Hertz 2013 Annual Report Download - page 21

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In addition, we offer optional liability insurance and other products providing insurance coverage, which create additional risk exposures for
us. Our risk of property damage is also increased when we waive the provisions in our rental contracts that hold a renter responsible for
damage or loss under an optional loss or damage waiver that we offer. We bear these and other risks, except to the extent the risks are
transferred through insurance or contractual arrangements.
In many cases we self-insure our risks or insure risks through wholly-owned insurance subsidiaries. We mitigate our exposure to large
liability losses by maintaining excess insurance coverage, subject to deductibles and caps, through unaffiliated carriers. For our international
operations outside of Europe, and for our long-term fleet leasing operations, we maintain some liability insurance coverage with unaffiliated
carriers.
Third-Party Liability
In our domestic operations, we are required by applicable financial responsibility laws to maintain insurance against legal liability for bodily
injury (including death) or property damage to third parties arising from the operation of our cars and on-road equipment, sometimes called
“vehicle liability,” in stipulated amounts. In most places, we satisfy those requirements by qualifying as a self-insurer, a 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 and equipment rental operations in Europe, we have established a wholly-owned insurance subsidiary, Probus Insurance
Company Europe Limited, or “Probus,” a direct writer of insurance domiciled in Ireland. In European countries with company-operated
locations, we have purchased from Probus the vehicle liability insurance required by law, and Probus reinsured the risks under such
insurance with Hertz International RE, a reinsurer organized in Ireland, or “HIRE,” and / or HIRE Bermuda Limited, a wholly-owned
reinsurance company domiciled in Bermuda. This coverage is purchased from unaffiliated carriers for Spain. We also insure a portion of our
European property risk through Probus. Thus, as with our domestic operations, we bear economic responsibility for vehicle liability in our
European car and equipment rental operations, except to the extent that we transfer such liability to others through insurance or contractual
arrangements. For our international operations outside of Europe, we maintain some form of vehicle liability insurance coverage with
unaffiliated carriers. 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 these exposures, we maintain excess liability insurance coverage with unaffiliated insurance carriers.
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 primarily provided under excess liability insurance policies issued by an unaffiliated insurance carrier, the risks
under which are reinsured with a subsidiary of ours, HIRE Bermuda Limited.
In both our domestic car rental operations and our company-operated international car rental operations in many countries, we offer optional
products providing insurance coverage, or “PAI/PEC” coverage, to the renter and the renter's immediate family members traveling with the
renter for accidental death or accidental medical expenses arising during the rental period or for damage or loss of their property during the
rental period. PAI/PEC coverage is provided under insurance policies issued by unaffiliated carriers or, in Europe, by Probus, and the risks
under such policies either are reinsured with HIRE or another subsidiary of ours or are the subject of indemnification arrangements between
us and the carriers.
Our offering of LIS and PAI/PEC coverage in our domestic car rental operations is conducted pursuant to limited licenses or exemptions
under state laws governing the licensing of insurance producers. In our international car rental operations, our offering of PAI/PEC coverage
historically has not been regulated.
Provisions on our books for self-insured vehicle liability losses are made by charges to expense based upon evaluations of estimated
ultimate liabilities on reported and unreported claims. As of December 31, 2013, this liability was estimated at $347.7 million for our
combined domestic and international operations.
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Source: HERTZ CORP, 10-K, March 31, 2014 Powered by Morningstar® Document Research℠
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