July 2019 Case Notes & Comments

"We are what we repeatedly do; excellence, then is not an act, but a habit." ~ Aristotle

MONTHLY QUIZ: Subcontractor's (Sub) Employee, who was injured attempting to retrieve rebar used for concrete installation, sues General Contractor (GC) for negligence. After discovery closes, GC moves for summary judgment, arguing it had neither actual nor constructive notice of any alleged dangerous condition at the jobsite. Employee asserts the record contains substantial evidence that GC retained contractual control over the work of the Sub and negligently failed to exercise its control by allowing unsafe material storage at the jobsite. Specifically, Employee points out that GC had a project superintendent who inspected the jobsite daily, employed a safety auditor, had its own safety measures in place, a safety manual, ongoing training, and a safety supervisor monitoring safety at the worksite who was authorized to halt any subcontractor's unsafe work practices. In addition, the contract between GC and Sub required Sub to comply with GC's safety rules. Can GC be held liable even though it had neither actual nor constructive notice of the dangerous rebar? Did Employee provide sufficient evidence of a material disputed fact? Is GC entitled to summary judgment? You be the judge. (Answer below). 

LEF OBTAINS A NOT GUILTY VERDICT FOR A CHICAGO BOUTIQUE HOTEL: Congratulations to Susan Chae Corcoran and Sara Spratt who prevailed on behalf of a Boutique Hotel after a four day jury trial in Cook County. Plaintiff, a 56 year old corporate executive, slipped in the hotel's shower in 2016. Plaintiff filed suit alleging that the negligently designed shower caused a displaced, fractured clavicle.  He claimed continuing pain, disability, loss of normal life (avid golfer), and disfigurement. LEF's trial team convinced the jury that the shower was not unreasonably dangerous contrary to plaintiff's retained expert's opinions and further argued that plaintiff's injuries were not as severe as claimed by plaintiff's orthopedic surgeons and retained medical expert. Plaintiff's counsel asked for a verdict in excess of $590,000. Six of the jurors provided feedback to both the plaintiff's and defendant's attorneys explaining what evidence they found compelling. Case was tried February 19-22, 2019. Case No: 17 L 1333 (Cook). 

AUTO POLICY'S 'NONDUPLICATION' PROVISION ENTITLES INSURER TO APPLY SETOFFS TO UIM ARBITRATION AWARDS: Insured-Driver presented his underinsured motorist claims to Insurer for damages he sustained in two car accidents. The claims were submitted to arbitration and the arbitrators entered of total of $44,000 in awards in favor of Insured. When Insured sought confirmation of the $44,000 awards, a dispute arose regarding the application of setoff provisions in his auto policy (Policy). Insurer claimed that the Policy's "Nonduplication" provision, which permitted setoffs for amounts that "have already been paid," permitted a $40,000 set off, which was the total amount recovered from the underinsured motorists (i.e. bodily injury policy limits recovered from each). Insurer tendered the $4,000 and Insured rejected the money, contending he was entitled to the entire award and that allowing such setoffs violated Illinois' insurance statutes and public policy. The trial court held that Insurer was entitled to a setoff and Insured appealed. On review, the appellate court found the insurance statutes cited by Insured inapplicable. Moreover, given that the express provisions of the Policy allowed for such setoffs and placed Insured in the same position as he would have been, Insurer's Policy was found to have "adhere[d] to the well-established principles of [Illinois'] public policy" and to Illinois' "underinsured motorist statute." Gean v. State Farm Mutual Automobile Insurance Company, 2019 IL App (1st) 180935 (Jul. 25, 2019).

ILLINOIS SUPREME COURT HOLDS THAT IMPLIED WARRANTY OF HABITABILITY DOES NOT APPLY TO SUB-CONTRACTORS NOTWITHSTANDING INSOLVENT GENERAL CONTRACTORS:  Condominium Association, on behalf of individual condominium owners, sued various entities including the general contractor and several sub-contractors involved in the construction of condominiums, alleging that the buildings contained various latent defects that resulted in water infiltration. Subcontractors moved to dismiss Plaintiff's count alleging implied warranty of habitability, arguing that there was no contractual privity.  In response, the plaintiff invoked the long-established "Minton Rule" from Minton v. The Richards Group of Chicago, 116 Ill.App.3d 852 (1st Dist. 1983), which permits implied warranty claims to proceed against subcontractors where the general contractor was legally insolvent. On appeal, the Illinois Supreme Court found that Minton was incorrectly decided in that it allowed a tort action against a subcontractor for economic loss where the builder-vendor had gone bankrupt, without properly addressing why the economic loss rule (i.e., Moorman Doctrine) would not apply. The Court then held that, without exception, "[t]he purchaser of a newly constructed home may not pursue a claim for breach of implied warranty of habitability against a subcontractor where there is no contractual relationship."  Sienna Court Condominium Ass'n v. Champion Aluminum Corp., 2018 IL 122022 (December 28, 2018). 

INSURANCE COVERAGE - SILENCE AS TO NAMED INSURED'S NEGLIGENCE CANNOT BE BASIS FOR DENIAL OF A DUTY TO DEFEND ADDITIONAL INSURED: Contractor hired a Vendor, a company that provided elevators and escalators installation and modernization service. Vendor agreed to name Contractor as an additional insured under its commercial general liability (CGL) insurance policy for liability arising out of Vendor's negligence. Vendor's Employee was injured on the job and named Contactor as a defendant in his lawsuit. Insurer refused to defend Contractor and filed a declaratory action as to Insurer's putative obligation to defend and indemnify Contractor as an additional insured under Vendor's policy. Insurer filed a motion for judgment on the pleadings, arguing that no defense was owed to Contractor because "there is not one word within the [underlying complaint] against [Contractor] that alleges any negligent act or omission by [Vendor]." The trial court ruled for Insurer, and Contractor appealed. On review, the appellate court reversed, finding that "the allegations in the underlying complaint must be read within the context of the Workers' Compensation Act, meaning that silence in an underlying complaint as to an employer's possible negligence must be understood as the possible result of tort immunity for employers." The appellate court held that the underlying complaint's silence as to Vendor's negligence cannot be grounds for Insurer's refusal to defend the additional insured Contractor. The decision has potential implications on insurers' duty to defend additional insureds under additional insured provisions which condition additional insured status on the negligence of the named insured, even where an underlying complaint may not specifically allege the named insured's negligence. Core Const. Servs. Of Ill., Inc. v. Zurich Am. Ins. Co., 2019 IL App (4th) 180411 (July 2, 2019). COMPARE: Pekin Insurance Co. v. Centex Homes, 2017 IL App (1st) 153601 ("[T]he allegations of the underlying complaint must be read with the understanding that the employer may be the negligent actor even where the complaint does not include allegations against that employer."). 

ANSWER TO QUIZ: Employee wins, GC loses. GC is not entitled to summary judgment. Illinois has adopted Section 414 of the Restatement (Second) of Torts, which provides that "[o]ne who entrusts work to an independent contractor, but who retains the control of any part of the work, is subject to liability for physical harm to others for whose safety the employer owes a duty to exercise reasonable care, which is caused by his failure to exercise his control with reasonable care." Restatement (Second) of Torts § 414 (1965). There must be such a "retention of a right of supervision that the contractor is not entirely free to do the work in his own way." In Illinois construction negligence cases, the trier of fact determines the extent of supervision of a contractor's control over a subcontractor's work. Here, in view of the evidence presented by Employee (e.g. GC's project superintendent's daily jobsite inspections, GC's in-place safety measures, GC's safety manual, ongoing training, GC's outside safety auditor, the contract between GC and Sub) gave rise to a material question of fact arose regarding the issue of compliance with GC's safety rules. Accordingly, summary judgment was inappropriate. John Foley v. Builtech Construction, Inc. 2019 IL App (1st) 180941 (Jul. 23, 2019). 

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