Rental car insurance still valid even if license isn't

Legal News Line Dec. 11, 2006, 3:12am

SACRAMENTO - Excess liability insurers who cover rental vehicles in California are still liable for third-party damages even if the renter's apparently valid licence is actually suspended, according to a recent California Supreme Court decision. In the case of Philadelphia Indemnity Insurance Company vs. Blanca Montes-Harris and others, the Supreme Court was asked by the Ninth Circuit Court of Appeals to address whether a 37-year-old ruling applies to excess-liability insurance policies sold by rental-car companies. That ruling established the duty of an insurer to investigate the insurability of an insured. The case involved an Arizona man who rented a car from Budget Rent-a-Car in California using a suspended licence that was not obviously invalid. Four day later the man was involved in an accident that injured a number of people, who filed suit in state court to recover damages. Meanwhile, Philadelphia sought judgment in federal district court that it was not liable for damages, which it won, and the claimants later filed for relief from the decision. The Supreme Court decided that once a rental car customer has presented a facially valid driver's license and has its signature verified, "the excess insurer has no obligation to conduct a further inquiry" about the license. Consequently, Philadelphia cannot use the invalid driver's license for "avoiding liability to third parties under the excess policy."

More News