COURT DECISIONS

Rough Notes, Jun 2005

Digested from case reports published in the North Eastern Reporter 2d, West Publishing Co., St. Paul, MN

Car rental customer uses false driver's license

On November 14, 1997, Mehul Thakkar was involved in an automobile accident while driving a car he had rented from Enterprise Leasing Company of Chicago. Thakkar was insured under an Allstate Indemnity Company policy, but he had also purchased supplemental liability coverage of $1 million under the Enterprise Leasing rental agreement. The other driver involved in the accident was Michael DeLuca, who was insured under a United Services Automobile Association policy.

Donald Fogel and James Burke were passengers in DeLuca's vehicle. They filed a complaint against Allstate, United Services, Enterprise, Thakkar, and DeLuca, seeking a declaration of the rights and liabilities of the parties with respect to the insurance coverage. Enterprise argued it was entitled to rescind the rental agreement, including the supplemental insurance policy, because Thakkar had provided false information at the time he rented the car. Specifically, Enterprise alleged Thakkar had presented a fictitious California driver's license that showed his age to be 22 years. Enterprise had a policy at the time that its agents could not lease vehicles to individuals under the age of 21. In fact, Thakkar was 18 years old on the day of the accident.

The trial court, after hearing testimony, found that the rental agreement was procured by fraud, and that the contract between Enterprise and Thakkar was rescinded. The court held that Enterprise was not liable for supplemental liability protection; however, it was required to pay $50,000 under the Illinois minimum financial responsibility statute.

Meanwhile, Fogel and Burke entered into an arbitration agreement with Thakkar and Allstate. The arbitrator entered an award of $1,692,163 for Fogel and $72,770 for Burke. This award was confirmed by the court. Enterprise, which did not participate in the arbitration, then asked the court to clarify several issues related to the fraud / rescission of contract decision. The court denied this motion to clarify.

Fogel and Enterprise both filed appeals. Fogel appealed the trial court's decision regarding rescission of the leasing agreement with Enterprise. According to Fogel, Thakkar's misrepresentation of his age was not "material" in the sense that Enterprise would have acted differently had it been aware of the misrepresentation. Fogel also argued Enterprise was unreasonable in accepting Thakkar's misrepresentation.

Finally, Fogel argued rescission of contract was against public policy because such action would fail to protect the claimants and the public from financial hardship. The Appellate Court of Illinois, First District, Sixth Division, was not convinced by any of these arguments. It found rescission of contract was a proper finding under the circumstances and was not against public policy.

Enterprise appealed the trial court's decision requiring Enterprise to pay $50,000 pursuant to the minimum financial responsibility statute. The appellate court evaluated the statute in question, which required all owners of for-rent motor vehicles to give proof of financial responsibility. It found nothing in the statute requiring Enterprise to provide liability insurance to customers who prefer their own insurance. Accordingly, the court reversed the portion of the trial court's decision finding Enterprise responsible for $50,000 under the minimum financial responsibility statute.

The court affirmed the decision of the trial court in favor of Enterprise. It found in favor of Enterprise on the fraud claim, and remanded the case to the trial court to determine damages. The trial court's order finding Enterprise liable for $50,000 under the minimum financial responsibility statute was reversed.

Fogel vs. Enterprise Leasing Company of Chicago-Nos. 1-02-1645, 1-02-2244, 1-02-2318-Appellate Court of Illinois, First District, Sixth Division-September 30, 2004-817 North Eastern Reporter 2d 1135.

Is child a "resident" of grandparents' farm if he stays there regularly?

Carrie Smith was the mother and legal guardian of a minor boy, A.T., who was injured while visiting his grandparents' farm in Madison, Indiana. A.T.'s father, David Tinker, and Smith were divorced prior to A.T.'s birth. By agreement, and since he was an infant, A.T. regularly visited Tinker's mother and stepfather, the Imels, on their farm. During the visits, A.T.'s mother did not stay on the farm, and the Imels had full authority to care for and discipline him as necessary. A.T. typically visited the Imels twice per month. Sometimes he stayed just for the day, sometimes for an entire weekend.

On March 28, 2002, during a weekend visit, A. T. was injured when a cow that was being loaded on a trailer bolted and ran over A.T. The Imels had liability and medical payment coverage with Indiana Farmers Mutual Insurance Company. The liability coverage was limited by the following provision: "2. Additional Exclusions That Apply Only to Coverage L-Coverage L does not apply to: a. 'bodily injury' to 'you', and if residents of'your' household, 'your' relatives and persons in 'your' care or in the care of 'your' resident relatives."