Avoiding Significant Corporate Risks
By Sean Jackson, Director of IMA’s Global Risk Division, published in TechAssure Newsletter – Q1- 2014
Rented automobiles and the use of employee vehicles for company business can create significant liability exposures for an organization. Renting vehicles in a foreign country only amplifies these exposures.
The focus of this article is to address the insurance issues related to foreign automobile rentals. In addition to proper insurance, organizations should develop strong risk management procedures and best practice guidelines for the use of nonowned or rented vehicles.
Not Everything That Happens Abroad Stays Abroad – You may think that you have adequate insurance through the local liability coverage provided by your car rental company. In some territories however, the local compulsory liability limit might be as low as $50,000 (or the equivalent), so it is entirely possible that you may not have enough coverage.
If you don’t have enough liability protection and you’re involved in an auto related accident overseas, the outcome could be catastrophic. A case could be brought against you and your firm in that country and/or in your home country. In order to be in the best financial position to defend yourself, secure Foreign Excess Auto Liability Coverage from your international package insurance provider in your home country. Think of the excess policy as a “top up” that provides additional limits over and above the local policy limits.
One Policy Does Not Cover All – International travelers should understand the local requirements in the country where they plan to rent their vehicle. Local laws normally require you to purchase primary automobile liability coverage and to have evidence of the coverage with you at all times. This protection would cover bodily injury and property damage to third parties and is usually included in the auto rental contract. Also, be sure to select coverage to protect you against any physical damage caused to the vehicle you are renting. This is usually an addon for an additional daily fee. At a minimum, the international auto insurance policy within your rental agreement should contain the following components:
- Auto Liability: Based on local, in country requirements and limits
- Physical Damage: Comprehensive and Collision – To protect you and your firm against damage you may cause to the rented vehicle
Once you confirm this coverage, you can rely on the international auto insurance within the rental contract to take care of any local defense for bodily injury and property damage caused overseas.
When an Accident Occurs – The insurance coverage behind an international auto incident is best measured by the claims process. Filing a claim in a foreign country can be a complicated process, but the efficient handling of your claim at the local level is critical. Make sure you know who the local insurer is and have the necessary paperwork with you so that you may reference it if you need to.
In summary, follow this Four Step Plan for peace of mind when you travel and rent a car overseas:
- Secure Foreign Auto Liability Coverage on your company’s international foreign package policy before you leave
- Review your auto rental contract to understand the liability coverage that is provided
- Say YES to the physical damage coverage
- Pay for the car rental with a credit card that has the auto rental protection benefit
These simple tips should provide you with the coverage you need for safe travels and a good night’s sleep abroad.
Roach Howard Smith & Barton’s International Specialty Practice Group is focused on developing solutions for clients operating internationally. Our international capabilities include:
- Evaluations to determine duplications and gaps in coverage
- Design and implementation of insurance program to cover international exposures
- Implementation of risk management program and local claims advocacy
- Assistance for clients with overseas supply chains
- Help with uncertainty in laws, regulation, cost, culture, and language
Contact our International specialists David Kohl or Spencer McClenahan at 972-231-1300