Strategies, Challenges, and Answers

Rental Car Agencies Are Not Insurance Companies And Are Not Subject To The “Must Offer” Obligations Of NRS 687B.145 (2) And (3)

NRS 687B.145 (2) and (3) obligate “insurance companies transacting motor vehicle insurance” to offer its insureds Uninsured / Underinsured and Medical Payments coverage to its insureds in and amounts equal to the amount of liability coverage that the insured carries.  If there is no signed waiver on a form approved by the insurance commissioner, then that policy is deemed to carry UM/UIM and MP coverage.  See our blog post HERE for a discussion on this topic.

Hertz_prius So then the question came up: Is a rental car company under a duty to get a UM/UIM waiver from each customer it encounters?  In the case of Hartz v. Mitchell, 107 Nev. 893, 822 P.2d 667 (1991), the insured argued that Thrifty Rent A Car rented him a vehicle and didn’t offer him UM/UIM insurance.  Therefore, he concluded that the rental car agency owed him UM/UIM coverage.  The Nevada Supreme Court found that Thrifty didn’t own him UM/UIM, but the court did not clearly say why.

The Court hinted at two reasons.  One reason was that Thrifty had “waived” in writing its UM coverage with its carrier.  But the Court didn’t stop there.  The Court suggested a second reason.  The Court didn’t come right out and say it but it insinuated that Thrifty wasn’t obliged to offer UM/UIM because it was not an “insurance company transacting motor vehicle insurance in this State”.  Here is what they said:

An insurance agent in Nevada is subject to statutory regulation, licensing, administrative standards and financial safeguards.  Automobile rental agents are not expressly subject to the provisions of NRS Chapter 683A which regulates insurance representatives in this state. Moreover, Thrifty does not fall within Nevada’s statutory definition of an “insurance agent,” which otherwise would have subjected Thrifty to regulation and a mandatory obligation to offer UM/UIM insurance through insurance contracts.

While the Hartz case didn’t clearly say that rental car companies were not insurers for purposes of the “must offer” statute, in the more recent case of Alamo v. State Farm, 114 Nev. 154, 157, 953 P.2d 1074, 1076 (1998) the Court came pretty close when it said that a rental car driver’s personal liability auto policy should be primary over coverage that the rental car agency provided under the Nevada financial responsibility law:

We conclude it is better policy to make an insurance company the primary insurer over a rental agency which is not in the business of underwriting insurance for individual drivers. The nature of a car rental agency’s business—renting cars to strangers for short periods of time—is not conducive to a finding that it is in the insurance business; unlike a full-time insurance company, Alamo does not review renters’ driving histories, nor (in the absence of the renter’s purchase of extra protection) does Alamo collect a premium from its “insureds.” The rental agency does not have the ability to raise a single negligent driver’s premiums to cover its losses, but would be forced to raise rental rates across the board for all future renters.

I think that the most recent case of Hall v. Enterprise Leasing, 112 Nev. 685, 137 P.3d 1104 (2006) pretty much seals the deal and states once and for all that rental car agencies are not insurers for purpose of the “must offer” rules.  In footnote 11 it said:

the Alamo decision notes that, under Hartz v. Mitchell, 107 Nev. 893, 822 P.2d 667 (1991), qualified self-insured short-term lessors must be distinguished from insurance companies for some purposes, including the obligation to provide uninsured motorist protection.

While the discussions in these cases specifically talk about UM and not med pay, it is our belief that since the description of who must offer med pay (namely “insurance companies transacting motor vehicle insurance”) is exactly the same as the language used as to who must offer UM.  Therefore, rental car agencies are not obligated to offer Medical Payment coverage either.

If you have any questions about the “must offer” rules in Nevada, please give us a call and we will do our best to respond to your question.