Rental of a replacement vehicle under third party motor liability insurance

Wersja do wydruku / Printing versionPDF version

General notes

In the case of occurrence of claims under third party motor liability insurance, the claimant - in some cases – can hire a replacement vehicle chargeable to the perpetrator’s insurer. There is no legal act specifying exactly who, when, under which circumstances and for which period of time one can hire a replacement vehicle. So far all this has been fully volitional. Recently, the Polish Chamber of Insurance in co-operation with the Financial Supervision Authority have issued guidelines concerning the rental of a replacement vehicle under third party motor liability insurance. This document does not constitute a generally binding legal regulation (which should be borne in mind) but it may create a basis for unifying applied practices and for interpreting legal regulations.

Suggested procedures and principles for action

• If damage under third party insurance occurs, we suggest that the claimant immediately informs the insurer about the necessity of renting a replacement vehicle.
• According to the guidelines laid down below, the claimant may request from the insurer a written confirmation that the costs of car rental shall be acknowledged as rightful. This request does not involve a confirmation of the rental period of the replacement vehicle.
• In certain cases the insurer has the right to request evidence backing the facts that the claimant refers to.  
• The claimant – as a rule – should cover the cost of the rental of a replacement vehicle out of pocket and then submit invoices, bills etc. to the insurer. The insurer does not cover these costs in advance (on an installment basis).

The document published below (original content) has been issued by the Polish Chamber of Insurance in co-operation with Financial Supervision Authority..

Principles of rental of replacement vehicles under compulsory third party motor liability insurance

1. Principles of rental of replacement vehicles under compulsory third party motor liability insurance 

Under compulsory third party motor liability insurance a claim for compensation is well-founded if the overall circumstances imply that:

• the claimant was unable to use his vehicle to such an extent which he would have used it if it had not been for the damage and bore expenses which necessitated the use of another vehicle to such an extent which he would have used his own vehicle which had been damaged,
• being a natural legal person who does not run any business activity, he could not satisfy his consumption requirements or needs in another way, especially by using means of public transport.

A claim for covering expenses of the rental of a replacement vehicle requires due justification of the necessity of a replacement vehicle rental on the part of the claimant and supporting the claim with appropriate documents. The claimant is obliged to minimize the extent of the damage and to prevent it from getting worse.

The insurer has a right to verify motives underlying the claimant’s decision about hiring a replacement vehicle. In the case of an acknowledgment of the replacement vehicle rental cost as part of the claim liable to a compensation obligation – in a given case -  the insurer should consider the possibility of using other means by the claimant (e.g. a taxi or other means of public transport) inasmuch as they were economically justified in the given status quo.

In order to avoid situations where a claimant decides to hire a replacement vehicle in circumstances which do not justify the usage of such a vehicle, upon the claimant’s request the insurer shall inform of circumstances allowing acknowledgment of the costs of a rented replacement vehicle and about pieces of evidence necessary to obtain a refund of the costs.

Upon the request of a claimant who is about to hire a replacement vehicle, after submitting the necessary evidence, the insurer shall immediately confirm, in writing, that he considers the cost of hiring a replacement vehicle well-founded with the reservation that this does not apply to the length of the rental period.

A claim for coverage of the costs of hiring a replacement vehicle can be considered well-founded when: 

1.1 The claimant is a person for whose business activity a vehicle is necessary:

1.1.1. Using the damaged vehicle for a business activity is basically a sufficient preliminary to acknowledge a claim.

1.1.2. The claimant issuing for refund of hiring costs of a replacement vehicle is obliged to prove the fact of running a business activity (e.g. by means of a certificate of business register entry) and of using the vehicle for the business activity (e.g. by an excerpt from the fixed asset account, documents confirming costs allocation for usage of the vehicle for the business activity). The list of admissible evidence is not closed and depends, among other things, on the kind of business activity conducted, method and scope of bookkeeping and the method of allocation of costs due to vehicle usage.

1.1.3. In well-founded cases concerning business people using several vehicles an additional analysis may be reasonable if, during repair of the damaged vehicle, there was no possibility to use another similar vehicle which would satisfy the needs which had been met by the claimant using the vehicle which had been damaged. 

1.1.4. If the claimant is a person for whom a vehicle is indispensable for carrying out professional activities (e.g. a lawyer, an architect), the fact and the way of conducting the profession requiring frequent changes of place for unobstructed activity must be testified.

1.2 The claimant is a natural legal person who does not run any business activity:

1.2.1. If the overall circumstances imply that the claimant is a natural legal person who does not run any business activity, and that he could not satisfy his consumption requirements or existential needs in another way, especially by using means of public transport, then a refund of the cost of hiring a replacement vehicle is due if the expenses were purposeful and inevitable, resulting from the impossibility of using one’s own vehicle in such a way in which it had been used so far.

1.2.2. The claimant should provide evidence of how he had used the vehicle, how frequently, what distances were covered and for which purpose they were driven. A refund of the cost of hiring a replacement vehicle is due if other circumstances, proven by the claimant, indicate that the vehicle was necessary for commuting to work,  or the need of using was of a personal nature (e.g. the necessity to transport a disabled family member to a doctor or physiotherapist), or was due to external conditions (e.g. because of the lack of public transport between the claimant’s residence and work place), or due to other hindrances which render it impossible to satisfy the reasonable needs of the claimant in a more economical way. Providing evidence concerning vehicle usage by the claimant cannot cause him disproportionate trouble and is carried out e.g. in form of a statement. In the case in which this statement evokes doubts, the insurer can verify it or request additional proof concerning specific circumstances outlined by the insurer.

1.2.3. The costs of hiring a replacement vehicle cannot be considered purposeful and necessary in every case. If the claimant used his vehicle with low intensity or for short distances (e.g. once a week in order to satisfy his personal needs –e.g. for a recreational trip to the allotment or driving to the church), the circumstances indicated cannot justify a claim for covering rental costs of a replacement vehicle. Consumption requirements or existential needs may be satisfied by the usage of other means of transport by the claimant (e.g. taxi or other means of public transport) if in the specific conditions of the case an alternative means of transport is accessible for the claimant and similarly convenient to the usage of his own car. Alternative means of transport are considered inconvenient if they are considerably bothersome compared to the usage of one’s own car or require much more time due to an inconvenient public transport timetable, location of stations (stops) or necessity to change a line many times.

1.2.4.The list of actual facts substantiating the necessity of hiring a replacement vehicle is open and every case requires individual evaluation.

1.2.5. Denying the necessity of hiring a replacement vehicle does not exclude a payment of the amount equal to the costs of alternative means of transport which would be reasonable in the specific circumstances of the case. 

2. Verification of the rental period of a replacement vehicle:

2.1 Partial loss:

2.1.1. A reasonable coverage period of rental costs of a replacement vehicle consists of the following partial periods summed up:

1) the period between the occurrence of the damage and submitting a claim to the insurer – as long as the claim was submitted without undue delay. 3 days are considered a typical, sufficient period, which does not require any explanations. In the case of claims submitted later, an explanation is needed concerning the cause of the delay. Objective causes for which the claimant cannot be blamed justify acknowledgement of the entire period between occurrence of the damage and submitting a claim;

2) from the day of submitting the claim to the day of insurance inspection carried out by a representative of the insurer and receiving by the claimant (or by a unit authorized by him, e.g. a garage) a document describing, in detail, a reasonable range of repair. It can be a report from the inspection or a repair cost estimation. The document should certify that the repair is reasonable (i.e. the damage has not been classified by the insurer as a total loss);

3) MTTR (mean time to repair) based on the vehicle manufacturer’s technologies (counted on the basis of time units from the repair cost evaluation);

4) waiting period for an optional additional inspection during the repair (from submitting a request for such an inspection to the insurer until the additional inspection is carried out);

5) organizational period for finding a garage, ordering the repair, acceptance/picking up the vehicle from the repair – standard joint time up to 2 days;

6) waiting time for spare parts supply – up to 2 working days;  the preliminary to accept a period exceeding two working days issuing a written statement by the service that it is impossible to obtain the element necessary for the repair within 2 days at the network of authorized as well as independent spare part suppliers. 

2.1.2. In some circumstances the actual periods listed above may overlap, which must be taken into account while establishing the reasonable rental period of a replacement vehicle.

2.2 Total loss:

2.2.1. A reasonable coverage period of rental costs of a replacement vehicle consists of the following partial periods summed up:

1) the period between occurrence of the damage and submitting a claim to the insurer – as long as the claim was submitted without undue delay. 3 days are considered a typical, sufficient period, which does not require any explanations. In the case of claims submitted later, an explanation is needed concerning the cause of the delay. Objective causes for which the claimant cannot be blamed justify acknowledgement of the entire period between occurrence of the damage and submitting a claim;

2) from the day of submitting the claim to the day of insurance inspection carried out by a representative of the insurer and receiving by the claimant (or by a unit authorized by him, e.g. a garage) information that the damage has been classified as a total loss. This information does not automatically mean a decision about awarding compensation;

3) period necessary to sell the vehicle wreck, buy another vehicle of similar parameters and register it. It is assumed that a 7-day period from delivering information about having classified the damage as a total loss is usually sufficient (if the information is obtained together with estimation of the price of the wreck) and should be acknowledged as a period in which rental costs of a replacement vehicle are covered without any explanation needed on the part of the claimant. Any period exceeding 7 days should be considered individually in view of due diligence in the claimant’s efforts concerning a sale of the wreck and purchase of a new vehicle. While assessing invested due diligence the possibility of buying another car is taken into account for means owned by or available to the claimant, without waiting for a sale of the wreck. A period exceeding 7 days may be acknowledged, in particular, when the claimant did not own and had no possibility to acquire financial means to buy another and when the extension of the rental period of a replacement vehicle resulted from assuming a higher value of the wreck than its market value, unless the insurer provided an option of ownership transfer of the wreck or of selling the wreck to an indicated unit at the price he assumed. 

2.2.2. If the sum of the above periods exceed the day of payment of the compensation then the day of compensation payment is assumed to be the end of the admissible period of rental of a replacement vehicle, unless the payment of the compensation took place within 7 days from delivering information about the damage being classified as a total loss (together with estimation of the price of the wreck). In the last case the end of the admissible rental period of a replacement vehicle is the 7th day, counted from the receipt of information about the classification of the damage as a total loss.

3. Verification of rental costs of a replacement vehicle

3.1 A vehicle hired should be of similar (not higher) class to the damaged vehicle.

3.2 Daily rental cost should not differ from local market prices and must not be higher than prices in leading Polish country-wide car rental networks. 

3.3 If no vehicle rental firm can let a vehicle of similar parameters within the immediate area of the claimant’s abode, the rental costs of a higher category vehicle will be acknowledged with the restriction that the price must not be higher than prices in leading Polish country-wide car rental networks applied to cars of similar class to the damaged vehicle. 

3.4 The insurer is not liable for costs resulting from the usage of the rented vehicle which the claimant would have paid using the damaged vehicle in the same way. This exclusion does not involve the costs which meet all of the following conditions:

• they were paid for services strictly connected with the replacement vehicle,
• the services are necessary in order to provide the possibility to use this vehicle in the same way the damaged vehicle had been used,
• the claimant had previously acquired the same services strictly connected with the damaged vehicle and cannot take advantage of them while using a replacement vehicle.

3.5 The fact of using a replacement vehicle should be neutral for the claimant’s property. The claimant should neither get richer nor poorer due to usage of a replacement vehicle instead of his own. This is why the insurer is not liable for any costs resulting from usage of the rented vehicle which the claimant would have paid using the damaged vehicle in the same way (e.g. fuel, parking costs).

3.6 If the claimant had paid costs of a certain service which can only be realized in connection with the damaged vehicle (e.g. annual toll for a vehicle with certain license numbers), the insurer should cover the cost of the same service for the replacement vehicle if it is necessary to ensure the possibility of using this vehicle in the same way the damaged vehicle had been used.

source: Polska Izba Ubezpieczeń, Komisja Nadzoru Finansowego