Don't get mewrong—I like to rent a car when I'm on a long trip and have lots ofdriving to do, but I often question the wisdom of claim departmentsthat have a direct line to the auto rental companies for anassignment every time a claimant's or insured's damaged car has togo to the body shop for repairs. As an urban dweller, the fuss andbother of finding the rental agency, signing contracts, andpledging one's first-born if the car is returned with damage, is abigger nuisance than just walking up to the corner and catching thenext bus to wherever one is headed.

Consider London's transportation system. The city haspractically outlawed automobiles from the center of town, so arental would more than likely be left parked somewhere. New YorkCity is another driver's nightmare. It is much easier to take atrain into town and transfer to the subway than it is to drive inthat traffic. Hence, a rented car would again be parked at somerail station and left for the day.

The practice of assigning rental cars forvirtually every auto damaged in a wreck has financial consequencesgalore for the insured, who ends up paying twice for the very samething: they pay an auto insurance premium that includes “loss ofuse” for property damage and “transportation expenses” underphysical damage coverage, plus they pay taxes to operate amunicipal transit system that probably also gets a subsidy from thefederal government (which is more tax money that we all mustpay).

A careful look at PP 00 01 01 05, otherwise known as the I.S.O.Personal Auto Policy, reveals that it does not mention the term“auto rental” anywhere within the form. Third-party liability for“loss of use” does not legally mean “rental car” any more than“nuisance” or “inconvenience” means a bodily injury. Under firstparty coverages, the transportation expenses agreement provides upto $600, but not more than $20 a day, for “temporary transportationexpenses … incurred by you in the event of a loss to 'your coveredauto.'” I suppose one can rent a car that includes all of the bellsand whistles for somewhere around $20 a day, but by the time taxesand extras are added, most cost more than that. Also, if the limitis $600, that gives insureds 30 days of coverage at $20 a day.Except in the case of theft, if the car is going to take 30 days tofix, perhaps it should have been totaled. Damage appraisers need totake costs of loss of use into consideration in those “repair orreplace” decisions.

Other TransportationOptions
Perhaps someone who lives too far away from alternatetransportation options might need a rental vehicle, but even then,it's possible that they could borrow a neighbor's extra pick-uptruck for a few days instead of renting a car. The neighbor mightbe glad to get the 20 bucks a day.

This type of alternate transportation is like alternativemedicine. Far too many adjusters would pay for radical surgerybefore they would consider paying for the services of alternativemedicine, other than chiropractic perhaps. Most adjusters would noteven agree to pay the price of one herbal tea bag, regardless ofthe psychosomatic value of the tea. The same is probably true ofalternate transportation. “What do you mean, you 'paid yourbrother-in-law' to borrow his car? We can't reimbursethat!” Why not? Like the policy says, the coverage is for“temporary transportation expenses,” and it doesn't have to alwaysmean a rental car.

One crafty claims manager I knew tried to collect the “loss ofuse” of his injured adjuster when the man was hurt in an autoaccident that wasn't his fault.  But that is not allowedunder the I.S.O. policy either. “Property damage” is defined as“physical injury to, destruction of, or loss of use of tangibleproperty.” Undoubtedly the injured adjuster was “tangible,” but hewasn't the claims manager's “property.” Although the Old Testamenttalks about payment for injury to one's chattels, slavery has beenabolished and an employer cannot collect damages for “loss of use”of an employee (nor can he collect on a policy for a “useless”employee.).

What is 'Tangible'?
Certainly an automobile would qualify as “tangible property,” whichis why auto adjusters must consider loss of use as a factor. Theremay be damage to other property besides the automobile in anaccident though, and the loss of use of that property must also beconsidered in a liability claim. Suppose a claimant had a tractorin the bed of his truck when a negligent insured caused damage toboth the truck and the tractor. The policy would have to cover theloss of use of both. Nothing but the insured auto would beconsidered in a first party claim, but when damage occurs to aclaimant's property, then one must get out the calculator andconsider the value of the loss of use of that property, and thatamount is not limited to just $20 a day or $600 total.

As insurers, the public, and the courts began to approach the21st century, the question of what “tangible” meant becamesignificant. I.S.O. forms such as CG 00 01 12 04 Commercial GeneralLiability began adding a caveat: “For the purposes of thisinsurance, electronic data is not tangible property. As used inthis definition, electronic data means information, facts, orprograms stored as or on, created or used on, or transmitted to orfrom computer software, including systems and applicationssoftware, hard or floppy disks, CD-ROMS, tapes, drives, cells, dataprocessing devices or any other media which are used withelectronically controlled equipment.” A more specific definition oftangibility is becoming the norm today, especially in the realm oftechnology.

Intangible PropertyTheft
Courts have also addressed other issues of tangibility.Intellectual property, for example, is not “tangible.” This issuehas often arisen in advertising liability claims, in which aplaintiff alleges that a defendant “stole” an idea, or improperlyused a trademark or copyright. That is perhaps what all those“license agreements” are about when new software is purchased.Plagiarism is a growing threat to those who earn their living usingtheir ideas.

As a writer, I'm not thrilled about the invention of the Kindleand other e-reading devices. I know that these columns areavailable on the Internet, as is one of my books; I get paid whenpeople use those, but who knows who is copying my other bookswithout paying my publishers to buy a copy?

Students “copy” entire reports into their computers and passthem on to the teacher or professor as their own work, withoutpaying any credit to the real author. I can recall one situation 30years ago when a member of a large local agency published anarticle in a magazine. A reader recognized the bulk of the article,and thinking it sounded familiar, found the original work in one ofthese Iconoclast columns. As the author, I was flattered thatsomeone would think enough of what I had written to copy it, but ashe had been paid for what he did not write, it was theft and he wasfired. After all, these columns in Claims are copyrighted,and even I have to acknowledge the source when I quote myselfelsewhere!

I can remember another “intellectual property”lawsuit that cost hundreds of thousands of dollars. It involved acommercial bakery that wanted to learn how to make a certain bakedgood that was being popularized by a competitor. They had one oftheir bakers hire on with the competitor in order to learn theformula. When he learned the secret he quit, returned to thedefendant bakery, and devised a similar product. It was industrialespionage and trade infringement. When the defendant bakery wascaught, they found that their general liability insurance did notcover such a “tort,” even if it involved an actual“torte.”     

The claim was, basically, “loss of use,” even though there hadbeen no actual physical damage to any tangible property. To theextent that the competing bakery could claim market share, theoriginating bakery lost the use of that market share.

Paying for indirect loss, such as loss of use, loss of market,and similar loss is tricky, as many victims of the Deep Horizon BPoil spill in the spring of 2010 discovered. When fishermen can'tfish, motel owners can't rent rooms, or restaurants can't selldinners, the loss is real, even if it is not direct loss, and evenif there is no actual damage to property. The proof must bedocumented, but when it is an element of damages, the adjuster isgoing to have to investigate and evaluate those documents, thennegotiate the value of the loss. That is the art of claimadjusting. It is far more detailed than simply saying, “Oh, go renta car while yours is in the shop.”