Hertz 2009 Annual Report Download - page 168

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
damages, interest, attorneys’ fees and costs. The district court has dismissed all of plaintiffs’
claims against all defendants. Plaintiffs have appealed to the United States Court of Appeals for
the Ninth Circuit.
5. Patent Infringement
On February 19, 2007, we filed an action entitled The Hertz Corporation and TSD Rental LLC v.
Enterprise Rent-A-Car Company and The Crawford Group, Inc. The suit was filed in the United
States District Court for the District of Massachusetts alleging that Enterprise unlawfully
engaged in anticompetitive and unfair and deceptive business practices. On September 25,
2007, we filed a second lawsuit, also captioned The Hertz Corporation and TSD Rental LLC v.
Enterprise Rent-A-Car Company and The Crawford Group, Inc. in the United States District
Court for the District of Massachusetts seeking a declaratory judgment that a newly issued
patent to Crawford is not infringed by Hertz and is invalid and unenforceable. These two cases
were later consolidated and the parties agreed to a non-monetary settlement and joint
dismissal in June 2009.
6. Public Liability and Property Damage
We are currently a defendant in numerous actions and have received numerous claims on
which actions have not yet been commenced for public liability and property damage arising
from the operation of motor vehicles and equipment rented from us and our licensees. The
obligation for public liability and property damage on self-insured U.S. and international
vehicles and equipment, as stated on our balance sheet, represents an estimate for both
reported accident claims not yet paid and claims incurred but not yet reported. The related
liabilities are recorded on a non-discounted basis. Reserve requirements are based on
actuarial evaluations of historical accident claim experience and trends, as well as future
projections of ultimate losses, expenses, premiums and administrative costs. At December 31,
2009 and December 31, 2008 our liability recorded for public liability and property damage
matters was $277.8 million and $311.4 million, respectively. The reserve balance decreased as
a result of an 8.0% reduction in transaction day volume and a 4.8% reduction in expected cost
per transaction day for the current accident year or $27.4 million for all probable pending and
future claims. In addition, there was a reduction in the reserve for existing claims of $6.2 million
as a result of lower expenses than previously estimated. We believe that our analysis was
based on the most relevant information available, combined with reasonable assumptions, and
that we may prudently rely on this information to determine the estimated liability. We note the
liability is subject to significant uncertainties. The adequacy of the liability reserve is regularly
monitored based on evolving accident claim history and insurance related state legislation
changes. If our estimates change or if actual results differ from these assumptions, the amount
of the recorded liability is adjusted to reflect these results.
We intend to assert that we have meritorious defenses in the foregoing matters and we intend to defend
ourselves vigorously.
We have established reserves for matters where we believe that the losses are probable and reasonably
estimated, including for various of the matters set forth above. Other than with respect to the reserve
established for claims for public liability and property damage, none of those reserves are material. For
matters, including those described above, where we have not established a reserve, the ultimate
outcome or resolution cannot be predicted at this time, or the amount of ultimate loss, if any, cannot be
reasonably estimated. Litigation is subject to many uncertainties and the outcome of the individual
litigated matters is not predictable with assurance. It is possible that certain of the actions, claims,
148