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The Law Offices of Edward P. Graham, Ltd. periodically sends updates about important and interesting
The Law Offices of Edward P. Graham, Ltd. periodically sends updates about important and interesting legal updates and news about the Firm to our clients and friends.

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Illinois Legal Updates

Fall 2011
 • Basics of Divorce Law in Illinois
• SBA Loans Can Help Small Businesses
• Don't Lose Your Charitable Deduction
• Chalk One Up for the Little Guy

Summer 2011
• Child Labor Laws in Illinois
• Different Ways to Hold Investment Property
• Parents Not Liable for Teen Drinking
• Franchising Your Business
• Bike Riders Must Know the Rules of the Road

Spring 2011
• State Law Claim for Defective Artificial Hip
• New Federal Tax Law
• Workers' Compensation in Illinois
• The Importance of Estate Planni
• Homeowners Insurance Basics
• What is Marital Property?

Winter 2011
• Are you Legally Liable for Serving Alcohol to Guests?
• Bank Accounts Are A-Changing
• Cybersquatters, Beware!
• What is an S Corporation?
• What is the Real Property Disclosure Act?
• Defective Insulin Pumps

 Fall 2010
• The Basics of Automobile Insurance
• Debit Versus Credit Cards
• Owning Property as Joint Tenants
• Social Security Disability Benefits
• Unnecessary Surgery Leads to Large Verdict

Summer 2010
• Choosing an Executor for Your Will
• Tax Credits for Historic Preservation
• Workers' Comp Update
• Purchasing a Car in Illinois
• Preparing for a Disaster
• Suspended Driver's License

Spring 2010
• Title Insurance Basics
• Nursing Home Assaults
• Prevent Burglary
• "Obvious" May be in the Eye of the Beholder
• Insurance Coverage Can be Limited
• Credit Card Act

Winter 2010
• Tax Breaks for College Costs
• Wallyball in the Workplace
• Auto Accidents and Auto Insurance
• Statutes and Limitations and Statutes of Repose
• Snow and Ice Removal in Illinois

Summer 2009
• Traffic Court in Illinois
• New Identity Theft Rules affect Businesses
• Duties of Guardians
• Federal Laws Trump State Laws
• Estate Planning for Vacation Homes

Spring 2009
• Faqs about Mortgage Foreclosures
• Two Deaths are Two Occurrences
• The Value of Pets
• Work-Related Injuries in Illinois
• So You're Married: Now What
• Generation-skipping Trusts

ILLINOIS LEGAL UPDATE
WINTER 2011 ISSUE

Are you Legally Liable for Serving Alcohol to Guests?

What is your legal liability when you serve alcoholic beverages to your guests? Illinois law provides that social hosts have no legal liability to persons to whom they serve alcohol, whether they are adults or minors. Nor do social hosts have any legal liability to persons injured by an intoxicated guest. This freedom from liability exists even if it can be proved that the host had some reason to believe that his or her guest was intoxicated or that an intoxicated guest might drive. Illinois courts have joined in the widely held theory that it is not blameworthy conduct to supply intoxicating liquor to an ordinary able‑bodied adult. Rather, it is the consumption of alcohol, not the furnishing of the alcohol, that is the cause of any subsequent occurrence.       

“Social hosts” include both private individuals and companies that hold parties or social events. If a company holds a holiday party for its employees or serves alcohol at a business meeting, it is not responsible to the employees or to third parties for any injuries that may result due to intoxication. Likewise, where friends or family gather in private homes, the hosts are not responsible for the drinking of other adults.    

Anyone under 21 years of age commits a criminal offense if he or she attempts to purchase, purchases, consumes, possesses, or transports any alcohol, liquor, or malt or brewed beverage, and an adult who furnishes any assistance is also criminally liable. A person commits a crime by serving any alcohol to a minor. It is not necessary that the minor have been served an amount sufficient to intoxicate him or her. Any person who serves minors mildly alcoholic beverages marketed as nonalcoholic is criminally liable if the beverage contains more than 0.5% alcohol.

License holders and their employees, along with owners or lessors, such as tavern owners, are not treated the same as social hosts. Licensees and their employees must refrain from selling liquor to any visibly intoxicated individual. Where a liquor license holder is found responsible for serving an intoxicated customer, he or she can be held liable by anyone injured by the intoxicated customer’s negligence. Once the determination has been made that the liquor license holder knowingly served a patron who was intoxicated, the liquor license holder will be held liable regardless of actual fault.

An adult who pays for a hotel or motel room or any other facility, with the knowledge that the room or facility is to be used by persons under 21 for the unlawful consumption of alcoholic beverages, can be held liable as if he or she were a liquor license holder. However, Illinois does limit the amount of damages that the injured party may recover for personal injury in such an action. Under no circumstances is the liquor license holder or person who rents the hotel/motel room or facility liable to the intoxicated person.

Bank Accounts Are A-Changing

In the last year, new Federal Reserve Board rules have reined in the ability of banks and other financial institutions to impose charges and fees for some of their services. Issuers of credit cards generally cannot increase the interest rate on a card for one year after the account is opened. Consumers will no longer be charged a fee when a transaction causes an account to exceed its credit limit, unless the consumer has agreed in advance. For “subprime” cards, held by those with a limited or bad credit history, the total initial fees cannot exceed 25% of the card’s initial credit limit, with the exception of fees for late payments, for exceeding the credit limit, or for returned payments due to insufficient funds.

With these and other tightened regulations, it is predictable that financial institutions will gravitate toward other means of enhancing revenues through new or increased fees, and with new or more demanding requirements placed on consumers. In such a climate, consumers are well advised to brush up on some strategies for minimizing the financial hits from the institutions:

• If your bank decides to add or raise a minimum balance requirement for your account, consider whether you would do just as well with a “no frills” account that would have no such requirement, and likely no maintenance fee. The tradeoff may be a monthly limit on the number of checks that you can write or on the number of ATM or debit card transactions.

• With today’s low interest rates, it might be smarter to use a free account that pays no or very little interest, instead of an account that pays a slightly higher interest rate but also comes with a monthly fee. The monthly fee could well be greater than the meager return on the interest bearing account.

• It is not exactly riveting reading material for most people, but make yourself promptly check your accounts online or check your paper account statements for errors, or for fees or account changes you may not have been expecting. In the same vein, monitoring the activity on your debit or ATM card will help you promptly report a problem if the card is lost or stolen, thereby limiting your liability.

• Many banks offer a free “alert service,” meaning that the bank will send you an e mail or text message notifying you when there has been a significant transaction on your account or if your balance drops below a certain threshold. Such a “heads up” could allow you to shift funds among your accounts to avoid overdrawing one of them.

• If overdrawing an account is a recurring event, consider changing from overdraft coverage to cheaper alternatives, such as linking a savings account to a checking account, arranging for an overdraft line of credit, or, for a short term shortage of cash, applying for a small loan.

• ATM fees may not be crippling, but they can add up. Try to stick mainly with your own institution’s ATMs, where there generally is no charge. If your bank allows getting some cash back on a debit card transaction at no charge, that is an alternative to an ATM for getting small amounts of cash.

Cybersquatters, Beware!         

A recent decision from a federal court in Chicago highlights both the practice of “cybersquatting” and the effect that the Internet is having on litigation.

A cybersquatter either takes the name of a website that the owner forgot to re-register or sets up a website with a name that is very similar to the name of some other website. The cybersquatter then either extorts a payment from the company that wants to legitimately use the site that it has taken or it tries to confuse consumers who accidentally go to the similarly named site.

The case involved the second kind of cybersquatting, with a Chicago inventory auction company suing web hosting company GoDaddy, claiming that GoDaddy had registered domain names (such as UBID.com) similar to the one that it used (uBID.com), and then used consumer confusion to sell advertising that would run on those similar websites. GoDaddy responded by claiming that it was an Arizona company and that courts in Illinois had no jurisdiction over claims brought against it.

The trial court agreed with GoDaddy, but the appellate court reversed the decision and ruled that GoDaddy could be sued in Illinois. The court noted that GoDaddy had “thoroughly, deliberately, and successfully exploited the Illinois market” with a national advertising campaign, and it rejected GoDaddy’s claims that Illinois, as one market among many, was “of no particular interest to it.”

Finding it a reasonable quid pro quo to require GoDaddy to come to Illinois to defend claims against it when it had reached and profited from so many Illinois residents, the court ordered the case sent back for trial.

What is an S Corporation?

An S corporation is a form of business classified for federal income tax purposes as a corporation that has elected to be taxed as a pass through entity, in a manner similar to a partnership or sole proprietor. Unlike a regular corporation, or C corporation, an S corporation (both names derive from sections of the Internal Revenue Code) generally is not subject to federal income tax. Instead, its income is reported on the tax returns of its shareholders, and they have the responsibility for paying the tax. If there are losses suffered by the corporation, they also pass through and are reported on the shareholders’ income tax returns.

Because only the shareholders, and not the corporation, are taxed, S corporations avoid the problem of double taxation associated with C corporations. This is the biggest draw for creating an S corporation, particularly for closely held corporations.

Shareholders in an S corporation, like shareholders in a C corporation, generally have limited liability arising from corporate matters, even though they pay taxes as if they were partners or sole proprietors. In addition, when the corporation eventually is sold, there can be reduced taxable gains, as compared with the sale of a business operating as a C corporation.

On the downside, the limitation on classes of stock in an S corporation provides less control over the company and the value of its stock. Potential outside investors likely will not be attracted by the pass through tax characteristics of an S corporation, nor by the limit on the number of shareholders. Although corporate taxes are avoided, there is still a requirement for filing an informational tax return every year. Finally, if avoiding formalities is an important consideration, it should be noted that, like any other corporation, an S corporation must follow the requirements for having regular meetings and keeping company minutes.

The balancing of the advantages and drawbacks of S corporation status in any given case is sufficiently complex that it is advisable to seek professional advice before making this important choice.

What is the Real Property Disclosure Act?

If you have bought or sold a home in Illinois, you are most likely aware of the Residential Real Property Disclosure Act. The Act has two main provisions.

The first is a provision requiring that everyone selling residential property with one to four dwellings on it must disclose to prospective buyers certain defects in the property by completing and signing a 22-question disclosure form. A seller must disclose all defects that he actually knows are present on the property as of the date of completing the form. Although a seller does not have to make his own investigation or inspection of the property in order to fill out the form, he must supplement the disclosure form in writing if he learns of a mistake or if he left something out on the document before the date of the closing of the sale.

Even after a supplemental disclosure, the buyer does not have a right to terminate the real estate contract unless the seller had actual knowledge of the defect at the time when he first completed the disclosure form. However, most real estate contracts provide for an inspection of the property prior to closing to determine that the property has not changed since the contract was signed. If the mistake or omission revealed is not corrected by the date of this inspection, the buyer will have the right to demand such a repair prior to the closing.

The disclosure form includes a warning that disclosures do not include previous problems with the property if the seller reasonably believes that they have been corrected; it reports only the current condition of the property. This resolves the question asked by many sellers regarding their obligations in completing the disclosure form: "Do I have to include things that have been fixed such as the air conditioning?" Hopefully, this warning will encourage more buyers to use professional home inspectors to determine any potential defects in the home.

A buyer has the right to cancel the contract if the seller does not provide the disclosure form before the closing. A "seller" is defined as every person or entity who owns the property, including a beneficiary of a trust. A person who has never occupied the property and who has never had control over the property is not considered a seller. A seller who does not comply with the Act will be responsible for paying damages to the buyer, court costs, and possibly the buyer's attorney's fees.

The second provision is relatively new and calls for the creation of a database to provide information about predatory lenders. Although right now the database includes only certain areas of Cook County, it requires lenders to submit certain information about borrowers, and the state determines if the borrower requires credit counseling. The purpose of this provision is to reduce the number of defaults on loans and to make sure that borrowers are not being taken advantage of by unscrupulous lenders.

Defective Insulin Pumps         

It is estimated that 25 million Americans suffer from diabetes, and their ranks are growing every day. Many diabetics are able to control their condition with diet and exercise, but others must take insulin, a drug that helps diabetics regulate the level of glucose in the blood.

For many years, insulin was given by injection, but then the insulin pump was invented. An insulin pump is a small device (about the size of a cell phone) that introduces insulin into the body at the same rate that it would be produced in the pancreas of a healthy person. More than 400,000 Americans currently use insulin pumps, and when the pumps work they allow many diabetics to lead nearly normal lives.

However, insulin pumps do not always work as designed. After 18 different models of insulin pumps were recalled over a five year period, the Food and Drug Administration appointed a panel to look into the issue.
The panel issued its findings in 2008, reporting that it had discovered that insulin pumps were associated with more than 300 deaths and 12,000 serious injuries. Some of the diabetics using insulin pumps received too much insulin, while others did not receive enough. Although some of these injuries or deaths may have resulted from user error, a disturbingly high number were caused by unknown problems with the various models of insulin pumps that were recalled.

A number of product liability lawsuits have been filed against insulin pump makers. Some of these lawsuits allege that there is a specific problem with a specific pump, while others complain more generally that manufacturers did not give users of insulin pumps enough information about the pumps to use them safely. These lawsuits fault the pump manufacturer for producing a product that can injure users in ways that they are unable to guard themselves against.

If you suspect that you or someone you love has experienced injury, illness, or even death due to the use of an insulin pump, the first step is to find and consult a lawyer you trust. A lawyer can help you evaluate the facts and determine whether you have a claim and, if so, can help you make your claim within the limited time allowed. A lawyer can also help provide the guidance that you need and ensure that you obtain the compensation that you deserve.

Small Businesses Maintaining s Safe Workplace   

 

In theory, and often in practice, the safety of the workplace is a top priority for any business. But while large companies may have personnel devoted exclusively to the subject, safety is but one of many responsibilities for the owners of small businesses. In some cases, the matter of keeping workers safe slips down the list of priorities. There to make sure the issue is not neglected is the federal Occupational Safety and Health Administration (OSHA).

OSHA has written very detailed standards for maintaining workers' safety. It also has an expansive mandate to enforce those standards and the various provisions of the Occupational Safety and Health Act. Removing dangerous conditions is only common sense from any point of view, including employer-employee relations and a calculation based solely on dollars and cents.

The first step for any small employer is to be informed and educated as to workplace dangers, not all of which may be obvious. OSHA maintains an extensive website (www.osha.gov) that includes information that is especially pertinent to small businesses and guidance about specific threats to safety. Insurance companies provide another good source of information, since these companies have a vested interest in enhancing workplace safety and thereby minimizing insurance claims.

While exotic threats such as anthrax or legionnaire's disease capture headlines, the leading causes of serious workplace injuries are more ordinary. They include overexertion, such as excessive lifting, pushing, pulling, holding, carrying, or throwing an object; falls on the same level (as distinct from falls from a height); and "bodily reaction," which covers injuries from bending, climbing, slipping, or tripping without falling. Regular inspections and repairs, not to mention a vigilant workforce, can head off many such injuries.

Apart from monetary penalties that may follow an OSHA investigation, many billions of dollars each year are paid by employers in medical costs, wage payments, and insurance claims management as a result of workplace injuries. Small businesses get some breaks from OSHA, in the form of smaller monetary penalties and some exemptions from recordkeeping requirements for employers with 10 or fewer employees. Still, given their smaller financial reserves, small businesses, in particular, are well advised to live by the truism that an ounce of prevention is worth a pound of cure.
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