ILLINOIS CONSTRUCTION CLAIMS RESOURCES
1 Construction Claims
- 1.1 Limitations & Repose Periods
- 1.2 Right to Repair Laws and/or Pre-Suit Statutory Procedures
- 1.3 Indemnity and Contribution
- 1.4 Certificate of Merit — Experts
- 1.5 Economic Loss Doctrine
- 1.6 Contractor Licensing Requirements
- 1.7 Common Law & Statutory Claims
- 2 Construction Damages
3 Coverage Trigger of Coverage
- 3.1 Definition of an Occurrence:
- 3.2 Duty to Defend
- 3.3 Contractual Indemnity
- 3.4 Anti-Indemnity Statutes
- 3.5 Additional Insured
- 3.6 Insureds Right to Independent Counsel and Consequences of Rejecting a Defense
- 3.7 Coverage Defenses
- 3.8 Choice of Law (Forum Selection Clauses)
- 3.9 Targeted Tenders
- 3.10 Consent Judgments
Four-year limitations period for all causes of action, based in tort, contracts or otherwise, against a person for an act or omission by said person in the design, planning, supervision, observation or management of construction. 735 ILCS 5/13-214.
Claims for indemnity that arise from construction contracts are not governed by the four-year statute of limitations, but instead, express indemnity claims are subject to the ten-year statute of limitations for written contracts (735 ILCS 5/13-206) and implied indemnity claims are subject to the two-year statute of limitations applicable to contribution and implied indemnity (735 ILCS 5/13-204(b)). 15th Place Condominium Association v. South Campus Development Team, LLC, 2014 IL App (1st) 122292.
Ten-year statute of repose. Any person who discovers an act or omission prior to the expiration of the ten-year period has four years to commence an action. 735 ILCS 5/13-214(a).
The repose period can be extended by contract. 735 ILCS 5/13-214(d).
Illinois does not have any right to repair laws or pre-suit statutory procedures for construction cases.
Unpublished Illinois case suggests that Illinois would apply common law rule that parties should be given an opportunity to cure a material breach of contract. Inland Fastener, Inc. v. South Holland Metal Finishing Co., Inc., 2015 IL App (2d) 140947-U.
The Illinois Joint Tortfeasor Contribution Act (740 ILCS 100) provides that “where 2 or more persons are subject to liability in tort arising out of the same injury to person or property, or the same wrongful death, there is a right of contribution among them, even though judgment has not been entered against any or all of them.” 740 ILCS 100/2(a).
The right of contribution exists only in favor of a tortfeasor who has paid more than his pro rata share of the common liability, and his total recovery is limited to the amount paid by him in excess of his pro rata share. 740 ILCS 100/2(b).
A tortfeasor who settles with a claimant in good faith is discharged from all liability for any contribution to any other tortfeasor. 740 ILCS 100/2(d).
The Illinois Construction Contract Indemnification for Negligence Act (740 ILCS 35/1) declares that with respect to construction contracts any promise or agreement to indemnify or hold harmless another person from that person’s own negligence is void as against public policy and wholly unenforceable.
Illinois does not require a certificate of merit for construction related claims.
In Illinois, the economic loss rule (commonly referred to as “the Moorman Doctrine”) stands for the proposition that a plaintiff cannot recover under a negligence theory for purely economic losses as a result of expectations not being met in a commercial setting. The idea behind this rule is that qualitative defects are best handled by contract law. Redarowicz v. Ohlendorf, 92 Ill 2d. 171 (1982); Moorman Manufacturing Co., v. National Tank Co., 91 Ill. 2d. 69 (1982).
There are three exceptions to the economic loss doctrine:
- Where the plaintiff incurred personal injury or damage to other property as a result of a sudden or dangerous occurrence. Hecktman v. Pacific Indem. Co., 2016 IL App (1st) 151459, 59 N.E.3d 868 (1st Dist. 2016)
- Where the plaintiff’s damages are a result of fraud committed by the defendant. Id.
- Where the plaintiff’s damages are caused by a negligent misrepresentation by a defendant in the business of supplying information for the guidance of others in the business transaction. Id.
However, this exception does not apply to architects and engineers. The economic loss doctrine prevents tort claims against engineers and architects for purely economic losses. Fireman’s Fund Ins. Co. v. SEC Donohue, Inc., 176 Ill. 2d 160 (1997).
Illinois requires roofing contractors and plumbers to obtain a license. Other contractor specialties (such as electricians) are not licensed at the state level, but local municipalities may have licensing requirements.
The Illinois Roofing Industry Licensing Act (225 ILCS 335) governs the licensing of roofing contractors.
The Illinois Plumbing License Law (225 ILCS 320) governs the licensing of plumbers.
Irrigation contractors are required to register annually with the Illinois Department of Public Heath. 225 ILCS 320/2.5.
Illinois courts have created an implied warranty of habitability to protect purchasers of new houses upon discovery of latent defects in their homes. Redarowicz v. Ohlendorf, 92 Ill. 2d 171 (1982).
- The implied warranty protects both the initial purchaser of a house as well as subsequent purchasers. Redarowicz v. Ohlendorf, 92 Ill. 2d 171 (1982).
- The implied warranty of habitability may be waived by purchasers, but any such waiver is strictly construed by the courts and must specifically mention the warranty by name. Board of Managers of Village Centre Condominium Ass’n, Inc. v. Wilmette Partners, 198 Ill. 2d 132 (2001).
- A valid waiver by the initial purchaser is binding on subsequent purchasers. Fattah v. Bim, 2016 IL 119365; 52 N.E.3d 332 (2016)
The cost of correcting the defective condition is the default measure of damages. If, however, the defects could be corrected only at a cost unreasonably disproportionate to the benefit to the purchaser, or if correcting them would entail unreasonable destruction of the builder’s work, the amount by which the defects have reduced the value of the property should be the measure of damages. Park v. Sohn, 89 Ill. 2d 453, 464–65 (1982).
See Cost of Repair, supra.
As a general rule, punitive damages are not recoverable for a breach of contract, even for a willful breach. Morrow v. L.A. Goldschmidt Associates, Inc., 112 Ill. 2d 87, 94 (1986); Naiditch v. Shaf Home Builders, Inc., 160 Ill. App. 3d 245, 262, 512 N.E.2d 1027, 1037 (2nd Dist. 1987). An exception to this general rule is when the conduct causing the breach is also an independent tort and there are proper allegations of malice, wantonness, or oppression, for which punitive damages are recoverable, such as where a construction defect causes physical injury or damage to other property. Id. at 95-98.
Attorney fees are not generally recoverable on a claim based on breach of contract absent a contractual provision overriding the “American Rule,” which requires each party to bear his/her own costs of litigation. Johnson v. Human Rights Comm’n, 173 Ill. App. 3d 564, 569, 527 N.E.2d 883, 887 (1st Dist. 1988).
There is no joint and several liability specific to construction and it is generally a function of tort law in Illinois.
Costs incurred in the discovery of a construction defect are recoverable. See Naiditch v. Shaf Home Builders, Inc., 160 Ill. App. 3d 245, 268, 512 N.E.2d 1027, 1041 (2nd Dist. 1987).
The general rule for measure of damages in a construction defect claim is based on section 347 of the Restatement (Second) of Contracts. Thus, consequential damages may be awarded in such a claim. Vill. of Pawnee v. Azzarelli Const. Co., 183 Ill. App. 3d 998, 1022, 539 N.E.2d 895, 910 (4th Dist. 1989).
An “occurrence” is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Lyons v. State Farm Fire and Cas. Co., 349 Ill.App.3d 404, 407; 811 N.E.2d 718 (5th Dist. 2004). Although the policy does not define “accident,” it has been defined as, “an unforeseen occurrence, usually of an untoward or disastrous character or an undersigned sudden or unexpected event of an inflictive or unfortunate character.” State Farm Fire & Casualty Co. v. Tillerson, 334 Ill. App. 3d 404, 409, 777 N.E.2d 986, 268 Ill. Dec. 63 (5th Dist. 2002). Under Illinois Law, if an occurrence is pled, absent exclusions in the policy, an insurance company owes a duty to defend its insured. Milwaukee Mut. Ins. Co. v. J.P. Larsen, Inc., 2011 IL App (1st. 101316, 956 N.E.2d 524 (1st Dist. 2011). There is no coverage under a CGL policy where the complaints allege only construction defects and not property damage or an occurrence within the terms of the policy. Id. at 526.
An insurer’s duty to defend is broader than its duty to indemnify. General Agents Ins. Co. of Am. V. Midwest Sporting Goods Co., 215 Ill. 2d 146, 154 (2005). To determine whether an insurer has a duty to defend, the court “must compare the allegations in the underlying complaint to the policy language.” Id. at 154-155. “An insurer may not justifiably refuse to defend an action against its insured unless it is clear from the face of the underlying complaint that the allegations set forth in that complaint fail to state facts that bring the case within or potentially within the insured’s policy coverage.” Id. at 154.
Contractual Indemnity arises where there is a specific contractual agreement between the parties that creates an obligation to indemnify. Such clauses must be clear and unambiguous in order to be upheld, and are strictly construed against the party seeking indemnification. Westinghouse Electric v. LaSalle Monroe, 395 Ill. 429, 433- 434 (1946).
The Construction Contract Indemnification for Negligence Act voids any agreement in a construction contract to indemnify or hold harmless a person from that person’s own negligence. S.H.A. 740 ILCS 35/1.
Under the indemnification Act, indemnity provisions in construction contracts under which the indemnitee is held harmless for its negligence are unenforceable. Braye v. Archer-Daniels-Midland Co., 175 Ill. 2d 201 (1997). However, an insurance provision in a contract requiring the indemnitor to procure insurance for the benefit of the indemnitee does not violate the statute. Jandritis v. Village of River Grove, 283 Ill. App. 3d 152, 669 N.E.2d 1166 (1st. Dist. 1996).
Coverage for additional insureds own negligence or for the additional insureds vicarious liability for the named insured is governed by the language in additional insured endorsement in the policy. National Union Fire Ins. Co. of Pittsburgh, PA v. R. Olson Const. Contractors, Inc., 329 Ill. App. 3d 228, 769 N.E.2d 977 (2nd Dist. 2002) (own negligence); Pekin Ins. Co. v. CSR Roofing Contractors, Inc., 2015 IL App (1st) 142473, 41 N.E.3d 559 (1st Dist. 2015) (vicarious liability for named insured)
When determining Primary and Non-Contributory vs. Excess Position for insurers, courts look to the controlling contract, the other insurance clauses and the ability of the insured to selectively tender coverage. See River Village I, LLC v. Central Ins. Companies, 396 Ill. App. 3d 480, 919 N.E.2d 426 (1st Dist. 2009); State Auto Mut. Ins. Co. v. Habitat Const. Co., 377 Ill. App. 3d 281, 875 N.E.2d 1159 (1st Dist. 2007).
Insurers of additional insureds may seek to recover under theories of either equitable contribution or equitable subrogation. Home Ins. Co. v. Cincinnati Ins. Co., 213 Ill 2d 307 (2004).
- In order to state a claim for equitable contribution, the two insurers must share an “identity of risk.” Id. This automatically excludes equitable contribution claims between insurers on different levels of coverage (excess v. primary).
- the elements of an equitable subrogation claim are as follows: (1) the defendant carrier must be primarily liable to the insured for a loss under a policy of insurance; (2) the plaintiff carrier must be secondarily liable to the insured for the same loss under its policy; and (3) the plaintiff carrier must have discharged its liability to the insured and at the same time extinguished the liability of the defendant carrier. Id. The “same loss” and “identity of risk” are separate concepts. Id.
In order for an insurer to refuse to defend a complaint filed against its insured, it must show that there is no possibility of coverage for any claim alleged. An insurer may not refuse to defend unless it is clear from the face of the underlying complaint that the allegations fail to state facts, which bring the case potentially within the policy’s coverage. Maryland Casualty Co. v. Peppers, 64 Ill. 2d 187 (1976).
When an insurer assumes the defense of an action, it must advise its insured of the potential defenses it maintains with respect to its obligation to indemnify the insured. This advice to the insured commonly takes the form of a “reservation of rights” letter. When an insurer agrees to defend an insured under a reservation of rights, it preserves its right to seek a declaratory judgment denying coverage. Illinois Ins. Guar. Fund v. Santucci, 384 Ill. App. 3d 927, 894 N.E.2d 801 (2nd Dist. 2008)
If the insurer fails to advise the insured of the potential defenses, the insurer will reasonably expect coverage for any liability. As a result of the expectation it created, the insurer will often be estopped from raising defenses to coverage at the conclusion of the lawsuit. Doe v. Illinois State Medical Inter-Insurance Exchange, 234 Ill. App. 3d 129, 599 N.E.2d 983 (1st. Dist. 1992).
In Illinois a forum-selection clause in a contract is prima facie valid, and should be enforced unless the opposing party shows that enforcement would be unreasonable under the circumstances such that the selected forum “ ‘will be so gravely difficult and inconvenient that [the opposing party] will for all practical purposes be deprived of [its] day in court.’ Calanca v. D&S Manufacturing Co., 157 Ill.App.3d 85, 87-88 (1987); see also Fabian v. BGC Holdings, LP, 2014 IL App (1st) 141576.
In determining reasonableness, Illinois courts consider the following factors: (1) the law governing the formation and construction of the contract; (2) residency of the parties; (3) location of execution/performance of the contract; (4) location of the parties and witnesses; (5) the inconvenience to the parties of any particular location; and (6) whether the parties bargained for the clause. Calanca, 157 Ill. App. 3d at 88.
Illinois is one of a handful of states that permits targeted or selective tender by policyholders. The ‘targeted’ or ‘selective’ tender doctrine allows an insured covered by multiple insurance policies to select or target which insurer will defend and indemnify it with regard to a specific claim.” Kajima Construction Services, Inc. v. St. Paul Fire & Marine Insurance Co., 227 Ill. 2d 102, 107. (2007). Illinois courts have consistently held that an insured has a paramount right to choose or knowingly forego an insurer’s participation in a claim. Richard Marker Associates v. Pekin Insurance Co., 318 Ill. App. 3d 1137, 1141, 743 N.E.2d 1078 (2nd Dist. 2001). A policyholder selectively tenders the coverage to particular insurers on a risk and essentially “deactivates” coverage for other insurers on a risk, effectively saving that coverage for another day.
There are many reasons why an insured may choose to forego a certain insurer’s coverage, such as the insured’s fear that premiums would increase or the policy would be cancelled in the future. Id. When an insured designates one or more of the insurers to defend, the duty to defend falls solely on the selected or “targeted” insurer(s). Cincinnati Ins. Co. v. West American Insurance Co., 183 Ill. 2d 317, 324 (1998).
Illinois does not have any special rules involving insurers and consent judgments.