R.I. Gov. Carcieri Vetoes Car Rental Policy Change

July 7, 2004

Rhode Island Gov. Donald Carcieri has vetoed a measure that would have restricted the state’s auto insurers’ ability to encourage the use of lower cost preferred providers for rental cars.

The General Assembly approved the amendment to S-2616, the Unfair Claims Settlement Act. Insurers had opposed the amendment and urged Carcieri to exercise his veto power.

The bill would have amended the unfair claims act to include refusing to directly pay the rental car benefit owed to an insured to the rental car company of that policyholder’s choice. Violation of the act can result in fines for the insurer of $10,000 per violation, as well as suspension and revocation of the insurer’s license.

But insurers argued that the restriction would end up costing insureds more and potentially force insurers to limit coverage options.

“Our member companies do not compel customers or claimants to rent from a preferred rental company while their vehicle is being repaired,” said Frank O’Brien, vice president and New England regional manager for the Property Casualty Insurers Association of America (PCI).

“What they have been able to do is recommend a preferred company which is under contract with the insurer to provide rentals at a lower cost per day. This may allow the customer to keep the vehicle for a longer period of time, which is especially important if there is a delay in repairing the damaged vehicle,” O’Brien said.

If customers are not told about the preferred rental company and the lower rates, they are likely to rent from a company charging a higher rate and, as a result, they may end up paying additional out-of-pocket expenses for any additional balance that exceeds the limit in their insurance policy, PCI argued in its appeal for a veto of the amendment.

A car rental group that supported the amendment, the Coalition for Fair Insurance Practices, said it was disappointed in the veto but pledged to continue to fight to what it calls “insurance companies’ unfair and exclusionary billing practices in relation to the auto rental industry.”

“We pledge to attack this issue with renewed vigor, in Rhode Island, in Maryland and across the country, despite the veto by Governor Carcieri,” said CFIP co-founder Ken Blum.

“The exclusionary practices in our industry perpetrated by the large insurance companies restrict access to this market and preclude willing independent providers who offer customers cost savings, convenience and a valuable service to their customers from competing for this business,” Blum added.

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