Rental Car and Loss of Use After an Accident: Who Pays

When your car is damaged by someone else's negligence, you lose two things: the car's value, which is paid through repair or total-loss settlement, and the use of the car while it is being repaired or replaced, which is a separate loss. The law in every state recognizes loss of use as an element of property damage, measured by the cost of renting a comparable vehicle for the reasonable period, and the at-fault driver's liability insurer owes it as part of the property claim.

In practice, the insurer either arranges and pays for a rental car directly, usually through a rental company it has an arrangement with, or reimburses you for a rental you arrange, or pays a daily amount if you did not rent. The first is the most common and the easiest; the third is the one insurers resist, because many people do not know they are owed it.

Loss of use applies to the period the car is reasonably out of service: the time to get an estimate, order parts, and complete repairs, including delays the insurer causes by slow inspection or authorization. For a total loss, it runs until a reasonable time, commonly a few days, after the insurer makes its total-loss offer, which is when you have the means to replace the car.

The direct route is the at-fault driver's insurer. Once it accepts that its driver was at fault, which can take days to weeks, it will authorize a rental, usually at a daily rate and vehicle class it sets. Until fault is accepted, the insurer will typically decline to pay for a rental, and if fault is later disputed or shared, it may pay only a percentage. The advantage is that you pay nothing; the disadvantage is the wait.

The faster route is your own policy, if it includes rental reimbursement coverage, an optional add-on that pays a set daily amount for a set number of days while your car is repaired under a collision or comprehensive claim. It applies immediately, without any fault determination, and your insurer then recovers the cost from the at-fault insurer along with the repair cost. If your coverage runs out before the repairs are done, the balance is claimed from the at-fault insurer.

Many people use both: their own rental coverage from the first day, and the at-fault insurer for any period beyond its limits or for the difference if the at-fault insurer owes more. Report the crash to your own insurer regardless, and ask what rental coverage you have before deciding.

Suppose your pickup was hit in a parking lot by a driver who admitted fault, and the repair took 31 days because of a parts delay. Your own policy had rental reimbursement at $30 a day for up to 30 days. A comparable pickup rented for $65 a day.

You rented through your own coverage from day one. Your insurer paid $30 a day for 30 days; you paid the $35 difference and the final day, a total of $1,115 out of pocket. The at-fault insurer, having accepted fault, owed loss of use for the full 31 days at the reasonable rental rate for a comparable vehicle, and reimbursed the $1,115 when your attorney or you presented the receipts, in addition to reimbursing your insurer for its $900.

Had you not rented at all, borrowing a relative's car instead, you would still have been owed loss of use at the daily value of a comparable vehicle, and the at-fault insurer would have resisted; a written demand citing the state's recognition of loss of use without an actual rental usually resolves it, sometimes at a negotiated figure. All figures are hypothetical.

Rental disputes are small in dollars and large in frustration, and most are avoided by a few steps.

• Check your own policy's declarations page for rental reimbursement coverage, its daily limit and its total limit, before you rent.
• Ask the at-fault insurer in writing whether it has accepted fault and will authorize a rental, and at what daily rate and vehicle class.
• Rent a vehicle comparable to your own within reason; an insurer owes a comparable class, not the cheapest car on the lot, and not a luxury upgrade.
• Decline the rental company's insurance if your own policy or credit card covers rental cars; check which does before you decline.
• Keep every receipt, and keep a record of the days the car was in the shop and of any delay the insurer caused.
• If the car is a total loss, expect the rental to end a few days after the total-loss offer, and plan the replacement accordingly.
• If you did not rent, make a written claim for loss of use at the daily rental value of a comparable vehicle for the period.

Loss of use is recognized in every state as part of property damage, but the details vary: whether it is owed without an actual rental, which most states allow but some insurers dispute; whether it applies to a total loss, which most states allow for a reasonable period; and whether a commercial vehicle's lost profits can be claimed instead of rental value, which many states permit for business vehicles. A few states' insurance regulations set specific requirements for insurers' handling of rental claims, including the maximum delay before a rental must be authorized.

In no-fault states, property damage is generally handled on a fault basis even though injury claims are not, so the at-fault insurer owes loss of use as elsewhere; Michigan is the exception, where vehicle damage is largely claimed under the owner's own collision coverage and the at-fault driver's liability for vehicle damage is limited to a small statutory amount, making rental reimbursement coverage on the owner's policy the main source.

Comparative negligence applies to the property claim: an insurer that assigns you a percentage of fault will pay that percentage less of the rental, as of the repair. Deadlines for a property damage claim are often longer than for injury, but they vary, and the practical deadline is the insurer's rental authorization, which should be sought in the first days.

The insurer stops the rental before repairs are done. The at-fault insurer owes loss of use for the reasonable repair period, and a parts delay or a supplement the shop found once the car was apart extends it. A written demand with the shop's documentation of the delay usually resolves it, because the amount is small and the insurer's position is weak.

The insurer offers an economy car when you drive a minivan, truck or SUV. The measure is a comparable vehicle, within reason; a family that needs seven seats or a contractor who needs a truck bed is owed that class, and insurers generally concede it when asked in writing.

The insurer refuses loss of use because you did not rent. Most states measure the loss by the value of the use, not by what you spent, and a written claim for the daily rental value of a comparable vehicle for the period usually produces a payment, sometimes negotiated. For a dispute the insurer will not resolve, small claims court is the practical forum, and the state insurance department takes complaints about handling.

Loss of use is a small part of a crash claim, but it is owed, and it is the part most people leave on the table, either by not knowing they are owed it or by accepting an early cutoff. The questions to answer early are what your own policy provides, whether the at-fault insurer has accepted fault, and how long the car will reasonably be out of service. For a crash that also involved injury, the property claim is handled alongside the injury claim.

Ask Legal Matters is a free claim-review request service, not a law firm. Requests may be shared with independent attorneys and legal services partners who handle inquiries in your state, and an attorney must evaluate the facts before anyone can say what the claim is worth. If you were hurt in a crash and are also dealing with the vehicle and rental claim, you can request a free claim review.

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