Felix Salmon

How comprehensive is Zipcar’s insurance?

By Felix Salmon
June 15, 2010

zipcar.tiffBack in 2006, I started writing about Zipcar insurance. Zipcar — which is going public in an offering worth as much as $75 million — has a history of being more than a little disingenuous about the degree to which its drivers are insured. I spoke to them in February 2007, and they promised to change the language on their website; instead, in May 2007, they decided to start leaving sock-puppet comments on my blog, rather than actually do what they’d promised. Eventually, in October, they merged with Flexcar, which had much better insurance policies, and as part of the merger they adopted Flexcar’s insurance plan. (They had to, or face mass defections by Flexcar’s corporate client base.)

Today, they still tout their “comprehensive insurance” (the image at right is from this page). But when push comes to shove, it seems they’re still interested in putting liability onto their members when there’s an accident, like the time when Zipcar member Dale Douglas rear-ended Leslie Minto. Minto took Zipcar to court, but Zipcar won, saying that it was not liable “for harm to persons or property that results or arises out of the use, operation, or possession of [their vehicles] during the period of the rental or lease”. As a result, Douglas has to personally pay Minto’s damages.*

In the short term, this is probably good for prospective shareholders in Zipcar, which don’t need to worry about large potential legal exposure. The bigger picture, however, is that Zipcar might not have put its insurance worries behind it. Anecdotally, I still speak to a lot of people who say that they won’t use Zipcar because they’re worried about the insurance situation. And if Zipcar starts to get a reputation for sticking its customers with damages after telling them that they had comprehensive insurance, that’s not going to be good for its business.

*Update: Zipcar’s general counsel, Maria Stahl, has now responded, via email:

Our insurance program covers our members for third party liability up to $300,000 per occurrence.  Accordingly, Mr. Douglas was in fact covered for this accident up to $300,000.  Your posting stated that “As a result, Douglas has to personally pay Minto’s damages.”  That simply is not true.  If Ms. Minto’s damages had been in excess of $300,000, Mr. Douglas may have been held liable, exactly as he would be had he been driving his own car and damages resulting from an accident had exceeded his own policy limits.

Ms. Minto had brought suit against Mr. Douglas as the driver of the vehicle and against Zipcar.  The court’s decision dismissed Zipcar from the lawsuit.  Zipcar’s dismissal from the action does not in any way affect Mr. Douglas’ coverage under the policy we maintain for members.

12 comments so far | RSS Comments RSS

Do we know that Douglas had to pay out of pocket? The law.com article just seems to say that Zipcar was not liable and only Douglas was liable. But I think that the liability insurance provided by Zipcar should take over and cover Douglas’ liability. (I can think of various reasons why Minto might have wanted Zipcar itself to be liable even if she could get money from Douglas via the insurance.)

Posted by FrankLG | Report as abusive

Comprehensive insurance is coverage for Fire, Theft, Vandalism, Deer Hits, Damage from falling objects and Glass Coverage. The Douglas/Minto accident was a collision loss. So unless Douglas purchased collision coverage from Zipcar, which it sounds like he didn’t, he or his own insurance is liable for the loss.

Posted by nanmeade | Report as abusive

Actually, nanmeade, collision would cover the car he was driving; liability would cover the other car. Even with the required minimum, he would have had some liability coverage, so I’m with FrankLG; I kind of want more explicit direct information that the insurance flaked out for some reason.

Posted by dWj | Report as abusive

I agree that the key factor in the lawsuit above is “liability coverage” and not collision or comprehensive. So, marketing aside: it would probably be illegal to put drivers in a car with no liability insurance. I believe the act of renting the car itself provides the minimum legal liability coverage for the state where the car is registered. (In NY State, that’s a $25,000 limit of medical reimbursement for one person involved in an accident and $10,000 limit for property damage claims) I don’t really care what the insurance seniority chain is for this… if the Zipcar bill is paid with a credit card, does the cardholders’ typical rental benefit kick in?… but we should be well assured that Zipcar has smart legal counsel that would prevent them from lending a car in a zero-insurance situation.

So, Minto may have had an excess of $10k in billable car damages, and named Zipcar as a plaintiff to cover the gap. But in this case, Douglas is responsible for the gap. That is normal.

I don’t think that most people, even normal car owners, are aware of the risk that they take upon themselves when they purchase minimum liability coverage. There are a lot of fairly expensive cars on the road. It’s not Zipcar’s responsibility to educate its customers on all applicable state laws related to insurance and liability, but caveat emptor.

Posted by BrianVan | Report as abusive

Yes, dWj, the collision coverage on Douglas’ policy would cover his vehicle damage and the liability coverage would cover the other vehicle. However, I am trying to specify the difference between what ZipCar is marketing which is “comprehensive” and what the TYPE of loss actually was and that is a “collision” loss. If Douglas had collision coverage on his auto insurance policy then the liability on that policy would cover Minto’s vehicle in this accident.

Posted by nanmeade | Report as abusive

Here is what Zipcar says about liability coverage:

“Beginning November 1, 2007, for Zipcar members 21 years of age or older, our insurance coverage consists of a combined single limit of $300,000 per accident, meaning that all third party bodily injuries, or property damage costs relating to the accident covered in the aggregate up to $300,000. For drivers under 21, we provide coverage up to state-mandated levels, which vary by the state in which the accident occurs. Zipcars are covered under a vehicle collision policy.”

Posted by FrankLG | Report as abusive

I’d be curious to know why the plaintiff in this case wanted to force liability onto Zipcar? Were the claimed damages more than the $300,000 covered by insurance, or was the renter under 21?

Posted by niveditas | Report as abusive

niveditas: Those are possibilities. It would also potentially allow the plaintiff to collect from Zipcar if the insurance covering the liable driver refused to pay for the plaintiff’s damages (e.g. on some technicality).

Posted by FrankLG | Report as abusive

Other pertinent questions not answered on Zipcar’s site and which they have not answered via e-mail, are “what insurance company provides the insurance coverage, is the company approved to write auto insurance in, e.g., New York, what is the A. M Best rating of the insurer and where can I find the explicit policy wording?”

All the advertising or good intentions in the world won’t help if the insurer is out of business or is beyond the reach of US courts or has a policy with so many exceptions that no actual coverage is provided.

Posted by Endicott65 | Report as abusive

A member was recently ejected from the Zip car club in the UK after a no-fault, no-injury accident. This was the first such incident of the member. Zip claims that the member contravened its “abuse of use” clause.

Zip is involved in a merger with the other major car sharing club in the UK, Streetcar. This is held up while the EU deals with the monopoly issue. Could be interesting news to the EU officials that Zip does not allow its members to have accidents despite offering insurance.

Posted by Peterrt | Report as abusive

As of today the Terms & Conditions seem to say that there is no collision insurance for a renter. There is insurance for liability & property damage. If correct, that means a renter is liable for the retail price or pr-rated used-price of a car if it is a total loss. I’ve emailed insurance@zipcar.com asking to clear this up. In the meantime, am looking onto a personal umbrella policy. Driving around in a newish car without collision insurance is financial foolishness.

Posted by Abe.Froman | Report as abusive

I really don’t understand what you’re saying about Zipcar at all. You haven’t told me any details and even your recounting of one member’s bad experience is vague at best. I’m not defending Zipcar at all – it’s just that your article just seems like a continuation of an on-going argument that I am not privy to the details of.


Posted by jacktrip | Report as abusive

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