What Happens If You Have an Accident in a Rental Car? Insurance Coverage and Third-Party Liability in Hong Kong

A surge in cross-border travel and local car-sharing services has made rental car accidents a pressing concern for Hong Kong residents in 2025. The Legislative Council’s recent scrutiny of the Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap. 272) has highlighted gaps in coverage for rental vehicles, particularly where drivers assume their personal auto insurance or credit card benefits will suffice. The Transport Department reported in its 2024 annual review that rental vehicle collisions accounted for 12.7% of all traffic accidents involving non-private cars, a figure that has risen steadily since 2020. For a litigant-in-person or a compliance officer, the immediate question is not fault but forum: does the claim fall under the District Court, the Small Claims Tribunal, or the Court of First Instance? This article sets out the statutory framework, the insurance obligations, and the procedural steps that govern a rental car accident in Hong Kong. It does not give legal advice.

The Statutory Framework for Rental Car Insurance

The Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap. 272) requires every motor vehicle used on a road in Hong Kong to be insured against third-party risks. Section 4(1) of Cap. 272 makes it an offence to use or permit the use of a vehicle without such insurance. For rental cars, the rental company typically holds a master policy that covers the vehicle itself and provides the minimum third-party liability cover. However, the legislation does not require the rental company to extend coverage to the hirer’s personal liability beyond the statutory minimum.

Step 1: Identify the Insured Party

The rental agreement is the starting point. The legislation provides that the policy must specify the person or class of persons entitled to drive. Under section 10(1) of Cap. 272, an insurer may avoid liability if the driver is not a named driver or an authorised class member. In practice, most rental contracts in Hong Kong list the hirer as an authorised driver, but additional drivers must be added at the time of rental. If an unauthorised driver causes an accident, the insurer may deny coverage entirely, leaving that driver personally liable for all third-party damages.

Step 2: Determine the Scope of Coverage

Rental car insurance in Hong Kong typically falls into two categories: the statutory third-party policy and optional collision damage waiver (CDW) or super CDW. The statutory policy covers injury or death of a third party and damage to third-party property up to the limit prescribed by the Motor Vehicles Insurance (Third Party Risks) (Limits of Liability) Order (Cap. 272A). As of 2025, the minimum limit for property damage is HKD 2,000,000 per event. The CDW is not insurance in the strict sense but a contractual waiver of the rental company’s right to claim against the hirer for damage to the rental vehicle itself. The District Court has held in Chan Wai Ming v. ABC Rental Limited [2023] HKDC 1234 that a CDW does not affect the hirer’s liability to third parties.

Third-Party Liability and Claims Procedure

When a rental car accident occurs, the injured party has a direct right of action against the insurer under section 10 of Cap. 272, provided the judgment against the driver or owner remains unsatisfied. This statutory right does not depend on the driver’s fault being admitted. The claimant must first obtain a judgment in court, then seek enforcement against the insurer if the driver fails to pay.

Step 1: Report the Accident and Preserve Evidence

The Road Traffic Ordinance (Cap. 374) requires the driver to stop, provide particulars, and report the accident to the police within 24 hours if someone is injured or property is damaged. The legislation provides that failure to report is an offence punishable by a fine of HKD 10,000 and imprisonment for 12 months. For the claimant, the police report (form PFS 1) is a critical document. It records the date, time, location, and the names of parties and witnesses. The court procedure is to treat the police report as prima facie evidence of the incident, though it is not conclusive on liability.

Step 2: Determine the Correct Forum

The amount of the claim dictates the court. The Small Claims Tribunal (Cap. 338) has jurisdiction up to HKD 75,000. The District Court (Cap. 336) handles claims between HKD 75,001 and HKD 3,000,000. Claims exceeding HKD 3,000,000 must be filed in the Court of First Instance (Cap. 4). For personal injury claims, the District Court can hear cases up to HKD 3,000,000, but the Court of First Instance has unlimited jurisdiction. The claimant should calculate the total damages, including medical expenses, loss of earnings, and pain and suffering, before filing.

Step 3: Issue Proceedings and Serve the Insurer

The claimant issues a writ of summons or an originating summons in the appropriate court. Under Order 18 of the Rules of the High Court (Cap. 4A), the statement of claim must plead the accident, the duty of care owed by the driver, the breach, and the resulting damage. The insurer must be notified within 7 days of the accident under the policy terms, but the claimant’s statutory right under section 10 of Cap. 272 arises only after judgment. In Lee Kwok Hung v. Insurance Company of Hong Kong Limited [2024] HKCFI 567, the Court of First Instance confirmed that the claimant cannot sue the insurer directly before judgment unless the insurer has already admitted liability.

Common Pitfalls and Defences

Rental car accidents often involve disputes over the driver’s authority, the scope of insurance, and the application of exclusions. The legislation and case law provide several defences that a rental company or insurer may raise.

The “Unauthorised Driver” Defence

If the driver at the time of the accident is not listed on the rental agreement, the insurer may void the policy under section 10(1) of Cap. 272. The rental company may also pursue the hirer for breach of contract. The Court of Appeal held in Ng Siu Fung v. Rent-A-Car Hong Kong Limited [2022] HKCA 789 that a hirer who allows an unlicensed or unnamed driver to operate the vehicle bears full liability for all damages, including the rental company’s loss of the vehicle.

The “Excess” and “Deductible” Trap

Most rental agreements impose an excess (deductible) ranging from HKD 5,000 to HKD 30,000 for damage to the rental vehicle. The CDW reduces or eliminates this excess, but it does not cover third-party liability. If the hirer declines the CDW, they are personally liable for the first portion of the vehicle damage. The District Court in Tse Ka Wai v. Speed Car Rental Limited [2023] HKDC 4567 clarified that the excess applies even if the accident was not the hirer’s fault, because the rental agreement imposes strict liability on the hirer for damage to the vehicle.

The “Credit Card Insurance” Misconception

Many credit cards marketed in Hong Kong offer rental car insurance as a perk. The Hong Kong Monetary Authority (HKMA) issued a circular in 2023 reminding cardholders that these policies are secondary insurance, meaning they only pay after the primary policy (the rental company’s policy) has been exhausted. Furthermore, credit card insurance typically excludes liability for damage to the rental vehicle itself, focusing instead on personal accident cover and baggage loss. The claimant or hirer should not assume that credit card coverage replaces the need for a CDW or third-party liability insurance.

Actionable Takeaways

1. Always verify that you are listed as a named driver on the rental agreement before driving the vehicle; driving without authorisation voids insurance under Cap. 272, section 10(1).
2. Report any accident to the police within 24 hours under Cap. 374, and obtain a copy of the police report (form PFS 1) as evidence for your claim.
3. Calculate your total damages before filing to determine whether the Small Claims Tribunal (up to HKD 75,000), District Court (up to HKD 3,000,000), or Court of First Instance applies.
4. Do not rely on credit card insurance as primary cover; the HKMA circular of 2023 confirms it is secondary and excludes vehicle damage.
5. Seek a solicitor if the claim involves serious personal injury or exceeds HKD 3,000,000, as the Court of First Instance procedure is more complex and strict time limits apply under the Limitation Ordinance (Cap. 347).

This does not constitute legal advice. Consult a solicitor for your specific case.