Your $30k SUV policyholders are renting $450k Ferraris — and your standard Personal Auto Policy pays the claim.

Under the ISO PAP, liability and physical damage can extend to a “non-owned auto,” broadly defined as any private passenger automobile, pickup, or van not owned or regularly furnished for the insured’s use. In practice, that definition encompasses most four-wheeled rental cars — including high-performance exotics — and it typically includes collision/comprehensive without any value cap tied to the insured’s own car and without explicit performance-based exclusions.

Exotic agencies exploit this flaw every day. A single call to your service center often prompts a well-intentioned but generic assurance — “yes, your policy covers rentals.” The call is recorded. The renter lists the PAP as primary at the counter. When a $450k Lamborghini is totaled, that recording resurfaces alongside the non-owned auto language. The result: losses with roughly 6× the frequency and 10× the severity of a standard rental hit your book.

This exposure was never underwritten, never rated, and never intended. Absent a rental value cap or disciplined call handling, it functions as a silent bomb inside every uncapped PAP — invisible until the loss arrives.

Policy Intent vs. Market Behavior

• PAP rental language assumed “standard” vehicles, not $200k–$500k exotics.
• Underlying rates don’t reflect supercar frequency/severity.

Verification Gap

• Service centers issue blanket confirmation of “rental coverage.”
• Recorded calls later used to assert exotic ATC expectations.

Structuring Arbitrage

• “Car-club” ownership + renter “self-rentals” to manufacture temporary coverage.
• No cap tying rental coverage to the insured’s own ACV.

From Inquiry to ATC Claim

• Insured rents an exotic vehicle.
• Rental agency requests coverage confirmation via call center.
• Loss occurs; recorded call is cited with PAP non-owned auto language.
• Full exotic ATC is demanded from the PAP carrier.

Note: The combination of a generic call confirmation + non-capped rental language is the common failure path.

Visual Sequence

Call confirmation feeds ATC expectations despite misaligned rating intent.

Uniform Verification Response

“WE CANNOT CONFIRM OR DENY COVERAGE FOR SPECIFIC VEHICLES OR VALUES OVER THE PHONE. COVERAGE, IF ANY, IS DEFINED BY THE POLICY AND IS SUBJECT TO ALL TERMS, EXCLUSIONS, AND LIMITS.”

• Use reason code: Exotic Rental Inquiry.
• Coach for red-flags: “exotic/supercar,” “track,” “club,” value > $75k.
• Disallow ad-hoc value opinions or suitability advice on calls.

Training & QA Emphasis

• Mandate script usage and log adherence in QA reviews.
• Fast-path supervisor escalation for hostile/persistent callers.
• Template post-loss rebuttals that reference the standard script and policy terms.

Concept

Limit any hired / non-owned / temporary substitute / rental auto coverage to the lower of (i) the applicable policy limits, or (ii) the actual cash value (ACV) of the insured’s own listed vehicle. Optionally, adopt a hard cap (e.g., $60k) for administrative simplicity.

Illustrative Endorsement Text

Rental/Non-Owned Auto Value-Cap Endorsement
The insurer’s obligation for Physical Damage and/or Liability arising from any hired, non-owned,
temporary substitute, or rental auto is limited to the lesser of (i) the applicable policy limit(s) and
(ii) the actual cash value (ACV) of the named insured’s own listed vehicle with the highest ACV
on this policy at the time of loss. This endorsement does not broaden coverage and applies
notwithstanding any contrary term, definition, or condition.
                                

Filing & Governance: File per jurisdiction (e.g., via SERFF). Consider explicit exclusions for track use and “club” self-rental arrangements. Harmonize outward statements with filed forms.

Claims & Operations

• Roll out standard verification script + reason code.
• Embed call-flow prompts in tools; prevent value commentary.
• Pre-build rebuttal templates for ATC demands citing call logs.

Underwriting & Product

• File and activate rental value-cap endorsement.
• Add “rented vehicle class” (standard / luxury / exotic) factor or rule.
• Introduce NB/RN disclosure for exotic rentals & club use.

Legal & Compliance

• Align producer/customer messaging with policy language.
• Monitor complaints; refine scripts and letters as needed.
• Audit recorded calls for script adherence & leakage indicators.

Will Caps Frustrate Customers?

Clear, consistent limits reduce surprise denials and keep pricing equitable across the pool. Transparent NB/RN communication lowers dispute rates.

Any Bad-Faith Risk From Stricter Scripts?

Standardizing “no advice / no value” language reduces extra-contractual exposure, strengthens documentation, and provides consistent, defensible handling.

Disclaimer: This document provides general risk-management guidance only; it is not legal advice. Final obligations are governed by the policy wording and applicable law; file any revised forms and rating rules per jurisdictional requirements.