a corporation (one of the great inventions of the law, BTW,
which was an essential step to make modern economic life possible).
Early examples such as the "East India Company" were basically
consortia of individual merchants, until the idea arose of buying and
selling shares to those with no active direct role in the enterprise,
to raise additional capital. As to some enterprises, the risk of loss
was so great that even a consortium of several merchants could not
afford to go it alone, thus there arose separate consortia of
"insurers" such as those in Lloyd's of London, wealthy individuals who
would pool their resources to cover the risk of loss to a ship or
goods in transit and who would gain a healthy profit without actually
having to own a share in the enterprise.
So, what makes insurance different from all these other types of
contracts is that the insurer is a separate group or entity which has
no direct role and no direct ownership in the enterprise or risk in
question. If they do, as in the housing co-op, corporate shares, or
building-contract examples above, their transaction will most likely
not be called one of "insurance." And the reason I felt the rental
agency's CDW is not, technically, insurance, arises from the same
crucial fact, i.e. that the rental company _IS_ one of the parties
involved in the underlying transaction, the owner of the vehicle being
rented, and is not simply an outside risk-buyer.
> 2. "Selling the risk". You have something you don't want: risk. You
> "sell" that risk to the insurer, who buys it from you. The risk has a
> negative value, so you pay money to the insurer.
Really, that's just another aspect of, another way of looking at, the
same situation - "spreading the risk" and "selling the risk" both
refer to re-assignment of a risk, usually for some kind of
consideration, which may be simply money (as it usually is, in the
insurance context, since the insurer has no direct role in the
enterprise being insured) or could involve a whole bundle of mutual
promises, rights, and obligations (as in a housing co-op, or ownership
of shares in a corporation, or the case of an owner/general-contractor/
sub all working together to complete a construction project).
> CDW/LDW isn't that different. If you have an accident while driving
> the rental car, you could end up having to pay $10,000 or more to
> replace the car (plus "loss of use"). That's a pretty big risk. So
> you "sell" that risk to the rental car company. The fact that the
> rental company is "insuring" the loss of its own property doesn't
> change the fact that _you_ (the renter) face the risk of that loss.
Right, but like I said, just about everything in life involves risk,
and therefore just about every economic transaction of any kind
involves some _apportionment_ or re-assignment of risk. That, alone,
does not convert every single contract into one for "insurance."
> Or you can look at it as spreading the risk among all the drivers who
> rent from that company. Either way, it looks a lot like insurance,
> economically.
Right. So does the idea of owning shares in a corporation, or buying
into a co-op, or deciding on the FOB terms with your counterpart in a
sale-of-goods transaction. If you want to carry more risk yourself,
you get a discount. If you want to shift more of the risk to someone
else, you pay for that. But that's economics, not law.
> Legally, of course, might be a different story.
Bingo.
> But different states
> can (and do) have different rules about whether CDW/LDW is "insurance"
> for regulatory purposes.
Correcto-mundo, amigo. Within reason, "insurance" is whatever the
state insurance regulators say it is.
Mike Jacobs
[several reasons why buying a liability insurance policy for a non-
owner driver who is not a named insured on a policy issued to anyone
else in his household may be a good idea]
> I wonder if such a policy would be written by an auto insurer.
I don't know for sure, but I imagine they would be willing to. In a
related context, piloting private aircraft, I know from personal
experience it is quite common for aviation underwriters to issue
liability insurance policies to non-owner pilots who only rent or
borrow the planes they fly.
> I say
> that because premiums are calculated on year, make, model of car as well
> as where it is garaged.
All of which has more effect on the collision and comprehensive rates
(for damage to the car itself) than on liability premium rates (it has
some, but not as much).
> Since A wants some sort of floating policy which
> may put him in a Bugatti which can do 250 mph or a Humvee or a Ford
> Fiesta, how would the insurance company rate him?
You do realize that, whether you take out a liability-only policy on a
10-year-old clunker you own, or full coverage on a new car, the
liability portion of that policy also covers _you_ the insured driver
whenever you borrow or rent that Bugatti, Humvee, or someone else's
Fiesta, don't you? How is that any different in terms of risk,
whether you also own your own car, or not?
Insurers do take into consideration that insured car owners also
sometimes rent or borrow other people's cars, and the driver's insurer
must cover the driver's liability when he does that. Generally, in
most states the liability policy that runs with the vehicle -
regardless of who was driving - is "primary" in the event of a crash,
and will pay out first on any liability claim; the liablity policy
owned by the driver is "secondary" and only kicks in to cover the
excess amount if the primary policy isn't big enough to pay the whole
claim. In other states, or where provided by the insurance contract,
the car owner's and driver's 2 separate policies must "coordinate
benefits" and each pay a pro rata share of the claim, relative to
their coverage limits. So, frex, if the car owner has a $20k
liability policy limit and the driver has a $100k limit, both insurers
will be on the hook for any given claim at either a 5:1 ratio (if the
state allows "stacking") or a 4:1 ratio (if the underlying or primary
coverage is treated as a credit against the larger coverage amount),
if they are in a pro rata state. Thus, if the claimant settles for a
total of $6k in such a state, he will get $1k from the car owner's
insurer and $5k from the driver's insurer (or the same proportion,
right up to policy limits). In a non-pro-rata, non-stacking state,
only the car owner's insurer would be on the hook for a claim, up to
his policy limit ($20k), while the driver's insurer would be
responsible for any amount _over_ $20k up to a total of $100k (i.e.,
$80k in excess coverage). As you can see, the options are all over
the map depending on state law, policy language, and the size of a
claim, and it can get pretty complicated. Figuring out how the
liability insurance scheme works in a given state where a crash
happened is one of the first things a claimant's attorney has to do
when taking on a case, and this usually involves consulting with an
attorney from that other state so he doesn't miss some of the more
arcane differences between the law of that state and his own.
The renter-or-borrower-only liability policy is likely to be cheaper
than liability coverage for someone who _owns_ a car would be, since,
actuarially, the risk for the renter-only is just X (the risk of
having to pay out for non-owner liability, which is mostly just
secondary or excess exposure if there is a primary policy covering the
car) while the risk for a car owner is X _plus_ Y (the primary
liability risk for a particular, more frequently driven car the
policyholder owns).
> I can see why A, if he regularly borrows cars, may wish such a policy
> but I wonder if he could obtain one. Do you know that he can for a fact?
Why not just call an agent and find out? If one company doesn't offer
it, another one might. My point is, it's certainly not _illegal_ for
a company to offer such coverage. And I suspect most of them would be
quite happy to take your money and provide you with any esoteric
insurance product you care to buy, so long as they have a reasonably
sound basis to figure your actuarial risk -- which, here, they do,
since that risk is exactly the same as the non-owned-vehicle portion
of the liability exposure they would take on in underwriting a policy
for a car _owner_.