Rental Vehicle Coverage Issue

Our insured rented a vehicle from a rental company, and turned it over to another person. He had no intention of using the vehicle when he rented it. The vehicle is now missing, and the rental company wants us to pay for the vehicle.

The insured has a personal auto policy. Although the insured misrepresented who would be in possession of the vehicle to the rental company, it does not mean to us that the provision concerning “fraud” is applicable in this instance.

Do we have to pay for the vehicle? What is your opinion?

Indiana Subscriber

Under part A, liability coverage, exclusion A.3. states, “We do not provide liability coverage for any “insured” for property damage to property rented to that “insured”. Therefore, there is no coverage for the missing vehicle under this portion of the policy.

Next, turning to part D, coverage for damage to your auto, the rented auto qualifies as a “non-owned” auto provided it is a “private passenger auto, pickup, van or 'trailer' not owned by or furnished or available for the regular use of you or any 'family member' while in the custody of or being operated by you or any 'family member'.”

Since neither the named insured nor any family member had custody of or was operating the vehicle, there is no coverage for the loss.