Dollar Rent A Car 2011 Annual Report Download - page 17

Fleet Leasing Programs
DTG Operations has historically made fleet leasing programs available to Dollar and Thrifty U.S. franchisees for each new model year. Additionally, DTG
Canada has historically made fleet leasing programs available to Canadian franchisees for each new model year. However, in recent years, the Company has
made fleet leasing programs available only on a very limited basis.
Competition
There is intense competition in the vehicle rental industry on the basis of price, service levels, vehicle quality, vehicle availability and the convenience and
condition of rental locations. Dollar and Thrifty and their franchisees operate mainly in the U.S. airport market, relying on leisure, tour and small business
customers. In addition to local and regional vehicle rental companies, Dollar and Thrifty and their franchisees’ principal competitors are Alamo, Avis,
Budget, Enterprise, Hertz, Advantage and National.
The Canadian vehicle rental markets are also intensely competitive. Most of the Canadian market is operated either directly or through franchisees of the major
U.S. vehicle rental companies, including Alamo, Avis, Budget, Enterprise, Hertz and National, as well as Dollar and Thrifty.
Insurance
The Company is subject to third-party bodily injury liability and property damage claims resulting from accidents involving its rental vehicles. In 2011,
2010 and 2009, the Company retained the risk of loss up to $7.5 million per occurrence for public liability and property damage claims. The Company
maintains insurance coverages at certain amounts in excess of its retained risk. The Company retains the risk of loss on supplemental liability insurance sold
to vehicle rental customers.
The Company retains risk of loss up to $5.0 million for general and garage liability. The Company retains the risk of loss for any catastrophic and
comprehensive damage to its vehicles. In addition, the Company carries workers' compensation coverage with retentions in various amounts up to
$500,000. The Company also carries excess liability and directors' and officers' liability insurance coverage.
Provisions for bodily injury liability and property damage liability on self-insured claims and for supplemental liability insurance claims (collectively referred
to as “Vehicle Insurance Reserves”) are made by charges to expense based upon periodic actuarial evaluations of estimated ultimate liabilities on reported and
unreported claims. As of December 31, 2011, the Company had Vehicle Insurance Reserves of $86.5 million. The Company’s obligations to pay insurance-
related losses and indemnify the insurance carriers for policies they have underwritten are collateralized by surety bonds and letters of credit. As of December
31, 2011, these letters of credit and surety bonds totaled approximately $48.5 million and $3.5 million, respectively.
The Company also maintains various letters of credit and surety bonds to secure performance under airport concession agreements and other obligations
which totaled approximately $10.3 million and $43.9 million, respectively, as of December 31, 2011.
Regulation
Loss Damage Waivers
Loss damage waivers relieve customers from financial responsibility for vehicle damage. Legislation affecting the sale of loss damage waivers has been
adopted in 25 states. These laws typically require notice to customers that the loss damage waiver may duplicate their own coverage or may not be necessary,
limit customer responsibility for damage to the vehicle or cap the price charged for loss damage waivers. Adoption of national or additional state legislation
affecting or limiting the sale, or capping the rates, of loss damage waivers could result in the loss of this revenue for Dollar, Thrifty and their franchisees.
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