The case of Alamo Rent-A-Car v. State Farm, 114 Nev. 154, 953 P.2d 1074 (1998) is a high-stakes showdown between the rental car company and two auto carriers, State Farm and Valley Forge. The auto carriers’ policies say that their coverage is secondary to any other policy. The rental car policy says its coverage is secondary.
Drivers with State Farm and Valley Forge automobile policies caused accidents while driving rented Alamo cars. None of the drivers bought extra coverage from Alamo. State Farm and Valley Forge settled the claims brought by the injured claimants and then went to Alamo looking to get back what they had paid.
Rather than side with either party, the trial court said that the policies should be pro-rated based upon the amount of coverage available from the driver’s coverage and the self-insurance certificate of Alamo. The case of Travelers Insurance Co. v. Lopez, 93 Nev. 463, 567 P.2d 471 (1977) suggested that this might be the correct outcome. In Travelers, the Nevada Supreme Court adopted the rule stated in Lamb-Weston, Inc. v. Oregon Auto. Ins. Co., 341 P.2d 110 (Or. 1959). The “Lamb-Weston” rules said that where the “other insurance” clauses in the policies conflict, the policies are both null and void.
The Supreme Court rejected the application of the “Lamb-Weston” rule under these facts. The court said that a rental car company is not an insurance company. Unlike an insurance company, the rental car company does not have the option of reviewing a renter’s driving history. The rental car company could not increase rates based upon bad driving. Instead, it would be required to raise the rental rates of all drivers.
The Supreme Court clearly reiterated Nevada’s policy of having minimum limits coverage for all cars on the road. But it pointed out that there was nothing in the law that required the rental car companies to foot that bill.
In the end, the Nevada Supreme Court said that where there is no additional coverage purchased, the automobile insurance company was primary and the rent-a-car company secondary.
