SENATE BILL REPORT

SSB 5148

BYSenate Committee on Financial Institutions & Insurance (originally sponsored by Senators von Reichbauer, Rasmussen, Johnson, Smitherman, McCaslin and Moore)

Regulating automobile rental liability.

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):January 13, 1989; January 24, 1989; February 28, 1989; January 16, 1990

Majority Report:  That Second Substitute Senate Bill No. 5148 be substituted therefor, and the second substitute bill do pass.

      Signed by Senators von Reichbauer, Chairman; Johnson, Vice Chairman; McCaslin, McMullen, Matson, Moore, Rasmussen, Smitherman, West.

Senate Staff:Benson Porter (786-7470)

                  January 22, 1990

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE, JANUARY 16, 1990

BACKGROUND:

Most automobile rental companies hold the renter responsible for all damages to the vehicle, whether or not he or she caused the damage, up to the retail value of the vehicle.  A few companies hold the renter responsible for a certain amount of damages, e.g. for $3,000.

A renter can escape this liability for vehicle damage by purchasing a collision damage waiver.  The collision damage waiver agreement is a contractual provision within the car rental agreement in which the rental company waives its right to hold the renter responsible for damage to the vehicle in exchange for a fee.  So long as the renter does not violate the terms of the agreement, the company will not hold the renter responsible for damages to the vehicle.  The price for the waiver agreement varies from company to company but generally ranges from $8 to $12 per day.

A renter who does not pay for the collision damage waiver agreement may rely on his or her own automobile insurance if their personal policy covers damage to a rental car.  Most automobile insurance companies provide coverage for damage to a rental vehicle if the renter has collision and comprehensive coverage under the automobile insurance policy.  This coverage, however, usually does not cover the rental company's loss of income from nonuse of the damaged rental vehicle while it is being repaired for which the renter may be held responsible.

Critics of collision damage waivers claim that the waivers fees are not based upon the risk-related use of the product and their use is profit oriented.  In addition, critics claim that car rental companies sometimes use pressure sales tactics to sell the waiver.

SUMMARY:

The Legislature finds the increased disclosure of provisions and practices associated with collision damage waivers is beneficial to citizens of this state.

A rental car company must provide a separate disclosure concerning a collision damage waiver to an individual renting a motor vehicle.  Such disclosure must contain an explanation of the nature and extent of the renter's liability, a statement that the renter's personal automobile coverage may provide coverage for damages to a rented vehicle, a statement encouraging the renter to contact his or her agent, and a list of exclusions from which the collision damage waiver does not apply.

The disclosure must be printed in at least 10 pt. size print and the renter must acknowledge receipt of the disclosure.

Signs containing the same disclosures must appear at the place where the renter signs the contract.

EFFECT OF PROPOSED SECOND SUBSTITUTE:

Rather than being a separate disclosure, the collision damage waiver disclosure shall be contained on the face of the rental contract.

The provisions of the bill constitute new sections in the Unfair Business Practices-Consumer Protection Act.

Modifications are made to the legislative intent section.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Senate Committee - Testified: Gordon Walgren, Catrala; Leon Titus, Budget Rent A Car; Dick Hemstad, Alamo Rent-A-Car; Terry R. Treisher, Catrala; Mike Grant, Attorney General's office (pro)