Obligations of Self-Insured Car Rental Company
November 16, 2015
The creditor filed a petition for an order against a self-insured car rental company seeking to collect $600,000 on a default judgment he obtained against an uninsured driver of the rented vehicle. This case is Nelson v. Artley, 2015 IL 118058.
Haney rented a car from Enterprise Leasing Company of Chicago. While the vehicle was being driven by Artley, the vehicle crossed the center line and collided with a car operated by Nelson. Nelson was severely injured and sued Artley to recover damages. Artley was uninsured and Nelson then sought and received a default judgment in the amount of $600,000.
After obtaining the default judgment, Nelson then sued Enterprise to determine whether the company held any property from which the judgment could be satisfied. The trial court ruled in favor of Nelson but limited the recovery amount to $25,000. The appeals court reversed that ruling and the car company appealed to the Supreme Court of Illinois.
The Illinois Supreme Court noted that the sole basis for Enterprise's financial liability in this case is the obligation imposed on it pursuant to the state's financial responsibility laws by virtue of its ownership of the vehicle what collided with Nelson when it was being driven by Artley, who was uninsured. The court also noted that Enterprise conceded it must pay some portion of the default judgment under state law. The only question before the court then was how much of the judgment Enterprise must pay. The resolution of that question turned solely on the terms of the relevant financial responsibility statutes.
The law, said the court, mandates liability insurance coverage for autos and other motor vehicles designed to be used on a public highway. However, the law does not require that the full amount of any loss be covered; rather, the law mandates only certain minimum levels of coverage. The law also allowed car rental companies to fulfill the financial responsibility requirements by obtaining a certificate of self-insurance from the Director of the Illinois Department of Insurance. Enterprise did this and now, the question was: how much of the default judgment was Enterprise required to pay.
Enterprise said that under its self-insured status and Illinois law, its total financial responsibility was $100,000 per occurrence, the same minimum required of rental companies that elect to meet their statutory financial responsibility obligations through the purchase of insurance policies. Moreover, Enterprise said that it had already paid $50,000 to settle another claim arising from the same accident and had tendered an additional $50,000 to the court to allocate between Nelson and a third injured person. Because these sums exhausted the $100,000 per occurrence liability limits, Enterprise contended that it had already tendered all that it could be required to pay.
The trial court had ruled that the allocation was to be divided equally between Nelson and the other injured person and so, Nelson could only receive $25,000. The appeals court reversed this ruling. The Illinois Supreme Court then reversed the appellate ruling and said Enterprise was required to pay only the $25,000.
The court noted that the express, undisputed, and overriding purpose of self-insurance was simply to establish proof of financial responsibility. It was not proof of the ability to fully satisfy judgments but was rather proof of the ability to provide some base level of financial coverage where otherwise there would be none. That base level coverage is the standard by which the self-insurer's liability must be gauged. The court said that imposing unlimited liability on those who elect to self-insure would be patently incompatible with this standard.
The court ruled that the trial court was correct when it construed the relevant provisions of the financial responsibility statutes to mean that Enterprise's financial responsibility was limited to the same minimum coverage provisions applicable to rental car companies electing to meet financial responsibility obligations through the purchase of an insurance policy. Under the construction, the amount Enterprise was obligated to pay is limited to $25,000, an amount Enterprise had already tendered to the court Contrary to the view taken by the appellate court, Enterprise is not liable for the entire $600,000 default judgment.
Editor's Note: The Illinois Supreme Court rules that a self-insured car rental company met its financial responsibility requirements through self-insurance, and the financial responsibility was limited to the same minimum coverage provisions applicable to car rental companies electing to meet financial responsibility obligations through the purchase of an insurance policy. In this instance, the car rental company had paid out its total financial responsibility amount and was not required to provide any additional amounts in order to satisfy full coverage for the loss.