Liability Pitfalls For Hotels Providing Insured Vehicles To Their Guests
Car companies like BMW, Mercedes, and Porsche have been teaming up with hotels for years to provide guests with vehicles – particularly luxury cars. It’s a way to drive up recognition of their respective brands among both leisure and business travelers. Some brands even offer loaner cars that allow guests to experience new models while taking mini-road trips. Business travelers who don’t want the hassle of going to a rental car agency also like having the option of borrowing a car.
For hotels, it’s a way to provide a great guest experience and enhance their suite of amenities and services. But doing so comes with hidden liability pitfalls that could end up being quite costly for the hotel.
Contract Provides Limited Liability Insurance For Hotel Guests
For example, a hotel will contract with an auto dealership or a car brand like Mercedes or BMW to provide guests with insured vehicles during their stay. Typically, the hotel requires a guest to be a certain minimum age (21) and provide a valid driver’s license…but that’s it. The contract with the hotel provides Liability insurance for the guests but at best it’s minimal, perhaps $5 million or $10 million in coverage. In addition, often the indemnification agreements are bilateral, holding the hotel liable for an accident involving the vehicle except in the event of gross negligence by the third party. Since the hotel is the entity with the deeper pockets, it only makes sense that an accident victim will go after both the guest and the hotel.
Not only are hotels at risk for a liability loss but providing this type of service also jeopardizes their ability to obtain coverage on their primary and Umbrella policies. This type of exposure will be excluded, further impacting a hotel’s bottom line in the event of a loss.
It’s prudent to discuss the risks involved in providing guests with vehicles and reinforce to your hotel insureds to put the brakes on doing so.