MOUNT VERNON, Ill. -- An Illinois appellate court last month upheld an earlier trial court decision, ruling that a car rental business in Belleville, Ill., violated no state law by making a customer's insurance primary after the customer declined supplemental liability insurance.

The court ruled against State Farm Mutual Automobile Insurance Co., which brought suit against Auffenberg Rent-A-Car's insurance providers: Hertz Claim Management Corp. and National Union Fire Insurance Co. of Pittsburgh, Penn.

On Jan. 11, 1999, Michael Kauling rented a 1998 Ford Contour from Auffenberg Rent-A-Car, which is affiliated with ADRI/Auffenberg Ford. The Ford dealership was repairing Kauling's van. The car rental contract provided that if Kauling declined to purchase supplemental liability insurance, his car insurance would assume primary coverage. He opted not to purchase the supplemental coverage.

Later that day, Kauling was involved in a car accident with David Watson, who later sued Kauling for injuries and car damage.

The Contour was insured by National Union Fire Insurance Co. of Pittsburgh, Penn. The certificate of financial responsibility that Ford had filed with Illinois designated the coverage as secondary. However, the policy itself didn't contain such a limitation.

Kauling's van was insured by State Farm. The policy provided liability coverage for his use of "temporary substitute vehicles," including rental cars. But the policy stated that such coverage was secondary if the temporary substitute vehicle had other liability insurance.

In State Farm's lawsuit against Hertz Claim Management Corp. and National Union, filed in 2000, State Farm argued that Illinois law requires a vehicle owner's insurance to provide primary coverage in all cases.

Hertz Claim Management and National Union, however, countered that car rental insurance issues fall outside of the jurisdiction of the Illinois Safety and Family Financial Responsibility Law. Instead, a separate set of state laws govern car rental insurance, and these laws don't make the vehicle owner's insurance primary in all cases.

A trial court ruled in favor of Hertz Claim Management and National Union on July 30, 2001. The Fifth District Appellate Court of Illinois upheld the decision on April 29.

In explaining the appellate court decision, Justice Chapman cited an earlier case involving Insurance Car Rentals Inc. "As here," he noted, "the car rental agency offered him [the customer] a choice between relying on his insurance company to provide primary coverage or paying a higher cost in order to be provided with full coverage through the rental agency's insurer. The driver opted for the former option."