Estoppel Doctrine Applied Only Where Insurer Breached its Duty to Defend

Written by:  Bill Toliopoulos and Max Guggenheim

In its latest insight regarding insurer’s obligations to additional insureds, the First District Appellate Court has determined additional insured status is not conferred to a party who is not identified as such in a certificate of insurance.

In Owners Ins. Co. v. Seamless Gutter Corp., N0. 07 CH 01603, 082924 (Ill. App. Ct. Nov. 14, 2011), defendant Westfield Homes of Illinois (“Westfield”) was the general contractor and defendant Seamless Gutter Corporation (“Seamless”) was a subcontractor on a construction project in Algonquin, Illinois (“Algonquin site”).  Westfield and Seamless’ contract included an obligation that Seamless obtain commercial liability insurance.  A certificate of insurance was issued by Seamless’ insurance agent that listed Seamless as the insured and Westfield as the certificate holder, but with no reference to Westfield as an additional insured.  Later that year, Westfield was dissolved and DRH Cambridge Homes (“Cambridge”) acquired Westfield’s assets, including the Algonquin site.  Further, Cambridge was added as an additional insured pursuant to an endorsement to plaintiff Owners Insurance Company (“Owners”).  Lastly, plaintiff Auto-Owners Insurance Company (“Auto-Owners”) issued a commercial umbrella insurance policy to Seamless.

A subsequent personal injury suit was filed based on injuries sustained at the Algonquin site.  Seamless filed a third-party complaint against Cambridge, who in turn, along with Westfield, tendered their defenses to Owners.  Owners declined coverage.  The circuit court granted summary judgment in favor of Westfield and Cambridge, finding that Owners and Auto-Owners had the duty to defend and indemnify Westfield and Cambridge.  Further, the insurers were estopped from raising coverage defenses.  This appeal followed.

The threshold inquiry on appeal became whether a certificate of insurance was separate from the policy itself.  The court reviewed the decision in United Stationers Supply Co. v. Zurich American Ins. Co., 386 Ill. App. 3d 88 (2008) where the plaintiff was issued a certificate of insurance containing a disclaimer that the coverage was governed by the policy itself.  The United Stationers court held that where the certificate refers to the policy and expressly disclaims any coverage other than that contained in the policy, the policy governs the extent and the terms of coverage.

Unlike United Stationers, on appeal the Owners court held that Westfield was not listed as an additional insured in the certificate.  The court stated the absence of a reference to Westfield as an additional insured in the certificate should have signaled to Westfield that there was some question to its additional-insured status.  Furthermore, there was no evidence that Westfield ever requested to view the CGL policy to verify its status as an additional insured.  The court held Westfield was not an additional insured and therefore Owners had no duty to defend.

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.

Score One for the Insured: Insurer’s Duty to Defend Triggered Based on Alleged Construction Defects

Written by: Bill Toliopoulos and Max Guggenheim

The Illinois Appellate Court has found that construction defect-related property damage at a condominium project constituted an “occurrence” within the meaning of the insurer’s Commercial General Liability (CGL) policy, thereby triggering the insurer’s duty to defend.  Interestingly, the court also held that such damage was not simply an uninsurable economic loss.

In Milwaukee Mutual Ins. Co. v. J.P. Larsen, Inc., N0. 09 CH 20554, 101316 (Ill. App. Ct. Aug. 15, 2011), plaintiff Milwaukee Mutual Insurance Company (Milwaukee) provided Larsen with a CGL policy.  In March 2003, Weather-Tite, Inc. (Weather-Tite) hired Larsen as a subcontractor to apply sealant to windows installed by Weather-Tite in a condominium building called Prairie District Homes (PDH).  The windows subsequently leaked and caused water damage.  PDH filed a complaint against Weather-Tite for breach of express and limited warranties.  Weather-Tite in turn filed a third-party complaint against Larsen alleging that Larsen was liable for contribution as a joint tortfeasor.  Weather-Tite and Larsen both tendered defenses to Milwaukee Insurance.

Milwaukee denied both defense tenders from Weather-Tite and Larsen, finding that there was no coverage under the CGL policy where the complaints alleged only construction defects and not “property damage” or an “occurrence” within the terms of the policy.  The trial court granted Milwaukee summary judgment as to Weather-Tite, but denied a summary judgment motion as to Larsen.  The appeal to the Appellate Court followed.

To determine whether Milwaukee has a duty to defend Larsen under the parties’ CGL policy, the court focused on the definition of two key terms within the insurance policy:  (1) “Property damage” was defined as a “physical injury to tangible property, including all resulting loss of use of that property.  All such loss of use shall be deemed to occur at the time of the physical injury that caused it, or loss of use of tangible property that is not physically injured.”  All such loss of use shall be deemed to occur at the time of the ‘occurrence’ that caused it.  (2) “Occurrence” was defined by the policy as an “accident, including continuous or repeated exposure to substantially the same general harmful conditions.”

In its complaint, PDH alleged that due to faulty construction, the condominium property’s common elements, individual condominium units and unit owners’ personal property were all damaged.  PDH alleged that it would have to make repairs to correct the design and/or construction defects in the amount of $4 million to $8 million, and further claimed that the costs associated with “property damage” suffered by the individual unit owners were in addition to that sum.

In evaluating whether there was “property damage,” the court looked to the language of the CGL policy.  The policy stated “[the insured] are not intended to pay the costs associated with repairing or replacing the insured’s defective work and products, which are purely economic losses.”  The court noted that “although the damages to the common elements, individual units and personal property were not expressly described, we must construe the pleadings liberally to allow for coverage, or, at least, the potential for coverage.”  The court found that the damages alleged were not intangible or merely associated with the repair or replacement of the faulty window caulking and sealant.  The court therefore held that the pleadings sufficiently alleged “property damage” within, or at least potentially within, the definition of the insurance policy.

Lastly, the court considered whether the “property damage” resulted from an “occurrence” within the meaning of the CGL policy.  In its complaint PDH alleged that Larsen’s negligent workmanship caused an accident in the form of significant and continuing water leakage throughout a building not constructed by Larsen.  The court held that the pleadings properly alleged liability and damages that exceeded merely window sealant and caulking defects, thus, the court concluded that an “occurrence” was sufficiently pled, triggering Milwaukee Insurances’ duty to defend the third party action.

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.

Loose Lips Sink Privileges in Partnership

Written by: Bill Toliopoulos and Max Guggenheim

The Illinois Appellate Court has recently provided a cautionary tale regarding the attorney-client privilege and the potentially broad scope of the subject-matter waiver if the privileged information is shared with third parties.  Specifically, in the context of a business negotiation, the attorney-client privilege can be waived by the client when the client voluntarily discloses the privileged information to its joint venture partner.

In Center Partners, Ltd. v. Growth Head GP, LLC, N0. 04-L-12194, 110381 (Ill. App. Ct. Aug. 30, 2011), the parties created a partnership for the ownership and operation of numerous shopping malls across the country.  Defendants Westfield America Trust (Westfield), The Rouse Company (Rouse), and Simon Property Group, Inc. (Simon) negotiated to purchase the assets of Rodamco North America, N.V. (Rodamco).  One of Rodamco’s assets was Head Acquisition, L.P. (Head) which was the general partner of plaintiff Urban Shopping Centers, L.P. (Urban).

Following a dispute related to the purchase of Rodamco’s assets, including the acquisition of Head, Urban filed suit alleging breach of fiduciary and contractual duties.  Urban sought the discovery of communications between Westfield, Rouse, and Simon concerning how they agreed to operate and collect revenue from the various shopping malls owned by Urban.  Westfield and Rouse conceded that during the negotiations leading up to the purchase of Rodamco, each had voluntarily disclosed to the other various attorney-client privileged information they had received from their attorneys regarding the purchase.

In 2008, Urban filed a motion to compel the attorney-client communications that were disclosed among Westfield, Rouse and Simon during their negotiations to purchase Rodamco.  The circuit court granted the plaintiff’s motion and ordered immediate disclosure of this information due to Westfield, Rouse and Simon’s waiver of the privilege.  Later, the court also ordered the disclosure of all privileged communication by and between the defendants concerning the purchase negotiations including information not disclosed among Westfield, Rouse and Simon.  The defendants promptly appealed that the disclosure order was too excessive and that the “attorney work-product doctrine” covered all communications that the attorney-client privilege did not.

The Appellate Court upheld the lower court, holding that the attorney-client privilege can be waived when a client voluntarily discloses the privileged information to a third party.  Specifically, the court found that the “subject-matter waiver doctrine” requires a party who discloses some privileged communication to reveal all privileged communications on the same subject matter.

In light of the defendants’ disclosures to one another, the Appellate Court held the scope of the attorney-client privilege extends to all communications relating to the same subject matter, regardless of whether the disclosure was in the context of litigation or a business negotiation.  Similarly, the court held that specific documents failed to qualify for protection under the “attorney work-product doctrine” because they were not generated in preparation for trial or litigation.  The Appellate Court affirmed the judgment of the circuit court and granted the motion to compel. 

The Center Partnersdecision highlights the precarious nature of partnership and joint venture agreements and serves as a poignant anecdote for attorneys and clients relating to disclosure of privileged information.  Once privileged information is shared to a third party, the privilege can be waived and the scope of the waiver could be held to extend to all communications of the same subject matter. 

Click Center Partners, Ltd. v. Growth Head GP, LLC to view the Center Partners Appellate brief.

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.

Exception to “Your Work” Exclusion Upheld Where Supplier Qualified As A Subcontractor

By: Dan Brennan and Max Guggenheim

The United States Court of Appeals for the Sixth Circuit found that where a subcontractor provided structural backfill for a waste-water treatment facility, the “your work” exclusion in the general contractor’s insurance policy did not exclude coverage because the supplier manufactured material at their own facility and supplied materials specifically for the project, which the court held satisfied the “subcontractor exception” to the “your work” exclusion.

In Mosser Constr., Inc. v. Travelers Indemnity Co., No. 09-4449, (6th Cir. Jul. 14, 2011), Mosser Construction (Mosser) entered into a contract with the City of Port Clinton, Ohio (Port Clinton) to make improvements to their waste-water treatment facility.  Mosser served as the general contractor for the project and was required to place structural backfill beneath and around the foundation of a new odor-control building.  Mosser contracted with Gerken Materials, Inc. (Gerken) for the purchase of the specified structural backfill. 

After construction was complete, the walls of the new odor-control building began to crack.  Port Clinton alleged that the cracking was due to failure of the structural backfill beneath and around the foundation of the building.  In December 2007, Port Clinton filed suit against Mosser for property damage.

The Travelers Indemnity Company (Travelers) issued Mosser a commercial general liability (CGL) insurance policy before the start of the project.  The insurance policy established a general obligation of Travelers to defend Mosser against suits seeking damages for property damage.  The policy contained an exclusion known as the “your work” exclusion which barred coverage for damage to Mosser’s constructed work after it has been “completed or abandoned.”  The policy provided an exception to the exclusion known as the “subcontractor exception,” which provided that Travelers would provide coverage for damage to “your work” if the work was performed by a subcontractor.

Mosser sought a defense from Travelers but was denied coverage because Travelers argued that Gerken was not a subcontractor.  The court determined the definition of “subcontractor” as used in the “your work” exclusion ambiguous.  Therefore, the court had to construe the term strictly against Travelers and in favor of Mosser.  The court determined that to qualify as a subcontractor, for a material supplier who does not perform work at the site, the supplier must manufacture the material according to specifications supplied by the general contractor, and, its materials contract with the general contractor must explicitly incorporate terms from the master contract or otherwise explicitly indicate that the materials at issue are manufactured or supplied specifically for the master contract’s project.

Under the above definition Gerken qualified as a subcontractor and the “subcontractor exception” was applicable.  Gerken manufactured the materials at its own facility using its own equipment.  Gerken’s purchase order also explicitly identified Mosser’s Port Clinton project as the “job” for which Gerken supplied the aggregate.  The court therefore reversed the judgment of the district court and held that Travelers had a duty to defend against the underlying Port Clinton suit.

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.

No Arbitration Agreement Where Multiple “Contracts” Created Ambiguity by Dan Brennan and Max Guggenheim

In January, the Illinois Appellate Court found that where two design firms executed both a “proposal” and then a contract with only one referencing an arbitration agreement, it was unclear which agreement governed and therefore unclear whether there was an agreement to arbitrate.  The intent of the parties in their multiple contracts was ambiguous.  Consequently, both documents could not be reconciled on the issues as to the arbitration requirement.

In A. Epstein & Sons Int’l, Inc. v. Eppstein Uhen Architects, Inc., Franciscan Communities, d/b/a St. Joseph Home of Chicago, hired defendant Eppstein Uhen Architects Inc. (EUA) to provide professional design services for a construction project in Chicago, Illinois.  EUA then asked plaintiff A. Epstein & Sons International Inc. (Epstein) to submit a proposal to help provide engineering design services for the St. Joseph’s construction project.  Dissatisfied with the performance on the project, St. Joseph Home of Chicago filed an arbitration demand against EUA in December 2007, which in turn led EUA to file an arbitration demand upon Epstein.

In May 2008, Epstein filed a petition to stay arbitration and for partial summary judgment. Epstein attached two documents to its petition:  (1) “MEPFP Engineering Services Proposal” dated November 6, 2002 “November Document,” and (2) “Architect-Consultant Agreement” dated December 9, 2002 “December Document”.  The November Document described the services Epstein planned to provide as well as project fees and expenses.  The December Document included a fixed fee of $275,000 for Epstein’s services as well as billing and insurance provisions.  The December Document also referenced an AIA provision: an unattached document that required disputes to be settled by arbitration.  Despite Epstein’s claims that the December Document was invalid due to a lack of consideration, the court denied Epstein’s motion for partial summary judgment.  The court reasoned that the November Document appeared to be a mere proposal between the parties, and that the December Document’s language was clear and unambiguous.

On appeal, contrary to the trial court’s ruling, EUA argued that the November Document was not a mere proposal, but instead it was an actual agreement between the parties.  This discrepancy concerned the appellate court and speculated that the circuit court may have ruled differently had the court known the November Document was an agreement between parties as opposed to a proposal.  EUA maintained that the December Document modified the November Agreement, whereas Epstein argued the December Document was a formality to insure proper payment.  The court found the parties’ intent for the documents ambiguous.   The appellate court held summary judgment was improper because of the discrepancy of terms in the November Document, and the need for extrinsic evidence to determine the intent of the parties.  Summary judgment was also inappropriate because the November Document raised fact issues that needed to be addressed at trial.  The judgment of the circuit court of Cook County was affirmed in part and reversed in part; cause remanded.

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.

Chambers and Partners ranks Laurie & Brennan, LLP in Band 2!

In only its second year of business, Laurie & Brennan, LLP has earned the highly regarded ranking of Band 2 for Illinois law firms in the area of Construction Law, ahead of many other established firms.  Chambers describes Laurie & Brennan as a “go-to firm in the Illinois market…providing a breadth of legal services across all aspects of construction projects, at a local and international level.”  Ty Laurie and Dan Brennan, founding partners, have been consistently ranked as lawyers in Band 1 and Band 2, respectively.  Chambers notes that the “pair draw praise from an array of loyal clients thanks to their tremendous credentials and ‘pragmatic and solution-oriented approach.’”

To view all the rankings please visit http://www.chambersandpartners.com/USA/Editorial/42945.

About Chambers and Partners: Chambers & Partners publish the leading guides to the legal profession. They have a team of 100 highly qualified full-time researchers who identify and rank the world`s best lawyers and law firms based on in-depth, objective research. Chambers identifies and ranks the world`s best lawyers and law firms.  Their team conducts thousands of interviews with lawyers and their clients worldwide. They select their sources on the basis of: submissions put forward by legal practices, interviews during the course of research, and their own database resources. 

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.

Warehouse Labeling Mistake Ruled a Covered “Occurrence” Under Commercial General Liability Policy, Triggers Duty to Defend by: Michael J. Patterson

The Illinois Appellate Court, First District, recently held that a commercial general liability insurer had a duty to defend its insured because an underlying negligence action alleged conduct that constituted an “accident” and, thus, an “occurrence” under the policy. United Nat’l Ins. Co. v. Faure Bros., No. 1-10-2214 (Ill. App. Ct. May 17, 2011).

In United Nat’l, plaintiff, United National Insurance Company (“United National”), issued a commercial general liability insurance policy to defendant, Faure Brothers Corporation (“Faure Brothers”). Air Products and Chemicals, Inc. (“Air Products”), filed suit against one of Faure Brothers’ divisions, Gateway Warehouse Company, Inc. (“Gateway”), which warehouses, re-labels and ships chemical products for its customers. In its lawsuit, Air Products alleged Gateway negligently mislabeled its products, in turn causing Air Products to ship improper chemical products to some of its customers and suffer damages. Faure Brothers demanded that United National defend the negligence lawsuit, but United National refused. Both Gateway and United National filed declaratory judgment actions and motions for summary judgment. The circuit court held that United National had no duty to defend the lawsuit, finding that Air Products’ complaint did not allege an “occurrence” as defined by the policy.

On appeal, the appellate court noted that the applicable policy provisions covered “property damage” caused by an “occurrence”, and that “occurrence” was defined as an “accident”. As the policy did not define “accident”, the court relied on the Illinois Supreme Court’s definition of “accident” in insurance cases. It stated that “determination of whether an occurrence is an accident is focused on ‘whether the injury is expected or intended by the insured, not whether the acts were performed intentionally.’” Id. (internal citation omitted). Here, the court reasoned that Faure Brothers unexpectedly mislabeled the chemicals, and thus the result was an “accident”.

Accordingly, in construing the underlying complaint liberally in favor of the insured, the appellate court held that Air Products’ allegations fell within, or potentially within, the policy’s coverage. Therefore, the court reversed the circuit court’s judgment order and found that United National had a duty to defend Faure Brothers in the underlying action.

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.

Lawyers World Law Awards 2011 Announces Laurie & Brennan, LLP a Winner

Laurie & Brennan, LLP announced as a winner of the 2011 Lawyers World Law Awards. The Lawyers World Law Awards recognize a select number of leading professional firms, across the globe, for their individual areas of specialization, within their geographical location. Laurie & Brennan, LLP was selected as a Lawyers World Law Award Winner 2011 in the category of CONSTRUCTION LAW FIRM OF THE YEAR. “We recognize and salute the organizations & advisers that have performed to exceptional levels during the most difficult period that the global economy has experienced for decades” stated the Lawyers World magazine. According to the magazine, 81,500 electronic voting forms were issued. By close of business Friday, March 18, 2011, votes received totaled 17,433, demonstrating a 21% response rate. The poll represents who the readership believes are the leading professional firms, within the various areas of specialization, across the various geographical regions. The Lawyers World Law Awards 2011 special edition will be published in May, 2011.

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.

The Recognition of our Seasoned Attorneys Gives Laurie & Brennan, LLP Reasons to Celebrate!

Laurie & Brennan, LLP recently celebrated its one year anniversary – and now we have even more reasons to celebrate!

The entire Laurie & Brennan, LLP team is proud of its Tier 1 (highest ranking) for construction law in Chicago awarded by U.S. News and World Report.  In addition, our name partners have numerous individual accolades.      

Laurie & Brennan, LLP is proud to be the only Illinois firm to have both of its named partners recognized in the “Top Ten” for Illinois construction law.  In January, Ty Laurie and Dan Brennan, the firm’s founding partners were both named to Leading Lawyers “Top Ten” lawyer list for Illinois construction lawyers.  Ty, ranked #2, and Dan, ranked #8, earned this recognition from their peers and competitors in the industry. 

Ty Laurie and Dan Brennan were both named Chicago’s Best Lawyers in the area of construction law.  Ty and Dan earned their respective places in this premier guide to the world’s top attorneys based on positive feedback from peers and colleagues. 

Ty Laurie was also ranked as a Top 100 Lawyer in Illinois and Top 100 Business Lawyer in Illinois in The Leading Lawyer.   He is also in the Top 100 lawyers in Illinois according to the 2011 Illinois Super Lawyers magazine.  The selection process for these prestigious listings was based on Ty’s high peer recognition, dedication to maintaining ethical standards, and demonstration of achievement in the construction law industry.

The prestigious publication Chambers U.S.A. consistently ranks Ty Laurie in its highest tier — Tier 1 – for Illinois construction lawyers.  He and Dan Brennan are also ranked highly in The International Who’s Who of Construction Lawyers and The Best Lawyers in America. Martindale Hubbell assigns each of them the highest professional and ethical rankings. 

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.

Subcontractor’s Mechanics Lien is Invalid Due to Failure to Serve 90-Day Notice to Lender

The Illinois Appellate Court, First District, recently held that a subcontractor’s lien does not have priority over a lender’s mortgage when the subcontractor fails to send or serve notice of its lien claim within 90 days after completion of its work to a known lender. Parkway Bank and Trust Co. v. Meseljevic, No. 1-09-3396 (Ill. App. Ct. Dec. 7, 2010). 

In Parkway Bank, a developer began constructing a forty-unit commercial condominium project in Chicago in 2006.  One of the subcontractors on the project, Beta Electric (“Beta”), contracted with the developer to perform the electrical work.  When the developer failed to pay Beta for its work, Beta recorded a mechanics lien against sixteen of the condominium units.  Shortly thereafter, the mortgagee, Parkway Bank and Trust Company (“Parkway”), filed a verified mortgage foreclosure complaint naming Beta, among others, as defendants.  Beta filed a counterclaim to foreclose its mechanics lien.

Parkway moved to dismiss the counterclaim arguing that Beta did not properly perfect its mechanics lien and that the lien, therefore, had no priority over the mortgage.  The court dismissed Beta’s counterclaim, finding that: (1) Beta was a subcontractor; (2) Beta did not give the statutorily required 90-day notice of the lien to Parkway; and (3) Parkway’s mortgage was, therefore, prior to and superior to Beta’s lien.  The court reinstated a default judgment against Beta, denied Beta’s motion to reconsider, and granted Parkway’s motion to confirm the sale and distribution of the unsold condominium units.

On appeal, the appellate court affirmed the trial court’s dismissal finding that Beta did not properly perfect its lien.  The court noted that according to Sections 1(a) and 21(a) of the Mechanics Lien Act (“Act”), Beta was a subcontractor, not a contractor, and Section 24(a) of the Act requires a subcontractor to send or serve a notice of its lien claim within 90 days after “completion” of its work to any lending agency, “if known.” 770 ILCS 60/24(a) (West 2010).  Further, the court stated that Parkway was a “known” lender to Beta as the mortgage was properly recorded and the lender was readily discoverable by Beta.  The court also noted that there was no question that Beta did not provide Parkway with notice of its lien.  As such, the court held that Beta’s lien was invalid against Parkway. 

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.