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Avis Budget keeps arbitration right in supplemental liability coverage dispute
A federal appeals court said the rental company did not waive arbitration despite waiting months after depositions, and the case was sent back for further proceedings.
Avis Budget will keep the ability to pursue arbitration in a dispute over how supplemental liability insurance was provided to customers, after a federal appeals court vacated a lower court decision that found the right had been waived. The Third Circuit ruled that the rental car operator had not given up its arbitration path in the class action tied to supplemental coverage terms.
The case involved two British customers who rented vehicles from Budget Rent A Car System on separate US trips between September 2016 and November 2019, with rentals including at least two trips in Massachusetts and two in Florida. The customers booked through third-party websites and selected a package that added supplemental liability insurance, signed rental forms at pickup, and later received a “rental jacket” with additional terms that included arbitration of most disputes, except for small claims.
The customers alleged that Budget did not obtain the excess automobile policy described in the “rental jacket,” and said Budget planned to pay supplemental claims from its own funds. In September 2022, they filed a putative class action in federal court seeking more than $5 million for nationwide, Massachusetts, and Florida classes, including claims for breach of contract, fraudulent misrepresentation, and Florida’s Deceptive and Unfair Trade Practices Act violations.
After the district court refused Budget’s April 2024 motion to compel arbitration, finding an implied waiver because Budget litigated for months before seeking arbitration, the Third Circuit reversed. According to Insurance Business, the appeals court reasoned that, under its earlier Bacon decision, customers would only be bound if they knew of the arbitration clause at signing, a factual record Budget needed discovery to develop, making its timing consistent with building that record rather than abandoning arbitration.