Ariz. House Committee Kills Rental Agency Insurance Bill

The Arizona House Banking and Insurance Committee killed a bill Monday that would have significantly cut rental car agencies’ insurance liabilities.

SB 1286, which had been narrowly approved by the Senate at the beginning of the month in a 16-14 vote, would have made it so that the policies purchased by rental agencies for their vehicles would kick in to cover crash damages only after the renter’s own personal liability coverage had been exhausted.

As the law currently stands, rental agencies’ Arizona car insurance coverage is primary, meaning it’s the first policy to kick in after an accident.

Members of the Banking and Insurance Committee defeated the bill in a 2-5 vote.

Representatives of the coverage industry had opposed the bill, saying that it would have ended up costing the average Arizona driver more for coverage, whether they rented cars or not.

That’s because making the renter’s own coverage primary would have meant most of the damages from accidents involving rental cars would have been covered by personal policies rather than the commercial policies purchased by agencies.

And since that means more losses dealt to the statewide pool of personal policyholders, insurers would be likely to raise rates to make up for those losses.

When the bill was still being debated in the Senate, industry groups like the Property Casualty Insurers Association of America (PCI) and many of the major insurers in the state had given public testimony in opposition of the bill.

PCI said in a statement that the change “would result in a cost shift of millions of dollars” to the private market.

On the same day the committee killed the rental car legislation, it also gave the go-ahead to a bill aimed at legitimizing proof of coverage in electronic forms.

If the bill passes and gets the approval from Gov. Jan Brewer, drivers would be able to show proof of coverage on a smartphone or tablet when pulled over by police or registering a vehicle.

About Ben Zitney
Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.

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