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Proposed rental car law disqualifies renter from PIP benefits after accident

November 16, 2016 by Steven M. Gursten

This terrible bill (SB 870) excludes otherwise insured car accident victims in Michigan and lacks a ‘knowledge’ requirement rental-car-law

Does it make any sense that the person who rents a car should be disqualified from receiving No Fault PIP benefits if she is injured in a car accident?

Of course not.

But that’s precisely the nonsensical outcome that a proposed rental car law that’s pending in the Michigan Senate would create.  In Senate Bill 870, Sen. Tanya Schuitmaker (R-Lawton) – the bill’s sole sponsor – proposes the following:

“A person is not entitled to be paid personal protection insurance benefits [i.e., No Fault PIP benefits including medical expense and wage loss reimbursements] for accidental bodily injury if at the time of the accident … the person was using a rental motor vehicle and was not an additional authorized driver as defined in the rental agreement applicable to the rental motor vehicle.”

What that means is that only “an additional authorized driver” will be eligible for auto No Fault insurance coverage after being injured while driving – or “using” – a rental car in a motor vehicle collision.

You may be wondering the same thing I am: How much is the car rental or insurance lobby giving to Rep. Tanya Schuitmaker for this beautiful piece of pork?

Beautiful for the car rental companies and the auto insurance industries, that is.  Not so much for someone injured in a car accident while driving a rental car.

The bill leaves the driver, who presumably is not “an additional authorized driver,” but rather, is the authorized driver, without any Michigan No Fault PIP benefits.

As crazy as some people have gotten with restricting auto No Fault insurance benefits, I’m quite sure that’s not what Sen. Schuitmaker intended.

Giving Sen. Schuitmaker a huge benefit of the doubt, she probably means to deny No Fault PIP benefits and insurance coverage to drivers not identified as the primary or as additional drivers in the rental agreement (much the way auto insurers will require that additional drivers be named in the policy in order for coverage to be provided).

But that isn’t what her proposed bill says.

And that’s not the only problem with SB 870.

Denying Personal Injury Protection Benefits (PIP) to otherwise insured drivers

Even assuming SB 870 was fixed, it would still have the effect of denying PIP benefits and No fault coverage to people who are otherwise lawfully insured.

Suppose somebody rents a car here in Michigan and, then, lets someone else drive the rental – either to run a quick errand or as a designated driver – and that “someone” gets in a car accident and is injured.

Under SB 870, that “someone else” would be disqualified from receiving No Fault benefits unless he or she was named as “an additional authorized driver” on the rental policy.

But what if that “someone else” was a Michigan resident and was fully covered under a No Fault auto insurance policy – either their own or one belonging to a spouse or resident relative? Is it right, fair, just or logical that her existing, available coverage would be negated by the disqualification in SB 870?

No, of course not. This is yet another reason SB 870 is poorly-thought-out and over broad.

What about ‘knowledge’ of one’s ‘unauthorized’ status?

A tenet of insurance law is that if a person is going to be punished for breaking the law, she must have had notice of what the law is and what it requires.

And SB 870’s disqualification for “unauthorized” drivers of rental cars fails this elementary due process test!

Specifically, SB 870 allows a rental car driver who is not named as “an additional authorized driver” to be disqualified from No Fault without requiring any showing that the unauthorized knew he or she wasn’t supposed to be driving.

For instance, Sen. Schuitmaker would do well to model her No Fault disqualification in SB 870 on the “joyriding” disqualification – just a little higher up in the same statute into which the lawmaker seeks to insert her proposal:

“A person is not entitled to be paid personal protection insurance benefits for accidental bodily injury if at the time of the accident … [t]he person was willingly operating or willingly using a motor vehicle or motorcycle that was taken unlawfully, and the person knew or should have known that the motor vehicle or motorcycle was taken unlawfully.” (MCL 500.3113(a))

Sen. Schuitmaker’s proposed rental car law  is a terrible piece of legislation.  Even in today’s pro-insurance environment in Lansing, it is far more extreme than most of the bills I’ve read.

It deserves to be ignored and to quietly fade away.

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