IL Supreme Court Brief Rules in Favor of TRALA and Enterprise in Graves Law Case

• By: Shannon Davison
• On: 10/08/2015 14:10:56
• In: Legislative Bulletins

 
The case of Enterprise vs. Nelson, was originally decided by the Circuit Court of Cook County which ruled that in this case, which revolved around a stolen rental car that caused an accident, Enterprise was only responsible for what any rental company would be under the state's MFR laws and not for the negligence of the operator of the vehicle.  
 
However, after it was appealed, the Appellate Court of Illinois, First District reversed the decision, holding that Enterprise should be held liable for all payments beyond MFR laws because they were a self-insured motor vehicle rental company and that because of this they were not protected by the federal Graves Amendment or Illinois MFR laws.  The Graves Amendment preempts state vicarious liability laws for non-negligent owners of rented and leased vehicles.
 
In its ruling, the Appellate Court judge differentiated between motor vehicle rental companies that purchase insurance policies and those that self-insure. Justice John Simon noted that one section of Illinois law states the minimum requirements for policies purchased from insurance companies, while there is an additional section of law that states how motor vehicle rental companies can self-insure. He noted that "If the entity chooses self-insurance, it is then required to pay all judgments entered against itself pursuant to the plain language of section 7-502." This interpretation was apparently based on the fact that section 7-502 (regarding self-insurance) does not explicitly state that rental vehicle companies that self-insure are subject to the same MFR limits as those who purchase insurance policies.
 
Justice Simon and the other judges of the Appellate Court rejected precedents which show that in other states, self-insured motor vehicle rental companies are subject to the same limits as rental companies that purchase insurance. Their ruling stated "...we do not find the interpretation of foreign statutes in the above-cited authorities to be sufficiently compelling to overcome our conclusion that the Code does not limit a self-insured rental car company's financial responsibility to the same minimum amounts that are required of an insurance policy." The court then also rejected the idea that the Graves Amendment would preempt the Illinois statute in question if the statute held that self-insured motor vehicle rental companies are subject to liability without limit, because it is a "financial responsibility" law that would be preserved by the Graves Amendment's savings clause.
 
TRALA filed an amicus brief in support of Enterprise in which it emphatically stated that the Appellate Court's interpretation "is preempted as it directly conflicts with the Graves Amendment. If that decision was allowed to stand, self-insured vehicle lessors would be exposed to unlimited liability, the very danger Congress sought to end with passage of the Graves Amendment." To elaborate on this position, TRALA's brief cited statutes and precedents to show that "the term financial responsibility is commonly used to refer to minimum insurance or surety requirements, and not maximum levels of vicarious liability as imposed by state law." Accordingly, non-negligent motor vehicle rental companies that self-insure under Illinois statue cannot be ordered to "pay all judgments entered against" them.
 
In today's ruling, the Illinois Supreme Court agreed with both TRALA and Enterprise and stated that if the Appellate Court's decision were upheld, rental companies that self-insure would be held to a completely difference standard than other rental companies that might choose not to self-insure.  In its decision, the Court stated, "Imposing unlimited liability on those who elect to self-insure...is patently incompatible with this standard.  It is the same as saying that anyone who chooses to meet the minimum financial responsibility requirements through self-insurance will be subject to maximum financial exposure.  That is a deal no rational economic actor would be likely to take.  Under the appellate court's interpretation of the law, the self-insurance option would therefore be rendered meaningless.  This is impermissible."
 
To see a copy of the Supreme Court decision please click here.
 
To see a copy of the amicus brief filed by TRALA in this case, click here.
 
For questions regarding this case or court decision, please contact TRALA's Jake Jacoby at jjacoby@trala.org or by calling (703) 299-9120. 
 

###