December 2023 Case Notes & Comments

LEF wishes you hope, joy, peace, health and good favor this Holiday season and in the coming New Year!

MONTHLY QUIZ: Jack Frost, the Grinch and Clark Griswold are site-seeing on the crowded downtown streets of the North Pole, looking at the Village’s architecture, buildings and attractions. As they near Santa’s Workshop, Jack Frost trips on a damaged, giant, decorative candy cane pole lying on the sidewalk and sustains injuries requiring surgery. The candy cane pole was installed and maintained by Santa and the Village. Jack Frost does not see the pole and does not know what he tripped on. Clark Griswold, who is walking behind Frost, sees the pole and later testifies that he also saw Frost’s foot near the pole. An Elf from Santa’s Workshop purportedly told Grinch that he contacted Santa and the Village about the pole because it was a "tripping hazard." Jack Frost sues Santa and the Village for negligence, alleging that they failed to maintain, remove and/or repair the pole and warn of the pole's dangerous condition. At deposition, Frost testifies that while there were no specific distractions such as loud noises or shouting, at the time of his fall, he was looking out for shoppers, elves and other pedestrians and was required to walk on the right side of the sidewalk to avoid them. Santa and the Village employees testify that with the exception of traffic signs, which are replaced in 24 hours of repair requests, the Village replaces all other signs within 50-days of a repair request. In discovery, the Village produces a "standard priority" repair request for the candy cane pole that the City received 13 days prior to Jack Frost’s fall. Based upon this record, Santa and the Village move for summary judgment, arguing they owed Jack Frost no duty of care to warn of a dangerous condition that was open and obvious and that neither the distraction nor deliberate encounter exceptions applied. Was the condition open and obvious? Does the distraction exception apply to these facts? Are Santa and the Village entitled to summary judgment? You be the judge. (Answer below).

 

ILLINOIS SUPREME COURT FINDS CONSTRUCTION DEFECTS CAUSED BY AN "OCCURRENCE" UNDER NEW LEGAL FRAMEWORK: A Developer and general contractor took over a townhouse development project from an initial developer, constructed additional townhomes and then sold all of the properties. Thereafter, the townhome Association filed suit against Developer/Contractor for alleged construction defects. Specifically, Association sued Developer for breach of contract and implied warranty of habitability, alleging that Developer's subcontractors use of defective materials and faulty workmanship resulted in defects, including “leakage and/or uncontrolled water and/or moisture in locations in the buildings where it was not intended or expected.” Association's Complaint further alleged that the defects, which were attributed solely to the subcontractors' work, resulted in "physical injury to the [t]ownhomes [that]... altered the exterior’s appearance, shape, color or other material dimension[s]", caused "property damage ... to other building materials, such as windows and patio doors", caused "water damage to the interior of units" and caused other "substantial damage to the [t]ownhomes and damage to other property.” As a result, Association alleged that it would be required to repair both the defects and the damage to "other property." Developer tendered the suit to a subcontractor's CGL Insurer as Developer was an additional insured by virtue of its contract with subcontractor. Insurer denied that it had a duty to defend Developer and filed a declaratory action contending, among other things, that Association's complaint did not allege "property damage" caused by an "occurrence." On summary judgment, Insurer argued that it was entitled to judgment because Association's damages related to defective construction, did not involve property damage beyond the buildings, but rather, were the natural and ordinary consequence of defective work, rather than an "occurrence" - arguments founded on more than thirty years of precedent from the Illinois Appellate Courts. Abandoning the prior analyses of the Illinois appellate courts, the Illinois Supreme Court set forth its own analysis, beginning with an examination of the policy. Here, the policy's insuring agreement provided that the insurance applied to "property damage [i.e. physical injury to tangible property"] only if ... caused by an occurrence." The Illinois Supreme Court found that the allegations that the townhomes suffered "water damage to the interior of [their] units" and were altered in "appearance, shape, color or other material dimension[s]" to be sufficient allegations of "physical injury to tangible property" and therefore, "property damage" as defined under the policy. Next, the Illinois Supreme Court considered whether the alleged defects were caused by an "occurrence," which was defined as an "accident" under the policy. Finding no policy definition, the Illinois Supreme Court resorted to dictionary and prior case law interpretations, concluding that "the term 'accident' in the policies at issue reasonably encompasses the unintended and unexpected harm caused by negligent conduct." Applying that definition and construing the allegations in the light most favorable to Developer, the high court held that, according to the allegations of the Association’s complaint, neither the subcontractors' substandard work, nor the resulting harm caused, were intentional intended, anticipated, or expected. The court rejected Insurer's argument that damage to the completed project caused by faulty workmanship was not accidental but the natural and ordinary consequence of the defective work, a cost of doing business. According to the Court, the grant of coverage does not reflect such limitation and the parties should look to the exclusions. The court also found the approach of looking to whether property other than the project was damaged was erroneous and should no longer be relied upon. Acuity Mut. Ins. Co v. M/I Homes of Chicago, LLC, et al., 2023 IL 129087, 2023 Ill.LEXIS 1019 (Nov. 30, 2023). 

 

WORKERS' COMPENSATION - Respondent, a municipality, appealed the Circuit Court’s determination of a prior settlement’s credit towards a present Arbitration award against Appellee-employee (Petitioner). The facts of the accident and injury are not relevant. Petitioner previously settled a December 1999 right leg injury for 20% (40 weeks) of the right leg. In his present claim, he was awarded 30% (64.5 weeks) of a right leg after Arbitration for a subsequent May 2015 right leg injury. The Arbitrator awarded Respondent a 40 week credit pursuant to Section 8(e)(17). The Act was amended in 2005 to increase the total permanent partial disability value of a leg from 200 to 215 weeks. Therefore, the Arbitrator subtracted the 40 weeks in the previous settlement from the 64.5 in the present awarded, to arrive at a net award of 24.5 weeks of permanent partial disability for Petitioner. The Commission affirmed the Arbitrator’s decision. The circuit court affirmed the Commission’s decision. The Appellate Court reversed the circuit court’s decision. Respondent argued that the plain meaning of Section 8(e)(17) must be applied when assessing credit for prior settlements and awards. The Petitioner argued that value of weeks at the time of the prior injury should be subtracted from the award rather than the percentage of loss. Petitioner argued this calculation is the most equitable as the permanent partial disability value of the leg increased between each accident, similar to inflation. Section 8(e)17 states “for the permanent loss of use or the permanent partial loss of use of any such member (leg) for which compensation has been paid, then the loss shall be taken into consideration and deducted from any award for subsequent injury.” The Appellate Court interpreted the statute to imply that the loss of use should be subtracted, rather than the compensation paid. Therefore, the Appellate court found that the credit must be calculated by subtracting the percentages of permanent partial disability (30% minus 20%), rather than the number of weeks (64.5 weeks minus 40 weeks), resulting in a 10% of the right leg credit for Respondent, or 21.5 weeks. Village of Niles v. Illinois Workers’ Compensation Comm’n, 2023 IL App (1st) 221617WC.

 

$18 MILLION VERDICT REVERSED AFTER FIRST DISTRICT FINDS THAT TRUCK DRIVER WAS NOT AN AGENT OF SHIPPING BROKER. Plaintiff was struck by an 18-wheel tractor-trailer while standing on the side of the highway. Plaintiff filed suit against the truck driver (Driver), the driver’s employer (Employer), and the shipping broker that hired the employer to transport goods (Broker). At trial the jury awarded plaintiff $18,150,750 against Driver, Employer and Broker. The jury found that Driver, as Employer’s admitted agent, was negligent. The jury also answered Broker’s special interrogatory that Employer was Broker’s agent. Broker appealed arguing that it was not liable for Driver’s negligence since neither Driver nor Employer were its agent. The First District agreed and found that the trial court erred in finding, as a matter of law, that Driver and Employer were not agents of Broker. The court considered the following facts: Broker did not pay Employer’s drivers or withhold taxes from the drivers’ pay; Broker did not hire, train or fire drivers; Broker did not dispatch or speak to drivers; Broker did not control drivers’ routes or provide them with tools, equipment or material; and Broker did not own the tractors or trailers used by the drivers. Based on these facts, the court found that Broker exercised little, if any, control over Employer’s drivers and, therefore, an agency relationship did not exist. The First District reversed the jury verdict against Broker. Driver and Employer did not appeal the verdict and, therefore, the verdict against those defendants remained. This holding can have serious implications for the defense of trucking accidents and brokers in the State of Illinois. Cornejo v. Dakota Lines, Inc. et al. 2023 IL App (1st) 220633.

 

ANSWER TO QUIZ: Santa and the Village win, Jack Frost loses. Summary Judgment was properly granted. Santa and the Village have no duty to protect against injury from a dangerous condition that is open and obvious, which under Illinois law has been defined to mean "that the condition and risk are apparent to and appreciated by a reasonable person 'exercising ordinary perception, intelligence, and judgment.'" Here, in addition to photographs depicting the (i.e. contrasting) pole, Griswold testified that he saw the pole and Jack Frost's foot near the pole, leading the trial and appellate courts to conclude that the pole was not obstructed, "readily visible" and therefore, "open and obvious." The Illinois distraction exception applies when a property owner has reason to expect that invitees' attention may be distracted so that they will not discover open and obvious dangers. Although Jack Frost was distracted by pedestrian traffic and the attractions in the Village, Jack Frost did not identify any specific distraction created by Santa or the Village that justifiably diverted his attention from the sidewalk or the candy cane pole. Additionally, the court determined that the "deliberate encounter" exception did not apply because Jack Frost admitted that he did not see the pole and therefore, did not deliberately encounter the condition. Under these circumstances, no question of fact existed as to whether the dangerous condition on a sidewalk was open and obvious, or, if the danger were open and obvious, whether the distraction or the deliberate encounter exceptions applied. Summary judgment affirmed. Patricia Ann Casey Powell and Richard Hays Powell v. The City of Chicago, 2023 IL App (1st) 211655-U (April 28, 2023).

 

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