The insured carries a personal auto policy. He has physical damage coverage with a limit of $11,261.00. The form used for the personal auto policy is (PP 0001 06-98). The insured had an accident and as a result decided to rent a vehicle. He signed an agreement where the only authorized driver is the named insured, who happens to be the renter. The renter decided to loan the rental car to another person. That person was involved in an accident while driving the car. The named insured submitted a claim under his policy, as a nonowned auto. The adjuster denied the claim. The policy carries the following exclusion: “Part D – Coverage for Damage to Your Auto Exclusions: We will not pay for: 9. Loss to any non-owned auto when used by you or any family member without the reasonable belief that you or that family member are entitled to do so.”

Since the other driver is not authorized by the rental company to drive the car, the insured understands that the exclusion applies. The insured believes he has the right to let anyone drive the rental car, and as a result he believes his policy should cover the total loss of the vehicle. What is your opinion about this issue?

Puerto Rico Subscriber

The exclusion does not apply in this case since it excludes coverage for the insured and the insured's family members. Since neither the insured nor any of his family members were driving the car at the time of the total loss accident, the exclusion does not apply.

A nonowned auto in the PAP is “any private passenger auto, pickup, van, or trailer not owned by or furnished or available for the regular use of you or any family member while in the custody of or being operated by you or any family member, or any auto or trailer you do not own while used as a temporary substitute for your covered auto which is out of normal use because of its breakdown, repair, servicing, loss or destruction.” Because the insured rented the car while his own car was being repaired after an accident, the rented car fits the definition of a nonowned auto. There is no restriction in the PAP for such a nonowned auto being driven by someone other than the named insured, or the named insured's family. So, unless there is another exclusion that would apply, the insured is entitled to coverage under the physical damage section of the policy.