SW Legal Educational Publishing

Car Rental Company Stands First in Line for Liability Responsibility
Description Driver of rental car who did not buy insurance from rental agency, at fault in accident, was required by rental contract to look to his personal auto insurer for liability coverage. Minnesota high court held that under statute and common law, rental company stands first in responsibility.
Topic Insurance
Key Words Rental Automobiles, No-Fault Insurance, Closest to the Risk
C A S E   S U M M A R Y
Facts Powers was at fault in an accident in which he was driving a rented Hertz car. He had declined to purchase insurance from Hertz. The rental agreement stated that, in such case, any auto insurance held by the renter would be responsible before Hertz. Hertz sued Powers' insurance company, State Farm, asserting that it has the primary duty to defend and indemnify Powers against claims arising from the accident. Trial and appeals courts held for Hertz; State Farm appealed.
Decision Reversed. A car rental agreement that provides that the rental agency is liable only in the event that the renter does not have automobile liability insurance violates Minnesota's No-Fault Act. In determining priority of coverage, the rental agency's coverage is primary. The renter's vehicle coverage arising from his or her own insurance policy is secondary under both Minnesota's insurance statute and the common law "closest to the risk" doctrine.
Citation Hertz Corp. v. State Farm Mutual Insurance Co., 573 NW2d 686 (Sup. Ct., Minn.)

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