Archive for July 2014

Illinois Appellate Court Holds Express Indemnity Claim Based on a Construction Contract is Governed By 10-year Statute of Limitations

July 8, 2014

The Illinois Appellate Court recently held that a developer’s express indemnity claim against a third-party defendant contractor was governed by the ten (10) year statute of limitations generally applicable to written contracts and not by the four (4) year statute of limitations for construction-related claims even though the underlying lawsuit against the developer included claims for workmanship defects.  In 15th Place Condominium Association v. South Campus Development Team, LLC and Fitzgerald Associates Architects P.C. and Linn-Mathes, Inc., 2014 IL App (1st) 122292, South Campus Development Team (“SCDT”) was the developer of two adjacent condominium towers located at 811 and 833 West 15th Place in Chicago, Illinois (the “Project”).  SCDT contracted with Fitzgerald Associates Architects P.C. (“Fitzgerald”) for architectural services and with Linn-Mathes, Inc. (“Linn-Mathes”) to be the general contractor for the Project.  In April 2005, after a number of condominium units were sold, SCDT turned over control of the Project to 15th Place Condominium Association (the “Association”). 

In 2008, following the turnover, the Association discovered many design and workmanship defects and filed a lawsuit against SCDT which included claims of breach of implied warranty of fitness and habitability, breach of fiduciary duty, and negligence.  In June 2011, SCDT filed a third-party complaint against Fitzgerald and Linn-Mathes alleging claims for breach of contract, breach of implied warranty of good workmanship, express indemnity, and alternatively, implied indemnity against both Fitzgerald and Linn-Mathes.  Among other things, the trial court dismissed the express indemnity claim against Linn-Mathes as being barred by the four (4) year statute of limitations set forth at 735 ILCS 5/13-214.

The appellate court reversed basing its decision upon the Illinois Supreme Court’s ruling in Travelers Casualty & Surety Co. v. Bowman, 229 Ill.2d 461 (2008), which found that a written agreement to indemnify was not one of the activities protected under the four (4) year statute of limitations applicable to construction matters (i.e. the design, planning, supervision, observation or management of construction), and was instead subject to the ten (10) year statute of limitations applicable to written contracts.  Here, like in Travelers, the express indemnity claim against Linn-Mathes arose from Linn-Mathes’ refusal to perform its obligation to indemnify SCDT pursuant to an express promise to indemnify SCDT contained in the contract between the parties.  As such, Linn-Mathes’ action or inaction as an indemnitor was not protected under 735 ILCS 12-214(a), and therefore the ten (10) year statute of limitations applicable to written contracts applied to SCDT’s express indemnity claim against Linn-Mathes.

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.

Laurie & Brennan, LLP Obtains First Impression Judicial Decision Dramatically Expanding the Rights of Policy Holders to have Choice of Counsel

July 1, 2014

In Perma-Pipe, Inc. v. Liberty Surplus Ins. Corp., No. 13 C 2898, 2014 WL 1600570 (N.D.Ill. 2014) Laurie & Brennan, LLP obtained a first of its kind decision dramatically altering the control a policy holder has over the defense of its insured cases.  L & B represented the interests of Perma Pipe as policy holder that was sued in a property damages case for over $40 million.  Liberty as the insurer agreed to pay defense costs of Perma-Pipe in that case and Liberty then waived any possible defense it may have had to pay for any loss under the policy as a result of judgment or settlement in the property damage case.  Liberty argued that a waiver of any defense allowed it to appoint its lawyers to defend Perma-Pipe and to control the defense.

Perma Pipe argued that it was entitled to choose its own counsel to be paid by Liberty for the defense, rather than be forced to accept defense of the $40 million claim by Liberty’s law firm because Liberty’s policy was only $1 million, thus leaving Perma Pipe exposed. Liberty refused and a lawsuit ensued.

The federal court agreed with Perma Pipe and held that a conflict still existed even though Liberty had allegedly waived all conflicts because there was a non trivial possibility that the damages would exceed the amount of insurance.  The court noted that when the amount of insurance is capped, and the claim is much large than the insurance, the insurer might be tempted to gamble with the insured’s exposure. Perma-Pipe was allowed to choose its counsel to defend it in the property damages case with the defense to be paid by Liberty.

This decision dramatically alters the insurance landscape.  At least in Illinois, policy holders should now be able to control the defense of their cases and have those costs paid by the insurer when the amount claimed exceeds insurance.

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.


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