Frivolous car rental damage claims are a hot topic. Not a day seems to go by that I don’t hear from someone complaining about a bogus repair bill from a car rental company.
But there’s another side to the story that’s easily overlooked: the car rental company’s side. So I asked Randy Harris, president of Khoury Alternative Claims Management, a subrogation management company based in San Antonio, Tex., for his take on the issue. Here’s our interview.
Many of my readers have rented cars, but have never come across the term subrogation management. Can you define that, please?
True subrogation is when an insurance company pays a claim on their insured’s behalf, regardless of fault and then attempts to get reimbursed by an at-fault third party, or their carrier.
Most rental car companies with fleets over 300 cars cannot afford, or opt not to carry collision or comprehensive insurance coverage. They are self-insured. A subrogation management company acts on the rental car company’s behalf to collect whatever damages are owed when a vehicle is damaged.
What kinds of cases get referred to your company?
We handle all recoverable damage claims suffered by our clients regardless of the amounts. So if an employee damages a vehicle, it has unsubstaniated damage, or the renter purchases the loss damage waiver, we would not get that claim.
Do you accept every case that you get?
We accept every claim sent to us and then evaluate it on its merits. If the renter purchased a collision or loss damage waiver and is found not to be negligent in their actions we would return that claim as there would be no recovery source.
Of the cases you work on, what percentage are disputed in some way by the customer?
Approximately 10 percent of the claims are disputed by the renters. It is important to remember that if the renter signed a contract and the vehicle is damaged in any way while in their possesion, they are responsible for that damage. So a vehicle may get bumped in a parking lot on the passenger side. The renter never sees it or knows it happened. When the vehicle is returned and the damage is discovered they are responsible for it.
What advice to you have for someone who really didn’t damage the car, but is dealing with a company like yours? How do you prove your innocence?
When a renter disputes they did damage to the vhicle we ask them to put their dispute in writing so we may present it to our client. If they take the time to put it in writing it adds credibility to their dispute. If the renter has a valid dispute most companies will drop the claim. They are very customer-service oriented and certainly want to retain that renter as a customer.
What percentage of claims turn out to be errors — in other words, the renter didn’t do it?
Of the disputed claims we have not seen an increase or decrease lately, roughly 50 percent are dropped by the client. That doesn’t mean they were wrongfully submitted. Usually those types of damages are minor and no one can be certain, so better to drop and save a customer then continue pursuing.
You say the odds of a renter denying damage they clearly did, or simply not paying for damage they acknowledge doing, far outwieghs the few rogue operators who may misrepresent damages. Can you explain what you meant?
Approximately 25 percent of the damage claims go unpaid by the renter or third party who struck the rental vehicle. An independant company that rents to local market people suffer more of these unpaid losses then a major rental car company like Hertz or Avis who rents to corporate travelors. Since they are self-insured for comprehensive and collision losses an unpaid claim is a direct loss to the bottom line.
A totaled vehicle unpaid for can be $20,000 loss, or more, depending on the value of the vehicle. Usually these claims aren’t paid for because the renter did not carry their own coverage which would transfer to the rental vehicle and they did not purchase the loss damage waiver offered by the rental car company.
I see some ads for subrogation management companies in the trade press, and they seem to stop just shy of saying, “Use our company and we’ll turn damage claims into a profit center.” Am I reading too much into the ads, or are there unscrupulous third-party companies that do this?
Three of the major disputes between rental car companies and insurance carriers are the loss of use, loss of market value, and administrative fees that become contractually owed to the rental car companies.
A company such as ours have the expertise to help collect those fees. There are legally and contractually owed and they are a loss to the rental car companies if not paid. So no one is profiting from the claims at all.
We and our competitors are simply making our clients whole for their losses. The biggest problem is that the credit card companies imply that they will take care of everything for their card holder and yet their own rules, they are not insurance but card memeber service providers, usually will not allow payment of these fees.
Hence, the renter feels the rental car company is pursuing fees not owed when they get billed, when they are only pursuing fees not covered.
There’s another side to this that I don’t often report on, which is car rental customer that intentionally damage a vehicle. Can you talk about that a little?
Ninety percent of the renters are good responsible customers who do their best to take good care of the vehicle they are in and hope to return it undamaged. However, like any area in today’s society, a small percent — 10 percent — do not take the same care.
Vehicles are rented to commit crimes, such as drug dealing. Keys are left in vehicles or left unguarded and someone grabs them and takes the vehicle. Many times a renter will keep the vehicle beyond their deposit and the rental operator only gets it back after the renter damages it and leaves the scene of the accident.
Do you have any tips for someone who is about to rent a car, and wants to avoid having to deal with a claim dispute?
The two most important times for the renter to do to avoid a disputed claim is during the check out and check in of the vehicle. They should try to get an employee to walk around the vehicle with them when they get the vehicle and make sure they mark all of the existing damage. Then when returning the vehicle have an employee walk around again and sign off that there is no new damage since they rented the vehicle.