Auto Rental News

NOV-DEC 2012

Magazine for the professional car and truck rental industry.

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L EG A L PURCO KOENIG: V. A WIN FOR THE INDUSTRY In a historic ruling for the car rental industry, the Colorado Supreme Court has ruled that 'PurCo is entitled to recover loss-of-use damages irrespective of actual lost profi ts.' BY CHRIS BROWN T THE COLORADO SUPREME COURT HAS RULED IN favor of PurCo Fleet Services in Koenig v. PurCo, an important loss-of-use dam- ages case for the auto rental industry. In a 20-page decision handed down Sept. 10, the court ruled that "PurCo is entitled to recover loss-of-use damages irrespective of its actual lost profi ts." The ruling is historic for the car rental industry. While the case is binding specifi c to Colorado courts, it is expected to have an impact on the recovery of loss-of-use damages nationwide. "This is a vindication for the rental car industry and property owners everywhere," says David Purinton, owner and presi- dent of PurCo. "The court said there is an intrinsic loss to the owner when a car is damaged, no matter what else is happen- ing in the fl eet with other cars. That is the truth, as any owner can tell you." The ruling caps a seven-year battle for PurCo Fleet Services Inc., a risk manage- ment company specializing in car rental loss prevention. The decisions issued from the highest Colorado court and the inter- mediate court before that are believed to be the only reported cases in the United States dealing specifi cally with loss of use and administrative fees for a rental car. THE CASE The case started on Sept. 16, 2005, when Judith Koenig rented a car from the Na- tional Car Rental licensee at the Durango 14 November/December 2012 Airport in Colorado. While driving the car, she hit a deer and damaged the vehicle. PurCo, the damage recovery company working with the licensee, demanded pay- ment from Koenig for the damage, as well as loss-of-use damages and a contractual administrative charge. Koenig's insurer, State Farm, paid for the damage to the car but refused to pay PurCo for loss of use or the administrative fee charge. PurCo then fi led suit to collect the unpaid amounts. Koenig fi led a request to dismiss the case without trial, which the trial court granted. The trial court ruled that PurCo could prevail on its loss-of-use damages claim only if it suffered actual lost profi ts. PurCo appealed. The intermediate court of appeals agreed with the trial court's conclusion that, in general, the appropriate measure of loss-of-use damages in a commercial setting is actual lost profi ts. But the court concluded the rental agreement in this case altered the measure of loss-of-use damages and held that PurCo was required to show certain loss prerequisites before it could recover. Both PurCo and Koenig fi led petitions to have the Colorado Supreme Court review the case, and the petitions were granted. On review, the Colorado Supreme Court affi rmed the court of appeals judgment but on different grounds that proved favorable to the rental car industry. The court held that loss-of-use damages in a commer- AUTO RENTAL NEWS cial setting may be measured either by "reasonable rental value" or by actual lost profi ts. The court based its decision on the common law of damages refl ected in the Restatements of the Law published by the American Law Institute and on its own prior case law decisions. The state Supreme Court then vacated the court of appeals opinion on loss-of-use damages and loss prerequisites. In doing so, the court put its stamp of approval on PurCo's longstanding position that loss-of- use damages are recoverable regardless of what else is going on in the fl eet. REASONABLE RENTAL VALUE "The 'reasonable rental value' standard has been the law for a long time, no matter what our detractors have said," Purinton says. "This ruling confi rms what we have always known to be true." The court has yet to determine "reason- able rental value" in this case. Even so, Purinton noted it is a simple determination, with the best evidence taken from the daily rate at the time the vehicle was damaged. "The court made it easy to calculate," Purinton says, adding that the ruling "will undoubtedly help owners, big and small, to recover real losses they are entitled to when renters return their cars damaged." In an appeals court ruling that went unchanged in the case, PurCo is entitled to the administrative fee as well, though the amount has not yet been determined. ©ISTOCKPHOTO.COM/ERICSPHOTOGRAPHY

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