IL Supreme Court: Law caps liability for rental car companies, no matter if self-insured

By Dan Churney | Oct 21, 2015

Predicting a double standard would result if it allowed an appeals court’s decision to stand, the Illinois Supreme Court said a lower court erred in ordering a self-insured Chicago-area car rental business to pay the victim of a car crash $600,000 – far more than what would have been required under the law if the company had purchased an outside insurance policy.

The state high court’s Oct. 8 opinion stemmed from a personal injury suit brought following a head-on traffic crash. The traffic incident involved a car driven by DeShaw Nelson and a car rented from Lombard-based Enterprise Leasing of Chicago, which was driven by Donald Artley. The Enterprise car had been rented by a woman, but she had reported the car stolen. Artley, who was not insured, had crossed the road’s center line before the collision.

Nelson filed suit in 2007 in Cook County Circuit Court against Artley, winning a default judgment for $600,000 damages. Nelson then sued Enterprise in 2010 to collect the $600,000.

Enterprise fought Nelson’s claim by pointing out it was self-insured and that under the Illinois Third District Appellate Court’s 2005 decision in Fellhauer v. Alhorn, it was only required by Illinois’ Motor Vehicle Code to pay $50,000 per person and $100,000 per occurrence – the same minimum the law requires of rental car companies that choose to buy insurance policies or maintain a liability bond, instead of self-insuring. Companies in Illinois that transport passengers for hire and medical transport vehicles also have the same insurance options.

With this argument in place, Enterprise noted it had already paid $50,000 for a claim from a second person involved in the crash and had tendered another $50,000 to the court to be divided between Nelson and a third person also injured. The circuit court agreed with Enterprise’s position that it was only on the hook for $100,000. As a result, the court divided the remaining $50,000 between Nelson and the third person.

Nelson then took the decision to the Illinois First District Appellate Court in Chicago, saying the Fellhauer decision was off the mark and Enterprise’s financial liability should not be limited because it is self-insured. The appellate court found Nelson’s reasoning persuasive and remanded the case to circuit court, directing Enterprise be ordered to pay Nelson $600,000.

Enterprise countered by asking the Illinois Supreme Court to look at the appellate ruling. The high court granted the request, so as to iron out the extent of a self-insured rental car company’s liability.

First, the Supreme Court observed the Fellhauer decision is a decade old and the legislature has not since moved to change the Vehicle Code insurance requirement – a sign of the legislature’s recognition of Fellhauer’s correctness, justices said.

The Supreme Court went on to say the appellate court failed to see the “express, undisputed and overriding purpose of the Vehicle Code’s self-insurance option . . is simply to establish ‘proof of financial responsibility’” and not “proof of ability to fully satisfy judgments.” The idea, the justices said, is to prove ability to furnish “some base level of financial coverage where otherwise there would be none.”

The high court observed absurdity would follow if the First District court’s decision was left in place.

In the high court’s eyes, the appellate decision would impose unlimited liability on those rental companies that self-insure, while at the same time, a company that placed a bond with the state or bought an insurance policy, could cap its liability at $100,000. This would create a situation in which two otherwise identical parties, who were injured by a rental car, would face substantially different prospects of recovering damages, based on the “fortuity” of which option the company chose. The appellate decision would thus take away any reason for a company to self-insure.

The state Supreme Court also criticized the appellate court’s take that Fellhauer wrongly relied on common sense as a sufficient consideration in interpreting the Vehicle Code. The high court said there is “nothing inherently objectionable about using common sense when deciphering a statute.”

In the end, the state Supreme Court reversed the appellate court and ruled the circuit court was right to limit Enterprise’s obligation to Nelson at $25,000. Illinois Supreme Court Justice Lloyd A. Karmeier delivered the decision, with concurrence from Chief Justice Rita B. Garman and justices Anne M. Burke, Mary Jane Theis, Thomas L. Kilbride, Robert R. Thomas and Charles E. Freeman.

Nelson is represented by the Lisa K. Lange Law Office in Chicago. Enterprise Leasing is defended by the Chicago firm of Stellato & Schwartz Ltd.

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Illinois Supreme Court Law Office of Lisa K. Lange Stellato & Schwartz

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