Vicarious Liability / Indemnity

"Yes, if an equipment lessor is held vicariously liable for the lessee's conduct, the lessor may be able to obtain indemnification from the relevant lessee for damages awarded to a third party.

*Vicarious liability*:

Under the theory of *respondeat superior*, a principal is vicariously liable for the conduct of its agent, but generally not for the conduct of an independent contractor and this determination generally hinges on the distinctions set forth in case law between an agent and an independent contractor. *See* *Brettman v. M & G Truck Brokerage, Inc.*, 2019 IL App (2d) 180236, ¶ 31, 127 N.E.3d 880, 887, appeal denied, 124 N.E.3d 471 (Ill. 2019) (citing *Sperl v. C.H. Robinson Worldwide, Inc.*, 408 Ill. App. 3d 1051, 1056, 349 Ill.Dec. 269, 946 N.E.2d 463 (2011)).

With regards to motor vehicles specifically, Congress enacted the Graves Amendment in 2005 to preempt state laws that hold motor vehicle lessors vicariously liable for damages caused by their related lessees while operating the relevant leased vehicle, *provided that* (1) the lessor is engaged in the business of leasing or renting motor vehicles (and the vehicle at issue was under lease at the time of the accident) and (2) the lessor was neither negligent nor engaged in criminal wrongdoings. 49 U.S.C. § 30106(a) (2012). The Northern District of Illinois previously held that the Graves Amendment allows claims of direct negligence but not vicarious liability against motor vehicle rental and leasing companies. *See* *Johnke v. Espinal-Quiroz*, 2016 WL 454333, at *5 (N.D. Ill. Feb. 5, 2016) (applying the Graves Amendment to multiple negligence claims and holding only claims of direct negligence against motor vehicle rental and leasing companies are allowable under the Graves Amendment) and *Favorite v. Sakovski*, No. 19 C 1597, 2019 WL 3857877 (N.D. Ill. Aug. 16, 2019) (following the *Johnke* holding and refusing to bar a negligent entrustment claim given it deemed such claim to be covered by the Graves Amendment); *but see* *Parker v. Auto-Owners Ins. Co.*, No. 19-CV-374-JDP, 2020 WL 488366, at *3 (W.D. Wis. Jan. 30, 2020) (refusing to adopt the holding in *Johnke* given the court's approach was deemed inconsistent with the plain language of the Graves Amendment due to the fact its holding did not appropriately give equal weight to both conditions of the Graves Amendment).

*Indemnification of claims*:

If a lessor is held vicariously liable, it may have a right to be indemnified by the relevant lessee based upon common law and express or implied indemnity. *See* *Kerschner v. Weiss & Co.*, 667 N.E.2d 1351 (Ill. App. Ct. 1996). With regards to express indemnity (or contractual indemnity) the court will look to the plain language in the relevant lease agreement and make a determination based upon the four corners of the document. *See, e.g., Richardson v. Chapman*, 175 Ill. 2d 98, 676 N.E.2d 621, 629 (1997).

Implied indemnity, however, is a theory based upon tort principles or quasi-contract principles and is generally available so long as the party seeking indemnity was not negligent or otherwise at fault for the underlying loss. *Kerschner*, 667 N.E.2d at 1355. The theory based on tort principles allowed a ""passively negligent tortfeasor"" to shift the entire burden of the plaintiff's loss to a more culpable ""actively negligent tortfeasor"", but the need for this theory was extinguished by the enactment of the Joint Tortfeasor Contribution Act (740 ILCS 100 *et. seq.*). *See* *id*. Notably, the Illinois Supreme Court has held that the Joint Tortfeasor Contribution Act did not abolish common law actions for implied indemnity in quasi-contractual relationships involving vicarious liability as discussed briefly below. *See* *Richardson*, 175 Ill.2d at 118; *American National Bank and Trust Co. v. Columbus–Cuneo–Cabrini Medical Center*, 154 Ill.2d 347, 350, 181 Ill.Dec. 917, 609 N.E.2d 285 (1992); *Frazer v. A.F. Munsterman, Inc.*, 123 Ill.2d 245, 123 Ill.Dec. 473, 527 N.E.2d 1248 (1988); and *Thatcher v. Commonwealth Edison Co.*, 123 Ill.2d 275, 278, 123 Ill.Dec. 486, 527 N.E.2d 1261 (1988).

The theory based on quasi-contract principles recognizes that a ""blameless party (the indemnitee) may be held derivatively liable to the plaintiff based upon that party's legal relationship with the one who actually caused the plaintiff's injury (the indemnitor)"". *Id*. (citing *American National Bank*, 154 Ill.2d at 351 and *Ashley v. Evangelical Hospitals Corp.*, 230 Ill.App.3d 513, 171 Ill.Dec. 749, 594 N.E.2d 1269 (1992)). In such circumstances, the law implies a promise by the indemnitor to make good on the loss incurred by the indemnitee and such indemnitee can assert a claim for implied indemnity if its liability was solely derivative. *Id*. (citing *Dixon v. Chicago & North Western Transportation Co.*, 151 Ill.2d 108, 176 Ill.Dec. 6, 601 N.E.2d 704 (1992) and *Frazer*, 123 Ill.2d at 255). The indemnitee must allege (1) a pre-tort relationship, such as lessor and lessee, and (2) a qualitative distinction between the conduct of the indemnitor and indemnitee. *Id*. (citing *Frazer*, 123 Ill.2d at 255 and *Van Slambrouck v. Economy Baler Co.*, 105 Ill.2d 462, 86 Ill.Dec. 488, 475 N.E.2d 867 (1985))."