COMPTROLLER GENERAL OF THE UNITED STATES WASHINGTON. D.C. 20948 B-158712 my 10, 1971 llllllllllllllllllllllllllllllllllll LM095662 Dear Senator Proxmirc: Your letter of LIarch 22, 1971, requested information con- cerning the rchase of collision _,-. --_.--- -.... insurance -.__ coverage for auto- mobiles ren employees of the ‘Federal Government. J Commercial rental cars used by Federal employees in the conduct of Government business are available under informal arrangements with commercial car rental firms and under Gen- eral Services Administration (GSA) contracts awarded to some of the rental firms. Under informal arrangements, Federal em- ployees are usually given the same 20-percent discount rate that is given to other preferred customers. Under the GSA con- tracts, a lower rate is available primarily because the con- tracts are awarded competitively. The Government spends an estimated $9 million a year for rental of cars, of which about $7.4 million is incurred under the. informal arrangements. Most of the car rental firms providing cars through the informal arrangements accept responsibility for collision dam- age losses in excess of $100 and include the insurance cost in their rental fees. Individuals , organizations, and agen- cies who rent cars are held liable for losses of $100 or less. They may, however, obtain full insurance coverage by purchas- ing a collision damage waiver which the rental companies pro- vide for an additional charge of $2 a day. The car rental firms providing cars through GSA contracts accept responsibility for all collision damage losses and in- clude the full-coverage insurance cost in their rental fees. We cannot determine how much the Government has spent for collision insurance, because most of these costs under the informal rental arrangements and all such costs under the GSA rental contracts are included in the overall rental fees .. - 50TH ANNIVERSARY 1921- 1971 B-158712 and are not shown separately. Representatives of GSA and a large car rental firm informed us that if the Government as- sumed its own risk-of-collision loss, it is possible that car rental firms could reduce their insurance costs and be in a po- sition to offer lower rental rates under both the informal ar- rangements and the GSA contracts. Any savings to the Govern- ment, however, would be offset to an unknown degree by the cost of accident damages. The Government does not accumulate information on the amounts expended by employees to purchase the collision dam- age waiver for $2 a day. In reviewing the travel policies of several Federal agencies, we found that uniformity was lack- ing in car rental procedures and practices as they related to the purchase of the collision damage waiver. Some agencies had regulations which allowed purchase of the waiver; some agencies had regulations which did not allow purchase of the waiver; other agencies l regulations were silent on the matter. Our review of selected rental vouchers showed that, in prac- tice, collision damage waivers were allowed and paid in most cases. In recent years there has been concern among Federal agencies about Federal employees’ purchasing damage waivers. Many agency officials apparently believe that the Government should assume the risk of loss covered by waivers and that implementation of such a policy would provide substantial sav- ings. In June 1970 we issued a report (copy enclosed) to the Director , Bureau of the Budget (now Office of Management and Budget), expressing our belief that a determination should be made whether it would be more economical for the Government to assume responsibility for collision damage losses of $100 or less and that existing regulations should be revised in ac- cordance with such a determination and uniformly applied throughout the Government e In October 1970 the Office of ?Ianagcment and Budget ad- vised us that, although information was not available for es- timating Government savings, the high cost of purchasing the 2 . * B-158712 collision damage waiver, compared with the limited liability potential, and the general principle that the Government is a self-insurer appeared to justify amending the Standardized Government Travel Regulations to prohibit payment of collision damage waiver premiums in the rental of automobiles for offi- cial business. The Office of Management and Budget informed us that such an amendment was being prepared. Sincerely yours, JIl k- Assistmt Comptroller General of the United States Enclosure The Honorable William Proxmire United States Senate ENCLOSURE COMPTROLL.EH GENERAL OF THE UNITED STATES Page 1 WASHINGTON. D.C. 20548 B-158712 June 30, 1970 Dear Mr. Mayo: We have briefly reviewed the travel policies of the Department of Defense and other Federal agencies and have found a lack of uni- formity in car rental procedures and practices as they relate to the purchase of collision damage insurance. --The Department o-P Defense has issued instructions encour- aging its travelers, both military and civilian, to buy collision damage insurance when renting cars for official use. Some subordinate commands apparently have issued conflicting instructions and are either discouraging or prohibiting the practice. Others seem to be following a permissive policy; some travelers buy the coverage and others do not. --Similar inconsistencies were found in other Federal agencies. Several allow their personnel to buy the cover- age; others refuse on the basis that it is more economical for the Government to assume the risk of loss; others have not established any policy. Most of the major car rental companies accept responsibility for collision damage losses in excess of $100 and include the insurance cost in their rental fees. Individuals who rent cars are held liable for losses of $100 or less, but they may obtain full insurance cover- age by purchasing a collision damage. waiver which the rental companies currently provide for an additional charge of $2.00 a day, Our Office has previously issued decisions on this matter (35 Comp. Gen. 553; 47 Comp. Gen. 145; and B-162186, Zanuary 7, 1970). The first-mentioned decision held that a charge for insurance which would release the Government from damage liability incident to the hire of an automobile by a Federal employee is a reimbursable item of expense to the traveler. We said in the second decision that an employee who was authorized to rent an automobile and who, in the absence of any administrative instructions in the matter, did not purchase the collision damage waiver insurance was entitled to reim- bursement for the $100 he was required to pay to the rental company because of damage to the rented vehicle. ENCLOSURE Page 2 B-158712 The Secretary of the Air Force was advised in our decision of January 7, 1970, that we had no legal objection to the Joint Travel Regulations for members of the uniformed services being amended to provide for reim'lxrrsement of the first $100 of damage sustained by a vehicle properly rented in the performance of official business provided that the regulations, as amended, specifically excluded the cost of collision damage insurance as a reimbursable item of expense D The policy of the Department of Defense is published in the Military Traffic Management Regulation, paragraph 316004e(2) B This regulation requires that travelers be informed that payment of additional charges for collision damage watvers is in the best interest of the Government and the travelers and is a reimbursable item of expens e when paid from personal funds. We reviewed 3,240 car rental payments in the September 1969 accounts of two Navy Regional F?na.nce Centers. The payments were made by disbursing officers at various Navy installations, Our tests showed that collision damage waivers were accepted in the majority of instances. We observed, however, that travelers from certain commands were either accepting or declining the waivers with some consistency while others were not, as illustrated below: Commercial Waivers Waivers Installation rentals declined Naval Weapons Center China Lake, California Naval Air Station Point Mngu, California 189 180 (95%) 9 ( 5%) Naval Underseas Warfare Center Pasadena, California 223 95 (43%) 128 (57%) We inquired about the policies in effect at other Navy installa- tions and found similar inconsistencies. One commander had issued instructions prohibiting the purchase of waivers; another insisted that they be accepted and that authorization be included in all travel orders; and others either had not established a policy or were permit- ting travelers to use their own discretion in accepting or declining the coverage. ENCLOSURE Page 3 sixty-five psment of the payments fn the two Navy accounts examined included additional costs for colb%sfon dabmar~waivers, totaling about $YyiYm. Waivers were not purchased on 22 percent of the rentals and the remaining 13 percent WB~PB made under Ckmeral Services Mministra-k-Aon eontrmts. Rental companies provide full insurance coverage under these contracts but include damage waiver costs in their ren%aIL fates. In recen% years there has been considerable concern abou% Federal employeesr purchasing damage waivers. Many agency officials apparently believe %ha%the Government should assume the risk of loss oovered by wafveys and %ha%this wi13 rasul.% in substan%ial savings. The records of %be %wo Navy Regfonal Finance Centers examined for the month of September 1969 showed that abmt $9,900 was spen% for waivers at the daily rate of $1.50 which prevailed at the time of our review and that these Centers processed only two ge clafmna from car rental com- pzmies, each fop $100, We did not at%empt %o develop estimates of potential savings be&ase we had been Wormed that the Department of Defense does not maintain accident OPPdamage loss statisti,cs for car rentals. We also inquired about the polfcEes of other Federal agencies and found that they diffex? in several res c%sc FOP eqle, the Atomic Eneqg- Commissfon issued a directive a%ing %ha%travelers would no% be Peimtised fosp extra charges pafd fog collSsPon or liabiEity insurance-- on the basis of its decision that it wo be less costly for %he Govern- ment to absorb, as a direct opera%ing e se, the cost of damages that might occur as a result of acofdents %o rented vehicles. Tha% directive was issued after we ques%Poned %he need for the additional Lnsmance covepage based on the experienced accident ya%e at the Los Alamos Scien- tifie EaboFa%ox=ypwhere pespsonnel had been involved in only two aceiden%s ' fn 15 years (ELlILL&V~, dated March 12, 1964j0 Veterans Adminis%ration regulations pyovfde for reimbursing travelers who obtain the eovex+age; the Ma%ional Aeronau%fcs and Space Administration regulations fnstmct travelers to buy the covepage, The Coast Guard has issued instructfons sta%ing %hat %be cost for additional insu~a.nce is no% Yeimbursable, Officiafs of the Federal Media%ion and'Concflibation Service, the Small Business Administration, end %..e Bureau of Narcotics informed us that they had no% established a poEiey, We believe that a de%ermLna%fon should be made as to whethey 1% would be more eoonotical for the Govemen% %o assume responsibility for collision damage losses of $lOO and under and that existing regulations ENCLOSURE Page 4 Kl.58712 we WQ fuPnirking copy of thPs resport to the nfstr&or of the &neral Se~kvbcersA i&r&ion. Comptroller General of the United St&es The Honorable Filbert F. Bkyo Director, E+ureu of the Budget U.S. GAO Wash., D.C.
Purchase of Collision Insurance Coverage for Automobiles Rented and Used by Employees of the Federal Government
Published by the Government Accountability Office on 1971-05-10.
Below is a raw (and likely hideous) rendition of the original report. (PDF)