WORK PRODUCT OF MATTHIESEN, WICKERT & LEHRER, S.C. Page 2 Last Updated 1/13/22
States such as Texas provide that a person whose vehicle is totally destroyed may only recover the value of the lost vehicle, while a person whose vehicle is repaired may
also recover the loss of use of the vehicle. Such states may allow the plaintiff to prove damages for loss of use of a repairable car by establishing the reasonable rental
value of a substitute car for the time reasonably required to repair or replace it.
Third-party (liability) claims for loss of use also vary and depend greatly on state law. Some states have not set forth rules, formulas, or calculations to be used in awarding
damages, but simply require that they be causally related to the negligence of the third-party tortfeasor.
Rental Car Company and Fleet Loss of Use
Many states have special rules and laws governing the recovery of loss of use by a rental car company or fleet operator. For example, California provides that where a
waiver loss is signed, loss of use is not recoverable from a renter or authorized driver. Where there is no damage waiver signed (and the terms of the waiver may alter
this), California statutes provide that:
A claim against a renter resulting from damage or loss, excluding loss of use, to a rental vehicle shall be reasonably and rationally related to the actual loss
incurred. A rental company shall mitigate damages where possible and shall not assert or collect a claim for physical damage which exceeds the actual costs of
the repairs performed or the estimated cost of repairs, if the rental company chooses not to repair the vehicle, including all discounts and price reductions.
However, if the vehicle is a total loss vehicle, the claim shall not exceed the total loss vehicle value established in accordance with procedures that are customarily
used by insurance companies when paying claims on total loss vehicles, less the proceeds from salvaging the vehicle, if those proceeds are retained by the rental
company. Cal. Civil Code § 1939.07(a)
However, it may be recovered from third parties who cause damage to rental vehicles. This is true even though the rental car company has other vehicles available for
rent. Cal. Civil Code §§ 1939.07 and 1939.09. When there is a third-party recovery (subrogation) by the rental car company, § 1939(c) provides that “A rental company
shall not recover from an authorized driver for an item described in § 1939.03 (“Agreement for renter responsibility”) to the extent the rental company obtains recovery
from another person.” Loss of use of property is different from loss of property. For instance, assume that a vehicle is stolen from its owner. The value of the loss of use
of the car is the rental value of a substitute vehicle; the value of the loss of the vehicle is its replacement cost. The nature of loss of use damages is described in California
law as: “The measure of damages for the loss of use of personal property may be determined with reference to the rental value of similar property which the plaintiff
can hire for use during the period when he is deprived of the use of his own property.” Collin v. American Empire Ins. Co., 21 Cal.App.4
th
787 (Cal. App. 1994).
At the same time, many states have not addressed any special rules or limitations for the recovery of third-party loss of use damages by a car rental company or fleet
operator. Wisconsin law does not allow a car rental company to collect for loss of use, administrative fees, or any other charges not specifically permitted by the statute,
or any amounts already collected from a renter or authorized driver. Wis. Stat. Ann. § 344.574. It does allow recovery of such damages from a third party. In some states,
such as Tennessee, case law rather than statutory law provides the answer. In Tennessee, case law allows for recovery of third-party loss of use damages by a car rental
company when a rental vehicle is damaged, for the period of time necessary for the vehicle to be repaired. Tire Shredders v. ERM, 15 S.W.3d 849 (Tenn. 1999).
The following chart does not cover or discuss loss of use damages recoverable by a rental car company or fleet operator, although such rights of recovery are sometimes
subsumed within a state’s laws regarding recovery of damages for “lost profits.”
Calculating Loss of Use
Some states have established formulas, calculations, and/or rules with regard to calculating reasonable loss of use damage claims; others do not. Some states limit loss
of use damages by declaring that they cannot exceed the value of the vehicle; others have no limit at all. Georgia, for example, allows loss of use damage for the time
the insured was deprived of the use of the vehicle. Atlanta Furniture Co. v. Walker, 181 S.E. 498 (Ga. 1935). In Indiana, loss of use is calculated by a vehicle’s rental value
– if the property does not have a rental value, loss of use is calculated by the value of its use to the injured party for the time he was deprived of its use. Weddle v. I.R.C.