SW Legal studies in Business

Rental Car Company Is Primary Insurer Despite Escape Clause
Description Appeals court affirmed that at least in Washington, a rental car company is the primary insurer of a rented vehicle. The escape clause that names the renter's insurance company comes into play only if the rental car company's insurance is exhausted, even if the company is a self-insurer.
Topic Insurance
Key Words Rental Car; Insurance; Escape Clause
C A S E   S U M M A R Y
Facts Bentley rented a car from Budget in Spokane. The rental agreement included a statement that Budget provided liability protection for bodily injury and property damage caused by the negligent use or operation of the vehicle. That coverage was not to apply until after the exhaustion of all automobile liability insurance available to the driver. Bentley did not buy the optional liability insurance because he had coverage through his policy with New Hampshire Indemnity (NHI). Bentley was in an accident with the Reillys, who submitted claims to Budget and NHI. Budget and NHI litigated over which company had primary liability. The trial court held that Budget provided primary insurance coverage. Budget appealed.
Decision

Affirmed. Liability coverage provided by a self-insured car lessor, Budget, was primary with respect to coverage under the lessee's policy. The rental contract was an insurance policy. The provision in the rental agreement making its liability coverage inapplicable until exhaustion of other insurance, whether primary, excess or contingent, was a super escape clause. A policy with a super escape clause is the primary policy, but does not automatically mean that NHI's coverage is primary. NHI would come into play only if Budget's coverage was exhausted.

Citation New Hampshire Indemnity Co. v. Budget Rent-A-Car Systems, Inc., 35 P.3d 1180 (Ct. App., Wash., 2001)

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