Rental Car Contracts Sometimes Contain Void Insurance Clauses
Clauses Voiding a Liability Policy Based Upon a Driver’s Intoxication are Unenforceable.
Illinois courts have held clauses such as the voiding of a liability policy based on the intoxication of the driver, as unenforceable. In Hertz Corp. v. Garrott, 238 Ill. App.3d 231, 606 N.E.2d 219, 179 Ill. Dec. 387 (1st Dist. 1992), a customer rented a vehicle from Hertz which she then loaned to her husband who was involved in an automobile accident. The rental contract provided that the rental vehicle was to be operated only by the customer and certain authorized persons which included the customer’s “immediate family members who were licensed drivers over the age of 25.” In small print on the back of the rental agreement the agreement provided that:
[I]f the customer permitted the use of the vehicle by an unauthorized operator or used or permitted the use of the vehicle in a prohibited manner, the collision damage waiver (CDW), all liability protection and other insurance coverage would be voided and the customer “may” then be responsible for all losses and damages to or connected with the vehicle. Garrott, Ill. App.3d at 233, N.E.2d at 220.
Hertz alleged that the driver was under 25 years of age, had been unlicensed to drive in the state of Illinois and was intoxicated at the time of the accident. The court reviewed the following issue:
Whether rental companies may condition liability protection upon the customer’s adherence to all the provisions contained within a rental agreement, including a prohibition against driving while intoxicated. Garrott, Ill. App.3d at 236, N.E.2d at 222.
The customer had purchased additional coverage including CDW. The policy indicated that liability protection would be in the amount of $100,000/$300,000. These amounts were an increase from the amounts appearing on the back of the form. The court noted that nowhere on the front of the form did it state what the ramifications would be for failing to comply with the agreement. Nor did it indicate on the front of the form that liability protection would be withdrawn if there was a violation of the agreement. On the reverse of the form the prohibited uses were listed. These included the following:
a. To carry persons or property for hire,
b. To propel or tow any vehicle trailer or other object,
c. In any race or contest,
d. For any illegal purpose,
e. To instruct an unlicensed in the operation of Vehicle,
f. If vehicle is obtained from lessor by fraud or misrepresentation,
g. To carry persons other than in passenger compartment of Vehicle,
h. Loading Vehicle beyond its rated capacity, or
i. While under the influence of alcohol or other intoxicants like drugs or narcotics.
Garrott, Ill. App.3d at 237, N.E.2d at 223.
The court reviewed the decisions of Standard Mutual v. General Casualty and Fidelity General v. Nelsen Steel & Wire Co. which had previously held that broad conditions voiding policy coverage are unenforceable. The court noted that these clauses did not deal directly with intoxication but they supported the proposition “that car rental agencies may not evade their responsibility to provide liability protection by inserting into their rental agreements a number of broad and sweeping conditions which nullifies such protection. Garrott, Ill. App.3d at 238, N.E.2d at 223.
The court held as follows:
Hertz, a private entity, does not have the ability to separately impose sanctions upon private citizens for driving while intoxicated, in the name of the public policy, when such sanctions work a hardship upon the general public and, at the same time, benefit the rental agency and/or its insurer.
As a result, the intoxication condition was held to be invalid as against public policy and stricken from the contract. The court found that the exculpatory clause did not invalidate the entire contract but instead only the offending clause. Therefore, the liability limits printed on the face of the contract of $100,000/$300,000 would be upheld as opposed to the statutory minimums of $50,000.
