Hertz 2007 Annual Report Download - page 43

process that typically involves governmental filings and demonstration of financial responsibility, which
sometimes requires the posting of a bond or other security. In the remaining places, we obtain an
insurance policy from an unaffiliated insurance carrier and indemnify the carrier for any amounts paid
under the policy. As a result of such arrangements, we bear economic responsibility for domestic vehicle
liability, except to the extent we successfully transfer such liability to others through insurance or
contractual arrangements.
For our car rental operations in Europe, we have established two wholly-owned insurance subsidiaries,
Probus, a direct writer of insurance domiciled in Ireland, and Hertz International RE Limited, or ‘‘HIRE,’’ a
reinsurer organized in Ireland. In European countries with company-operated locations, we purchased
from Probus the vehicle liability insurance required by law, and Probus reinsured the risks under such
insurance with HIRE through December 31, 2006. Effective January 1, 2007 reinsurance is provided by
another subsidiary of ours. Thus, as with our domestic operations, we bear economic responsibility for
vehicle liability in our European car rental operations, except to the extent that we transfer such liability to
others through insurance or contractual arrangements. For our international operations outside Europe
and for HERC’s operations in Europe, we maintain some form of vehicle liability insurance coverage. The
nature of such coverage, and our economic responsibility for covered losses, varies considerably. In all
cases, though, we believe the amounts and nature of the coverage we obtain is adequate in light of the
respective potential hazards.
Both domestically and in our international operations, from time to time in the course of our business we
become legally responsible to members of the public for bodily injury (including death) or property
damage arising from causes other than the operation of our cars and on-road equipment, sometimes
known as ‘‘general liability.’’ As with vehicle liability, we bear economic responsibility for general liability
losses, except to the extent we transfer such losses to others through insurance or contractual
arrangements.
To mitigate our exposure to large vehicle and general liability losses domestically and in our car rental
operations in Europe, we maintain excess insurance coverage with unaffiliated insurance carriers
against such losses to the extent they exceed $10 million per occurrence (for occurrences in Europe
before December 15, 2003, to the extent such losses exceeded $5 million per occurrence). The
coverage provided under such excess insurance policies is limited to $200 million for the current policy
year, which began on December 21, 2007 and ends on December 21, 2008 (for occurrences between
December 21, 2005 and December 21, 2007, the limit is $100 million; between December 15, 2005 and
December 21, 2005, the limit is $235 million; between December 15, 2004 and December 14, 2005,
$185 million; and between December 15, 2003 and December 14, 2004, $150 million). For our
international operations outside Europe and for HERC’s operations in Europe, we also maintain liability
insurance coverage with unaffiliated carriers in such amounts as we deem adequate in light of the
respective potential hazards, where such insurance is obtainable on commercially reasonable terms.
Our domestic rental contracts, both for car rental and for equipment rental, typically provide that the
renter will indemnify us for liability arising from the operation of the rented vehicle or equipment (for car
rentals in certain places, though, only to the extent such liability exceeds the amount stipulated in the
applicable financial responsibility law). In addition, many of HERC’s domestic rental contracts require
the renter to maintain liability insurance under which HERC is entitled to coverage. While such provisions
are sometimes effective to transfer liability to renters, their value to us, particularly in cases of large
losses, may be limited. The rental contracts used in our international operations sometimes contain
provisions relating to insurance or indemnity, but they are typically more limited than those employed in
our domestic operations.
In our domestic car rental operations, we offer an optional liability insurance product, Liability Insurance
Supplement, or ‘‘LIS,’’ that provides vehicle liability insurance coverage substantially higher than state
minimum levels to the renter and other authorized operators of a rented vehicle. LIS coverage is
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