Illinois Appellate Court Finds That Rental Car Companies Must Be Treated No Differently Than Any Other Self-Insured Entity

In Illinois, the Illinois Vehicle Code Section 9-101 requires that an entity may only engage in the business of renting out motor vehicles if it first provides the Illinois Secretary of State with proof of its financial responsibility. The purpose of the requirement is to provide the public with protection for negligent drivers who don’t have insurance and rent cars or other vehicles.

Section 9-102 of the Illinois Vehicle Code provides that a rental car company may give proof of financial responsibility by filing a bond, an insurance policy or a certificate of self-insurance issued by the director of the Department of Insurance.

A bond must be in the sum of $100,000 and conditioned on the rental car company’s payment of any judgment resulting from the operation of a rental vehicle or against the company, the renter or anyone driving the car with the consent of the company and the renter. 625 ILCS 5/9-103.

Accordingly, a rental car company has three options for satisfying the financial responsibility requirements set out by Section 9-101 of the Illinois Vehicle Code: a bond, an insurance policy or a certificate of self-insurance.

The self-insurance provision establishes financial responsibility under Section 9-102(3). There is another insurance section, 7-502 of the Code, which provides that the certificate applies only to judgments against the owner, and that statute does not limit the amount of the owner’s liability.

Section 7-502 authorizes the director of the Department of Insurance to issue a certificate of self-insurance to a “person” who has more than 25 vehicles if “such person is possessed and will continue to be possessed of ability to pay [a] judgment obtained against such person [i.e., against the rental car company].”

In this particular case, filed in the Circuit Court of Cook County, Enterprise Leasing Co. of Chicago used the certificate of self-insurance to show its financial responsibility; an Enterprise customer gave Donald Artley authority to drive the leased vehicle; and Deshawn Nelson obtained a $600,000 default judgment against Artley for allegedly causing a crash and resulting injuries while behind the wheel of the self-insured auto. The question for the Illinois Appellate Court was whether Enterprise was liable for the entire amount of the judgment. Relying on the case of Fellhauer v. Alhorn, 361 Ill.App.3d 792 (2005), the Fourth District Illinois Appellate Court held that when a motorcyclist obtained a $450,000 default judgment against the driver of a rented Enterprise owned vehicle, Enterprise argued it owed only $25,000 to Nelson (the “per occurrence” liability limit of $100,000 minus $75,000 paid to two other persons injured in the same accident).

In Fellhauer, the appellate court concluded that the certificate of self-insurance capped Enterprises’ liability at the “per person” limit for liability policy.

The trial judge in this new case was obligated to follow Fellhauer. But the Illinois Appellate Court First District concluded adherence to the plain language of [Section 7-502] would yield an absurd result that is contrary to legislative intent. The rule is that a “self-insured rental company’s minimum responsibility to pay judgments is not limited to $100,000 per occurrence or any other amount.”

In this case, no judgment was entered against Enterprise for damages. Accordingly, Enterprise is not required by the plain language of Section 7-502 to pay any portion of the default judgment against Artley.

To hold that self-insured rental car companies are not required to pay any portion of a judgment against the drivers of their vehicle would result in absurdity, as those companies with the financial wherewithal to qualify for self-insurance would not bear any responsibility for such judgments while other companies would be required to assume the financial burden of maintaining a bond or insurance policy.

Finally, the court held that a self-insured rental car company’s minimum responsibility to pay judgments is not limited to $100,000 per occurrence or any other amount. The court remanded the case for entry of a turnover order in favor of Nelson in amount sufficient to cover the entire amount of judgment entered against Enterprise’s renter, Artley.

Nelson v. Artley, 2014 IL App (1st) 121681 (June 17, 2014).

Kreisman Law Offices has been handling automobile accident cases, truck accident cases, bicycle accident cases, motorcycle accident cases and insurance company dispute matters for individuals and families who have been harmed, injured or died as a result of the carelessness or negligence of another for more than 38 years in and around Chicago, Cook County and its surrounding areas, including Melrose Park, Franklin Park, Elmwood Park, Forest Park, Hillside, Elmhurst, Chicago (Ashburn, Ravenswood, Wicker Park, Logan Square, Rogers Park, Back of the Yards, Austin, Gresham, Hegewisch, East Side, West Loop), Lincolnshire, Harwood Heights and Orland Park, Ill.

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