February 2011 Case Notes & Comments

“Knowledge is power, community is strength
and positive attitude is everything.” ~ Lance Armstrong

MONTHLY QUIZ: Defendant-Adult Son lives at his mother’s home, but holds no ownership interest in the house or property. Plaintiff came over to visit Defendant and is injured playing the ‘popcorn’ game on trampoline, when she ‘bottoms out’ and hits the ground. Plaintiff claims that Defendant knew the trampoline springs were loose and that the trampoline would not hold the weight of several adults playing ‘popcorn.’ Does Defendant have a duty to warn of such conditions if he knows about them? Who wins? You be the judge. (Answer below).

INSURANCE LAW - BUSINESS INCOME LOSS LIMITED TO PERIOD OF RESTORATION: Insured suffered flood damage to equipment. Though equipment was restored within three months, operations did not resume for more than a year. Insured filed a business interruption claim. The policy covered loss of business income for “necessary suspension” of operations during the “period of restoration,” limiting coverage to income lost for twelve months after the date of loss. Insured claimed business income loss for the entire twelve month period. The Court disagreed, finding provision only covered income lost during the “period of restoration” (three months), which period was limited to less than twelve months. Cimco Communications, Inc. v. Nat’l Fire Ins. Co. of Hartford, --N.E.2d--, 2011 WL 488746 (1st Dist. Feb. 08, 2011)


ARBITRATION/ENFORCEABILITY OF ARBITRATION PROVISION: Plaintiff purchased computer from Defendant-Manufacturer and later sued, alleging Defendant misrepresented computer’s processing speed. Defendant sought to dismiss suit and compel arbitration pursuant to an agreement. Trial court denied the motion. While on appeal, the arbitrator designated in agreement stopped accepting consumer arbitrations. The appellate court affirmed the dismissal on the basis that the arbitration agreement failed, due to unavailability of the arbitral forum. On review, the Illinois Supreme Court found the arbitral forum “integral to the parties’ agreement to arbitrate.” The high court held that the arbitration agreement failed, in part, due to the fact that the arbitral forum was unavailable. Section 5 of the Federal Arbitration Act (9 U.S.C. §5(2006)) also discussed. Carr v. Gateway, Inc.,--N.E.2d--, 2011 WL 329115 (Feb. 3, 2011)


INSURANCE LAW - NOTICE TO MEMBER COMPANY NOT SUFFICIENT TO PROVIDE CONSTRUCTIVE NOTICE: Worker injured by product sued Insured. Insurer No. 1 agreed to defend and Plaintiff (Insurer No. 2) agreed to provide excess coverage. Defendant (Insurer No. 3) refused to participate, claiming no coverage, citing notice provision which required Insured to give company notice “in writing, sent by registered or certified mail.” Insurer No. 3 and Insurer No. 1 were both AIG-member companies. The day of the accident, Insured phoned Broker but did not provide any written notification. In turn, Broker faxed AIG claims department an Accord that only referenced Insurer No. 1 and left “umbrella/excess” section blank. On appeal, Plaintiff argued that Defendant had sufficient notice since Insurer No. 3 and Insurer No. 1 were both AIG member companies. The appellate court disagreed, reasoning that merely because the insurance companies “belonged to the same organization … [does] not impute notice.” Federal Ins. Co. v. Lexington Ins. Co.,--N.E.2d--, 2011 WL 31860 (1st Dist. Jan.03, 2011)


NEGLIGENCE / CONSTRUCTION LAW – VOLUNTARY UNDERTAKING REQUIRES PHYSICAL INJURY: Plaintiff-Concrete Subcontractor hired by one of UIC’s contractors to pour concrete at University of Illinois at Chicago’s (UIC) campus. Defendant-Testing Lab was hired by UIC to test concrete. Though Defendant allegedly inspected and tested the concrete on several occasions, Plaintiff forced to remove and replace non-conforming concrete. Plaintiff sued for monetary losses, alleging that Defendant’s negligent misrepresentations and negligent testing caused it not to discover the bad concrete. In IL, negligence and negligent misrepresentation claims both require a duty owed by one party to another. The IL Supreme Court found that since Defendant had no direct or indirect contractual relationship with Plaintiff, Defendant owed no contractual duty. Plaintiff also argued that Defendant voluntarily undertook a duty when it inspected and tested the concrete. In IL, the ‘voluntary undertaking’ doctrine provides that one who voluntarily renders services to another may, under certain circumstances, be liable for ‘physical harm’ resulting from its failure to exercise reasonable care. According to the IL Supreme Court, ‘physical harm’ in the context of the voluntary undertaking doctrine is limited to bodily injury and does not include purely economic losses. Rojas Concrete v. Flood Testing Laboratories, --N.E.2d--, 2010 WL 5164495 (1st Dist. Dec. 15, 2010)


ANSWER TO QUIZ: Defendant wins. Because he did not own house or trampoline, Defendant did not owe Plaintiff any duty, irrespective of whether he knew the trampoline was dangerous. Also, Plaintiff’s failure to present evidence of Defendant’s ownership in trampoline resulted in a waiver of such argument and was fatal to her claim. Simmons v. Reichardt, --N.E.2d--, 2010 WL 5387560 (4th Dist. Dec. 23, 2010)