JUDGE SARA COMBS ON RISKS OF NOT BUYING CAR RENTAL INSURANCE

Judge Sara Combs helps explain the risks of waiving car rental insurance when you rent a car. This Ct. of Appeals decision is date Oct. 2012.

U] Fuller v. Enter. Rent-A-Car Co. of Kentucky (Ky. App., 2012) 2011-CA-001301-MR October 12, 2012

COMBS, JUDGE: Deana Fuller, as Administratrix of the Estate of Derrick Fuller, individually, and as mother and next friend of her four minor children, appeals the order of the Jefferson Circuit Court which dismissed her claims against Enterprise Rent-a-Car Company of Kentucky, LLC. After our review, we affirm.

On February 28, 2010, Derrick Fuller, a pedestrian, was struck and killed by an automobile driven by James Kelly. Deanna Fuller alleges that Kelly had fallen asleep at the wheel. It is undisputed that Kelly had rented the car from Enterprise. In his rental contract, Kelly declined to purchase Enterprise’s tort liability insurance and instead elected to be covered by his personal insurance policy.

Fuller filed her complaint in Jefferson Circuit Court on November 22, 2010, naming both Kelly and Enterprise as defendants. On December 15, 2010, Enterprise filed a motion to dismiss based on failure to state a claim. At some point during the pendency of the motions, Enterprise paid basic reparation benefits (BRB’s) to Fuller. However, the claims for tort liability remained the subject of litigation.

The sole issue in the case before us is tort liability insurance rather than excess coverage. Shelter recognized that insurance coverage is subject to modification by contractual agreements as long as it comports with the statutory scheme of the Motor Vehicle Reparation Act (MVRA). Shelter, supra. The MVRA at Kentucky Revised Statute[s] (KRS) 304.39-110 mandates that insurance be carried for tort liabilities. It allows “the requirement of security for payment of tort liabilities [to] be met by a contract.” KRS 309.39-110(2). This language is known as an “escape clause.” Rees v. U.S. Fidelity and Guar. Co., 715 S.W.2d 904, 906 (Ky. 1986). In Rees, the court held that the escape clause permits contractual shifting of tort liability – but not of BRB’s. Id.

Fuller further argues that the Kentucky Administrative Regulations (KAR) dictate that Enterprise, as a self-insured entity, is solely responsible for tort liability insurance. 806 KAR 39:050(2) provides that applicants for self-insurance must agree “to pay all tort liability and basic reparation benefits incurred and required by KRS Chapter 304, Subtitle 39[.]” As we pointed out, KRS 304.39-110 permits contractual shifting of tort liability, as acknowledged by our Supreme Court in Rees. KRS 304.39-080 requires self-insured entities to pay “tort liabilities or basic reparation benefits, or both.” By employing the disjunctive or, KRS 304.39-080 allows for contractual flexibility while still complying with the mandate of KRS 304.39-110 that coverage for BRB’s cannot be shifted or avoided.

As the trial court noted, Congress in 2005 enacted a law (the Graves Amendment) which exempts car rental companies from tort liability. 49 U.S.C.A. § 30106(a)(1). However, Fuller argues that the Graves Amendment is inapplicable because it provides that it does not supersede any state laws that deal with financial responsibility or liability insurance requirements of the law. 49 U.S.C.A. § 30106(b). While this may be a valid analysis, it does not apply to the particular facts of this case and is not pertinent to our resolution of the matter. Kentucky’s statutory scheme does not mandate that car rental companies be solely responsible for tort liability insurance and allows for contractual shifting of liability for them to create their own exemption. Essentially, the Graves Amendment was a federal codification of the already existing Kentucky law on this issue.

KRS Chapter 304, Subtitle 39[.]” As we pointed out, KRS 304.39-110 permits contractual shifting of tort liability, as acknowledged by our Supreme Court in Rees. KRS 304.39-080 requires self-insured entities to pay “tort liabilities or basic reparation benefits, or both[.]” By employing the disjunctive or, KRS 304.39-080 allows for contractual flexibility while still complying with the mandate of KRS 304.39-110 that coverage for BRB’s cannot be shifted or avoided.

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