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PurCo Win: What Now?

The Colorado State Supreme Court ruling in PurCo v. Koenig was a major victory for the car rental industry regarding the ability to collect loss-of-use damages. But the fight is far from over.

September 14, 2012

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It was all over a measly $350. What could be worth seven years of litigation and $250,000 in legal bills? How do you quantify the time spent away from the business and family for $350? The last time I saw David Purinton he had a full set of hair and it wasn’t grey. For all I know it may have been a very good hairpiece.

But we all know the $350 damage claim, based on damage caused to a rented vehicle in 2005, became the genesis of the landmark legal battle to recoup loss-of-use fees for the car rental industry fought by Purinton’s company, PurCo Fleet Services. And this week, the Colorado Supreme Court ruled that “PurCo is entitled to recover loss-of-use damages irrespective of its actual lost profits.”

Right now, across America, we shall collectively stand up, tip our hats to David Purinton and his team, and say a simple “thank you.” Do it now.

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And we move forward. Though the ruling is specific to Colorado, we hope and expect this precedent-setting case will have an impact on the recovery of loss-of-use damages — along with administrative fees — in other jurisdictions around the country.

Understand that the PurCo case was not about beating up on a defenseless renter; it was funded and guided by an insurance company. And insurance companies are a formidable group to take on.

Taking up this cause will not be easy in states such as New York, in which car rental companies by statute agreed to waive loss-of-use collections from renters or insurance companies as part of a compromise in a bill that restored their ability to offer CDWs. California has a similar statute.

It will also not be easy to sway credit card companies because they do not pay loss of use on their car rental insurance coverage either.

And despite the case in Colorado, insurance companies will still demand proof of 100% utilization, even when they know the car rental business doesn’t operate that way. They will still decline paying loss of use, even understanding that:

  • Those out-of-service cars (wrecks/repairs, manager loaners, de-fleeted cars, charity donations, recalled vehicles, etc.) are counted in the utilization percentage pool.
  • No rental company keeps “spare cars.”
  • The rental car company still has to pay fixed costs on out-of-service cars.
  • Lacking a guaranteed reservations policy, rental companies need to book more than 100% and hope their no-show rate doesn’t dwindle to the point of overbooking. 

If a car class is sold out, a customer is often put in a different (higher) car class at the same rate, hurting the daily dollar average.

No, these arguments may not hold sway with insurance companies. They may be better served when in front of a judge or state legislature in the next round of legal and legislative battles.

In the meantime, car rental companies must to continue to hone and improve their damage claims practices. It is essential for them to understand state regulations and whether loss of use is covered by statute or case law, or at all. It is necessary to review contract language to make sure that it clearly defines loss of use, defines the formula to calculate loss-of-use damages and that all parties agree to the terms. And, it is imperative to have a process that minimizes the number of repair days for the renter.

The fight is far from over. It is now incumbent on other car rental companies and risk management companies to take the torch.

But at least now, the new torchbearers are armed with a powerful precedent, in which a state Supreme Court understood that a company should be compensated for losing a revenue-generating piece of property. “PurCo is entitled to recover loss-of-use damages irrespective of its actual lost profits.” It’s a pretty powerful statement, and a very big win for the industry.

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Author Bio

Chris Brown

Executive Editor

Chris Brown is the executive editor of Business Fleet Magazine and Auto Rental News. Through these publications, online newsletters, trade events and associations, Chris covers all aspects of the fleet world, including fleet management, manufacturer fleet activities, the fleet leasing industry, vehicle remarketing, rental industry news, car rental taxation and legislation.

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