Borrowed & Rental Vehicles in Washington
When a crash involves a borrowed or rented vehicle, coverage may come from more than one source. The vehicle owner's policy, the driver's own policy, a rental-car policy, a peer-to-peer car-sharing policy, UIM, PIP, collision coverage, umbrella insurance and contractual protection can all occupy different positions. The correct analysis begins with who owned the vehicle, who had permission to drive, and why the vehicle was being used.
A borrowed vehicle can implicate both the owner's policy and the driver's policy
A common mistake is to identify the insurance card for the borrowed vehicle and assume that ends the coverage search.
A borrowed-car crash can involve at least two separate insurance questions:
Owner's policy
Determine whether the driver qualifies as a permissive insured under the policy covering the borrowed vehicle.
Driver's own policy
Determine whether the driver's personal policy extends liability or other coverage to temporary use of a nonowned automobile.
Permission can determine coverage under the owner's policy
Automobile policies commonly extend liability protection to additional drivers using a covered vehicle with permission.
Washington's Financial Responsibility Act expressly provides this model for certified owner's policies. RCW 46.29.490 requires such a policy to insure both the named insured and another person using the covered vehicle with the named insured's express or implied permission.
Express permission
Permission may be direct: the owner tells the borrower that the borrower may use the vehicle.
Implied permission
Permission also can be inferred from the relationship, prior conduct and surrounding circumstances.
Washington recognizes that permission under an automobile omnibus clause may be implied from conduct and circumstances rather than stated expressly.
Permission to one borrower does not always authorize a second driver
A difficult coverage problem arises when the vehicle owner lends a car to one person and that person allows someone else to drive.
Washington held that permission given to the first permittee did not, on those facts, automatically establish that the named insured had also authorized the second driver.
Reaffirmed that placing a vehicle in another person's unrestricted possession does not necessarily enlarge the insurance contract to every secondary driver.
The borrower's own automobile policy may also extend to a nonowned vehicle
Many personal automobile policies provide some liability protection when the named insured or qualifying family member occasionally drives someone else's automobile with permission.
Washington's Office of the Insurance Commissioner describes ordinary bodily-injury liability coverage as commonly protecting the policyholder and listed family members while driving another person's vehicle with permission.
But the actual policy may impose important conditions involving:
- permission;
- vehicle type;
- temporary or occasional use;
- business use;
- regular availability;
- ownership by household members;
- rental use;
- primary versus excess insurance; and
- territorial limitations.
A car available for regular use is different from an occasionally borrowed car
Nonowned-auto coverage is commonly designed for occasional use rather than allowing one premium to insure every automobile regularly available to the policyholder.
Washington described the purpose of a “use of other automobiles” provision as protecting occasional or incidental use of nonowned vehicles while preventing interchangeable use of other readily available automobiles without corresponding premiums.
Enforced a regular-use limitation where the nonowned automobile was furnished for the insured's exclusive and regular use. The relevant focus was regular availability, not merely the purpose for which the vehicle was being driven.
Different coverages can treat the borrowed vehicle differently
| Coverage | Question to investigate |
|---|---|
| Liability | Does the owner's policy cover the driver, and does the driver's own policy extend to the nonowned vehicle? |
| Collision | Does the driver's physical-damage coverage extend to a nonowned or rental vehicle, and what deductible applies? |
| UIM | Does the injured person's personal insured status provide UIM protection independent of ownership of the borrowed vehicle? |
| PIP | Does the statutory and policy definition provide PIP under the circumstances, or does an owned/regular-use exclusion apply? |
| Umbrella | Does excess liability protection follow the insured while operating a qualifying nonowned vehicle? |
Washington statutes expressly recognize regular-use limits in UIM and PIP
The concept of regular use appears not only in private policy language but also in Washington's statutory framework.
RCW 48.22.030 permits a UIM exception while a person is operating or occupying a motor vehicle owned by or available for the regular use of a named insured or family member when that vehicle is not insured for liability under the policy.
RCW 48.22.090 likewise authorizes specified PIP exclusions involving a vehicle owned by or furnished for the regular use of the named insured or relative when the vehicle is not described on the declarations page of the policy under which the PIP claim is made.
A rental vehicle creates a contract plus an insurance problem
Before driving away from the rental counter, several separate agreements can affect the risk:
- the rental agreement;
- the renter's personal automobile policy;
- insurance purchased from the rental company;
- credit-card benefits;
- employer or commercial insurance for business travel; and
- any umbrella or excess coverage.
Washington regulates rental-car insurance sold with short-term rentals
Chapter 48.115 RCW governs insurance offered incidentally to qualifying short-term rental-car transactions.
Under RCW 48.115.005, rental-car insurance can include:
- personal accident insurance;
- liability insurance;
- uninsured or underinsured motorist insurance;
- personal-effects insurance;
- roadside assistance; and
- emergency sickness protection.
RCW 48.115.025 requires written consumer information when qualifying rental insurance is sold.
The consumer must be told, among other things, that:
- the offered insurance may duplicate existing coverage;
- purchase of rental-car insurance is not required to rent the car;
- rental-company personnel are not qualified to evaluate the adequacy of the renter's existing insurance; and
- when the rental insurance is not primary, the renter's personal insurance will serve as the primary source of coverage.
Check the personal auto policy before assuming rental coverage exists
A personal policy may extend important protections to a rental automobile, but the scope differs among carriers and policy forms.
Confirm:
- whether liability coverage follows the insured to the rental;
- whether collision and comprehensive coverage extend to it;
- the deductible;
- whether the type of rented vehicle qualifies;
- whether business use changes the result;
- how long the rental may last;
- whether another driver is an authorized insured;
- whether coverage is primary or excess; and
- which contractual rental charges are excluded.
Damage to the rental car can involve more than repair cost
The rental agreement may attempt to make the renter responsible for several categories of economic loss after the vehicle is damaged.
Depending on the contract and circumstances, claimed amounts may include:
- repair or actual-cash-value loss;
- deductible;
- towing;
- storage;
- administrative charges;
- loss of use; and
- diminished value.
A credit card may also provide rental-vehicle protection, but those benefits are contractual and vary greatly. Determine whether the benefit is primary or secondary, what vehicles and rental periods qualify, and whether use of the particular card to pay for the rental was required.
A rental company is not automatically liable merely because it owns the vehicle
Federal law significantly limits pure ownership-based liability against businesses that rent or lease motor vehicles.
The statute preserves state financial-responsibility and insurance requirements.
Washington requires peer-to-peer sharing records to be preserved
RCW 46.74A.020 requires the sharing program to maintain records concerning vehicle use, including times used, fees and revenue, and to make that information available for a coverage investigation when requested by specified parties and insurers.
The car-sharing agreement must also disclose that the owner's personal automobile liability policy may not cover the shared vehicle and that program insurance generally applies only during the defined sharing period.
Build the coverage order rather than assuming which policy is primary
| Possible source | Coverage question |
|---|---|
| Vehicle owner's policy | Is the driver a permissive insured and are any exclusions applicable? |
| Driver's personal policy | Does nonowned-auto coverage apply, and is it primary or excess? |
| Rental-company insurance | What coverage was purchased and what priority does the contract state? |
| Peer-to-peer program insurance | Was the accident within the statutory sharing period and which policy satisfies RCW 46.74A.020? |
| Employer / commercial policy | Was the borrowed or rented car being used for work or business? |
| Umbrella / excess policy | Does higher-layer protection extend to the nonowned or rented automobile? |
| Credit-card benefit | Does contractual rental-car protection apply, and is it primary or secondary? |
Citizen workflow after a Washington borrowed- or rental-vehicle crash
Bottom line
A borrowed or rented car creates a coverage map, not a single insurance answer. For an ordinary borrowed vehicle, investigate both the owner's policy and the driver's own nonowned-auto coverage and determine whether permission was express or implied. Distinguish occasional borrowing from a vehicle furnished for regular use. For a rental car, preserve the rental agreement, personal auto policy, optional rental insurance, credit-card benefits and any employer coverage, then separate liability insurance from protection against damage to the rental vehicle. Federal law generally prevents imposing liability on a rental company solely because it owns the vehicle, but not for its own negligence. Peer-to-peer car sharing has its own Washington statutory insurance system and should never be analyzed as though it were simply an informal borrowed-car arrangement.