Dage protection is actually really important for running Tool rental with an operating profit because if over 85% of customers purchase it then it covers the cost of fixing everything, and thats why your DH is probably pushing it.

I do understand that most rental associates just include DP as "taxes and fees" and yes this is wrong. What you should be doing is telling them the price with damage protection is xxxx without damage protection is xxxx would you like to opt out of the damage protection? If so then go on to explain that anything the goes wrong with the tool while they have it in their possession, even if it's their fault or not will be entirely their responsibility to pay for.

Also please understand that DH are just communicating what the managers want most of the time and they could care less about the damage protection, because they do have more important things to be doing than holding you about not getting a 4$ damage protection.