December 2009 Case Notes & Comments

“They say that time changes things, but you actually have to change them yourself." ~ Andy Warhol

MONTHLY QUIZ: COVERAGE FOR CONSTRUCTION DEFECTS: One snowy holiday eve, Santa Claus and Hanukah Harry discover water damage to their shared toy warehouse. They make claim against Grinch Contracting for construction defects that caused the damage. Having no defense, Grinch settles with Santa and Harry. Grinch now sues his insurer for its previous refusal to defend and indemnify him against the claim. Query: Who wins the declaratory judgment action, and why? You be the judge. (Answer below).

INSURANCE LAW NOTES COMES TO YOU FROM LEAHY, EISENBERG & FRAENKEL, LTD: Your editor, Steve Frew, has recently moved to Leahy, Eisenberg & Fraenkel, Ltd. along with Bryan Luce.

ILLINOIS SUPREME COURT: DEFENDANTS FORFEIT SETOFF CLAIMS THEY FAIL TO PLEAD: A defendant doctor was held liable, and then claimed a setoff of the settlement amounts previously paid by other defendants. The Illinois Supreme Court held that the doctor forfeited his claim for a setoff by not pleading it to give the parties against whom the setoff is claimed “notice and an opportunity to defend against the [setoff] claim.” Thornton v. Garcini, 2009 WL 3471065 (Ill.S.Ct. Oct. 29, 2009)

LEF WINS APPEAL – INSURER NOT REQUIRED TO PROVIDE COVERAGE TO ADDITIONAL INSUREDS: LEF’s client prevailed as appellee in the First Appellate District. A subcontractor contractually agreed to provide insurance for the general contractor, but its policy specifically stated that coverage was provided only if the contract required primary and noncontributing coverage, which this contract did not. The general contractor selectively tendered to the sub’s insurer, seeking defense and indemnification. The trial and appellate courts ruled that the insurer was not required to provide any coverage to the general contractor. River Village I, v. Central Insurance Companies, ---N.E.2d---, 2009 WL 4041944 (First District, November 20, 2009)

SECOND DISTRICT EXPANDS LEGAL DUTY BEYOND EXPRESS TERMS OF CONTRACT: Two engineering companies were sued for negligent redesign of a bridge and traffic interchange when a car vaulted over the median. Though engineers’ contracts only required design to rebuild the bridge deck and median as it existed, the contracts also required the engineers to use “the degree of skill and diligence normally employed by professional engineers.” Relying on this language, the 2nd District held that the engineers had a legal duty to examine median barrier to determine if it was dangerous and notify the relevant parties of any defects. Thompson v. Gordon, ---N.E.2d---, 2009 WL 3969619 (Ill.App.2 Dist., November 19, 2009)


ANSWER TO QUIZ: Grinch loses, of course. The property damage was to Grinch’s own work, not to property of others. To provide coverage for Grinch’s own faulty work would transform a CGL policy into something akin to a performance bond. CMK Development Corporation v. West Bend Mutual Insurance, __Ill.App.3d__, (First District, No. 1-08-1155, October 30, 2009).