Customers lose it over car rental ‘loss of use’ fees
After Julie Thomason wrecked her rental car, she expected a repair bill. But she didn’t anticipate a $1,000 invoice for something called “loss of use.” No one ever does.
“Loss of use” is a car rental concept that, on the surface, seems reasonable. If you damage a car and it has to get repaired, you compensate the company for what it would have made as a rental if the vehicle had been available.
But under the hood, loss of use looks more like a junk fee.
A few weeks ago, when I wrote about the latest push to sell car rental insurance, many of you told me I’d omitted an important detail. Some car rental coverage, doesn’t cover loss of use.
Thomason, a research associate from Reading, Mass., said her insurance company told her not to worry about her supposed loss of use. “They said that after lots of back and forth, the fees usually disappear,” she recalls. Except when they don’t. Loss of use has been upheld by some courts, notably in a 2012 Colorado case in which the state’s supreme court ruled car rental companies could collect damages even if they didn’t suffer any financial losses. But customers and consumer advocates believe loss of use is on shaky ground.
Andrew Stoltmann, a Chicago attorney, says loss of use is “problematic.”
“There are limits to what companies can put in a contract, and all contract terms must be reasonable,” he says. Also, car rental companies are lightly regulated, and loss of use is one of the areas where there’s virtually no consumer protection.
Although loss of use is a legitimate legal claim in some states, the claims are generally difficult to prove, according to Wayne Cohen, a professor at George Washington University law school. The problem? They can fall apart quickly when car rental customers, or more frequently insurance companies, challenge the value of the claim. Car rental companies calculate their loss of use according to a formula that often uses a theoretical rate. But to customers, it just looks made up.
But what’s the right thing to do? If you dent up a car and your insurance doesn’t cover loss of use, should you have to foot the bill? The request seems fair. A car no longer can be rented, so the business suffers as a result.
While loss of use might be allowed in some states, it sets a problematic precedent. Every time you pay it, you are effectively agreeing that a business has the right to charge you for what it might make if circumstances had been different.
Because car rental companies’ expensive loss-damage waivers and collision-damage waivers cover this loss of use charge, some readers chided me for not recommending car rental coverage.
Yet I still can’t. Many insurance companies refuse to pay loss of use, and when it comes right down to it, the losses suffered by a car rental company should be thought of as a cost of doing business in the auto rental industry.
That’s the interesting thing about loss of use. Too often, companies won’t bother to justify the lost use or to prove the car would have been rented, making it a junk fee in the truest sense.
Thomason’s case had a happy ending. It turns out her insurance company was correct. After months of fighting, her loss of use charges vanished.