Archive for January 2011

Neighbors’ Indemnification Agreement Relating To Construction Project Is Not Governed By Illinois’ Four-Year Statute of Limitations For Construction-Related Activity

January 19, 2011

The Illinois Appellate Court, First District, recently held that the ten-year statute of limitations applicable to written contracts, rather than the four-year statute of limitations applicable to construction-related activity, applies to a property owner’s indemnification claim against another property owner for losses suffered as a result of a construction project.  The court held that the liability at issue emanates from the breach of a contractual obligation to indemnify, not from construction-related activity. Water Tower Realty Co. v. Fordham 25 E. Superior, L.L.C., 936 N.E.2d 1127 (1st Dist. 2010).

In Water Tower Realty, a property owner (“Fordham”) sought to construct a fifty-story high-rise building in the River North neighborhood.  To obtain consent from its neighbor (“Water Tower”), who owned a building across the street from the planned high-rise, Fordham agreed to indemnify Water Tower for any losses it suffered due to the construction.  Five years after Fordham completed construction, Water Tower sued Fordham for breach of the indemnity agreement alleging that the construction activity rendered its property unsuitable for rental to commercial tenants.

Fordham moved to dismiss the complaint asserting that the four-year statute of limitations for construction-related activity barred the claim.  Water Tower responded that the ten-year statute of limitations for written contracts governed its claim because it sued for breach of the indemnification agreement, not for an act or omission related to construction.  The trial court found that the four-year limitations period for construction claims governed and dismissed the complaint with prejudice.

On appeal, the appellate court reversed the trial court’s dismissal holding that the ten-year statute of limitations applied.  The court relied heavily on the Illinois Supreme Court’s reasoning in Travelers Casualty & Surety Co. v. Bowman, 893 N.E.2d 583 (Ill. 2008).  In Travelers the Court refused to apply the four-year statute of limitations for construction-related activity when Travelers sought indemnity from a contractor for Travelers’ payment on performance bonds that were paid as a result of the contractor’s breaches of its construction contracts.  The Illinois Supreme Court held that the liability at issue emanated not from construction-related activity, but rather from the breach of a contractual obligation to indemnify payment on the performance bonds.

Similarly, in Water Tower Realty the court focused on the nature of Water Tower’s injury and Fordham’s liability, not the cause triggering the indemnification obligation.  The Court noted that while the construction project allegedly caused Water Tower to lose rental income, the liability emanated from an indemnity obligation.  Therefore, Fordham’s potential liability emanated from a contractual obligation to indemnify, not from construction-related activity, and the four-year statute of limitations for construction-related activity did not apply.

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.

Advertisements

Concrete Subcontractor Cannot Recover Near $1 Million Loss From Concrete Testing Company That Approved Nonconforming Product

January 12, 2011

The Illinois Appellate Court, First District, recently held that a concrete subcontractor could not recover economic losses from a concrete testing company for its alleged negligence.  The court found that the testing company owed no duty of care to the subcontractor as there was no contractual relationship, no special relationship giving rise to a duty absent a contractual relationship, and no basis to apply the voluntary undertaking doctrine. Rojas Concrete, Inc. v. Flood Testing Laboratories, Inc., No. 1-09-2300 (Ill. App. Ct. Dec. 15, 2010).

In Rojas Concrete, the University of Illinois at Chicago began constructing the “UIC Forum” on its campus in 2005.  UIC hired several contractors, one of whom subcontracted with Rojas Concrete, Inc. (“Rojas”) to perform the concrete work at the Forum.  UIC also contracted with Flood Testing Laboratories, Inc. (“Flood”) to test and monitor the concrete poured at the Forum to ensure that it conformed to the formula and mix design specified in project plans.  Rojas and Flood did not enter into a contractual agreement with each other, though Flood did advise Rojas whether the concrete passed the inspections.

When Rojas poured approximately 710 cubic yards of nonconforming concrete, allegedly after relying on Flood’s tests, it filed suit against Flood alleging negligence and negligent misrepresentations seeking monetary damages in excess of $950,000.  Flood moved to dismiss the complaint arguing that it owed no duty to Rojas and that the economic loss claims were not recoverable in tort.  The trial court dismissed the complaint with prejudice, finding that Flood owed no duty to Rojas, the “information-provider” exception did not apply, and the voluntary undertaking doctrine did not extend to a purely economic loss.

On appeal, the appellate court affirmed the trial court’s dismissal.  The court found that Flood’s contract with UIC did not establish that Flood owed a duty to Rojas; the contract contained explicit provisions that repudiated any contractual relationships between Flood and any subcontractor, such as Rojas, and stated that Flood’s services did not relieve any contractor of its duty to comply with the terms of its own separate contract.  Further, the court found no merit in Rojas’ argument that although there was no contractual relationship, the nature of the parties’ relationship gave rise to a duty of care.  It noted the customary practice in the construction industry for the owner of a project to hire an independent entity, such as Flood, to test and monitor the concrete used by contractors, even though there may not be a contract between the contractor and testing company.  Finally, the court found that Flood did not owe Rojas a duty under the voluntary undertaking doctrine.  Noting its narrow construction, the court reasoned that the doctrine is intended to impose liability for bodily injury when one fails to exercise due care or the competence and skills one possesses.  As Rojas did not argue any reason to extend the doctrine to what is a purely an economic loss, the court could not apply it to this case.

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.


%d bloggers like this: