Oops!! Self-Insured Owner of Rental Vehicle that had no Obligation to Afford Omnibus Coverage to Permissive Users not entitled to recover $260,000 Settlement Payment.


In an unusual twist, a rental car company insisted it was obligated to pay damages to a third party who was injured by the permissive operator of its rental vehicle and the renter maintained it was not.

In Enterprise Rent-A-Car Co. of Boston, LLC v. Maynard, 2012 WL 1681970 (D. Me. May 14, 2012), Enterprise rented a vehicle to Robert Maynard and Maynard executed a rental agreement. Maynard gave the rental to Scotty Beausejour to use for the rental period. Beausejour then caused an accident in which he struck Thomas Webster, causing injuries to Webster. Webster filed a personal injury action against Beausejour, but did not sue Enterprise.  Enterprise, which was self-insured, assumed Beausejour’s defense and later settled the claim for $260,000. In addition to the cash payment to Webster, Enterprise expended over $17,000 in attorney’s fees defending the action.

Enterprise then sued Maynard.  By its terms, the rental agreement required Maynard to reimburse Enterprise for the amounts it had paid in settlement of Webster’s claim. In response, Maynard argued that Enterprise acted as a volunteer in making the payment and was not entitled to recover. It was undisputed that Enterprise had no vicarious liability for Beausejour’s negligence under the Maine vehicle owner liability statute (29–A M.R.S. § 1652) in light of the Graves Amendment, 49 U.S.C. § 30106.  (As noted in previous posts on this blog, the Graves Amendment preempts state laws that impose vicarious liability on rental-vehicle owners. (See “Leasing, Rentals and Vicarious Liability:  An Overview of the Graves Amendment”).

However, Enterprise claimed that its settlement payment to Webster was not voluntary because it was required by the Maine Financial Responsibility Statute (29–A M.R.S. § 1611) to do so. The Graves Amendment does not preempt state laws imposing insuring obligations on owners of motor vehicles. The savings clause, 49 U.S.C. § 30106(b)(1) provides that “[n]othing in this section supersedes the law of any State … imposing financial responsibility or insurance standards on the owner of a motor vehicle….”

The court agreed with Enterprise that the Graves Amendment did not preempt 29–A M.R.S. § 1611, but disagreed with Enterprise that it made a difference to the outcome of the case. Although not referenced in the opinion, 29–A M.R.S. § 1611 did not require rental vehicle owners to obtain a policy insuring a permissive user of a rental vehicle (a/k/a “omnibus” coverage). Rather, it only stated that “[t]he required insurance policy or bond must adequately provide liability insurance for the collection of damages for which the owner of a motor vehicle or vehicles may be liable by reason of the operation of a motor vehicle or vehicles subject to this chapter.” (29–A M.R.S. § 1611(5) (emphasis supplied)). Inasmuch as Enterprise had no vicarious liability and the statute it cited did not impose any obligation to insure permissive users against liability resulting from their operation of its rental vehicles, Enterprise was not obligated to defend Beausejour or settle Webster’s claim on behalf of Beausejour.

Enterprise acted as a volunteer in making the payment and was not entitled to recover.

The rental contract in this case must not have contained any language obligating Enterprise to defend or indemnify permissive users. Most rental contracts (and those I have drafted) obligate the rental car company (whether insured or self-insured) to defend and indemnify permissive users to the extent required by the law of the state where the accident occurred and only to the minimum limits mandated by the law of that state. While this type of language would not have assisted Enterprise in Maine – which apparently does not require omnibus coverage for permissive users — many states do.

This blog is for informational purposes only.  By reading it, no attorney-client relationship is formed.  The law is constantly changing and if you want legal advice, please consult an attorney licensed in your jurisdiction. © All rights reserved. 2010.

Auto Claims & Self Insured Retentions (“SIR”): Does the SIR Constitute “Insurance” ?


The determination of whether a self-insured retention (SIR) constitutes “insurance” within the meaning of an “other insurance” clause of another policy generally depends on the particular circumstances presented.  See, e.g., Champlain Cas. Co. v. Agency Rent-A-Car, Inc., 716 A.2d at 813 (1998) (noting that the “parties tend to paint with a broad brush, suggesting that self-insurance is a form of insurance . . . or alternatively, the antithesis of insurance” and observing that such labels are “generally unhelpful” to resolving the issue of whether self-insurance can constitute insurance).  The determination of whether an SIR constitutes “insurance” is significant because “[m]any business liability policies contain self-insured retentions, which are, in effect, large deductibles.”  U.S. Fidelity & Guarantee Ins. Co. v. Commercial Union Midwest Ins. Co., 430 F.3d 929 (8th Cir. 2005) (quoting Allan D. Windt, Insurance Claims and Disputes, §11.31 (4th ed. 2003)).  Although at first glance cases across the country appear to be inconsistent, the answer to the question is (or should be) fairly simple, at least in the context of auto accident claims involving a permissive user. In jurisdictions which require a vehicle owner’s insurer (or self-insurance plan) to extend omnibus liability protection to permissive users, the SIR will invariably constitute “insurance” within the meaning of the permissive user’s policy.  Minnesota, as well as several other jurisdictions, requires the policy insuring the vehicle owner to extend omnibus protection to permissive users.  Minnesota also recognizes that if a vehicle owner self-insures, the self-insurance plan must provide the same “coverage” and incidents of “coverage” as an insurance policy insuring the vehicle owner. See, e.g., McClain v. Begley, 465 N.W.2d 680 (Minn. 1991) (same) (self-insurance obtained pursuant to Minn. Stat.  §65B.48, subd. 3, of the Minnesota No-Fault Automobile Insurance Act, “is the functional equivalent of an insurance policy” and “such a policy, if purchased [by the self-insured owner], would contain an omnibus clause extending coverage to permissive drivers as additional unnamed insureds” and constitutes “other insurance” within meaning of renter’s personal policy); White v. Howard, 240 N.J. Super. 427, 573 A.2d 513 (N.J. Super. A.D. 1990), cert. denied, 122 N.J. 339, 585 A.2d 354 (N.J. July 17, 1990) (“qualified self-insurance” obtained by car rental agency was the equivalent of “other collectible insurance” within the meaning of renter’s personal automobile policy); Boatright v. Spiewak, 214 Wis.2d 507, 570 N.W.2d 897 (1997) (statute requires self-insured car rental agency to “pay the same amounts that an insurer would have been obligated to pay under a motor vehicle liability policy if it had been issued” and, thus, protection extended to renter constituted “other insurance” within meaning of renter’s personal auto policy); Southern Home Ins. Co. v. Burdette’s Leasing Service, Inc., 268 S.C. 472, 234 S.E.2d 870, 872 (1977) (self-insurer is required to provide same protection to one operating self-insurer’s vehicle with consent as a statutorily required automobile liability policy must provide and, thus, protection extended to lessee constitutes “insurance” within meaning of lessee’s policy).  Thus, in jurisdictions which mandate that a vehicle owner’s policy (or self-insurance plan) extend omnibus protection to permissive users, an SIR in the vehicle owner’s policy will constitute “insurance” within the “other insurance” clause of the policy insuring the permissive user.

However, in jurisdictions which do not require a vehicle owner’s insurance policy (or self-insurance plan) to extend omnibus protection to permissive users, an SIR should not be considered “insurance.”  See, e.g., Home Indem. Co. v. Humble Oil & Refining Co., 314 S.W.2d 861 (Tex. Ct. App.1958), writ of error and reh’g denied, 159 Tex. 224, 317 S.W.2d 515 (1958) (self-insurance does not operate for benefit of negligent driver); Farmers Ins. Co. of Oregon v. Snappy Car Rental, Inc., 128 Or. App. 516, 876 P.2d 833 (Ore. Ct. App. 1994) (same);  American Fam. Mut. Ins. Co., v. Missouri Power & Light Co., 517 S.W.2d 110 (Mo. 1974) (same).  An SIR should not be considered “insurance” in such jurisdictions because the vehicle owner, if it paid the injured party for damages caused by the negligent permissive user, would be entitled to recover its payment from the permissive user — a proposition directly contrary to the purpose of liability insurance.  See Champlain Cas. Co. v. Agency Rent-A-Car, Inc., 168, Vt. 91, 716 A.2d 810, 813 (1998) (explaining basis for distinction in case law decisions and noting that “there is far less disagreement in the cases that a superficial perusal would suggest”).

This blog is for informational purposes only. By reading it, no attorney-client relationship is formed. The law is constantly changing and if you want legal advice, please consult an attorney licensed in your jurisdiction. © All rights reserved. 2010.

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