The Illinois Association of Defense Trial Counsel
First Quarter 2018
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Volume 28, Number 1
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ISSN-2169-3668
MONOGRAPH The Saga Continues: The Further Development of Claims and Insurance Coverage in Construction Defect Cases
feature article A “Selective” Club – The Targeted Tender Doctrine Keeps Illinois in the Minority
Illinois Association of Defense Trial Counsel WWW.IADTC.ORG PRESIDENT MICHAEL L. RESIS SmithAmundsen LLC, Chicago PRESIDENT-ELECT BRADLEY C. NAHRSTADT Lipe, Lyons, Murphy, Nahrstadt & Pontikis, Ltd., Chicago 1ST VICE PRESIDENT WILLIAM K. MCVISK Johnson & Bell, Ltd., Chicago 2ND VICE PRESIDENT NICOLE D. MILOS Cremer, Spina, Shaughnessy, Jansen & Siegert, LLC, Chicago SECRETARY/TREASURER LAURA K. BEASLEY Joley, Oliver & Beasley, P.C., Belleville DIRECTORS DENISE BAKER-SEAL Brown & James, P.C., Belleville ELIZABETH K. BARTON HeplerBroom LLC, Chicago JOSEPH A. BLEYER Bleyer and Bleyer, Marion ADAM C. CARTER Esp Kreuzer Cores, LLP, Wheaton R. MARK COSIMINI Rusin & Maciorowski, Ltd., Champaign BRUCE DORN Bruce Farrel Dorn & Associates, Chicago JAMES P. DuCHATEAU HeplerBroom LLC, Chicago DONALD PATRICK ECKLER Pretzel & Stouffer, Chartered, Chicago TERRY A. FOX Flaherty & Youngerman, P.C., Chicago EDWARD K. GRASSÉ Busse, Busse & Grassé, P.C., Chicago JOHN P. HEIL, JR. Heyl, Royster, Voelker & Allen, P.C., Peoria DAVID A. HERMAN Giffin, Winning, Cohen & Bodewes, P.C., Springfield SETH LAMDEN Neal, Gerber & Eisenberg LLP, Chicago GREGORY W. ODOM HeplerBroom LLC, Edwardsville DONALD J. O’MEARA, JR. Pretzel & Stouffer, Chartered, Chicago CECIL E. PORTER, III Litchfield Cavo, LLP, Chicago KIMBERLY A. ROSS Ford & Harrison LLP, Chicago TRACY E. STEVENSON Law Office of Tracy E. Stevenson, P.C., Chicago MICHELLE M. WAHL Swanson, Martin & Bell, LLP, Chicago JOHN F. WATSON Craig & Craig, LLC, Mattoon JENNIFER A. WINKING Scholz, Loos, Palmer, Siebers & Duesterhaus, Quincy EXECUTIVE DIRECTOR Sandra J. Wulf, CAE, IOM PAST PRESIDENTS: Royce Glenn Rowe • James Baylor • Jack E. Horsley • John J. Schmidt • Thomas F. Bridgman • William J. Voelker, Jr. • Bert M. Thompson • John F. Skeffington • John G. Langhenry, Jr. • Lee W. Ensel • L. Bow Pritchett • John F. White • R. Lawrence Storms • John P. Ewart • Richard C. Valentine • Richard H. Hoffman • Ellis E. Fuqua • John E. Guy • Leo M. Tarpey • Willis R. Tribler • Alfred B. LaBarre • Patrick E. Maloney • Robert V. Dewey, Jr. • Lawrence R. Smith • R. Michael Henderson • Paul L. Price • Stephen L. Corn • Rudolf G. Schade, Jr. • Lyndon C. Molzahn • Daniel R. Formeller • Gordon R. Broom • Clifford P. Mallon • Anthony J. Tunney • Douglas J. Pomatto • Jack T. Riley, Jr. • Peter W. Brandt • Charles H. Cole • Gregory C. Ray • Jennifer Jerit Johnson • Stephen J. Heine • Glen E. Amundsen • Steven M. Puiszis • Jeffrey S. Hebrank • Gregory L. Cochran • Rick Hammond • Kenneth F. Werts • Anne M. Oldenburg • R. Howard Jump • Aleen R. Tiffany • David H. Levitt • Troy A. Bozarth • R. Mark Mifflin
COLUMNISTS Julie A. Bruch — O’Halloran Kosoff Geitner & Cook, LLC, Northbrook Donald Patrick Eckler — Pretzel & Stouffer, Chartered, Chicago John Eggum— Foran Glennon Palandech Ponzi & Rudloff P.C., Chicago Brad A. Elward — Heyl, Royster, Voelker & Allen, P.C., Peoria Sheina R. Franco — Foley & Mansfield, PLLP, Edwardsville Mark D. Hansen — Heyl, Royster, Voelker & Allen, P.C., Peoria Scott L. Howie — Pretzel & Stouffer, Chartered, Chicago Zeke N. Katz — Pugh, Jones & Johnson, P.C., Chicago M. Elizabeth D. Kellett — HeplerBroom LLC, Edwardsville Tara Wiebusch Kuchar — HeplerBroom LLC, Edwardsville Edna L. McLain — Tressler LLP, Chicago Emily J. Perkins — Heyl, Royster, Voelker & Allen, P.C., Peoria Michael L. Resis — SmithAmundsen LLC, Chicago Michael L. Young — HeplerBroom LLC, St. Louis
CONTRIBUTORS Brad A. Antonacci — Heyl, Royster, Voelker & Allen, P.C., Peoria Jonathan L. Federman — Pretzel & Stouffer, Chartered, Chicago Dana J. Hughes — Heyl, Royster, Voelker & Allen, P.C., Peoria Katherine E. Jacobi — HeplerBroom LLC, St. Louis Howard J. Pikel — Pretzel & Stouffer, Chartered, Chicago Tyler J. Pratt — Heyl, Royster, Voelker & Allen, P.C., Peoria J. Matthew Thompson — Heyl, Royster, Voelker & Allen, P.C., Peoria
IDC QUARTERLY
EDITORIAL BOARD Tara Wiebusch Kuchar, Editor-in-Chief HeplerBroom LLC, Edwardsville
[email protected] J. Matthew Thompson, Executive Editor Heyl, Royster, Voelker & Allen, P.C., Peoria
[email protected] Catherine A. Cooke, Associate Editor Robbins, Salomon & Patt, Ltd., Chicago
[email protected] Jeremy T. Burton, Assistant Editor CNA Insurance Company, Chicago
[email protected] James P. DuChateau, Assistant Editor HeplerBroom LLC, Chicago
[email protected] Britta Sahlstrom, Assistant Editor SmithAmundsen LLC, Chicago
[email protected]
IN THIS ISSUE Monograph M-I The Saga Continues: The Further Development of Claims and Insurance Coverage in Construction Defect Cases, by Donald Patrick Eckler and Jonathan L. Federman
Feature Articles 4
A “Selective” Club – The Targeted Tender Doctrine Keeps Illinois in the Minority, by John Eggum
In Memoriam — Remembering Shirley Stevens
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Columns 19
Appellate Practice Corner, by Scott L. Howie
Association News
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28 Civil Practice and Procedure, by Donald Patrick Eckler and Howard J. Pikel
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Civil Rights Update, by Emily J. Perkins
The IDC Quarterly is the official publication of the Illinois Association of Defense Trial Counsel. It is published quarterly as a service to its members. Subscriptions for non-members are $100 per year. Single copies are $25 plus $5 for postage and handling. Requests for subscriptions or back issues should be sent to the Illinois Association of Defense Trial Counsel headquarters in Rochester, Illinois. Subscription price for members is included in membership dues.
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Construction Law Update, by Zeke N. Katz
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Employment Law, by Julie A. Bruch
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Health Law, by Mark D. Hansen, J. Matthew Thompson and Tyler J. Pratt
Manuscript Policy
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IDC Notice of Election
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IDC Membership and Committee Applications
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IDC New Members
Members and other readers are encouraged to submit manuscripts for possible publication in the IDC Quarterly, particularly articles of practical use to defense trial attorneys. Manuscripts must be in article form. A copy of the IDC Quarterly Stylistic Requirements is available upon request from The Illinois Association of Defense Trial Counsel office in Rochester, Illinois. No compensation is made for articles published, and no article will be considered that has been submitted simultaneously to another publication or published by any other publication. All articles submitted will be subjected to editing and become the property of the IDC Quarterly, unless special arrangements are made. Statements or expression of opinions in this publication are those of the authors and not necessarily those of the Association or Editors. Letters to the Editor are encouraged and welcome, and should be sent to the Illinois Association of Defense Trial Counsel headquarters in Rochester, Illinois. Editors reserve the right to publish and edit all such letters received and to reply to them. IDC Quarterly, First Quarter 2018, Volume 28, No. 1, Copyright © 2018 The Illinois Association of Defense Trial Counsel. All rights reserved. Reproduction in whole or in part without permission is prohibited. THE ILLINOIS ASSOCIATION OF DEFENSE TRIAL COUNSEL • P.O. Box 588 • Rochester, IL 62563-0588 800-232-0169 • 217-498-2649 • FAX 866-230-4415
[email protected] • www.iadtc.org
Editor’s Note, by Tara Wiebusch Kuchar
39 IDC Quarterly Monograph and Feature Article Index — Volume 27
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IDC Seminar — Guide to Effective Legal Writing and Advocacy
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IDC Seminar — New Trends in Medical Malpractice
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IDC Spring Symposium Registration
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Insurance Law, by Michael L. Young and Katherine E. Jacobi
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Legislative Update, by John Eggum
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Medical Malpractice Update, by Edna L. McLain
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President’s Message, by Michael L. Resis
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Supreme Court Watch, by M. Elizabeth D. Kellett
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Workers’ Compensation Report, by Brad A. Elward, Brad A. Antonacci and Dana J. Hughes
Young Lawyers Report, by Sheina R. Franco
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SANDRA J. WULF, CAE, IOM, Executive Director
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President’s Message Michael L. Resis SmithAmundsen LLC, Chicago
The IDC’s promotion and support of a fair, unbiased, and independent judiciary ranks first among its core values. The independence of the judiciary is enshrined through the Constitution’s separation of powers, which recognizes that judges must have the freedom to decide cases impartially and without political pressure or influence; our democracy and the rule of law depend on it. The IDC’s declaration and commitment to an independent judiciary is not new: a past President, Steve Puiszis, authored an editorial opinion that appeared in The IDC Quarterly (Vol.23, No.2) in 2013 in which he highlighted the need for lawyers to protect judicial independence. Steve spoke knowledgeably and with passion on this issue, having chaired DRI’s Judicial Task Force and served as editor of DRI’s report, “Without Fear or Favor,” which identified nationwide threats to an independent judiciary in 2011. Unfortunately, threats to an independent judiciary have only increased in today’s heated political climate. The 2016 presidential campaign saw repeated, personal attacks on the impartiality of a federal judge and his ability to decide a particular case based on the judge’s Mexican ancestry (the judge was born in Indiana). The attacks have not abated since last year’s presidential election. A different federal judge found himself under attack and referred to disparagingly as a “so-called judge” after he stayed an executive order mandating a travel ban; the suggestion was made that the courts
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were “political” and that they should be blamed for any act of terrorism that takes place as a result of the judge’s decision to stay the travel ban. Whether intended or not, these and similar statements and tweets undermine public confidence in our judicial system.
sion. Such personal attacks intended to intimidate judges threaten their ability to perform their sworn duty and discharge the duties of their office. Closer to home, judicial independence in Illinois is threatened by the unprecedented sums of campaign money spent to target judges. In 2010, special interests and advocacy groups spent over $3 million in an uncontested Illinois Supreme Court retention election. In 2014, in the most recent judicial retention election of an Illinois Supreme Court justice, a group of trial lawyers funded
All of us must be prepared to protect the independence of the judiciary and respond to unfair attacks on judges; the stakes are too high for us to remain silent.
To be sure, it is a time-honored American tradition and constitutional right for citizens to disagree with court decisions on controversial issues. And not just ordinary Americans—Presidents Jefferson and Jackson had their differences with Chief Justice Marshall; Lincoln with Chief Justice Taney; Roosevelt with Supreme Court decisions striking down early New Deal legislation; and more recently, Obama with Citizens United, to name a few of the better known disputes in our history. Judges can and should be criticized for their decisions on the merits. Judicial opinions are not sacrosanct; reviewing courts overturn their previous decisions as well as lower court decisions frequently. But today, many people across the political spectrum believe that personal attacks on judges are fair game when they simply dislike a judge’s deci-
an eleventh-hour television campaign ad (with two lawyers alone donating $1.2 million) that suggested that the Illinois Supreme Court justice had sold his vote to overturn multi-million dollar judgments against Phillip Morris and State Farm in return for their contributions to his 2004 election campaign. That attack ad stirred up last-minute support (and money) for the justice, who received 60.7% of the vote and was narrowly retained. At the time, our President, David Levitt, wrote about the late infusion of money in that election in The IDC Quarterly (Vol.25, No.1) in 2015, and how it threatened judicial independence in Illinois. According to a column recently appearing in the Chicago Daily Law Bulletin, “Attack on Courts, Judges Grow as Money Pile Gets Higher and Higher” (Vol.163, No.214), the flood of outside
Editor’s Note money in the most recent election cycle in 2015-16 for state judicial races topped $19 million nationwide. Ten state judicial races across the country each exceeded $1 million. As the spending arms race escalates, the state judicial selection process has become more partisan and politicized with each cycle. Regardless of which candidate wins, the loser every time is the public’s confidence in a fair and independent judiciary. Judges by their Code of Judicial Conduct cannot effectively answer when politicians and special interest groups attack them on social media and through expensive advertising campaigns; we, as lawyers and officers of the court, must answer unwarranted attacks. The Illinois Rules of Professional Conduct encourage lawyers to defend judges who are unfairly criticized (“[A] lawyer should further the public’s understanding of and confidence in the rule of law and the justice system because legal institutions in a constitutional democracy depend on popular participation and support to maintain their authority”) (Ill. R. Prof. Conduct (2016), Preamble)). Moreover, as a matter of public education, we can author op-ed articles for newspapers on the importance of a fair and independent judiciary and write letters to the editor and correct misconceptions regarding the role of the judiciary. We can accept speaking engagements to educate the public. Finally, we can find ways to improve campaign funding, disclosure and spending limits for judicial elections, and work with other organizations and bar groups to support open lines of communications between bench and bar. All of us must be prepared to protect the independence of the judiciary and respond to unfair attacks on judges; the stakes are too high for us to remain silent.
Tara Wiebusch Kuchar HeplerBroom LLC, Edwardsville
A new year brings a sense of renewal and fresh beginnings. When the calendar flips to January 1, we get to shed the hard shell formed the year before and emerge brand new. Oprah Winfrey captured these sentiments when she said “Cheers to a new year and another chance for us to get it right.” This quote is perfect—not just as it relates to personal growth and change—but as it relates to the IDC’s ongoing efforts, guided by its core values, in service to the defense bar and justice in Illinois
There have also been interesting and important developments in the law and rules of procedure that are noteworthy. The Employment Law Column by Julie Bruch explains the Court of Appeals for the Seventh Circuit’s recent opinion regarding whether extended medical leave is a “reasonable accommodation” under the Americans with Disabilities Act. Emily Perkins’ Civil Rights Column highlights another Seventh Circuit opinion regarding constitutionality of public nudity ordinances and its analysis of the
“Cheers to a new year and another chance for us to get it right.” — Oprah Winfrey
and beyond. This year presents more chances for each of us to continue our efforts to get it right. The content of this IDC Quarterly certainly assists these efforts. Michael Resis’ President’s Message draws our collective attention to the importance of a fair and independent judiciary. His words on this issue are especially important as 2018 is an election year. He appropriately reminds us that, as members of the Illinois bar, we are called to defend judges who are unfairly attacked. The Legislative Update authored by John Eggum succinctly explains the General Assembly’s recent veto session —how it works, what occurred, and what can be expected in 2018.
First Amendment and Equal Protection claims. The Civil Practice Column authored by Donald Patrick Eckler and Howard J. Pikel examines a recent decision related to the Petrillo doctrine that is a “must read” for any attorney representing a healthcare provider. The Medical Malpractice Column by Edna McLain discusses the recent Illinois Supreme Court decision relating to relation back of wrongful death claims when the act of negligence occurred beyond the medical malpractice fouryear statute of repose. The Appellate Practice Corner by Scott Howie and the Workers’ Compen— Continued on next page
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Editor’s Note | continued
sation Column highlight the importance of following and understanding the rules. The Appellate Practice Corner thoughtfully explains the rationale of a fractured Illinois Supreme Court regarding the requirements of Illinois Supreme Court Rule 308. The Workers’ Compensation Column discusses three recent cases related to appellate jurisdiction and the rules of appellate review. The sole feature of this issue, authored by John Eggum, discusses the selective tender doctrine and examines its continued viability in Illinois. The issue is rounded out by the Civil Practice Monograph that is focused on the implied warranty of habitability. The authors, Donald Patrick Eckler and Jonathan Federman, set forth important updates on the law and present new issues for consideration. Finally, the IDC pays tribute to Shirley Stevens, the former executive director. As reflected in the tribute, Shirley was a beloved member of the IDC family who is dearly missed. As always, a debt of gratitude is owed to all of the columnists, contributors, and editors whose collective efforts continue to make the IDC Quarterly a preeminent publication. The IDC is fortunate to have so many volunteers eager to make a difference. Hopefully, the content of this issue, and all others, will help each of us as we strive to get it right this year.
Feature Article John Eggum Foran Glennon Palandech Ponzi & Rudloff P.C., Chicago
A “Selective” Club – The Targeted Tender Doctrine Keeps Illinois in the Minority For more than 25 years, Illinois has recognized the targeted/selective tender doctrine, which allows insureds confronted with a claim that implicates two or more insurance policies to choose which insurer should respond to the claim. Once a selection is made, this judicial doctrine applies to restrict the rights of the targeted/selected insurer, preventing claims for contribution by otherwise co-liable (non-selected) insurers. No statute or regulation controls, nor do the terms of the insurance policies themselves. Rather, targeted tender is a judicial solution to a purported problem that Illinois courts decided could not be otherwise resolved. The Illinois Supreme Court has repeatedly addressed the doctrine and determined it to be sound. The quandary, however, is that after 25 years, Illinois is the only state to apply the targeted/selective tender doctrine with regularity, and based on reported decisions, it appears that only two other states, Washington and Montana, have applied the doctrine to resolve insurance coverage disputes. The lack of adherents to the Illinois approach calls into question whether the doctrine should continue in Illinois, or whether it should be discarded in favor of approaches used in other jurisdictions. Why Are There Two Policies? The concept of targeted tender presumes that an insured person or
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entity is insured by two insurance policies. As might be expected, it is highly unusual for an insured to purchase multiple redundant insurance policies for a particular policy period. Although companies certainly maintain “towers” of excess coverage and may purchase “umbrella” policies to insure gaps in coverage, it would be atypical to pay for two substantially identical primary insurance policies from different insurance companies. Targeted tender is not directed at an outlier situation involving an insured that bought redundant coverage, however. Rather, it is most often directed at a commonplace factual scenario. Commercial contracts of all kinds, such as for con-
About the Author John Eggum is a partner at Foran Glennon Palandech Ponzi & Rudloff P.C., where he concentrates his practice on insurance coverage matters and commercial litigation. He represents insurers, TPAs, brokers, and captive managers in professional liability disputes, and also litigates cyber/technology liability claims. Mr. Eggum’s law degree was obtained, with distinction, from The University of Iowa College of Law, and following law school, he served as the law clerk to the Hon. Bruce A. Markell in the United States Bankruptcy Court for the District of Nevada, in Las Vegas. Mr. Eggum serves as the Vice-Chair of the IDC Legislative Committee and the Vice-Chair for the IDC’s Young Lawyers Division.
The Illinois Supreme Court has repeatedly addressed the doctrine and determined it to be sound. The quandary, however, is that after 25 years, Illinois is the only state to apply the targeted/selective tender doctrine with regularity, and based on reported decisions, it appears that only two other states, Washington and Montana, have applied the doctrine to resolve insurance coverage disputes.
struction or repairs, the sale of goods, or the manufacture of a product, frequently require the good or service provider to have insurance, and to name the contract counterparty (the person paying for the goods/services) as an additional insured on the provider’s insurance policy. Being named as an additional insured does not cost the party being added anything, and it is an attractive benefit because if a claim has to be tendered under that insurance, the claim will not be held against the additional insured for purposes of its own loss history. This means it will not face increased insurance premiums as a result of the contractual counterparty’s insurer paying the claim. Accordingly, the ability to “target” a policy that the insured did not have to pay premiums for carries a potentially significant advantage. Key Cases The targeted/selective tender doctrine was first articulated by the Illinois Appellate Court First District in Inst. of London Underwriters v. Hartford Fire
Ins. Co., 234 Ill. App. 3d 70, 73 (1st Dist. 1992). At issue was an accident settlement which implicated insurance policies issued by both the Institute of London Underwriters and Hartford Fire Insurance Company. Inst. of London Underwriters, 234 Ill. App. 3d. at 71. Underwriters sought contribution from Hartford, and Hartford resisted on the grounds that the insured had instructed Hartford not to respond to the loss. Id. at 74. Without an actual tender of the claim (a request for the insurer to respond), Hartford had no responsibility to indemnify the insured for any portion of the settlement, and therefore Hartford similarly had no obligation to reimburse or otherwise contribute with respect to amounts that Underwriters paid in settlement. Id. at 76. Arguments that the “other insurance” provisions of the respective policies—contractual provisions that expressly contemplated the existence of other applicable insurance policies and purported to provide how the policies responded—were rejected. Id. at 77. Specifically, the appellate court held:
The Institute’s argument that the ‘other insurance’ clause of Hartford’s policy requires Hartford to contribute to the settlement suffers from the same infirmity as its argument for application of the equitable contribution doctrine, in that any liabilities arising under this clause are not triggered until the insurer becomes obligated to pay or defend. Id. Without a tender by the insured, the court found that Hartford could have no obligations—either contractual or contributory. Id. at 80. It specifically reasoned that: Contribution is a creature of equity. . . . Under the circumstances of this case, it would be inequitable to require an insurer to reimburse another carrier for a claim it has no obligation to pay to its insured and in circumvention of the insured’s wishes with whom it has the contract. Id. The Illinois Supreme Court subsequently cited London Underwriters with approval in a decision discussing Illinois law on what constitutes tender of a claim and the implications for the trigger of insurance coverage. Cincinnati Companies v. W. Am. Ins. Co., 183 Ill. 2d 317, 326 (1998). There, the court recognized the principle that an insured could knowingly choose to forego an insurer’s assistance on a particular claim as an accurate statement of Illinois law. Cincinnati Companies, 183 Ill. 2d at 326. (“It is true that an insured may choose to forgo an insurer’s assistance — Continued on next page
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Feature Article | continued
for various reasons, such as the insured’s fear that premiums would be increased, or the policy cancelled, in the future.”). The Illinois Supreme Court then fully adopted the London Underwriters framework in the case John Burns Const. Co. v. Indiana Ins. Co., 189 Ill. 2d 570, 578 (2000). In John Burns, the supreme court expressly found that an “other insurance” provision does not overcome the right of an insured to tender defense of an action to one insurer alone. John Burns Const. Co., 189 Ill. 2d at 578. The insured (John Burns) had a right to coverage under two insurance policies – one it paid the premiums for, and one paid for by John Burns’ subcontractor (as is customary, the subcontractor had to provide this insurance as a condition of working on the applicable construction project). Id. at 571. The court found that John Burns’ decision to target the policy procured by the subcontractor was controlling with respect to the rights of the two insurers. Id. at 578. The insurance that John Burns purchased directly was found to be “unavailable” as the result of John Burns’ decision not to tender to that insurer, and therefore the “other insurance” provisions of the insurance policies could not be invoked. Id. (“The insurance provided to Burns by Royal was not ‘available,’ in the language of the other insurance provision, for Burns had expressly declined to invoke that coverage.”). This meant that Indiana Insurance (the insurer providing coverage paid for by the subcontractor) had to bear the full loss, notwithstanding the fact that John Burns had other insurance that it had the ability to access, and which would have covered John Burns’ liability but for the decision to forego that insurer’s participation. Id. (“Indiana
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was foreclosed from seeking equitable contribution from [Burns’ insurer].”). In 2007, several years after John Burns, the Illinois Supreme Court finally labeled and formalized the targeted/selective tender doctrine that had first been applied in London Underwriters. Specifically, in Kajima Const. Servs., Inc. v. St. Paul Fire & Marine Ins. Co., 227 Ill. 2d 102, 107 (2007), the supreme court expressly stated that “[T]he ‘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 Const. Servs., Inc., 227 Ill. 2d at 107. The facts presented by Kajima forced the supreme court to address a consequence of allowing insureds to manipulate the sources of insurance available to them; namely, that at some point the manipulation becomes so prejudicial to the insurers that it would be inequitable to permit. See, Id. At issue in Kajima was whether the non-selected primary insurance had to be exhausted prior to the obligations of an excess insurer being triggered. Id. at 112-113. The court recognized that the targeted tender doctrine had to have limits, lest it eviscerate the distinction between primary and excess insurance – it hypothesized that, after all, if you can pick any insurer to target, why not pick the excess policy which likely has greater limits and was purchased for a lower premium? Id. at 116-117. The court declined to go this far and expressly held that: Given the clear distinctions between primary and excess insurance coverage, we decline to extend the targeted tender
doctrine to require one insurer to vertically exhaust its primary and excess coverage limits before all primary insurance available to the insured has been exhausted. Id. Thus, while the targeted tender doctrine was reaffirmed, the supreme court recognized its utility was subject to certain limits. Trending Away from Targeted Tender In the decade since the Kajima decision, the Illinois Supreme Court has not revisited the targeted doctrine. The Illinois Appellate Court First District and several federal courts have had occasion to address it, however, and those cases demonstrate a trend away from applying selective tender. See, Illinois Emcasco Ins. Co. v. Nationwide Mut. Ins. Co., 2015 IL App (1st) 140928-U, ¶ 79, as modified (Nov. 9, 2015) (“Illinois precedent disfavors expanding the targeted tender doctrine beyond its originally intended scope.”). The decisions are varied in their rationales, but the trend has clearly been to seize upon any distinguishing factors recognized by the Illinois Supreme Court (such as the primary/excess distinction addressed in Kajima), and move away from allowing targeted tender to control outcomes (instead seeking to reach a result that is both equitable and which gives force to the intentions of the parties, as expressed by the relevant insuring agreements). See, e.g., Greenwich Ins. Co. v. John Sexton Sand & Gravel Corp., 2016 IL App (1st) 151606-U, ¶ 54, as modified on denial of reh’g (July 22,
2016) (case involving two commercial liability policies and a pollution policy, all of which were alleged to apply on a primary basis; court found pollution policy was, in fact, an excess policy, and therefore targeted tender doctrine could not apply); Netherlands Ins. Co. v. Knight, No. 410CV04043, 2014 WL 3376873, at *2 (C.D. Ill. July 10, 2014) (targeted tenders found invalid); Certain Underwriters at Lloyd’s, London v. Cent. Mut. Ins. Co., 2014 IL App (1st) 133145, ¶ 9, 12 N.E.3d 762, 767 (suggesting, incorrectly, that “other insurance” clauses were created in response to the targeted tender doctrine, and therefore not applying the doctrine); AMCO Ins. Co. v. Cincinnati Ins. Co., 2014 IL App (1st) 122856, ¶ 14, 10 N.E.3d 374, 378 (discussing that “the targeted tender doctrine has been criticized in recent years.”). Other States’ Approaches As noted, Montana and Washington have sparingly applied the targeted tender doctrine. See, Mut. of Enumclaw Ins. Co. v. USF Ins. Co., 164 Wash. 2d 411, 431, 191 P.3d 866, 878 (2008); see also, Cas. Indem. Exch. Ins. Co. v. Liberty Nat. Fire Ins. Co., 902 F. Supp. 1235, 1239 (D. Mont. 1995). All other states have rejected it. See, Am. States Ins. Co. v. Nat’l Fire Ins. Co. of Hartford, 202 Cal. App. 4th 692, 706, 135 Cal. Rptr. 3d 177, 187 (2011) (citing 4 Bruner & O’connor, Construction Law (2011) § 11:59) (“The selective tender rule has had little traction outside of Illinois”); Ins. Co. of Pennsylvania v. Great N. Ins. Co., 787 F.3d 632, 637 (1st Cir. 2015), certified question answered sub nom. Ins. Co. of State v. Great N. Ins. Co., 473
Mass. 745, 45 N.E.3d 1283 (2016) (“This is not to say that selective tender makes obvious sense as a rule. . . . The parties point us to only a few jurisdictions that have expressly adopted the rule.”); see generally 14 Couch on Ins. § 200:37 (“A minority of jurisdictions have adopted what is commonly referred to as the “selective tender” rule.”). Instead of allowing an insured to override the other insurance clauses in the insurance policies that apply, other states have taken the more traditional approach of attempting to give effect to the intentions of the parties, as expressed through the contractual language utilized. See W. Bend Mut. Ins. Co. v. MacDougall Pierce Const., Inc., 11 N.E.3d 531, 546 (Ind. Ct. App. 2014) (resolving multiple insurer dispute by reference to underlying indemnity agreements); see also Cont’l Cas. Co. v. N. Am. Capacity Ins. Co., 683 F.3d 79, 93 (5th Cir. 2012) (permitting subrogation by one insurer against three others, relying on policy language). These cases demonstrate that a judge-made doctrine is not essential to resolving disputes between or involving one insured and multiple insurers. These courts would appear to seek to avoid the parade of horribles that have been asserted to accompany selective tender: [A]doption [of selective tender] would also be contrary to sound public policy because it would reward insurers that try to ignore their coverage obligations at the expense of those that conscientiously honor them. Under the selective tender exception, an insured that has two insurers of the same risk might choose to
tender the claim to the insurance company that will promptly honor and pay the claim with minimum inconvenience and paperwork, and avoid tendering the claim to the insurance company that would delay payment of the claim and maximize the inconvenience and paperwork involved in obtaining payment. Selective tender would prevent the conscientious insurer from seeking equitable contribution from its less conscientious coinsurer. It would reward the “bad” insurer, who would be spared paying its fair share of the claim, and punish the “good” insurer, who would be required to pay the entirety of the claim alone. Great Northern, 473 Mass. at 752. Conclusion After 25 years of experience with targeted tender, the case law in Illinois has failed to demonstrate that the targeted tender doctrine is a better way to resolve issues with multiple insurers than the alternatives utilized elsewhere. This is best illustrated by the failure of the doctrine to gain any adherents from other states, as well as by the several courts applying Illinois law that have shown a trend toward declining to apply the doctrine. Accordingly, whether the doctrine should continue to have vitality in Illinois is a significant question, as well as whether courts will continue to independently move away from finding that the doctrine governs particular situations.
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Supreme Court Watch M. Elizabeth D. Kellett HeplerBroom LLC, Edwardsville
Can a Named Driver Exclusion Be Used to Deny Coverage to the Named Insured? Thounsavath v. State Farm Mutual Automobile Insurance Co., No. 122558, 1st Dist. No. 1-16-1334 The plaintiff (Insured) was a passenger in a car driven by Clinton Evans. Thounsavath v. State Farm Mutual Automobile Insurance Co., 2017 IL App (1st) 161334, ¶ 4. The Insured was injured in an accident and filed an underinsured motorist claim with State Farm (Insurer). Thounsavath, 2017 IL App (1st) 161334, ¶ 5. The Insurer denied coverage because of a named driver exclusion for Mr. Evans. Id. The Insured filed a declaratory judgment action, seeking an order that the driver exclusion endorsement violated section 143a-2 of the Illinois Insurance Code (215 ILCS 5/143a-2) and violated Illinois public policy. Id. ¶ 1. The Insurer filed a counterclaim for declaratory judgment that the Insured was not entitled to underinsured coverage under her policy. Id. The circuit court denied the Insurer’s motion for summary judgment and granted the Insured’s motion for summary judgment. Id. The Insurer appealed. Id. Reviewing the case de novo, the Illinois Appellate Court First District affirmed. Id. ¶¶ 10, 36. The First District first addressed Illinois’s mandatory insurance statutory scheme. Under 625 ILCS 5/7-317(b)(2), motor vehicle insurance “[s]hall insure the person named therein and any other person using or responsible for the use of such motor vehicle or vehicles with the express or 8 | IDC QUARTERLY | First Quarter 2018
implied permission of the insured.” Id. ¶ 16. The First District explained that liability insurance is required “to protect the public by securing payment of their damages.” Id. ¶ 17 (citing Phoenix Ins. Co. v. Rosen, 242 Ill. 2d 48, 57 (2011)). Illinois Insurance Code Section 143a-2, which requires insurance policies to include uninsured and underinsured motorist coverage, is necessary “so that the policyholder is placed in substantially the same position he would occupy if he were injured or killed in an accident where the party at fault carried the minimum liability coverage.” Id. (citing Phoenix Ins. Co., 242 Ill. 2d at 57). Although parties are free to contract, their agreement may not be contrary to public policy. Id. ¶ 19. The First District noted that while named driver exclusions are permitted in Illinois, there are cases in which Illinois courts have refused to enforce such exclusions. Id. ¶¶ 22, 24. The First District pointed to Barnes v. Powell, 49 Ill. 2d 449 (1971), which held that an injured insured was entitled to uninsured motorist coverage under her own policy where she was a passenger in her vehicle, which was driven by an uninsured individual. Id. ¶ 24. Moreover, in Rockford Mutual Insurance Co. v. Economy & Casualty Co., 217 Ill. App. 3d 181 (1st Dist. 1991), the First District held that
decedent’s mother could recover under the uninsured motorist coverage in her own policy where the named driver exclusion rendered the vehicle uninsured. Id. ¶ 25. Finally, in Doxtater v. State Farm Mutual Automobile Insurance Co., 8 Ill. App. 3d 547, 552 (1st Dist. 1972), the First District held that Section 143a requires “insurance companies to provide uninsured motor vehicle coverage for ‘insureds’ regardless of whether, at the time of injury, the insureds occupied or operated the vehicle declared in the subject policy.” Id. ¶ 26. Turning to the facts of the case, the First District articulated the issue before it as, “whether the named driver exclusion violates our mandatory insurance requirements and public policy where the exclusion bars coverage for the named insured.” Id. ¶ 28. The First District looked to American Access Casualty Company v. Reyes, 2013 IL 115601 to guide its decision. Id. In Reyes, the defendant was the named insured and
About the Author M. Elizabeth D. Kellett is a partner at HeplerBroom LLC. Ms. Kellett is a litigation attorney with a primary emphasis in the defense of complex, multi-party civil cases and class actions, including all aspects of product liability, particularly pharmaceutical drugs and devices. Prior to joining HeplerBroom, Ms. Kellett practiced law in Washington, D.C. and represented institutions of higher learning in administrative hearings and proceedings before the U.S. Department of Education. She also represented insurance and financial corporations and individuals in proceedings before the Securities and Exchange Commission, civil and criminal litigation, and in matters of corporate governance and compliance. Ms. Kellett earned her B.A. from Georgetown University in Washington D.C. in 2002 and her J.D. from Georgetown University Law Center in 2006.
was excluded from the policy if she operated the vehicle. Id. ¶ 29. After an accident, the defendant’s insurance company sought a declaration that it owed no liability coverage to the defendant based on the named driver exclusion. Id. ¶ 30. The Illinois Supreme Court held that under the plain language of Section 7-317(b)(2), the named insured could not be excluded from coverage. Id. ¶ 32. The Supreme Court also found that the interest in protecting the driving public outweighed an individual’s desire to obtain a lower premium by agreeing to the exclusion. Id. ¶ 33. In light of Reyes, Barnes and its progeny, the First District held that “a named driver exclusion in an insured’s policy that bars liability, uninsured, or underinsured coverage for the named insured violates Illinois’s mandatory insurance requirements and Illinois public policy.” Id. ¶ 34. The Insurer appealed. The Insurer first argues that named driver exclusions are permitted in Illinois and are supported by public policy. In St. Paul Fire & Marine Insurance Company v. Smith, 337 Ill. App. 3d 1054 (1st Dist. 2003), the Insurer explains, the First District noted that exclusions allow drivers with family members having poor driving records to purchase affordable insurance. Smith, 337 Ill. App. 3d at 1061-62. Moreover, exclusions deter insured drivers from letting unfit excluded drivers drive their vehicles, which keeps these drivers off the road. Id. The Insurer argues that the Insured knew that liability would not be paid if Mr. Evans operated a vehicle. The Insured agreed to the named driver exclusion and understood that the endorsement would be effective as to the general public. Therefore, the Insurer argues, the Insured cannot now object to the endorsement being applied to herself.
Second, the Insurer distinguishes the Reyes decision. Reyes dealt with liability coverage, which is specifically addressed by Section 7-317(b)(2), and addressed the narrow issue of whether the sole named insured and owner can be excluded from coverage. Reyes, 2013 IL 115601, ¶ 34. Here, however, the issue is underinsured coverage, which is not addressed by Section 7-317(b) (2), and the Insured was covered by her policy. Moreover, the Insurer argues, Reyes does not hold that there is a public policy of protecting named insureds at a higher level than the general public. The Insured was free to enter into this contract with the Insurer and the general public is not harmed by it. The Insured chose to get in the car with Mr. Evans despite her knowledge of the exclusion. Third, the Insurer argues that the named driver exclusion does not
violate the uninsured or underinsured motorist statutes. The First District’s reliance on Doxtater, the Insurer argues, was improper because Doxtater was effectively overruled when Section 143a was amended to apply uninsured coverage only if the vehicle involved in the accident is described in the policy. Moreover, the Insurer again argues that it is against public policy to give the Insured special status by not applying an exclusion to the Insured that would be applied to the general public. Finally, the Insurer argues that Barnes does not support the First District’s holding. Barnes dealt with whether a driver would be considered uninsured because of a member of the household exclusion under liability coverage. Barnes does not address named driver exclusions, which are specifically authorized under Illinois law.
If Policy and Discretion are Involved, Is a Public Employee, and Therefore a Public Entity, Always Immune from Liability? Monson v. City of Danville, No. 122486, 4th Dist. No. 4-16-0593 The plaintiff (Plaintiff) tripped and fell onto a sidewalk maintained by the defendant (City). Monson v. City of Danville, 2017 IL App (4th) 160593, ¶ 1. The Plaintiff sued the City alleging that the City failed to repair an uneven seam between two slabs of concrete. Monson, 2017 IL App (4th) 160593, ¶ 7. The City moved for summary judgment and attached depositions from the superintendent of downtown services (“Superintendent”) and the public works
director (“Director”). Id. ¶ 8. The superintendent testified that she walked the City sidewalks, identified areas that she thought required repair, and then toured sites with the City engineer who would determine what repairs to recommend. Id. ¶¶ 9, 12. The director testified that decisions to repair part of a sidewalk are made on a case-by-case basis and that numerous factors are considered before making that decision. — Continued on next page
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The director testified that decisions to repair part of a sidewalk are made on a case-by-case basis and that numerous factors are considered before making that decision. The director inspected every slab of sidewalk and used his discretion to make the final decision regarding whether to repair each slab.
Id. ¶ 11. The director inspected every slab of sidewalk and used his discretion to make the final decision regarding whether to repair each slab. Id. ¶ 12. The director and superintendent testified that they would have inspected the piece of sidewalk on which the plaintiff tripped. Id. ¶¶ 9, 12. Relying on Richter v. College of Du Page, 2013 IL App (2d) 130095, the circuit court found that the City was immune under sections 2-109 and 2-201 of the Local Governmental and Governmental Employees Tort Immunity Act (“Act”) and granted the City’s motion for summary judgment. Monson, 2017 IL App (4th) 160593, ¶ 13. The plaintiff appealed. Id. ¶ 14. Reviewing the case de novo, the Illinois Appellate Court Fourth District affirmed. Id. ¶¶ 3, 37. The Fourth District first discussed the applicable sections of the Act. Id. ¶¶ 19-20. Section 2-109 states that “[a] local public entity is not liable for an injury resulting from an act or omission of its employee where the employee is not liable.” 745 ILCS 10/2-109. Section 2-201 states: “[e]xcept as otherwise provide by Statute, a public employee serving in a position involving the determination of policy or the exercise of discretion is not liable for an injury resulting from his act or omission in determining policy when acting in the 10 | IDC QUARTERLY | First Quarter 2018
exercise of such discretion even though abused.” 745 ILCS 10/2-201. Second, the Fourth District discussed the Richter case. Monson, 2017 IL App (4th) 160593, ¶¶ 22-26. In Richter, a student tripped on a sidewalk slab and sued her college. Id. ¶ 23. The college claimed immunity under sections 3-102, 2-109, and 2-201 of the Act. Id. Under section 3-102, a public entity is not liable for injury unless the public entity had actual or constructive knowledge that a condition is not reasonably safe and they gain that knowledge in enough time to remedy or protect against the condition. Id. ¶ 22. The trial court found that the college was immune and granted summary judgment because the buildings and grounds director had a policy regarding how to handle sidewalk defects and he exercised his discretion in determining whether to fix defects. Id. ¶ 24. Because the buildings and grounds director was using his discretion as opposed to performing a ministerial act, the college was immune under sections 2-109, and 2-201. Id. ¶ 24. On appeal, the student argued that the college was liable under section 3-102 because there was still a question regarding whether the college had knowledge of and could have repaired the defect. Id. ¶ 25. The Second District affirmed summary
judgment because the buildings and grounds director exercised his discretion in performing his duties. Id. ¶ 26. Third, the Fourth District summarized the ultimate issue as whether section 2-109 and 2-201 immunities are superseded by the exception to immunity in section 3-102. Id. ¶ 28. The Fourth District found that they were not. In Kennell v. Clayton Township, 239 Ill. App. 3d 634 (4th Dist. 1992), the Fourth District held that the discretionary acts governed by sections 2-109 and 2-201 were distinct from the ministerial acts governed by section 3-102. Monson, 2017 IL App (4th) 160593, ¶ 30. Because these provisions of the Act are mutually exclusive, the absolute immunity under 2-109 and 2-201 cannot be superseded by 3-102. Id. Immunity under 2-201 is applicable if injuries resulted from acts performed or omitted by the public entity in determining policy and exercising discretion to execute that policy. Id. ¶ 30. The Fourth District then applied the law to the facts of this case and found that the director used his discretion to implement the City’s policy regarding whether to repair a sidewalk. Id. ¶¶ 3334. Therefore, sections 2-109 and 2-201 apply and the City was immune under 2-109 even if the City knew about the deviation and even if the director was negligent in failing to repair that section of sidewalk. Id. ¶¶ 34-35. The plaintiff appealed. The plaintiff first argues that a public entity’s duty to maintain its property pursuant to section 3-102 is not subject to discretionary immunity under section 2-109 because maintaining governmental property is a ministerial function. The plaintiff states that, in Richter, the Second District conflated the definitions for ministerial and discretionary functions relating to property maintenance
Construction Law and overly expanded local governmental tort immunity. The plaintiff cites to a line of cases including Chicago v. Seben, 165 Ill. 371, 378-79 (1897), Hanrahan v. City of Chicago, 289 Ill. 400, 405 (1919), and Johnston v. Chicago, 258 Ill. 494, 500-1 (1913), for the proposition that, under common law definitions, a local government’s duty to keep its property in good repair is a purely ministerial function. Therefore, section 3-102 applies and there is no immunity if the public entity knows of the defect and has sufficient time to repair it. The plaintiff next argues that the legislature intended to hold public entities liable for dangerous conditions on their properties because section 2-201 begins with the phrase “[e]xcept as otherwise provided by Statute” and because section 2-201 is a general provision. Therefore, the plaintiff argues, where another provision of the Act directly addresses an injury or where another provision is a specific provision, section 2-201 immunity does not apply. The plaintiff cites to Murray v. Chicago Youth Center, 224 Ill. 2d 213, 232, 234 (2007), and argues that the Illinois Supreme Court held that the exception to immunity in section 3-109, which specifically addresses hazardous recreational activities, superseded immunity under section 2-201 in a case involving hazardous recreational activities. Murray also held that section 3-109, a particular provision that relates to only one subject, prevailed because section 2-201 provided for general immunity. Murray, 224 Ill. 2d at 233-34. Here, the plaintiff argues, section 3-102 is a specific provision that directly addresses the dangerous condition of the City’s sidewalk. Therefore, the exception to immunity in section 3-201 supersedes the general immunity under section 2-201.
Zeke N. Katz Pugh, Jones & Johnson, P.C., Chicago
A Primer on Self-Insured Retentions Construction companies and contractors face a myriad of options when selecting the appropriate commercial general liability insurance coverage. One of the many factors in choosing a suitable insurance policy is whether to utilize a form of self-insurance referred to as a self-insured retention (“SIR”) rather than a policy with a deductible. At first glance, a SIR and a deductible appear to be similar concepts with respect to insurance policies. However, upon closer inspection, there are significant ramifications in choosing a SIR as opposed to a deductible. Potential concerns for a construction company or contractor in deciding between a SIR or deductible include primary versus excess insurance, horizontal exhaustion, “other insurance” provisions of a policy and indemnification implications. SIRs and Deductibles With a SIR, when a claim is made, the insured agrees to pay up to a certain amount, and the insurer pays only after that certain amount has been exceeded. A SIR is a risk that the insured has agreed to retain for itself. Practical Tools for Handling Insurance Cases §1:43 Deductibles and Self-Insured Retentions (July 2017). Essentially, with a SIR, no insurance coverage exists until the predetermined amount has been met. The insured must pay its agreed portion of the loss before the insurance policy is activated and the insurer is obligated to pay. Id. Importantly, until the amount of the SIR has been reached, the insurer is
not compelled to defend the insured and the insured is responsible for all of its own settlement decisions and costs of defense, if any. Id. Illinois courts have cited to decisions from other states, which characterize SIRs as “the antithesis of insurance.” Fellhauer v. Alhorn, 361 Ill. App. 3d 792, 796 (4th Dist. 2005) quoting American Nurses Ass’n v. Passaic General Hospital, 192 N.J. Super. 486, 491 (1984). In doing so, the appellate court explained that unlike insurance, where the risk of loss is shifted from the insured to the insurer, no such shift occurs under a SIR until the agreed certain amount has been met. Fellhauer, 361 Ill. App. 3d at 798. Under a policy with a SIR, the insured initially bears the risk of loss that has been levied upon them and must pay all settlements or judgments before the SIR limits are reached. Id. at 798. SIRs and deductibles are distinct entities. While they both represent amounts at which the insurer becomes responsible for the loss, for a deduct— Continued on next page
About the Author Zeke N. Katz is an Associate Attorney at Pugh, Jones & Johnson, P.C. Mr. Katz graduated from Colgate University in 2006 with a Bachelor of Arts degree in Philosophy & Religion. He received his J.D. from Chicago-Kent College of Law in 2014. He is admitted to practice in Illinois. He focuses his practice in the areas of complex civil litigation and professional negligence.
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For a SIR, any payment or payments made to the claimant until the SIR amount has been reached are paid directly by the insured. Construction companies and contractors must measure the balance between the pricing of insurance policies with SIRs or deductibles, as well as their ability to pay for defense costs or settlements at the outset of a claim.
ible, the insurer initially covers the loss, with the insured eventually being obligated to reimburse the insurer for the amount of the deductible. Practical Tools for Handling Insurance Cases §1:43 Deductibles and Self-Insured Retentions (July 2017). When a claim is made on an insurance policy with a deductible, the insurer has an immediate responsibility to defend a covered claim. In that instance, as opposed to a policy with a SIR, the insurer controls the settlement of that claim, regardless of whether the amount of the deductible has been met. Id. With control of the claim from the outset, the insurer is not required to obtain the insured’s consent when negotiating or agreeing to a settlement amount that is within the deductible. For a deductible-based policy, the insurer assesses whether the settlement is appropriate, though the insured pays the settlement amount up to the deductible limit. Id. As a result, in considering whether to opt for a SIR or standard deductible policy, construction companies and contractors need to evaluate whether future claims would be best handled by themselves, their legal counsel, or their insurer. Of course costs go hand in hand with the responsibility of defending a claim. 12 | IDC QUARTERLY | First Quarter 2018
Who initially pays the cost of defense signifies another difference between SIRs and deductibles. With deductibles, when early settlement negotiations occur at the outset of a claim, the insurer pays all defense costs, with the insured later reimbursing the insurer up to the deductible limit. Insurance Coverage of Construction Disputes §4:6 Deductibles and Self-Insured Retentions (November 2017). In contrast, at the outset of a claim with a SIR-based policy, the insured pays the defense costs and the insurer is not involved with the claim until the agreed limit for that SIR has been met. Id. Only after that point, the insurer steps in and covers defense costs. Similarly, if or when payment is made to the claimant, the logistics of that payment, also differ between an insurance policy with a deductible or SIR. For a deductible policy, the insurer first pays the settlement or judgment amount to the claimant, then pursues reimbursement from the insured for the deductible amount, if and when appropriate. Id. For a SIR, any payment or payments made to the claimant until the SIR amount has been reached are paid directly by the insured. Id. Construction companies and contractors must measure the balance between the pricing of insurance policies
with SIRs or deductibles, as well as their ability to pay for defense costs or settlements at the outset of a claim. SIRs and deductibles also differ with respect to insurance policy limits. For an insurance policy with a deductible, the policy limits reflect the actual amount of insurance coverage afforded by the policy, with the deductible amount included within the relevant policy limits. Id. On the other hand, with a SIR-based policy, the certain agreed amount of that SIR is not included in the policy limits, so that the amount of actual insurance coverage is the difference between the policy limits and the SIR amount. Id. This difference in policy limits may be applicable with respect to certain construction or service agreements that contain minimum insurance coverage provisions. Likewise, while a SIR must be disclosed on a certificate of insurance, the insurer has no obligation to include the deductible amount on the certificate. Id. SIRs, Primary Insurance Coverage, and Horizontal Exhaustion A construction company or contractor considering whether to include a SIR as part of its overall liability coverage should also take into account the various interpretations of SIRs as either primary or excess insurance coverage. Primary and excess insurance coverage, in conjunction with SIRs, apply in distinct fashions. Excess insurance coverage provides an additional level of coverage where a judgment or settlement exceeds the SIR or primary insurance policy limits, after the SIR or predetermined amount of primary insurance coverage has been expended. John Crane, Inc. v. Admiral Ins. Co., 2013 IL App (1st) 1093240-B, ¶ 42. Even if an excess insurance policy has been triggered, the limits
of the SIR or primary coverage must be exhausted before the excess insurer is compelled to contribute to a settlement or judgment. John Crane, Inc., 2013 IL App (1st) 1093240-B, ¶ 42. Where there are multiple primary insurance policies, the excess insurance policies may not be obligated to contribute to a judgment or settlement until all primary insurance coverage has been expended. Id. ¶ 42. This concept is referred to as horizontal, rather than vertical, exhaustion. For example, under the model of horizontal exhaustion, Illinois courts have held that an insured is “required to exhaust all applicable underlying coverage … before reaching any excess insurance.” Missouri Pac. R. Co. v. Int’l Ins. Co., 288 Ill. App. 3d 69, 81 (2d Dist. 1997). The insured in Missouri Pacific held a SIR and sought to manipulate its insurance coverage to “avoid absorbing the cost resulting from its position as a self-insurer.” Missouri Pac. R. Co., 288 Ill. App. 3d at 81. The insured was prevented from vertically exhausting its insurance coverage to select particular insurance policies to apply to its loss, in an effort to circumvent the complications encountered by its SIR and the bankruptcy of a portion of its insurers. Id. at 81–82. Specifically, the court held that the insured was not allowed to seek insurance coverage from particular excess insurers while disregarding other sources of coverage. Id. The court reasoned that if an insured were permitted to do so, the barrier between primary and excess insurance coverage would be effectively eliminated and the holder of the SIR or primary insurer could “escape unscathed when they would otherwise bear the initial burden of providing indemnification.” Id. at 82. Rather than the vertical exhaustion of insurance coverage attempted in
Missouri Pacific, Illinois decisions are clear that an insured’s coverage must be horizontally exhausted, so that all primary or underlying polices are used prior to the expenditure of any excess coverage. Commonwealth Edison Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA., 323 Ill. App. 3d 970, 986 (1st Dist. 2001). Particularly, the insured’s primary insurance coverage, including any SIRs, must be exhausted before any excess coverage is triggered. John Crane, Inc., 2013 IL App (1st) ¶ 41. These rulings underscore the assessment of SIRs as primary insurance. In particular, the court in Missouri Pacific emphasized that a SIR must be interpreted as primary coverage, and consequently must be exhausted prior to any other insurance coverage. Missouri Pac. R. Co., 288 Ill. App. 3d at 82. “To hold otherwise would allow Missouri Pacific to manipulate the source of its recovery and avoid the consequences of its decision to become self-insured.” Id. With respect to cost of coverage, which is often a significant factor in a construction company or contractor’s selection of an insurance policy, horizontal exhaustion “is required because excess coverage carries a smaller premium than primary coverage due to the lesser risk insured.” Id. at 81. Correspondingly, the excess insurer substantially reduces the insured’s risk of loss, with that reduced risk being signified in the cost of the excess insurance policy. Id. SIRs and “Other Insurance” As in Missouri Pacific, it is often the plain language of the “other insurance” provisions of the policies that view a SIR as “other insurance,” thereby differentiating SIRs and deductibles. Id. at 83. While a SIR is interpreted as constituting
“other insurance,” a deductible is not considered “other insurance” within the plain meaning of a policy. Id. The plain language of the insurance policy at issue in Missouri Pacific, similar to the language found in other policies, stated that the insured must exhaust all “other insurance” coverage prior to the insurers being required to contribute to a settlement or judgment. Id. Importantly, SIRs, as opposed to deductibles, constitute “other insurance” with respect to these insurance policy provisions. The Missouri Pacific court found that it was the “other insurance” provision of the insurance policy that required the insured “to exhaust all underlying coverage, including its SIRs, before it [sought] coverage under the policies.” Id. at 84. In direct contrast, other courts have held that SIRs do not fall under the “other insurance” provisions of insurance policies, and therefore SIRs do not constitute primary insurance. Those courts have found that when an insured chooses a SIR-based policy rather than one with a deductible, it has opted “to completely retain the risk of a particular loss” up to a certain amount, and that a SIR is not insurance, and therefore does not constitute “other insurance.” Chicago Hosp. Risk Pooling Program v. Illinois State Med. Inter-Ins. Exch., 325 Ill. App. 3d 970, 982 (1st Dist. 2001). One court reasoned that “a true self-insured does not share an identity of insurable interests and risks with a traditional insurance carrier because it has chosen to retain its risk rather than shift any of that risk to a commercial carrier.” Chicago Hosp. Risk Pooling Program, 325 Ill. App. 3d at 982. Similarly, SIRs are not deemed “other insurance” for purposes of assigning liability for contribution. Caterpillar v. Century Indem. Co., 2007 — Continued on next page
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WL 7947740, at *5 (Ill. App. Ct. 3d Dist. Feb. 2, 2007). Construction companies and contractors must be mindful of any “other insurance” provisions of prospective policies if they are contemplating a SIR rather than a deductible. In certain instances, courts have also found that horizontal exhaustion may not apply with respect to SIRs. See, Commonwealth Edison Co., 323 Ill. App. 3d 970 at 986. Unlike Missouri Pacific, the “other insurance” provision at issue in Commonwealth Edison failed to reference SIRs, or any other form of self-insurance. Id. at 987. The court in Commonwealth Edison further differentiated its analysis from Missouri Pacific, noting that in Missouri Pacific, the question posed to the court was whether the insured was obligated to exhaust its SIRs as primary insurance before it could obtain any coverage under any excess insurance policies. Id. In Commonwealth Edison, a utility company sought coverage for a claim as an additional insured under the primary insurance policy of a tree maintenance company. Id. at 973. The court found that the principle of horizontal exhaustion did not apply because, while the utility company did have an excess insurance policy with a SIR, its primary insurance coverage was via its status as an additional insured under the primary insurance policy of the tree maintenance company. Id. at 988. This scenario is markedly different from an insured attempting to circumvent its SIR under its primary policy and move directly towards seeking coverage from its excess insurer. In Commonwealth Edison, the court noted that the utility company “made no attempt to invoke coverage under its separate excess policy under which it had taken its SIR.” Id. The utility company never reached its excess insurance, and therefore never 14 | IDC QUARTERLY | First Quarter 2018
To maintain the efficacy of the Indemnification Act, a contractor must not be permitted to “simply substitute a requirement that the subcontractor ‘insure’ the contractor against its negligence rather than deploy the term ‘indemnify.’”
invoked its SIR, since it was covered as an additional insured under a separate primary insurance policy. Id. SIRs and the Construction Contract Indemnification for Negligence Act The Illinois Construction Contract Indemnification for Negligence Act (“Indemnification Act”) proscribes any agreement to indemnify an individual from that individual’s own negligence as void against public policy. 740 ILCS 35/1. However, the Indemnification Act specifies that it “does not apply to construction bonds or insurance contracts or agreements.” 740 ILCS 35/3. In doing so, the Indemnification Act provides that while parties cannot agree to indemnify individuals for those individuals’ own negligence, those individuals may agree to procure insurance coverage for their own negligence. In construing the statute’s application to SIRs, Illinois courts have held that a subcontractor’s promise to include the general contractor under its SIR, and thereby indemnify that contractor, would “invoke the insurance exception” and thus circumvent the Indemnification Act’s directive to prevent indemnification of an individual’s own negligence. USX Corp. v. Liberty Mut. Ins. Co., 269 Ill. App. 3d 233, 243 (1st Dist. 1994). The Indemnification Act would essentially be rendered useless if “a distinction were to be made between
self-insurance and indemnity.” USX Corp., 269 Ill. App. 3d at 243. To maintain the efficacy of the Indemnification Act, a contractor must not be permitted to “simply substitute a requirement that the subcontractor ‘insure’ the contractor against its negligence rather than deploy the term ‘indemnify.’” Id. “‘[S] elf-insurance’ is merely a recognition that there is no insurance, a ‘mere private promise to indemnify.’” Beloit Liquidating Tr. v. Century Indem. Co., 2002 WL 31870525, at *2 (N.D. Ill. Dec. 20, 2002). This assessment is noteworthy for legal counsel of Illinois construction companies and contractors that are contemplating SIRs as part of their overall liability insurance coverage. Conclusion When evaluating whether to choose a SIR or deductible, a construction company or contractor, as well as their legal counsel, must contemplate a variety of elements, including whether the SIR would be applied to a primary or excess insurance policy, whether that application would have any potential bearing with respect to horizontal exhaustion, whether there are pertinent “other insurance” provisions in the policy at issue, and whether that policy would be affected by the Indemnification Act.
Health Law Mark D. Hansen, J. Matthew Thompson and Tyler J. Pratt Heyl, Royster, Voelker & Allen, P.C., Peoria
Recent Appellate Decision Emphasizes Need for Caution in Drafting Special Interrogatories Under appropriate circumstances, special interrogatories can be valuable tools to employ at trial. However, in drafting a special interrogatory, defense counsel must carefully choose the language of the interrogatory. In its recent decision in Stanphill v. Ortberg, 2017 IL App (2d) 161086, the Illinois Appellate Court Second District criticized a special interrogatory submitted by the defense, which ultimately resulted in a defense verdict being entered by the trial court. In overturning this result, the appellate court provides direction that defense counsel should consider before submitting special interrogatories in future cases. Background Keith Stanphill suspected that his wife was having an extramarital affair. Stanphill, 2017 IL App (2d) 161086, ¶ 4. Ultimately, after finding romantic e-mails to his wife from one of her co-workers, he committed suicide. Id. ¶ 9. During the last month of his life, Keith lost nearly 15 pounds, walked around in a lethargic state, was pale, had sunken eyes, his work performance slipped, and he had effectively withdrawn from participating in the church where he had been a lifelong member. Keith’s wife believed he needed help and arranged for him to see a counselor. Id. ¶ 4. Keith was seen by Lori Ortberg, a licensed clinical social worker. Part of Ortberg’s responsibilities was to assess
whether her patients posed threats of suicide or lethal violence. Id. ¶ 5. To do so, Ortberg had Keith complete a questionnaire regarding his psychological condition. In answering the questionnaire, Keith indicated that he had feelings of harming himself or others most of the time. Id. He also reported feelings of sadness, sleep changes, sudden unexpected panic attacks and feelings of being on the verge of losing control “most of the time” and appetite changes, feelings of anxiety, nervousness, worry, and fear “all of the time.” Id. Keith also stated he was seeing a primary care physician for his mood. Id. After meeting with Ortberg for a onehour assessment, she diagnosed Keith with “adjustment disorder with depressed mood” but did not note on his chart that he was suicidal, despite the fact that he told her he thought a lot about harming himself or others. Id. ¶ 6. Nine days later, Keith committed suicide. Id. ¶ 9. Keith’s son, Zachary Stanphill, subsequently filed a wrongful death and survival action against Ortberg and her employer. Id. ¶ 10. At trial, the plaintiff’s expert social worker and psychiatrist testified Ortberg was negligent for not doing a more thorough assessment. Id. ¶ 11. The experts testified that it was reasonably foreseeable at the time of Ortberg’s interview that Keith was suicidal and that Ortberg misdiagnosed Keith with adjustment disorder rather than major depression. Id. ¶¶ 11, 14.
About the Authors Mark D. Hansen is a partner in the Peoria office of Heyl, Royster, Voelker & Allen, P.C. He has been involved in the defense of cases involving catastrophic injury, including the defense of complex cases in the areas of medical malpractice, products liability, and professional liability. Mr. Hansen has defended doctors, nurses, hospitals, clinics, dentists, and nursing homes in healthcare malpractice cases. He received his undergraduate degree from Northern Illinois University and law degree from University of Illinois College of Law. Mr. Hansen is a member of the Illinois Association of Defense Trial Counsel and is a former co-chair of the Young Lawyers Committee, former ex officio member of the Board of Directors, and has served as chair for various seminars hosted by the IDC. He is also a member of the Illinois Society of Healthcare Risk Management, the Abraham Lincoln American Inn of Court, and the Defense Research Institute.
J. Matthew Thompson is a partner in the Peoria office of Heyl, Royster, Voelker & Allen, P.C. He practices primarily in the area of general tort defense. He received his B.S. in Accounting from Culver-Stockton College in 2005 and his J.D. cum laude from Southern Illinois University School of Law in 2008. Tyler J. Pratt is a senior associate in the Champaign office of Heyl, Royster, Voelker & Allen, P.C. He has been involved in the defense of catastrophic injury, including the defense of complex cases in the areas of medical malpractice, professional liability, and trucking litigation. He is a member of the Champaign County, Illinois State, and American Bar Associations, the Illinois Association of Defense Trial Counsel, and the Illinois Trucking Association.
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The defendants presented a licensed clinical social worker, who testified that Ortberg conducted a thorough assessment and complied with the standard of care in her counseling session with Keith. She testified Keith was not suicidal on the day he met with Ortberg because he scheduled a follow-up appointment with another counselor Ortberg recommended. She testified that someone who is planning to kill himself does not make a follow-up appointment. Id. ¶ 12. The defendants’ expert psychiatrist testified that Keith’s suicide was not reasonably foreseeable because Ortberg specifically documented that Keith had no suicidal ideation, had never attempted suicide before, had no family history of suicide, was working, was religious and receiving pastoral care, was living with his in-laws with whom he maintained a close relationship, saw his children every day, was keeping up with his hygiene, had agreed to outpatient therapy, and had scheduled a follow-up appointment. Id. ¶ 15. At trial, the defendants submitted a special interrogatory, which read: Was it reasonably foreseeable to Lori Ortberg on September 30, 2005, that Keith Stanphill would commit suicide on or before October 9, 2005? Id. ¶ 16. The defendants relied upon Garcia v. Seneca Nursing Home, 2011 IL App (1st) 103085 in crafting the language of the special interrogatory. Stanphill, 2017 IL App (2d) 161086, ¶ 16. After deliberation, the jury returned a general verdict in favor of the plaintiff but answered “No” to the special interrogatory. Id. ¶ 18. Because of the special interrogatory answer, the trial court entered judgment 16 | IDC QUARTERLY | First Quarter 2018
in favor of the defendants. Id. In denying the plaintiff’s motion to reconsider, the trial court explained that it was bound by the decision in Garcia, a nursing home suicide case in which the appellate court approved of the same special interrogatory language. Id. ¶ 19. However, the trial court criticized the Garcia decision for approving a special interrogatory that was confusing and misleading to the jury, opining that: I think if we’re going to give any kind of a special interrogatory in a suicide case where the defendant is allegedly negligent for not foreseeing the suicide, that the special interrogatory needs to not have the defendant’s name in it. It needs to say was it foreseeable or was it reasonably foreseeable to a reasonably careful social worker that so and so would commit suicide on such and such a date. Id. ¶ 19. The plaintiff appealed, arguing that the jury’s answer to the special interrogatory was not irreconcilable with the general verdict or, alternatively, that the special interrogatory should never have been given. Id. ¶ 22. Ultimately, the appellate court agreed with both contentions. Whether the Special Interrogatory was Inconsistent with the General Verdict The appellate court began its analysis by recounting that special interrogatories are designed to be the “guardian of the integrity of a general verdict in a civil jury trial,” and “test the general verdict against the jury’s determination as to
one or more specific issues of ultimate fact.” Id. ¶ 25 (quoting Simmons v. Garces, 198 Ill. 2d 541, 555 (2002)). A special interrogatory answer controls the judgment when it is inconsistent with a general verdict. Stanphill, 2017 IL App (2d) 161086, ¶ 25 (citing 735 ILCS 5/2-1108). However, the special interrogatory must be “clearly and absolutely irreconcilable with the general verdict” to control. Stanphill, 2017 IL App (2d) 161086, ¶ 25 (quoting Simmons, 198 Ill. 2d at 556). Here, the appellate court found the special interrogatory answer was “not necessarily inconsistent” with the general verdict. Stanphill, 2017 IL App (2d) 161086, ¶ 29. The jury could have concluded that because Ortberg was negligent when she counseled Keith, it was not reasonably foreseeable to her (rather than a reasonably careful social worker) that Keith would commit suicide nine days later. Id. Therefore, the special interrogatory and the general verdict were not clearly and absolutely irreconcilable, and the trial court should have entered judgment in favor of the plaintiff. Id. Whether the Special Interrogatory was in Proper Form Going further, the appellate court also found the special interrogatory was not in proper form. Id. ¶ 30. In reaching this conclusion, the court pointed out that proximate cause has two requirements: cause in fact and legal cause. Id. ¶ 32. Legal cause, at issue in this case, is established if an injury was foreseeable to a reasonable person as a likely result of his conduct. However, “the extent of the injury or the exact way in which it occurs need not be foreseeable.” Id. The Second District found the
Civil Rights Update special interrogatory was not in proper form because it did not ask whether Keith’s suicide was foreseeable to a reasonable person or a reasonable licensed clinical social worker. Id. ¶ 33. Instead, the special interrogatory asked whether Keith’s suicide was foreseeable to Ortberg. Id. Because the special interrogatory substituted “Lori Ortberg” for a “reasonable person” or a “reasonable licensed clinical social worker,” it distorted the law and was ambiguous and misleading to the jury. Id. The court stated that although a reasonable person or a reasonable licensed clinical social worker might have foreseen Keith’s suicide, it does not mean Ortberg would have because the plaintiff’s theory was that Ortberg did not act reasonably. Id. Therefore, the court determined the special interrogatory was confusing and should not have been given. Id. Conclusion The result reached in Stanphill is unfortunate because the defense attorneys relied upon published case law in crafting the special interrogatory. Nevertheless, defense counsel should carefully consider this decision when drafting special interrogatories. If the special interrogatory is not in proper form, or if an answer to a special interrogatory might be ambiguous, the special interrogatory may not be effective.
Emily J. Perkins Heyl, Royster, Voelker & Allen, P.C., Peoria
The Naked Truth: The Constitutionality of Public-Nudity Ordinances In the past few years, protests and marches have noticeably increased in number. Some of these activists strive for attention to increase awareness of the cause, others protest for political or social change. The Court of Appeals for the Seventh Circuit recently addressed whether protesting topless is constitutionally protected in Tagami v. City of Chicago, No. 16- 1441, 2017 U.S. App. LEXIS 22410 (7th Cir. Nov. 8, 2017). Facts In Tagami v. City of Chicago, Sonoku Tagami was an active supporter of the nonprofit organization GoTopless, Inc. and advocated for women’s right to bare their breasts in public. Id. at *2. On August 24, 2104, Tagami participated in “GoTopless Day,” an annual event where men and women walk the streets of Chicago topless to promote genderequality and women’s rights. GoTopless. org, http://gotopless.org/gotopless-day (last visited Dec. 4, 2017). She ultimately received a citation for violating the City of Chicago’s public-nudity ordinance. Tagami contested the citation before a hearing officer but was found guilty and ordered to pay a $150 fine. Tagami, 2017 U.S. App. LEXIS 22410at *3. Tagami subsequently filed suit against the city, alleging that the public-nudity ordinance was facially unconstitutional because it violated her First Amendment right of freedom of expression. Id. She further alleged that the ordinance was discriminatory on the basis of sex under
the Fourteenth Amendment’s Equal Protection Clause. Id. The district court granted the city’s motion to dismiss the equal protection claim under Federal Rule of Civil Procedure 12(b)(6). Id. The First Amendment claim survived. Tagami filed an amended complaint, which the city again moved to dismiss. The court construed the city’s motion to be a request for reconsideration as to the First Amendment claim, and reversed its prior ruling, thereby dismissing both claims. Tagami appealed. Id. First Amendment Claim In analyzing Tagami’s First Amendment claim, the Seventh Circuit first — Continued on next page
About the Author Emily J. Perkins is an associate in the Peoria office of Heyl, Royster, Voelker & Allen, P.C. She concentrates her practice in the area of employment/labor law, governmental law, and Section 1983 civil rights litigation. Ms. Perkins is involved in various employment matters, including hostile work environment issues, discrimination, and retaliation claims against employers. She works with employers of public entities in negotiating collective bargaining agreements and defending against unfair labor practice charges. Ms. Perkins has successfully defended clinical therapists and law enforcement officers in Section 1983 claims, and represented townships, villages, road districts and other governmental entities in a variety of litigation areas.
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The court concluded that a state of nudity is not in and of itself an inherently expressive condition and held that Tagami’s public nudity did not by itself objectively communicate a message of political protest. looked to the language of the publicnudity ordinance at issue which provided as follows: [a]ny person who shall appear, bathe, sunbathe, walk or be in any public park, playground, beach or the waters adjacent thereto, or any school facility and the area adjacent thereto, or any municipal building and the areas adjacent thereto, or any public way within the City of Chicago in such a manner that the genitals, vulva, pubis, pubic hair, buttocks, perineum, anus, anal region, or pubic hair region of any person, or any portion of the breast at or below the upper edge of the areola thereof of any female person, is exposed to public view or is not covered by an opaque covering, shall be fined not less than $100.00 nor more than $500.00 for each offense. Id. at *2 (citing Chicago, Il., Code § 8-8-080). The court noted that the city’s ordinance did not regulate speech itself, it regulated conduct. Id. at *3-4. While some forms of expressive conduct are entitled to First Amendment protection, such protection exists only where the conduct is “inherently expressive,” such that the conduct in question “comprehensively communicate[s] its own message without additional speech.” Id. at *4. In 18 | IDC QUARTERLY | First Quarter 2018
other words, “the conduct itself must convey a message that can be readily ‘understood by those who view it.’” Id. at *4-5. The court concluded that a state of nudity is not in and of itself an inherently expressive condition and held that Tagami’s public nudity did not by itself objectively communicate a message of political protest. Id. at *5. The court further noted that even if Tagami’s nudity was communicative enough to warrant First Amendment protection, the claim was properly dismissed because it could not survive scrutiny set forth in United States v. O’Brien, 391 U.S. 367 (1968) (known as the O’Brien test). Tagami, 2017 U.S. App. LEXIS 22410, at *6. Under the O’Brien test, the regulation of public nudity would be upheld if: (1) the regulation is within the constitutional power of the government; (2) the regulation furthers an important or substantial governmental interest; (3) the governmental interest is unrelated to the suppression of free expression; and (4) the restriction on alleged First Amendment freedoms is no greater than essential to further the government›s interest. Id. at *6 (citing Foxxxy Ladyz Adult World, Inc. v. Village of Dix, 779 F.3d 706, 712 (7th Cir. 2015) (describing the O’Brien court’s intermediate standard of
scrutiny). Thus, the court concluded that the ordinance would survive scrutiny under the O’Brien test because the City possessed an important interest in promoting moral norms and public order. Tagami, 2017 U.S. App. LEXIS 22410, at *7-8. Equal Protection Claim Tagami also alleged that the Equal Protection clause was implicated because the city’s public-nudity ordinance was discriminatory on the basis of sex. Id. at *3. The city argued that the ordinance treated both men and women alike by prohibiting public exposure of male and female body parts that are traditionally considered to be intimate. Id. at *8. The court disagreed with the city in part, noting that on its face, the ordinance imposes different rules for women and men because it prohibits public exposure of “the breast at or below the upper edge of the areola thereof of any female person.” Id at *8-9 (citing Chicago, Il., Code § 8-8-080) (emphasis added). Despite the fact that the ordinance contains a sex-based classification, the court noted that the ordinance could still be “compatible with the Equal Protection Clause if the classification serves important governmental objectives and the ‘discriminatory means employed are substantially related to the achievement of those objectives.’” Id. at *9 (citing United States v. Virginia, 518 U.S. 515, 533 (1996)). The court concluded that the intermediate-scrutiny test for sex-based legal classifications was “materially identical” to the scrutiny used in analyzing the First Amendment claim under the O’Brien test. Because the city had an important interest in restricting exposure of “intimate, erogenous, and private” body parts, the ordinance sur-
Appellate Practice Corner vived the O’Brien test and withstood the equal protection challenge. Id. at *8-10. Dissent Justice Ilana Rovner dissented, claiming that the majority “nakedly” declared that Tagami’s nudity, by itself, was not political protest. Id. at *12. Tagami was not sunbathing topless or streaking across a football field to appear on television. Rather, her conduct had one purpose—to engage in a protest to challenge the city’s ordinance on indecent exposure that, on its face, treats women differently than men. Id. at *13. Thus, Tagami’s First Amendment claim should not have been dismissed at the pleadings stage. Likewise, with respect to the equal protection claim, the city’s ordinance sexualized the female form and imposed a burden of public modesty on women alone. Id. at *18. Therefore, Tagami’s equal protection claim may have also prevailed. Justice Rovner concluded that both claims were potentially viable, and therefore, Tagami should have been permitted to develop the record in support of her claims and the city should have been required to present evidence to justify its actions. Id. at *19. Conclusion Due to social changes and the current political atmosphere, forms of political expression like the one at issue in this case are likely to continue—if not increase. While unpublished, this case serves as an important reminder to attorneys who represent municipalities to ensure that public ordinances clearly articulate a legitimate public interest and are not solely designed to prohibit expressive conduct.
Scott L. Howie Pretzel & Stouffer, Chartered, Chicago
Supreme Court Refines Rule 308 Requirements in Rozsavolgyi v. City of Aurora One of the few ways to obtain interlocutory review in the Illinois courts is to move the circuit court to certify a question of law under Supreme Court Rule 308. Such review requires the circuit court to find, and the appellate court to agree, that a previous interlocutory order “involves a question as to which there is substantial ground for difference of opinion, and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.” Ill. S. Ct. R. 308(a) (eff. July 1, 2017). The nuances of Rule 308 might be dry and fusty points of appellate procedure to some, but they made for high drama in Rozsavolgyi v. City of Aurora, 2017 IL 121048—where a four-justice majority of the Illinois Supreme Court declined to answer the certified questions and vacated the appellate court’s decision in its entirety. The majority’s rationale drew a sharp rebuke from the three dissenting justices, who took vehement issue with nearly every aspect of the majority decision. The conflict starkly emphasizes the restrictive interpretation that governs Rule 308. This edition of the Appellate Practice Corner examines the differing procedural views that divided the Rozsavolgyi court. Rather than offering a point-by-point synopsis of the competing opinions, this column analyzes the major points of contention related to Rule 308 in an effort to refine the understanding
of that rule’s procedural requirements. Procedural Background of Rozsavolgyi The plaintiff in Rozsavolgyi sued the City of Aurora under the Illinois Human Rights Act, 775 ILCS 5/1-101 et seq. (2014), claiming she had suffered employment discrimination on the basis of disability. Rozsavolgyi, 2017 IL 121048, ¶ 3. The City moved to dismiss, arguing that disability harassment is not recognized as a cause of action under the Human Rights Act. Id. ¶ 4. The circuit court initially dismissed two counts of the plaintiff’s four-count complaint on that ground, but on the plaintiff’s motion to reconsider it reversed itself and reinstated those counts. Id. It also granted — Continued on next page
About the Author Scott L. Howie is a partner at Pretzel & Stouffer, Chartered, in Chicago, specializing in post trial and appellate practice in the state and federal courts. He received his undergraduate degree from Northwestern University in 1989 and his law degree from ChicagoKent College of Law in 1994. Mr. Howie is a member and past director of the Illinois Appellate Lawyers Association, where he co-chairs the Moot Court Committee.
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the plaintiff’s motion to strike the City’s affirmative defenses claiming immunity under the Tort Immunity Act, 745 ILCS 10/1 et seq. (2014). Id. ¶ 6. On the City’s motion, the circuit court certified three questions, each containing alternate or subordinate questions, for interlocutory review under Rule 308. Id. The first and second certified questions concerned the scope of the Human Rights Act—whether the plaintiff’s allegations of disability harassment made for a recognized civil-rights violation under that statute, and if so, whether and to what extent an employer can be held liable for the actions of nonemployees or nonmanagerial and nonsupervisory employees. Id. The third certified question concerned the City’s affirmative defenses under the Tort Immunity Act—whether that statute applied to civil actions under the Human Rights Act seeking damages, attorneys’ fees, and costs, and if so, whether the appellate court should “modify, reject or overrule” three prior decisions in which the appellate court had found the Tort Immunity Act applicable only to tort actions and not to actions for constitutional violations. Rozsavolgyi, 2017 IL 121048, ¶ 6. The appellate court granted leave to appeal as to all three certified questions, but it was divided in resolving them. Id. ¶ 7 (citing Rozsavolgyi v. City of Aurora, 2016 IL App (2d) 150493). As to the first two questions, the majority held that the Human Rights Act prohibits disability harassment, but that the employer can be responsible for the actions of nonemployees or nonmanagerial and nonsupervisory employees only if it becomes aware of such conduct and fails to take reasonable corrective measures—and that the employee always bears the ultimate burden of persuasion 20 | IDC QUARTERLY | First Quarter 2018
in such cases. Id. (citing Rozsavolgyi, 2016 IL App (2d) 150493, ¶¶ 77, 95). As to the third certified question, the appellate court’s majority held that the Tort Immunity Act applies to actions under the Human Rights Act, but provides immunity only against damages and not against a request for equitable relief. Id. (citing Rozsavolgyi, 2016 IL App (2d) 150493, ¶ 115). The court acknowledged previous decisions holding that the Tort Immunity Act applied only to tort actions and not to other types of claims, but chose not to follow those decisions, contending that the supreme court had “impliedly rejected” them. Id. (citing Rozsavolgyi, 2016 IL App (2d) 150493, ¶ 97). One justice dissented in part, expressing the view that the legislature did not intend the relevant section of the Human Rights Act to apply to anything other than sexual harassment. Id., ¶ 8 (citing Rozsavolgyi, 2016 IL App (2d) 150493, ������������������������������� ¶¶ 12�������������������������� 1–24 (McLaren, J., concurring in part and dissenting in part)). He also disagreed that the Tort Immunity Act applied to the plaintiff’s claim under the Human Rights Act, and disagreed that the supreme court had “impliedly rejected” decisions holding otherwise. Id. (citing Rozsavolgyi, 2016 IL App (2d) 150493, ¶¶ 125–28 (McLaren, J., concurring in part and dissenting in part)). Pointing to those decisions, he reasoned that there were not reasonable grounds for a difference of opinion on that issue, and thus disagreed that the third question was proper under Rule 308. Id. (citing Rozsavolgyi, 2016 IL App (2d) 150493, ¶ 127 (McLaren, J., concurring in part and dissenting in part)). The plaintiff requested that the appellate court certify the third certified question as being sufficiently important to be decided by the supreme court under
Supreme Court Rule 316. Id. ¶ 9; see also Ill. S. Ct. R. 316 (eff. July 1, 2017). The appellate court issued a certificate of importance, requiring the supreme court to hear the case. Rozsavolgyi, 2017 IL 121048, ¶ 9. Competing Views in the Supreme Court Justice Garman authored the supreme court’s majority opinion, holding that the third certified question had improperly been certified and declining to answer it. Id. ¶¶ 26, 34. Though the City had cross-appealed, asking the supreme court to reverse the appellate court’s decision as to the first two certified questions, the majority expressly chose not to address those questions—but it vacated the appellate court’s decision in its entirety. Id. ¶ 41. The three dissenting justices, in an opinion authored by Justice Burke, criticized nearly every aspect of the majority’s opinion, including its refusal to address the City’s cross-appeal. Id. ¶¶ 47–48. Though their criticism did not muster enough votes to carry the day, their contrasting views underscored the implications of the majority opinion and explicitly described several principles that the majority implicitly rejected. Proper Breadth of a Certified Question The majority and dissenting opinions chiefly clashed over whether the third certified question was proper under Rule 308. The initial point of contention concerned a factor not found in the language of the rule: whether the third certified question was “improperly overbroad,” as the majority described it. Id. ¶ 26; see also id. ¶¶ 53–54 (Burke, J.,
The three dissenting justices, in an opinion authored by Justice Burke, criticized nearly every aspect of the majority’s opinion, including its refusal to address the City’s cross-appeal. Though their criticism did not muster enough votes to carry the day, their contrasting views underscored the implications of the majority opinion and explicitly described several principles that the majority implicitly rejected.
dissenting). While Rozsavolgyi involved alleged actions in the employment setting, the majority observed, that the third certified question was framed generally in terms of the Human Rights Act, “which provides for numerous types of civil actions for unlawful conduct in a variety of contexts.” Id. ¶ 26 (citing 775 ILCS 5/1-101 et seq. (2014)). Because the question implicitly embraced types of actions other than the one at issue, the majority held, an answer would necessarily bear on situations not before the court “and would therefore result in an advisory opinion.” Id. The dissenters found it “simply incorrect” to reject the question as overbroad. Id. ¶ 48 (Burke, J., dissenting). They were unpersuaded by the possibility that an answer would apply to other situations, observing that any question properly certified under Rule 308 would be a question of law, and would “obviously bear on factual situations other than the one before the reviewing court.” Id. ¶ 55 (Burke, J., dissenting) (citing Walker v. Carnival Cruise Lines, Inc., 383 Ill. App. 3d 129, 133 (1st Dist.
2008)). Because the applicability of the Tort Immunity Act to actions under the Human Rights Act would have an effect on the parties’ rights, they believed, it would not result in an advisory opinion. Id. ¶ 57 (Burke, J., dissenting). While the breadth of a certified question is not among the factors set forth in Rule 308, the supreme court’s conflicting views reflect a disagreement as to how that concern should be applied to a proposed certified question. The dissenters felt that review is suitable for questions that indirectly invoke similar or related issues; they appear to have reasoned that a decision answering such a question might be persuasive authority in another case, even if the decision is potentially distinguishable or not squarely on point. But the majority opinion carried the day, setting the precedent that a certified question must be narrowly limited to the specific circumstances of the case, and that a question should not be certified or answered if it might suggest an application to disparate situations.
“Substantial Ground for Difference of Opinion” In addition to disagreeing over whether the third certified question was too broad, the court also split over whether the question met the requirements of Rule 308. The majority was skeptical that the question involved a matter on which there was “substantial ground for difference of opinion,” and held that the appeal would not “materially advance the ultimate termination of the litigation.” Id. ¶¶ 31–33. The dissenters believed that the question satisfied both criteria. Id. ¶¶ 59–61(Burke, J., dissenting). As to the difference of opinion, the majority stopped short of holding that that there was no substantial ground for such a difference—but found it “questionable at best” that the third certified question met this requirement. Id. ¶ 32. Observing that the certified question itself cited three decisions of the appellate court that might effectively be overruled by the answer to the question, the majority concluded that this uncontradicted case law suggested that there was no meaningful difference of opinion. Id. ¶¶ 31–32. This prong may be satisfied when an issue has not been decided at all, the majority held, but it does not refer to a mere disagreement with existing case law unless that case law conflicts with decisions from other appellate districts or the supreme court. Id. This holding implicitly rejected the more liberal interpretation contained in the dissenting opinion. Despite the cases cited in the third certified question, the dissent observed, the matter at issue in that question—whether the Tort Immunity Act applies to claims under the Human Rights Act—was a matter of first impression in the supreme court, and — Continued on next page
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was “far from settled.” Id. ¶ 59 (Burke, J., dissenting). The dissent further noted that the Tort Immunity Act itself appears to abrogate the line of cases cited by the majority as evidence that there was no difference of opinion, and observed that other courts have applied the Tort Immunity Act in non-tort settings. Id. (Burke, J., dissenting). Because “the state of the law on this issue is uncertain and lacking in clear direction,” and the question “involves statutory construction, a proper subject for certification under Rule 308,” the dissent described the third certified question as “ideally suited” for review. Id., ¶ 60 (Burke, J., dissenting). In questioning whether the third certified question identified a substantial ground for difference of opinion, the majority did not expressly hold that this prong demands either a clean legal slate or a clear conflict of law. But its opinion, particularly in contrast to the dissenters’ more liberal view, strongly suggested that a question should not be certified under Rule 308 if there is uncontradicted case law answering it—even if there are reasons to question that case law. “Materially Advance the Ultimate Termination of the Litigation” The majority and dissenting opinions differed further over what it means to “materially advance the ultimate termination of the litigation.” The majority opinion held that the third certified question did not satisfy this requirement because it pertained only to the plaintiff’s request for damages, attorneys’ fees, and costs, and would not have resolved the other relief she requested. Id., ¶ 33. “[R] egardless of how the third certified question is answered,” the opinion observed, “the City’s liability would still be at issue as to the other forms of relief sought.” Id. 22 | IDC QUARTERLY | First Quarter 2018
Since the question could not be answered in a way that would terminate the litigation, the majority opinion held, it did not satisfy this prong of Rule 308. Id. The dissenting opinion disagreed, unsuccessfully proposing the more expansive view that even if an answer to the third certified question could not bring the litigation to an end, “[r]emoving an entire category of damages from consideration obviously advances the course of litigation.” Id., ¶ 61. This conflict, and the prevailing view of the majority, clarified that the “materially advance” prong of Rule 308 is to be strictly construed with an emphasis on “termination.” Contrary to the dissent, it is not enough that a question can be answered in a way that will end the litigation sooner—perhaps by eliminating certain issues or streamlining the presentation of others. To “materially advance the ultimate termination of the litigation,” the majority opinion held, means to conclude it. Modifying a Certified Question While both opinions agreed that the court has the power to “modify the certified question to correct any impropriety,” such as the overbreadth of the third certified question, the justices disagreed over whether to do so in this case. Id. ¶ 28; id., ¶¶ 62–65 (Burke, J., dissenting). The majority acknowledged that in other cases the court has modified such questions, or read them in such a way as to make them proper under Rule 308—but despite a nod to “principles of judicial economy,” it found that modification of the third certified question was not warranted. Id. ¶28. The dissent criticized this refusal, complaining that the majority gave no reason not to tailor the certified question
to the facts of the case. Id. ¶ 65 (Burke, J., dissenting). If the question was overbroad because it was not limited to the employment context, the dissent maintained, then modifying the question to apply to that context would allow the court to address the concern that prompted the appeal in the first place. Id. (Burke, J., dissenting). Since the majority opinion drew no distinction between this case and those in which it was persuaded to modify certified questions—another omission the dissent criticized—it is hard to draw any lesson from its refusal to do so in Rozsavolgyi. See id. ¶ 65 (Burke, J., dissenting). But at a minimum, this refusal reflected a general reluctance to modify a question even when principles of judicial economy might call for it, and further underscored the importance of drafting a suitable question in the first place. Conclusion In construing the criteria of Rule 308 so strictly, the majority opinion severely narrowed the scope of the rule and gave effect to the principle that interlocutory review is disfavored. The dissenting opinion further clarified that scope by setting forth alternate interpretations that, while well-reasoned and consistent with the language of the rule, reflected minority viewpoints. Rozsavolgyi makes it more difficult to obtain interlocutory review of a certified question, underscoring the importance of care, skill, and experience in the preparation of such questions. It also offers ample ways to challenge an adversary’s attempt at obtaining such review.
Workers’ Compensation Report Brad A. Elward, Brad A. Antonacci and Dana Hughes Heyl, Royster, Voelker & Allen, P.C., Peoria
Three Recent Appellate Court Jurisdictional Rulings Should Give Practitioners Pause When Filing Reviews Appellate jurisdictional issues are always of interest to busy trial attorneys. Whether perfecting a petition for review of an arbitrator’s decision to the Workers’ Compensation Commission or perfecting a judicial review from the Commission to the circuit court, special rules apply that often have serious, if not fatal, consequences for noncompliance. The September 2017 oral argument call of the Illinois Appellate Court, Workers’ Compensation Commission Division, produced three significant rulings on appellate jurisdiction that all practitioners should know about. One decision dealt with petitions for review following the issuance of a corrected arbitration decision; one decision concerned when a petitioner must provide a bond to support judicial review; and one order (albeit an unpublished Rule 23 order) addressed the need to affirmatively establish when an attorney receives a Commission’s decision for the commencement of the 20-day time to file a judicial review. In this issue we provide an overview of these three jurisdictional decisions which, if not heeded, can have a huge and potentially negative impact on any review taken in your case. Appeals Following a Recalled Decision Must be from the Corrected Decision As most workers’ compensation trial attorneys well know, a petition for review of an arbitrator’s decision to the
Commission must be filed within 30 days of the arbitrator’s decision. 50 Ill. Admin. Code § 9040.10(a). Likewise, a judicial review of a Commission’s decision to the circuit court must be filed within 20 days of the party seeking review’s receipt of the Commission’s decision. 820 ILCS 305/19(f). Determining when that time for filing period begins can be challenging in cases where a recall order and corrected decision are involved. In Eddards v. Illinois Workers’ Compensation Comm’n, 2017 IL App (3d) 150757WC, the arbitrator awarded benefits in favor of the claimant. Following the award, the employer filed a timely motion to recall the arbitrator’s decision to correct a clerical error. The motion was made pursuant to section 19(f), which states: [T]he Arbitrator or the Commission may on his or its own motion, or on the motion of either party, correct any clerical error or errors in computation within 15 days after the date of receipt of any award by such Arbitrator or any decision on review of the Commission and shall have the power to recall the original award on arbitration or decision on review, and issue in lieu thereof such corrected award or decision. When such correction is made the time for review herein specified shall begin to run from the date of the
receipt of the corrected award or decision. 820 ILCS 305/19(f). The arbitrator granted the motion, re— Continued on next page
About the Authors Brad A. Elward is a partner in the Peoria office of Heyl, Royster, Voelker & Allen, P.C. He practices in the area of appellate law, with a sub-concentration in workers’ compensation appeals and asbestos-related appeals. He received his undergraduate degree from the University of Illinois, Champaign-Urbana, in 1986 and his law degree from Southern Illinois University School of Law in 1989. Mr. Elward is a member of the Illinois Appellate Lawyers Association, the Illinois State, Peoria County, and American Bar Associations, and a member of the ISBA Workers’ Compensation Section Counsel. Brad A. Antonacci, a partner with Heyl, Royster, Voelker & Allen, P.C., concentrates his practice on workers’ compensation defense and drone law. He has represented hundreds of employers before the Illinois Workers’ Compensation Commission, has authored numerous articles and spoken frequently on workers’ compensation law. Mr. Antonacci is a graduate of Northern Illinois University College of Law and received his undergraduate degree from the University of Illinois–Urbana-Champaign. Dana J. Hughes is a partner in the Peoria office of Heyl, Royster, Voelker & Allen, P.C., and represents employers in workers’ compensation claims. Ms. Hughes frequently speaks and writes on Workers’ Compensation law, including co-authoring Southern Illinois University Law Journal’s “Survey of Illinois Law: Workers’ Compensation.” She is a graduate of Northern Illinois University College of Law and received her undergraduate degree at NIU. In 2015, Ms. Hughes was named to the Leading Lawyers Emerging Lawyers list.
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called the decision, and issued a corrected decision, after which the employer filed a petition for review to the Commission. Eddards, 2017 IL App (3d) 150757WC, ¶ 1. The Commission reversed the arbitrator’s decision and found the claim non-compensable, and the circuit court confirmed. Id. ¶ 2. Before the appellate court, the claimant filed a motion challenging the court’s jurisdiction, alleging that the employer had filed its petition for review from the original arbitrator’s decision and not the corrected decision. As a result, the employer did not perfect its review, the claimant contended. Id. The appellate court agreed with the claimant, finding that where an arbitrator corrects a decision upon a motion for recall, “a party must file a petition for review within 30 days after the receipt of the arbitrator’s corrected decision.” Eddards, 2017 IL App (3d) 150757WC, ¶ 11. The court noted that where a corrected decision is made, “the time for review begins to run from the date of the receipt of the corrected award.” Id. (citing Residential Carpentry, Inc. v. Kennedy, 377 Ill. App. 3d 499, 503 (1st Dist. 2007)). Relying on Schulz v. Forest Preserve Dist. of Cook County, 344 Ill. App. 3d 658, 662 (1st Dist. 2003), the court stated that strict compliance with section 19(f) is required. Acknowledging that the employer had filed the petition for review within 30 days of receipt of the arbitrator’s corrected decision, the petition for review nevertheless requested review of the arbitrator’s original decision. Yet because the Commission issued a corrected decision, “the original decision was not a final, appealable decision.” Eddards, 2017 IL App (3d) 150757WC, ¶ 16 (citing Garcia v. Industrial Comm’n, 95 Ill. 2d 467, 469 (1983)), the court observed that 24 | IDC QUARTERLY | First Quarter 2018
a petition for review filed from an original decision was “without effect” because the issuance of the corrected decision made the original decision a nullity. Eddards, 2017 IL App (3d) 150757WC, ¶ 16. Accordingly, the employer’s failure to file a petition for review from the arbitrator’s corrected decision divested the Commission of jurisdiction to consider the employer’s review. “By requesting review of the arbitrator’s original decision rather than the corrected decision, [the employer] has not strictly complied with the Act.” Id. ¶ 18. The appellate court rejected the employer’s argument that the filing constituted a scrivener’s error, finding that the petition for review “references a non-final order entered on an entirely different date.” Id. ¶ 20. As such, the petition for review could not be said to have adequately notified the opposing party or the Commission as to which decision was being appealed. Id. ¶ 21. The appellate court reversed the judgment of the trial court, vacated the decision of the Commission, and reinstated the arbitrator’s corrected decision, which had found in favor of the claimant and awarded benefits under the Act. Id. ¶ 22. Eddards demonstrates the importance of attention to detail when preparing a petition for review of an arbitrator’s decision to the Commission or a judicial review from a decision of the Commission involving a recalled decision. Section 19(f)’s recall provisions apply to both means of review. Counsel must take great care when motions for recall to correct a clerical error are filed, as these motions must not only be timely-filed (within 15 days of receipt of the target decision) but also must truly request clarification rather than reconsideration, which is not permitted. McDuffee v.
Industrial Comm’n, 222 Ill. App. 3d 105, 110 (2d Dist. 1991). A motion to recall for clarification that is truly one to reconsider will be deemed an invalid motion and will not toll the time to file the subsequent review. Wilson-Raymond Constructors Co. v. Industrial Comm’n, 79 Ill. 2d 45, 56 (1980). Moreover, as Eddards illustrates, appeal must be timely-filed from the corrected decision. This situation can be even more muddied if one of the parties files its own judicial review when the other party has filed or files a section 19(f) motion to recall. In that event, a party may need to consider refiling the judicial review from the corrected decision and asking the circuit court to determine in which action jurisdiction is proper (it should be the review from the corrected decision). Another quandary arises where a party files a motion to recall and it is denied. See International Harvester v. Industrial Comm’n, 71 Ill. 2d 180, 186 (1978) and Zbilski v. Industrial Comm’n, 48 Ill. 2d 131, 134 (1971) (the Commission’s decision is not final until the Commission determines whether or not to correct errors). In that event, any petition for review (or judicial review) filed prior to the resolution of a motion to correct error is premature, as it is based on a decision that is not yet final and appealable. The Party Against Whom an Award was Made can be a Claimant In Joiner v. Illinois Workers’ Compensation Comm’n, 2017 IL App (1st) 161866WC, the claimant, Joiner, had filed an application for adjustment of claim under the Act and filed a common law complaint against his employer related to the same accident. The parties entered into a global settlement in the civil action, which purported to settle
both the workers’ compensation claim and the civil action. When the employer submitted the settlement agreement to the Commission for approval, the arbitrator approved the agreement and ordered the claimant to pay attorneys’ fees to the attorneys who had represented him at various times during the Commission proceedings. Joiner, 2017 IL App (1st) 161866WC, ¶ 1. The claimant appealed the award of attorneys’ fees to the Commission, which affirmed the arbitrator’s findings, and then sought judicial review to the circuit court. Id. ¶¶ 2-3. The claimant did not, however, post an appeal bond when filing his written request to commence proceedings in the trial court. The employer moved to dismiss the judicial review, which was allowed by the court. Id. ¶ 3. On appeal, the appellate court noted that section 19(f)(2) requires a party “against whom the Commission [has] rendered an award for the payment of money” to file an appeal bond in order to invoke the court’s jurisdiction to review the Commission’s decision. Joiner, 2017 IL App (1st) 161866WC, ¶ 28. The court observed that in most cases, this party is the employer, who has been found liable for an award. Here, while the claimant received the award, the Commission’s decision ordered the claimant to pay attorneys’ fees. The court distinguished Joiner’s case from the court’s prior ruling in Celeste v. Industrial Comm’n, 205 Ill. App. 3d 423 (1st Dist. 1990), which seemingly held that a claimant was not required to file an appeal bond because he was an employee, not an employer. In Celeste, the claimant had filed a judicial review to contest the Commission’s denial of interest and did not file an appeal bond. The Celeste court held that the employee did not need to file an appeal bond, as he was “not one against whom
an award of money has been rendered,” Joiner, 2017 IL App (1st) 161866WC, ¶¶ 29-30. The Joiner court pointed out, however, that the claimant in Celeste had appealed an adverse finding by the Commission, but had not appealed an order requiring him to pay money to his former attorneys. As a result, the appellate court upheld the circuit court’s order dismissing the judicial review with prejudice and held that “[b]y its plain terms, section 19(f) (2) applies to all individuals or entities ‘against whom the Commission shall have rendered an award for the payment of money,’’ and that section 19(f)(2) “does not exempt employees ordered to pay money by the Commission from having to file an appeal bond.” Id. ¶ 33. Joiner is a helpful decision for employers to keep in mind when evaluating a claimant’s judicial review filings for section 19(f) compliance. In such cases where a bond is required of an employee, the employer’s counsel should pay close attention to the form of the bond, as few claimant’s counsel are well-versed in bonding procedures. And as almost any employers’ counsel is aware from personal experience, procuring an appeal bond in a workers’ compensation case can be a daunting process. Timeliness of Judicial Review Filing Must Appear On Face of Pleading In Final Call, Inc. v. Illinois Workers’ Compensation Comm’n, 2017 IL App (1st) 162030WC-U, the appellate court vacated the judgment of the circuit court on judicial review and remanded the matter back to the court with instructions that it conduct an evidentiary hearing to determine whether the petition for judicial review was filed within the 20 days prescribed by section 19(f)(1). In that
case, Final Call appealed from a circuit court order confirming a Commission decision awarding benefits on behalf of the employee, Kenneth Wright. Final Call, 2017 IL App (1st) 162030WC-U, ¶ 2. The Illinois State Treasurer, as exofficio custodian of the Injured Workers’ Benefit Fund (Fund) was added as a party to the litigation because Final Call lacked insurance. Id. On appeal, the Treasurer argued the appeal should be dismissed because Final Call failed to establish that it timely commenced its proceeding for review by filing a request for summons within 20 days of receiving notice of the Commission’s decision. Id. The Commission issued its decision on August 27, 2015, and according to Final Call’s assertions in its reply brief, it received that decision on September 23, 2015, and filed its request for summons on October 13, 2015, a date within the 20 day period specified in section 19(f)(1). According to the appellate court, compliance with the jurisdictional requirements of section 19(f) “must affirmatively appear in the record.” Id. ¶ 10. However, “the issue of whether [Final Call] filed its request for summons within 20 days of its receipt of a notice of the Commission’s decision, is a question of fact.” Id. Because the challenge to jurisdiction was not raised before the trial court, but raised on appeal, the court found that “the Treasurer [had] effectively prevented [Final Call] from introducing evidence on the issue.” Id. While Final Call had attached a copy of an envelope from the Commission addressed to its attorneys with a postage meter date of September 21, 2015, and asserted that the attorneys had received the decision on September 23, “neither the envelope nor any evidence as to the date that the decision was received appear — Continued on next page
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in the record.” Id. The appellate court concluded that it was constrained by the record, and “we cannot consider exhibits or information supplied by counsel which find no support in the record.” Id. The appellate court held that while it was Final Call’s burden to establish compliance with section 19(f)(1), “we believe that it should be afforded an opportunity to establish compliance after the issue has been raised.” Id. ¶ 11. As a result, the court vacated the trial court’s order confirming the Commission’s decision and remanded the matter back to the court for a hearing on the issue of whether Final Call filed its request for summons within 20 days of its receipt of a notice of the Commission’s decision. Id. Final Call stands for the proposition that the timeliness of the judicial review must be affirmatively stated within the written request to commence proceedings filed in the trial court. This can be accomplished in two ways. First, the party filing the written request to commence proceedings can make an affirmative statement in the pleading that the Commission’s decision was received on “X” date. Second, the party filing the written request to commence proceedings can provide a copy of the Commission’s decision, together with either a copy of the “received” stamp or a copy of the Commission’s e-mail wherein the decision is forwarded to counsel. The latter reflects the Commission’s recent method of providing parties with decisions by e-mail. Including this documentation ensures that the date of receipt is in the trial court record and places the onus on the non-filing party to present evidence that the statements and attachments are incorrect.
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Employment Law Julie A. Bruch O’Halloran Kosoff Geitner & Cook, LLC, Northbrook
Seventh Circuit Rules that Employers Do Not Have to Allow Extended Medical Leave as a “Reasonable Accommodation” Under the ADA Employers and attorneys frequently struggle with determining the amount of time to allow an employee to remain off work following the expiration of Family Medical Leave Act (FMLA), 29 U.S.C. §§ 2601 et. seq., leave as a reasonable accommodation under the Americans with Disabilities Act (ADA), 42 U.S.C. §§ 12101 et. seq. In Severson v. Heartland Woodcraft, Inc., 872 F.3d 476, 481 (7th Cir. 2017), the Court of Appeals for the Seventh Circuit issued a pro-employer ruling holding that “a long-term leave of absence cannot be a reasonable accommodation.” The decision is filled with language that will greatly assist defense attorneys in ADA cases involving employees who request time off of work as a reasonable accommodation. Raymond Severson was employed at Heartland Woodcraft, Inc. for seven years in a physically demanding job as a fabricator. Severson, 872 F.3d at 478. In early June 2013, Severson took 12 weeks of FMLA leave due to back myelopathy, which during flare-ups, made it hard for him to walk, bend, lift, sit, stand, move, and work. Id. at 479. On his last day of leave, Severson had back surgery and needed another two to three months off of work. Id. Severson requested an extension of his medical leave once his FMLA entitlement ended. Id. Heartland denied the extension, telling Severson that his employment would end when his FMLA leave expired on August 27, 2013 and he
was invited to reapply with the company when he recovered from surgery and was medically cleared to work. Id. at 480. Following back surgery, Severson’s doctor gave him a release to return to work on October 17, 2013 with a restriction of no lifting more than 20 pounds and a full release on December 5, 2013. Id. Instead of reapplying at Heartland, Severson sued the company claiming that Heartland discriminated against him in violation of the ADA by failing to accommodate his disability. Severson, 872 F.3d at 480. Severson argued that the company could have offered him three accommodations: “(1) a two-or threemonth leave of absence; (2) a transfer to a vacant job; or (3) a temporary light-duty position with no heavy lifting.” Id. The district court granted Heartland’s motion for summary judgment, finding that the proposed accommodations were not reasonable. Id. On appeal, the Seventh Circuit initially noted that there was no dispute
About the Author Julie A. Bruch is a partner with O’Halloran Kosoff Geitner & Cook, LLC. Her practice concentrates on the defense of governmental entities in civil rights and employment discrimination claims.
that Severson had a disability and that frequently lifting 50 pounds or more was an essential function of Severson’s position and he was unable to perform this function at the time he was fired. Id. Thus, the focus of the court’s analysis was whether Heartland violated the ADA by failing to reasonably accommodate Severson’s disability. Id. Answering that question in the negative, the court initially looked to Section 12111(8) of the ADA definition of “qualified individual” which states that: “A ‘reasonable accommodation’ is one that allows the disabled employee to ‘perform the essential functions of the employment position that such individual holds or desires.” Id. (quoting 42 U.S.C. § 12111(8)). The court noted that, “[i]f the proposed accommodation does not make it possible for the employee to perform his job, then the employee is not a ‘qualified individual’ as that term is defined in the ADA.” Severson, 872 F.3d at 481. Based on these definitions, the court held that a reasonable accommodation under the ADA does not include a longterm leave of absence. Id. In its holding, the court stated that, “[s]imply put, an extended leave of absence does not give a disabled individual the means to work; it excuses his not working.” Id. This does not mean that employers never have to grant leaves of absences as reasonable accommodations. Rather, the court noted that “a brief period of leave to deal with a medical condition could be a reasonable accommodation in some circumstances” following Byrne v. Avon Prods., Inc., 328 F.3d 379, 381 (7th Cir. 2003). Id. at 481. The Seventh Circuit defined such brief period as “a couple of days or even a couple of weeks” but reiterated that “a medical leave spanning multiple months does not permit the employee to perform the essential functions of his job.” Id.
“A ‘reasonable accommodation’ is one that allows the disabled employee to ‘perform
temporary duties for no longer than two days. Id. In such a case, the court noted that “[i]f an employer ‘bends over backwards to accommodate a disabled worker . . . , it must not be punished for its generosity.’” Id. at 483.
the essential functions of
Practical Takeaways
the employment position
When an employee requests a leave of absence as a reasonable accommodation under the ADA, employers should still go through the interactive process to meet with the employee and discuss such issues as (1) what is the employee’s disability; (2) the job functions that the employee is not able to perform due to the disability; (3) whether those job functions are essential or nonessential; (4) the expected length of time that the requested accommodation will be needed; (5) where there is any other type of accommodation that the employer can provide rather than the extended leave; and (6) if there are any available open positions for which the employee is qualified that the employee can perform and which meet the employee’s restrictions. Keep in mind that this should be an individualized process and employers should not automatically reject an employee’s request for a leave of absence under Severson. Following the interactive process meeting, if it turns out that the need for time off is only a few days or weeks, serious consideration should be given to granting the request. Requests for leaves of absence greater than a few weeks (when FMLA either does not apply or has been exhausted) could be denied under the reasoning of Severson. Of course, employers are free to grant more generous leave benefits to employees, but the Severson decision provides important guidance for employers on their legal obligations under the ADA.
that such individual holds or desires.”
The court flatly rejected the position advocated by the EEOC that a long-term medical leave of absence should qualify as a reasonable accommodation when the leave is “(1) of a definite, time-limited duration; (2) requested in advance; and (3) likely to enable the employee to perform the essential functions of the job when he returns.” Id. at 482. In the court’s view, the EEOC’s interpretation would transform the ADA “into a medicalleave statute—in effect, an open-ended extension of the FMLA,” which the court deemed “an untenable interpretation of the term ‘reasonable accommodation.’” Severson, 872 F.3d at 481. With respect to Severson’s other proposed accommodations, the court found that Severson failed to meet his burden of proving that there were vacant positions available at the time of his termination. Id. at 482. In addition, Heartland was not required to offer Severson a temporary light-duty position with no lifting because the evidence showed that the company did not have a policy of providing light-duty positions for employees who suffered work-related injuries and on occasion the company had given occupationally injured employees
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Civil Practice and Procedure Donald Patrick Eckler and Howard J. Pikel Pretzel & Stouffer, Chartered, Chicago
No Petrillo Violation for Meeting by Hospital Defense Counsel with Retired Nurse Petrillo v. Syntex Laboratories, Inc., 148 Ill. App. 3d 581 (1st Dist. 1986) is often invoked in medical malpractice lawsuits to bar disclosure of privileged information. A recent Illinois Appellate Court Second District opinion illustrates how case-specific facts operated to defeat successful use of the Petrillo doctrine. In Caldwell v. Advocate Condell Medical Center, 2017 IL App (2d) 160456, the plaintiff unsuccessfully sought reversal of a defense jury verdict claiming a Petrillo violation where counsel for the defendant hospital met ex parte with its retired nurse before her evidence deposition. Factual Background On April 22, 2013, Judith Caldwell arrived home to find that Jeanette DeLuca, age 92, had injured one of her eyes. Caldwell, 2017 IL App (2d) 160456, ¶ 15. Following DeLuca’s office examination, Caldwell and her husband took DeLuca to defendant Condell Medical Center where she was admitted for emergent eye surgery. Id. ¶ 16. DeLuca had surgery under general anesthesia that concluded early on the morning of April 23, 2013. Id. ¶ 23. Later that morning, DeLuca asphyxiated when she choked while eating her breakfast. Id. ¶ 1. Caldwell filed a medical malpractice lawsuit against Condell. She claimed that Condell, through its unidentified agents, was vicariously liable for the death of DeLuca for failing to monitor DeLuca
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post-operatively, failing to ensure that DeLuca had recovered from surgery sufficiently to consume food, and allowing DeLuca to eat food without ensuring that DeLuca had her dentures in her mouth. Id. ¶ 3. Trial Testimony At trial, the central issue was whether DeLuca had her upper denture and lower partial plate in place when she was served breakfast on April 23, 2013. Id. ¶¶ 13-39. Caldwell testified that DeLuca had her upper and lower dentures in place prior to surgery, and that DeLuca never ate food without her dentures. Id. ¶¶ 16-17. Nurse Bella Patseyevsky testified that Deluca removed only her upper denture before surgery. Id. ¶ 22. After surgery, Deluca was taken to the post-anesthesia care unit. DeLuca had her upper dentures in place when she was discharged from the PACU and was taken back to her hospital room. Id. ¶¶ 23-24. DeLuca’s vital signs were recorded on nine occasions from 12:45 a.m. to 6:30 a.m. and DeLuca walked with assistance to and from the bathroom. Id. ¶¶ 25-28. Medical staff ordered pancakes for DeLuca at her request and there was no concern regarding DeLuca’s ability to eat her breakfast. Id. at ¶¶ 29-30. Patient-care technician Christina Riek checked on Deluca following delivery of her breakfast and testified that nothing looked out of place. Id. ¶ 31. When Riek returned to
check DeLuca’s vital signs, she noticed that DeLuca did not look right, and summoned the rapid-response team. Id. ¶ 32. Nurse manager Kathleen Likosar went to DeLuca’s room where she found DeLuca unresponsive and performed a mouth sweep to clear DeLuca’s airway. Likosar removed Deluca’s upper denture and a piece of pancake. Id. ¶¶ 33-34. Nurse Awit also responded to DeLuca’s room and saw Likosar remove DeLuca’s upper denture. There was no testimony or charting in the record that established
About the Authors Donald Patrick Eckler is a partner at Pretzel & Stouffer, Chartered, handling a wide variety of civil disputes in state and federal courts across Illinois and Indiana. His practice has evolved from primarily representing insurers in coverage disputes to managing complex litigation in which he represents a wide range of professionals, businesses and tort defendants. In addition to representing doctors and lawyers, Mr. Eckler represents architects, engineers, appraisers, accountants, mortgage brokers, insurance brokers, surveyors and many other professionals in malpractice claims. Howard John Pikel is a partner at Pretzel & Stouffer, Chartered. He is licensed in Illinois, Indiana and Missouri, and a member of the Federal Trial Bar for the Northern District of Illinois. Mr. Pikel has defended doctors, pharmacists, lawyers, homeowners, businesses and not-for-profit organizations involving wrongful death, catastrophic injuries and property damage. His practice includes professional malpractice, asbestos injuries and death, premises and product liability, construction, contracts, fires and explosions, and auto and trucking liability. Before practicing at Pretzel & Stouffer, Mr. Pikel was a prosecutor for the Cook County State’s Attorney’s Office, where he supervised the Narcotics Felony Trial Unit, and tried numerous felony jury and bench trials.
that DeLuca’s lower partial plate had ever been removed. Id. at ¶ 39. Trial Court Rulings Likosar provided her video evidence deposition on February 12, 2016. Id. ¶ 6. Likosar retired from Condell on January 5, 2016 and was not employed by Condell on the deposition date. Id. ¶ 33. During Likosar’s deposition, Condell’s attorney objected to questions from the plaintiff’s attorney based on attorney-client privilege about conversations between Likosar and Condell’s attorney. Id. ¶ 6. Likosar did not answer the questions and the plaintiff’s attorney did not seek a ruling on Condell’s objection. Id. The plaintiff moved to bar introduction of Likosar’s video evidence deposition on the bases that (1) Condell failed to properly notice Likosar’s video evidence deposition; and (2) based on the failure of Likosar to answer questions about her pre-depositon meeting with Condell’s attorney. Id. ¶ 7. Plaintiff’s counsel argued that no attorney-client privilege existed between Condell and Likosar because Likosar was not a Condell employee at the time of her evidence deposition. Id. Plaintiff’s counsel did not raise a Petrillo objection. Id. ¶ 75. In response, Condell demonstrated that it provided sufficient notice of Likosar’s evidence deposition, but agreed to forgo use of the video portion of Likosar’s evidence deposition at trial. Condell also argued that an attorney-client relationship existed because Likosar was an agent of Condell for whose conduct Condell could be held liable, and because Likosar was insured by Condell’s self-insured trust. Id. ¶ 9. The trial court denied the plaintiff’s motion to bar Likosar’s evidence deposition based on lack of notice. The trial
court also found that Likosar was an agent and insured of Condell, and that Likosar’s retirement was not relevant to whether an attorney-client relationship existed between Condell and Likosar. Id. ¶ 10. The jury returned a verdict for Condell and the trial court denied the plaintiff’s post-trial motions. Id. ¶ 47. Appellate Court Opinion The plaintiff’s arguments focused on the trial court’s failure to bar the evidence deposition testimony of nurse Likosar. The plaintiff advanced three arguments in this regard. First, the plaintiff maintained that the trial court should have barred Likosar’s evidence deposition because Condell failed to satisfy the formal notice requirements under Illinois Supreme Court Rule 206(a). Id. at ¶ 62. The appellate court quickly dismissed this argument, citing the emails exchanged between the parties’ attorneys setting Likosar’s evidence deposition for February 12, 2016. Further, the court observed that the plaintiff’s attorney appeared for the evidence deposition and while there was a dispute as to whether Condell technically complied with the formal notice requirements for the video portion of Likosar’s evidence deposition, Condell resolved the issue by agreeing to read Likosar’s testimony to the jury without presenting the video portion. Id. ¶¶ 65-66. The plaintiff next argued that the trial court should have barred Likosar’s evidence deposition based on the lack of attorney-client privilege between Condell and Nurse Likosar. Id. ¶ 68. The plaintiff maintained that there was no attorney client privilege because Likosar was not an employee of Condell at the time of her evidence deposition because she had retired from Condell in January 2016. Id.
The court rejected the plaintiff’s argument based on two reasons. First, under Illinois Supreme Court Rule 201(b)(2), “All matters that are privileged against disclosure at trial, including privileged communications between a party or his agent and the attorney for the party, which are privileged against disclosure through any discovery procedure.” Id. ¶ 69. Second, the attorney-client privilege extends to communications between an insurer and its insured. Id. ¶ 71. Applying these two principles, the court cited the undisputed affidavit of Likosar, which established that Likosar was an agent of Condell, and that she was an insured under Condell’s self-insured trust. Id. ¶¶ 9, 72. In affirming the trial court ruling, the court also noted that Likosar’s retirement was irrelevant to the status of Likosar as Condell’s agent where Likosar’s conduct could have given rise to vicarious liability on the part of Condell. Id. Finally, Caldwell argued that Likosar’s evidence deposition should have been barred due to an alleged Petrillo violation committed by Condell’s attorney when she met with Likosar ex parte prior to her evidence deposition. Id. ¶ 75. At the outset, Caldwell conceded that she did not raise a Petrillo violation before the trial court. In its discretion, the appellate court overlooked Caldwell’s forfeiture of the Petrillo claim. Id. ¶¶ 78-79. The court went on to hold that the ex parte meeting fell within an exception to the Petrillo doctrine so as not to bar admission of Likosar’s evidence deposition. Citing Morgan v. County of Cook, 252 Ill. App. 3d 947, 952 (1st Dist. 1993), the court observed that where a hospital is sued solely on a theory of vicarious liability, the defendant hospital’s attorney may meet ex parte with the plaintiff’s caregiv— Continued on next page
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ers whose negligence the plaintiff sought to impute to the hospital. Caldwell, 2017 IL App (2d) 160456, ¶ 77. The court went on to cite Burger v. Lutheran General Hospital, 198 Ill. 2d. 21, 58 (2001), which extended Morgan to the plaintiff’s caregivers who were not identified as defendants in the complaint. Caldwell, 2017 IL App (2d) 160456, ¶ 77. In dismissing the plaintiff’s argument, the court noted that it was clear that there was no Petrillo violation. Id. ¶ 80. The court cited the plaintiff’s complaint, wherein she alleged that Condell was liable for the alleged negligent conduct of its unidentified nurses and patient-care technicians related to their care of DeLuca. Id. ¶¶ 77, 80. The court held that there was no Petrillo violation where Likosar was one of the plaintiff’s care-givers at the time of the alleged occurrence, and that Likosar was an insured of Condell at the time of the occurrence. Id.
Legislative Update John Eggum Foran Glennon Palandech Ponzi & Rudloff P.C., Chicago
The 2017 Veto Session Each fall, the Illinois General Assembly closes the legislative year by reconvening to address the bills vetoed by the governor and to consider any attempts to override the governor’s veto. This aptly named “veto session” is short—less than two weeks during October and November—but it can have major implications because vetoed bills can represent some of the most contentious public policy issues of the year. Even when efforts to override the governor’s veto fail, significant energies directed at attempting an override can provide a preview of the issues that may be a battleground for the next year’s legislature. How the Veto Session Works
Practical Takeaways In summary, the Caldwell court applied the well-established holdings in Morgan and Burger to hold that an ex parte meeting between a medical defendant’s attorney and the defendant’s former employee does not constitute a Petrillo violation where the alleged vicarious liability of the defendant is based on the conduct of the former employee. Caution is always the appropriate manner to approach communications with the medical professionals who were involved in treating the plaintiff. Though the Caldwell decision was favorable for the defense, such caution should continue to be observed because of the narrow scope of the exception to the Petrillo doctrine applied in this case.
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Under the Illinois Constitution, every bill passed by the General Assembly must be presented to the governor within 30 days after its passage. Ill. Const. art. IV, § 9(a). The governor then signs those bills that he approves. Unlike the federal system, however, the governor cannot “pocket veto” a bill by declining to sign it. Instead, the Illinois Constitution provides that any bill that the governor does not veto within 60 days becomes law. Ill. Const. art. IV, § 9(b). Illinois governors have significant veto powers. The Illinois Constitution provides four veto mechanisms. The first is the most traditional—a straightforward, complete veto of the bill. Id. If the governor exercises this option, the bill returns to the chamber in which it originated, and that house has the opportunity to attempt to override the veto
by a three-fifth’s vote. Ill. Const. art. IV, § 9(c). If such a vote is successful, then the other house has 15 days to pass an override of bill’s veto by a three-fifth’s vote. Id. In the House of Representatives, a three-fifth’s supermajority is 71 votes, and in the Senate a supermajority is 36 votes. At present, democrats have a super majority in Senate but not the Illinois House of Representatives. Accordingly, some republicans must joint their democratic colleagues for an override to occur. Apart from the traditional complete or “total” veto, there are three other veto mechanisms provided by the Illinois Constitution, all of which allow the governor to alter bills that have been passed by the General Assembly. Two of the mechanisms are specific to appropriations bills. Ill. Const. art. IV, § 9(d). First, the governor may reduce any item of an appropriations bill, and
About the Author John Eggum is a partner at Foran Glennon Palandech Ponzi & Rudloff P.C., where he concentrates his practice on insurance coverage matters and commercial litigation. He represents insurers, TPAs, brokers, and captive managers in professional liability disputes, and also litigates cyber/technology liability claims. Mr. Eggum’s law degree was obtained, with distinction, from The University of Iowa College of Law, and following law school, he served as the law clerk to the Hon. Bruce A. Markell in the United States Bankruptcy Court for the District of Nevada, in Las Vegas. Mr. Eggum serves as the Vice-Chair of the IDC Legislative Committee and the Vice-Chair for the IDC’s Young Lawyers Division.
second, he or she may also elect to veto any item in an appropriations bill. Under these mechanisms, the remainder of the bill becomes law. However, in either case, the bill returns to the General Assembly as to those items reduced or vetoed, and the General Assembly has the opportunity to restore them. Unlike with a total veto, a simple majority of the members in each house can restore an appropriations specific item vetoed by the governor. Id. Thirdly, Illinois governors also possess the right to effect amendatory vetoes. The governor may return a bill with specific recommendations for a change. These amendatory recommendations are then considered, and may be accepted by a majority vote in each house. Ill. Const. art. IV, § 9(e). If accepted and the governor certifies the changes were made in accordance with his recommendations, the amended bill becomes law. If he or she does not so certify, then the bill is a vetoed bill, subject to supermajority override (like any other “totally” vetoed bill). The 2017 Legislative Session During this session, Governor Rauner vetoed 21 House Bills and 19 Senate Bills. Apart from these total vetoes, he also issued amendatory vetoes of 10 other bills. There were no item or reduction vetoes this session (there was only one appropriations bill during the session, and that bill was one of the 40 bills that received a total veto). For frame of reference, 352 House Bills became law and 203 Senate Bills became law during the session. See Illinois General Assembly, http://www.ilga.gov/reports (last visited November 20, 2017). Of the total vetoes, nine House Bills and six Senate Bills became law as the result of override votes. None of
the amendatory vetoes were accepted (meaning they became total vetoes), and three of those were overridden and became law. The 18 overrides included a bill to require students to be taught cursive writing before completion of fifth grade (HB2977), an amendment to the State Prompt Payment Act, which adds certain human services providers to the list of those eligible for interest penalty payments from the state (HB3143), a bill that punishes companies that utilized certain tax structures (inverted domestic corporations) by precluding them from bidding on state contracts (HB3419), a bill creating the Student Loan Servicing Rights Act (SB1351), and, of course, the budget-related bills (previously addressed in earlier columns) (SB006 and its corollaries). One of the notable, and contentious, bills that was vetoed and not overridden was HB2622, which would have created a state-run workers’ compensation insurance company. The bill would have loaned $10 million to a new entity called Illinois Employers Mutual Insurance Company. Those funds would have been insufficient for the new company and represented only start-up costs and initial capitalization. Critics felt that HB2622 was not the right solution to Illinois’ workers’ compensation premium issues, and that a state-run insurer would find itself in the same financial trouble as the rest of Illinois. Given the pressing political need to “do something” on workers’ compensation issues, this bill may find itself re-filed with a new name and number during 2018. Other vetoed bills focused on Illinois’ business environment that were not overridden but may resurface next year include a proposed an increase in the minimum wage (SB0081), an Equal Pay Act amendment that would prohibit em-
ployers from inquiring into prior wage/ salary history (HB2462), and a Collective Bargaining Freedom Act, which would prohibit local governments from enacting “Right-to-Work” ordinances (SB1905). This union-supported law would have prevented local governments from using ordinances to restrict unions’ ability to require employee membership in the union and/or to pay union dues. It is expected that Illinois will see these and other pieces of contentious business and fiscal policy legislation as a centerpiece of the 2018 legislative session, as politicians on both sides of the aisle advocate for policies they believe will be in Illinois’ best economic interests. Tort and other civil justice reforms will likely take a back seat given political pressure to put economic matters at the forefront of the political arena, particularly in an election year. Early 2018 Activity Given the primary contests set to occur in March of 2018, Illinois legislators are likely to limit substantive activity as we move into the New Year. Bills will likely be filed en masse, as usual, but without knowing the upcoming election outcomes, pols may shy away from pushing to pass anything contentious during the beginning of the session. Compromise will likewise probably be in short supply, given posturing for the November 2018 election cycle. If there is any certainty to be had, however, it is that we will hear a lot in 2018 about what all General Assembly members promise to accomplish in the future. With the issues facing our State, hopefully the best of the ideas will come to fruition much sooner than later.
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Insurance Law Update Michael L. Young and Katherine E. Jacobi HeplerBroom LLC, St. Louis
Should I Stay or Should I Go? Staying Coverage Litigation Pending Resolution of the Underlying Lawsuit Liability carriers faced with coverage issues in an underlying lawsuit generally have two options under Illinois law: defend the suit under reservation of rights or seek a declaratory judgment that no coverage exists. See Standard Mut. Ins. Co. v. Lay, 2013 IL 114617, ¶ 19. To avoid estoppel issues, carriers often elect to do both, defending the suit under reservation while simultaneously pursuing a declaratory judgment action. Certain coverage defenses may turn on the facts as determined by the ultimate finding of liability in the underlying suit. Consider, for instance, a classic coverage issue: alternative theories of liability against the insured for negligent or intentional conduct. If the underlying plaintiff prevails on the negligence theory, the claim likely is covered. If the underlying plaintiff prevails on the intentional conduct theory, on the other hand, the claim likely is not. Two courts—the court in the underlying lawsuit and the court in the declaratory judgment action—may be called to decide whether the insured acted negligently or intentionally. Though the issue is the same, there is no guarantee the outcomes will be. Litigation of coverage defenses turning on factual developments in the underlying lawsuit can be tricky. Several Illinois appellate courts recently examined how parties should proceed when these conflicts arise. When the issues in the underlying litigation and the coverage litigation overlap, the safest—and perhaps, only—course of action may be 32 | IDC QUARTERLY | First Quarter 2018
to stay the coverage litigation until the underlying suit is resolved. Earlier this year, the Illinois Appellate Court First District analyzed at length whether to stay pending coverage litigation in Sentry Insurance v. Continental Casualty Company, 2017 IL App (1st) 161785. Sentry Insurance provided its insured a defense under reservation of rights against over 60 lawsuits filed against the insured, concerning alleged damage to reproductive materials the insured allegedly stored for the underlying plaintiffs, and also filed a declaratory judgment action seeking a finding of no coverage. Sentry, 2017 IL App (1st) 161785, ¶¶ 3-4. Sentry argued the “care, custody, or control” and “professional services” exclusions set forth in its policy barred coverage for the underlying suits. Id. ¶ 9. Sentry also named as a defendant to its declaratory judgment action the insured’s excess carrier Continental Casualty. Id. ¶ 3. Continental asserted a counterclaim for declaratory judgment with respect to its policy, seeking a declaration that it had no duty to indemnify the insured against the underlying suits based on the same exclusions as those in the Sentry policy. Id. ¶¶ 10-11. The insured moved to dismiss Sentry’s complaint and Continental’s counterclaim, or alternatively, moved to stay the coverage litigation. Id. ¶ 12. The trial court stayed the coverage litigation with respect to Continental’s duty to indemnify, declining to apply the policy’s
exclusions. Id. ¶¶ 18-19. While on appeal, Sentry settled with the insured, leaving only Continental’s appeal as to its purported duty to indemnify pending. Id. ¶ 22. On appeal, the First District ultimately determined that the trial court had not abused its discretion in staying resolution of the coverage litigation. The court examined a liability carrier’s obligations under the policy and Illinois law: the duty to defend and the duty to indemnify. Id.¶¶ 35-39. While a carrier has a duty to defend any claim that potentially implicates coverage under the policy, a carrier has a duty to indem-
About the Authors Michael L. Young is a partner with the St. Louis office of HeplerBroom LLC, with a primary emphasis in the practice of insurance law. He represents both insureds and insurers in complex insurance coverage matters at all stages of the claims process. Mr. Young’s litigation practice also includes the defense of personal injury, products liability, and white collar criminal defense matters. Mr. Young obtained his law degree from Saint Louis University, summa cum laude, in 2002, where he was the Valedictorian of his class. While in law school, Mr. Young served as a Staff Member for the Saint Louis University Law Journal in 2000–2001. He received his Bachelor of Arts degree in 1999 from Washington University in St. Louis, Missouri, summa cum laude, majoring in History. Katherine E. Jacobi is an associate at the Chicago office of HeplerBroom LLC, with an emphasis in the practice of insurance law. Ms. Jacobi received her J.D. from St. Louis University School of Law, cum laude, where she was inducted into the Order of the Coif, and her undergraduate degree from Truman State University, cum laude. She is licensed in Illinois and Missouri and is a member of the IDC, serving its Insurance Law Committee.
When the issues in the underlying litigation and the coverage litigation overlap, the safest—and perhaps, only—course of action may be to stay the coverage litigation until the underlying suit is resolved.
nify only those claims that are actually covered. Id. The duty to defend typically turns on the allegations asserted against the insured; however, extrinsic evidence may be relevant to determining that duty under certain circumstances. Id. ¶ 37. Generally, extrinsic evidence may be used in a coverage declaratory judgment action to defeat a carrier’s duty to defend, provided the evidence does not “‘determine an issue crucial to the determination of the underlying lawsuit.’” Id. (quoting Pekin Ins. Co. v. Wilson, 237 Ill.2d 446, 461 (2010)). The exception stems from what is referred to as the “Peppers doctrine,” set forth by the Illinois Supreme Court in its seminal decision in Maryland Casualty Company v. Peppers, 64 Ill.2d 187 (1976). While Peppers is known largely for introducing independent—or “Peppers”—counsel to Illinois insurance law, Peppers also introduced the Peppers doctrine, prohibiting a declaratory judgment court from determining ultimate facts in the underlying lawsuit even if those facts also are critical to coverage. Peppers, 64 Ill.2d at 197 (finding declaratory judgment court improperly determined an ultimate fact upon which recovery was predicated in the underlying lawsuit). Applying the Peppers doctrine, the First District in Sentry first “had to determine whether the facts to be decided in the declaratory judgment action would be considered ‘ultimate facts’ such that
coverage litigation was premature.” Sentry, 2017 IL App (1st) 161785, ¶ 44. But first, the court had to determine what constitutes an “ultimate fact.” Peppers suggests “that an ultimate fact is one which would estop the plaintiff in the underlying case from pursuing one of his theories of recovery.” Sentry, 2017 IL App (1st) 161785, ¶ 45 (quoting Fidelity & Cas. Co. of New York v. Envirodyne Engineers, Inc., 122 Ill.App.3d 301, 307 (1st Dist. 1983)). Further, an “ultimate fact” is one that is critical to the insured’s liability in the underlying suit. Id. (quoting Envirodyne Engineers, Inc., 122 Ill. App.3d at 307). In Sentry, for instance, an “ultimate fact” crucial both to liability and to the application of the “care, custody, or control” exclusion was whether the insured exercised exclusive control over the reproductive materials at issue in the underlying lawsuits. Id. ¶ 51. If the insured exercised exclusive control, the “care, custody, or control” exclusion applied to remove coverage. Id. Yet, finding that the insured exercised exclusive control would require finding that the insured’s co-defendant did not exercise control over those materials, contradicting plaintiffs’ allegations against that co-defendant and effectively precluding plaintiffs’ recovery against it. Id. Because this fact was critical to at least one of the underlying plaintiffs’ theories of recovery (that against the insured’s co-defendant),
it constituted an “ultimate fact” in the underlying litigation. Id. Under the Peppers doctrine, the declaratory judgment court could not decide that ultimate fact, and the coverage action properly had been stayed with respect to Continental’s duty to indemnify. Id. The Illinois Appellate Courts’ Second and Third Districts also applied the Peppers doctrine to determine whether coverage litigation should be stayed in the months following Sentry. See State Farm Fire & Cas. Co. v. John, 2017 IL App (2d) 170193; see also Pekin Ins. Co. v. Johnson-Downs Construction, Inc., 2017 IL App (3d) 160601. JohnsonDowns concerned a liability carrier’s duty to defend its putative additional insured, coverage for which was afforded only with respect to vicarious liability. Id. ¶ 3. The Third District rejected the putative insured’s argument that resolution of the duty to defend required a determination of vicarious liability, an ultimate fact in the underlying suit. Id. ¶ 13. Instead, the appellate court held that the trial court could simply evaluate the allegations against the insured to determine whether they sufficiently alleged vicarious liability so as to trigger the duty to defend, without actually determining vicarious liability. Id. Sentry and Johnson-Downs read together to suggest that whether coverage litigation should be stayed depends on which duty is at issue, defense or indemnity. Sentry upheld the stay of litigation with respect to the duty to indemnify, whereas Johnson-Downs overturned the stay of litigation with respect to the duty to defend. In Sentry, the duty to indemnify could not be determined without resolving ultimate facts in the underlying suits, whereas in Johnson-Downs, the duty to defend — Continued on next page
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could be determined based simply on the allegations. This could be explained by the different standards for the two duties: the duty to defend is triggered if the allegations are potentially covered, but the duty to indemnify is triggered only if the liability is actually covered. A court can evaluate the duty to defend at the outset based on the allegations, but can evaluate the duty to indemnify only after the pertinent facts are resolved in the underlying suit. Yet, the Second District in John stayed determination of the insured’s duties to defend and to indemnify pending resolution of the underlying lawsuit. John, 2017 IL App (2d) 170193, ¶ 30. Coverage in John hinged, in part, on whether the insured had acted negligently or intentionally, as well as whether the insured had breached certain coverage conditions. Id. ¶¶ 5-7. The Second District stayed resolution of the entire suit, rather than decide any coverage issues, including the carrier’s duty to defend. Id. ¶ 30. However, the Second District expressly based this decision on extenuating factors, stating that a stay of the entire proceeding was appropriate under the “unique circumstances” of the case. Id. Overall, these cases make clear that the declaratory judgment court should not determine facts critical to liability in the underlying lawsuit, though figuring out exactly which facts are off limits may be more complicated. Nevertheless, deference must be made to the underlying suit. The question arises, however, as to what happens after the underlying suit resolves these ultimate facts. Once those ultimate facts are decided, are they binding in the coverage action? The Peppers doctrine stems from an effort to avoid collateral estoppel in the 34 | IDC QUARTERLY | First Quarter 2018
Presumably, just as the ultimate fact decision in the declaratory judgment suit could be binding in the underlying suit, the ultimate fact decision in the underlying suit could be binding in the declaratory judgment suit based on these same collateral estoppel principles.
underlying lawsuit if the ultimate facts already have been determined by another court in the coverage suit. Presumably, just as the ultimate fact decision in the declaratory judgment suit could be binding in the underlying suit, the ultimate fact decision in the underlying suit could be binding in the declaratory judgment suit based on these same collateral estoppel principles. Collateral estoppel bars litigation of issues decided in a prior action. Dancor Const., Inc. v. FXR Const., Inc., 2016 IL App (2d) 150839, ¶ 60. One requirement to collateral estoppel is that the party against whom preclusion is sought be a party to or in privity with a party to the prior action. Dancor Const., 2016 IL App (2d) 150839, ¶ 61. It is this requirement—that the carrier be a party to or in privity with a party to the prior action—that arguably is not satisfied when an ultimate fact is sought to be used against the carrier in the coverage action. But see U.S. Fidelity and Guar. Co. v. State Farm Mut. Auto. Ins. Co., 152 Ill. App. 3d 46, 49 (1st Dist. 1987) (finding carrier could not collaterally attack judgment in underlying suit in subsequent coverage litigation). Peppers itself recognized this tension, concluding that the carrier was “entitled to have an attorney of its
choosing participate in all phases of this litigation subject to the control of the case by [the insured’s] attorney and [the carrier] is not barred from subsequently raising the defense of noncoverage in a suit on the policy.” Peppers, 64 Ill.2d at 199. Peppers does not answer the question, however, as to whether the carrier may relitigate those ultimate facts in that subsequent suit on the policy or is bound by those facts as previously determined. Perhaps the carrier has an argument that it should not be bound by those fact findings in the underlying lawsuit since it was not a party nor—arguably—in privy with a party to that suit, when the insured was represented by independent counsel. Perhaps the carrier may have an argument these fact findings should not be binding for reasons of fraud or collusion. See, e.g., U.S. Fidelity, 152 Ill.App.3d at 49. Perhaps, on the other hand, the carrier simply is stuck with the findings in the underlying lawsuit. In that event, due process considerations may allow the insurer an argument to intervene in the underlying suit. Exactly what happens after the underlying suit is resolved and the stay has been lifted may remain something of an open question that future cases will need to answer.
Medical Malpractice Update Edna L. McLain Tressler LLP, Chicago
The Illinois Supreme Court Speaks: The Relation-Back Statute Applies to Wrongful Death Case After Statute of Repose Expires The Illinois Supreme Court recently issued its opinion in Lawler v. University of Chicago Medical Center, et al., 2017 IL 120745, affirming the decision of the Illinois Appellate Court First District and finding the relation-back statute applied to a wrongful death claim even when the death occurred more than four years after the alleged act of negligence. On August 4, 2011, plaintiff Jill Prusak sued the defendant, Dr. Rama Jager, and other medical providers, for medical malpractice. The plaintiff alleged that Dr. Jager, and other medical providers, misdiagnosed plaintiff’s macular pathology and failed to recognize lymphoma in her central nervous system during treatment provided from November 5, 2007 through July 2009. Lawler, 2017 IL 120745 at ¶ 3. The plaintiff claimed she did not learn about the alleged misdiagnosis until at least August 7, 2009, following a brain biopsy. Id. The plaintiff died on November 24, 2013. Id. at ¶ 4. On April 11, 2014, Sheri Lawler, the plaintiff’s daughter and the executor of her estate, filed an amended complaint, adding two counts under the Illinois Wrongful Death Act. Id. The defendants moved to dismiss the wrongful death claims as barred by the four-year statute of repose because the plaintiff died more than four years after the last act of alleged medical negligence. Id. at ¶ 5. Plaintiff argued that the wrongful death claim was timely because it related-back to the original complaint pursuant to
735 ILCS 5/2-616(b). Lawler, 2017 IL 120745 at ¶ 6. The circuit court granted defendants’ motions to dismiss, reasoning “that the medical malpractice statute of repose was an ‘absolute bar’ to a wrongful death claim brought more than four years after the last alleged act of negligence and that the relation back doctrine did not apply.” Id. at ¶ 7. The First District reversed the circuit court’s decision, finding that the relationback doctrine applied. Because plaintiff’s original complaint was timely filed, her wrongful death claims, which were filed more than four years after the alleged act of negligence related-back, were timely. Id. at ¶ 8-9. The appellate court relied on language in the relation-back statute that “ ‘[t]he cause of action…in any amended pleading shall not be barred by lapse of time under any statute or contract prescribing or limiting the time within which an action may be brought or right asserted.’” Id., quoting, Lawler v. University of Chicago Medical Center, et al., 2016 IL App (1st) 143189 ¶ 56. On appeal to the Illinois Supreme Court, the defendants contended the relation-back statute did not apply when a death occurs more than four years after the alleged act of negligence, and even if it did apply, the medical malpractice statute of repose should control and preclude plaintiff’s wrongful death claims. Lawler, 2017 IL 120745 at ¶ 10. Considering this an issue of first impression, the supreme court initiated its de novo review of the circuit
court’s order granting defendants’ motions to dismiss by examining the Wrongful Death Act, the medical malpractice statute of repose, and the relation-back statute. The supreme court emphasized that the “primary goal in construing a statute is to ascertain and give effect to the intent of the legislature.” Id. at ¶ 12. To determine the legislature’s intent, one should consider the statute in its entirety and look to the plain language of the statute, “which must be given its plain and ordinary meaning.” Lawler, 2017 IL 120745 at ¶ 12, quoting, Evanston Insurance Co. v. Risenborough, 223 Ill.2d 49, 49 (2006). The Court considered the plain and ordinary meaning of the Wrongful Death Act, the statute of repose, and the relation-back statute. The supreme court emphasized that the Wrongful Death Act allows a decedent’s next of kin to recover damages for their own pecuniary injuries caused by the wrongful acts of another. 740 ILCS 180/2. The cause of action accrues when the death occurs, and “the death must also be the result of a wrongfully caused injury — Continued on next page
About the Author Edna L. McLain is a partner at Tressler LLP in Chicago. She focuses her litigation practice on defense of corporate clients in toxic tort and general liability cases, as well as the defense of nursing homes nurses, and other medical personnel in medical negligence cases. She has she successfully argued an appeal before the Second District Appellate Court. In addition, she has tried seven medical negligence cases and obtained six defense verdicts. Ms. McLain obtained her law degree from St. Louis University School of Law and earned her B.A. from University of Illinois at Urbana-Champaign.
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Medical Malpractice Update | continued
suffered by the deceased at the hands of another.” Lawler, 2017 IL 120745 at ¶ 15, quoting, Wyness v. Armstrong World Industries, Inc., 131 Ill.2d 403, 414-15 (1989). Therefore, “the cause of action is the wrongful act, neglect, or default causing death, and not merely the death itself.” Id. The medical malpractice statute of repose, codified at 735 ILCS 5/13-212(a), establishes a four-year period to file a medical negligence action that is triggered by the occurrence of the act or omission caused by the injury and “may preclude recovery for an injury arising out of patient care even before the plaintiff knows or discovers the injury.” Lawler, 2017 IL 120745 at ¶ 18. The repose period was intended to curtail exposure to medical malpractice claims by placing a time limit within which an action must be commenced. Id. The relation-back statute, codified at 735 ILCS 5/2-616(b), allows a claim to be added through an amended pleading after the statute of limitations has run if that claim relates back to the original cause of action. Id. at ¶ 20. The original pleading must have been timely filed and the amendment must grow out of the same transaction or occurrence set up in the original pleading. Id. at ¶ 21. In this case, the “wrongful act, neglect or default causing death” was the defendants’ failure to diagnose Jill Prusak’s lymphoma between November 5, 2007 and July 2009. Jill Prusak discovered she had lymphoma on August 7, 2009, following a brain biopsy, triggering the two-year statute of limitations. She timely filed her original medical negligence case within those two years. However, the four-year statute of repose simultaneously began to run on the date of the last act of alleged medical treatment in July 2009 and expired in July 2013. When Jill Prusak 36 | IDC QUARTERLY | First Quarter 2018
died on November 24, 2013, her next of kin’s wrongful death action accrued, but the statute of repose period for medical negligence claims had already expired four months before her death. The defendants argued that “the statute of repose ‘extinguished’ the wrongful death claim before it accrued,” yet the supreme court explained that the relation-back statute specifically precludes amendments to pending complaints from being time-barred. Lawler, 2017 IL 120745 at ¶ 28-29. The issue was not that Jill Prusak filed her original complaint for medical negligence after the repose period. In fact, the parties conceded the original complaint filed on August 4, 2011 was timely. Id. at ¶ 28. Further, the supreme court found that the wrongful death claim was based on the same alleged acts of medical malpractice as the original complaint and that the wrongful death allegations were “taken verbatim” from the allegations of the original complaint. Id. Since plaintiff had satisfied the requirements of the relation-back statute, her wrongful death claim was not time-barred even though it accrued after the statute of repose period expired. The defendants further argued the relation-back statute was not intended to “preserve” a cause of action that is time-barred, relying on Real v. Kim, 112 Ill.App.3d 427 (1983) and Evanston Insurance Co. Lawler, 2017 IL 120745 at ¶ 30. The supreme court noted that neither of those cases addressed the relation-back statute or the propriety of amending a pending complaint. The Real case involved a wrongful death action alleging medical negligence originally filed after the repose period had already expired, and Evanston involved a legal malpractice complaint that was initially dismissed as the cause of action had not accrued. Id. The plaintiff then tried to
file another complaint entitled a “second amended complaint” after the cause of action accrued but after the repose period had expired. Id. at ¶ 31-32. The court in Evanston pointed out that there was no amendment to a pending complaint. The second complaint was a new complaint filed after the repose period expired, which is why the court ruled it was time-barred. Id. The difference was that Jill Prusak filed her original complaint timely and the substituted plaintiff sought to amend the complaint after the wrongful death action accrued. The supreme court highlighted that allowing amendments to pending complaints after the limitations period had expired is not new to Illinois jurisprudence or in other jurisdictions, and that such amendments have been permitted when the conditions of the relation-back statute were met. Defendants further argued the statute of repose should control because it is the more specific statutory provision and the relation-back statute is procedural. Lawler, 2017 IL 120745 at ¶ 40. The court disagreed, finding that the relation-back statute was the more specific provision in these circumstances. Id. The supreme court reasoned that the relation-back statute governs amendments without being subject to time limitations, and when applied, it does not bar an amendment “as long as there is a pending timely filed original complaint and the same transaction or occurrence test is satisfied.” Id. The court did not find this interpretation to be contrary to legislative intent or creating an exception to the statute of repose. Rather, the court concluded [w]hen there is a pending complaint based on medical malpractice and a wrongful death claim is added to that complaint, these concerns are not implicated.
Young Lawyers Report A defendant would already be aware of a claim for medical malpractice, and the wrongful death claim would not be stale if it is based on the same transaction or occurrence as the original complaint. Id. The court, therefore, held that the relation-back statute applied to the wrongful death claim filed on behalf of Jill Prusak’s estate and was not barred by the statute of repose. Conclusion The main consideration when determining the timeliness of a later added wrongful death claim is whether the original complaint was timely filed. If the first complaint had not been filed until after Jill Prusak died on November 24, 2013, the Court agreed her wrongful death claim would have been barred by the statute of repose because her death occurred more than four years after the last act of medical negligence. However, because her original medical negligence complaint was timely filed and merely amended after her death to allege a wrongful death claim stemming from the same act of medical negligence, the relation-back statute applied. When evaluating any wrongful death action, know the date of the last act of medical negligence at issue, calculate the statute of limitations and repose period, calculate whether the original complaint was timely filed, and ensure that the wrongful death action actually concerns the same acts of medical negligence identified in the original complaint. If there is a question as to any of these factors, prepare a section 2-619 motion to dismiss to challenge the timeliness of the claim.
Sheina R. Franco Foley & Mansfield, PLLP, Edwardsville
Young Lawyers Give Back Once again, the IDC had the opportunity to demonstrate its generosity during this year’s Holiday Party, which was held on December 7, 2017 at Lloyd’s Restaurant in Chicago. During the Holiday Party, the YLD held its Spirit of the Season Fundraiser to benefit legal organizations in the Chicago area. This year, a total of $900 was raised, which will benefit two organizations—the Land of Lincoln Assistance Foundation and the Chicago Bar Foundation. The Land of Lincoln Assistance Foundation is a not-for-profit organization that provides free “civil legal services to low-income persons and senior citizens in 65 counties in central and southern Illinois.” See Who We Are, Land of Lincoln Assistance Foundation, Inc., http:// lollaf.org/?page_id=16 (last visited December 4, 2017). The Land of Lincoln is governed by a Board of Directors comprised of attorneys and clients who live in the various Illinois counties the organization serves. Id. The Chicago Bar Foundation is an organization that “increases access to free and affordable legal assistance for people in need, and makes the courts and legal system more user-friendly and accessible for people without lawyers.” See Our Work, The Chicago Bar Foundation, https:// chicagobarfoundation.org/our-work/ (last visited December 4, 2017). On December 14, 2017, the YLD hosted a Holiday Happy Hour for IDC members at Big Daddy’s in Edwardsville, Illinois. The proceeds from this event will go to the Madison County division of the Illinois Department of Child and Family Services (DCFS). The
DCFS was established in 1964 and has a “long tradition of service and innovation for the state’s most vulnerable children.” See About DCFS, Illinois Department of Children & Family Services, https:// www.illinois.gov/dcfs/aboutus/Pages/ ab_about.aspx (last visited December 4, 2017). The YLD is proud to “give back” to IDC members through a new CLE offering. Coming this spring—the YLD will present an ethics CLE to meet the new Illinois requirements. Illinois now requires attorneys to take CLE courses in substance abuse and diversity. “Pursuant to Amended Supreme Court Rule 794(d), Illinois lawyers will be required to complete one hour of diversity and inclusion CLE and one hour of mental health and substance abuse CLE as part of the Professional Responsibility CLE requirement.” See Illinois Supreme Court Amends Rule on Minimum Con— Continued on next page
About the Author Sheina R. Franco is an associate in the Edwardsville office of Foley & Mansfield. Ms. Franco focuses her practice on personal injury, products liability, and premises liability, with an emphasis on the defense of toxic tort/mass tort claims. She has represented clients including premises owners, individuals, and product manufacturers from initial complaint to trial prep. Ms. Franco received her J.D. in 2014 from Liberty University School of Law. While there, she interned with the Madison County Circuit Court in Illinois, where she researched, compiled, and compared legal documents for Madison County Civil Court judges.
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tinuing Legal Education Requirement, Illinois State Bar Association, https:// iln.isba.org/blog/2017/04/04/illinoissupreme-court-amends-rule-minimumcontinuing-legal-education-requirement (last visited November 27, 2017). The Illinois Supreme Court’s rationale for this new requirements was based, in part, on statistics that showed a lack of attorney participation in discussions of diversity and substance abuse. Id. The hope is that this new requirement will help support a “healthier profession.” Id. The number of hours required to fulfill the professional responsibility requirement and the total number of CLE credits required in a reporting period are to remain the same. Id. The YLD plan to make this CLE a webinar so all can attend. This ethics course will be led by a member of the ARDC and will cover the required diversity and substance abuse credits needed for the 2017/2018 reporting year. Again, stay tuned for more information.
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In Memoriam Shirley Stevens, Former IDC Executive Director Passes Away
Shirley Stevens was so much more than the IDC Executive Director during her 16 years of service (1992-2007). She was the heart and soul of the organization, our rock, and a friend to us all. In truth, without her the IDC would have ceased to exist. It was fortuitous that, when the organization suffered one of its darkest times, we found a leader of such high integrity and character. Shirley’s commitment to the IDC and all those who served over the years was critical. She led with her unique combination of grace, style, and extraordinary competence. She worked tirelessly, advancing the organization, our mission, and our message. Shirley helped so many IDC members grow into, and successfully navigate, leadership positions, and she did so with ease— deftly handling the challenges of annual leadership changes. Our dear friend and colleague Shirley managed all of these challenges and successes with sincere joy and a smile—always with a smile, and an innate understanding of the challenges of running a volunteer organization. While
balancing different personalities and approaches to leadership year in and year out, Shirley got a lot of things done. She guided the IDC with deft but gentle direction, and in so doing, quite naturally saw to the needs of the organization and its leaders. Shirley helped lead the IDC through an important era by masterfully solidifying our financial base, advancing our mission and membership, and raising the organization’s profile through many organized events and publications. Reflecting on this era brings back exceptional memories of growth and collegiality, including annual fall and spring seminars, and Trial Academy. Many of us still fondly recall the great times in Lake Geneva, Galena, and Oakbrook. Long before mandatory CLE, Shirley was cutting edge in her shepherding of the “Rookie Seminar,” providing a forum for IDC to shine doing what we do best—sharing our talents in the training of young lawyers from our many member defense firms. She also began the Thursday night Executive Committee dinner meeting tradition—what great fun, laughs, and
planning were accomplished at these easy, largely impromptu gatherings. Of greater personal remembrance are the solid friendships and sincere professional understanding and respect that these gatherings fostered. Shirley provided a forum for strengthening relationships, contributing so effectively to even greater and broader IDC accomplishments and growth. Shirley was a woman of fascinating interests and pursuits—she was truly “one of a kind” and never sat still for long. As a young woman, she was an airline stewardess. She and her husband Gary, a life-long pilot, flew together to many locations, for many years. Knowing Shirley, we envision that while Gary was the pilot, Shirley was almost certainly directing the show from off stage—just as she did for the IDC, no matter who held the title of “president” in any given year. It seems so fitting of her generous spirit, with thoughtful attention to those under her care, that, in her last days, Shirley urged Gary to purchase an airplane he had been eyeing for some time—“no excuses!” she said. As always, with her kind but firm hand, Shirley reached her goal… and Gary has a new airplane. Shirley once fondly revealed that she kept “a warm place in her heart” for every IDC president with whom she served. In fact, she made each and every one of us feel that we held that special place in her heart. We all maintain a warm place in our hearts for you too, Shirley.
Index of IDC Monograph and Feature Articles Volume 27 The IDC Quarterly has a rich tradition of presenting thought-provoking, timely, educational articles to the Illinois defense bar. This award winning legal journal is a well-respected piece of the legal landscape in Illinois and the country. Our reputation for excellence is based upon years of excellent submissions from our members. Below is an index of the Feature Articles and Monographs that have appeared in the IDC Quarterly in the past year. All of these submissions are available on our website, www.iadtc.org. We are fortunate to have had the opportunity to present these pieces, and many others, to you over the years. We offer our sincere thanks to the many editors and authors who have made this journal what it is today.
Monograph Index Additional Things to Know About Being an Insured Under Another’s Liability Policy (27.2.M1) Written by: Stephen M. Murphy, Sandberg Phoenix & von Gontard, P.C., Edwardsville, Arsenio L. Mims, Dowd Bennett LLP, St. Louis, and Kenneth R. Goleaner, Sandberg Phoenix & von Gontard, P.C., Edwardsville
Crossing the Line: Interference with Business and Contractual Relations (27.1.M1) Written by: Mark J. McClenathan, Heyl, Royster, Voelker & Allen, P.C., Rockford
The Supreme Court Takes on Personal Jurisdiction: What the Court’s Recent Opinions Tell Us About the Future of Personal Jurisdiction (27.4.M1) Written by: James L. Craney, Craney Law Group, LLC, Edwardsville and Gregory W. Odom, HeplerBroom LLC, Edwardsville
The Tort Immunity Act (27.3.M1) Written by: Dustin S. Fisher, Judge, James, Hoban & Fisher, LLC, Park Ridge, John M. O’Driscoll, Tressler LLP, Bolingbrook, Elizabeth K. Barton, Ancel, Glink, Diamond, Bush, DiCianni & Krafthefer, P.C., Chicago, and Emily J. Perkins, Heyl, Royster, Voelker & Allen, P.C., Peoria
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IDC 2017 Index | continued
Feature Article Index In Memoriam — Remembering Willis R. Tribler (27.1.54) Carney v. Union Pacific Railroad Company: Daylight Comes to Section 414 (27.2.17) Written by: David B. Mueller, Cassidy & Mueller P.C., Peoria and Timothy J. Cassidy, Cassidy & Mueller P.C., Peoria Limitations of Liability Actions for the Non-Admiralty Practitioner (27.3.34) Written by: Andrew C. Corkery, Boyle Brasher LLC, Belleville
The IDC is proud to welcome the following new members to the association:
Matthew Brandabur HeplerBroom LLC, Chicago Sponsor: James DuChateau
Public Policy and the Art of Drafting Conforming Insurance Policies (27.3.52) Written by: Jason E. DeVore, DeVore Radunsky LLC, Chicago Seat Belt Evidence Inadmissible? Not So Fast. (27.3.43) Written by: Circuit Judge Donald J. O’Brien, Jr., Circuit Court of Cook County, Illinois and Charles P. Rantis, Johnson & Bell, Ltd., Chicago Seventh Circuit Expands Title VII of the Civil Rights Act of 1964 to Include Discrimination on the Basis of Sexual Orientation in Hively v. Ivy Tech Community College of Indiana (27.3.26) Written by: Donald Patrick Eckler and Mary H. Cronin, Pretzel & Stouffer, Chartered, Chicago The Times They are a’Changin’: Snow and Ice Cases Following MurphyHylton and the Snow Removal Service Liability Limitation Act (27.1.21) Written by: Edward K. Grassé, Busse, Busse & Grassé, P.C., Chicago and Donald Patrick Eckler, Pretzel & Stouffer, Chartered, Chicago Unauthorized Software? What To Do When the BSA Calls (27.2.5) Written by: David H. Levitt, Hinshaw & Culbertson, LLP, Chicago When “Reasonable” is Unreasonable: ALI’s Proposed Final Draft of the Restatement of Law Liability Insurance (27.3.12) Written by: R. Mark Mifflin, Giffin, Winning, Cohen & Bodewes, P.C., Springfield and Donald Patrick Eckler, Pretzel & Stouffer, Chartered, Chicago Wilson v. Clark—Its Use and its Ramifications (27.1.4) Written by: Circuit Judge Donald J. O’Brien, Jr., Circuit Court of Cook County, Illinois and Charles P. Rantis, Johnson & Bell, Ltd., Chicago
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Jonathan L. Federman Pretzel & Stouffer, Chartered, Chicago Sponsor: Donald Patrick Eckler
Daniel Hardin Bozeman, Neighbour, Patton & Noe, LLP, Moline
Jeffery Kehl Bryce Downey & Lenkov LLC, Chicago Sponsor: Howard L. Huntington
Joshua C. Schumacher HeplerBroom LLC, Edwardsville
THE IDC MONOGRAPH: The Saga Continues: The Further Development of Claims and Insurance Coverage in Construction Defect Cases Donald Patrick Eckler Pretzel & Stouffer, Chartered, Chicago Jonathan L. Federman Pretzel & Stouffer, Chartered, Chicago
IDC QUARTERLY | Volume 28 Number 1
The Saga Continues: The Further Development of Claims and Insurance Coverage in Construction Defect Cases The implied warranty of habitability is the principal theory of relief upon which residential construction defect cases are prosecuted in Illinois, particularly in cases involving condominium construction. The development of this common law doctrine continues apace and Illinois courts have resolved several questions since Anthony Longo and Michael Pisano authored a comprehensive discussion of the essentials of the issues related to the implied warranty of habitability entitled “The Implied Warranty in Construction Defect Cases” in IDC Quarterly, Volume 24, Number 4. We will build on that Monograph as several questions that were open at the time of its publication have been answered and will discuss and set forth new questions that have been raised. Many of these new questions have been principally raised by the recent decisions related to coverage for claims of the implied warranty of habitability. In addition, we will look at the likely advent of additional claims that arise in this context involving breach of fiduciary duty and counterclaims among defendants. Can a Design Professional Be Sued for Breach of the Implied Warranty of Habitability? One of the open questions the last time the implied warranty of habitability graced these pages was whether a design professional could be liable under that theory. In Board of Managers of Park Point at Wheeling Condo Association v. Park Point at Wheeling, LLC, the court answered that question in the negative.1
In Park Point, the condominium association sought to impose liability for breach of the implied warranty of habitability under Minton v. The Richards Group of Chicago2 to design professionals.3 The plaintiff claimed latent defects caused by improper design, material, and construction led to water and air infiltration that was damaging interior flooring and finishes of the common elements and individual units. 4 The plaintiff claimed that it had no recourse against the developer-seller or general contractor.5 The trial court dismissed the claims against the architect and an interlocutory appeal was allowed.6 The appellate court looked first to the basics of the implied warranty of habitability and found that it arises because a disappointed home buyer under the principles of caveat emptor has little or no recourse against the builder.7 The court found that “regardless of the exact role played in each of these projects, the implied warranty of habitability claim centered on the quality of the construction work.”8 Based upon this, the court held that “only builders or buildersellers warrant the habitability of their construction work.”9 In contrast, design professionals do not warrant the accuracy of their plans and specifications.10 The court pointed to the decision in Paulkovitz v. Imperial Homes, Inc.11 and opinions from courts in other jurisdictions to support the proposition that design professionals do not owe a duty with respect to the implied warranty of habitability.12 From that analysis, the court determined that the implied warranty of habitability has been applied
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to construction entities and that design professionals do not engage in such activity.13 In opposition, the plaintiff argued that the work of an architect is sufficiently similar to a construction defendant to subject it to liability under the implied warranty of habitability because the work of either a construction entity or a design professional could create latent defects and the purpose of the warranty
About the Authors Donald Patrick Eckler is a partner at Pretzel & Stouffer, Chartered, handling a wide variety of civil disputes in state and federal courts across Illinois and Indiana. His practice has evolved from primarily representing insurers in coverage disputes to managing complex litigation in which he represents a wide range of professionals, businesses and tort defendants. In addition to representing doctors and lawyers, Mr. Eckler represents architects, engineers, appraisers, accountants, mortgage brokers, insurance brokers, surveyors and many other professionals in malpractice claims. Jonathan L. Federman joined Pretzel & Stouffer, Chartered in July 2016, as an associate attorney with a focus on insurance coverage. Prior to joining Pretzel & Stouffer, Mr. Federman served as a judicial law clerk and administrative assistance to Justice Thomas L. Kilbride in the Supreme Court of Illinois, where he worked on petitions for leave to appeal, motions, opinions, and assisted Justice Kilbride in his administrative duties to the Court. Mr. Federman earned his J.D., summa cum laude, from The John Marshall Law School in 2013.
The court found that “regardless of the exact role played in each of these projects, the implied warranty of habitability claim centered on the quality of the construction work.” Based upon this, the court held that “only builders or builder-sellers warrant the habitability of their construction work.” In contrast, design professionals do not warrant the accuracy of their plans and specifications.
is to protect an innocent homebuyer, irrespective of who created the defects.14 In addition, the plaintiff contended that Paulkovitz was no longer good law.15 The court rejected these contentions and held that the law is limited to construction entities that assist in the physical construction of the property.16 Further, the court found that Paulkovitz is still good law because every case cited by the plaintiff to claim otherwise held to the principle that to state a cause of action under the implied warranty of habitability, the party charged must “contribute to the actual construction of [the] home.”17 The appellate court concluded that a design professional does not contribute in that fashion and therefore could not be held liable.18 A New Claim Against Developers? The nature of claims advanced against developers and the fact that they are most commonly advanced by condominium associations means that there is often significant delay following the completion of the construction before the claims arise. Complicating the filing of the claim is that the developer
creates and appoints those who sit on the original condominium board prior to turnover of the board to the unit owners. As a result, the statute of limitations is an early and frequent defense advanced by defendants in these cases. In Henderson Square Condominium Association v. Lab Townhomes, LLC,19 the Illinois Supreme Court found that the statute of limitations defense was overcome because of alleged misrepresentations and fraudulent concealment, as well as breach of fiduciary duty by the developer board for failing to properly reserve funds prior to turnover.20 This decision could lead to these types of claims arising in other cases and could be used by plaintiffs to extend the time to file claims for breach of the implied warranty of habitability. The plaintiff in Henderson filed a five-count complaint: breach of implied warranty of habitability (Count I), fraud (Count II), negligence (Count III), breach of the Chicago Municipal Code (Count IV), and breach of fiduciary duty (Count V).21 The trial court dismissed the Chicago Municipal Code and breach of fiduciary duty claims, but that judgment was reversed on appeal.22 The Illinois Supreme Court accepted the petition
for leave to appeal, but sustained the judgment of the appellate court.23 The townhome project at issue was built by defendants, which included the development companies, general contractors, and the individuals controlling both, Ronald Shipka, Sr., Ronald Shipka, Jr., and John Shipka.24 The condominium association was created in June 1996 and the Shipkas comprised the first board of managers prior to turnover of the board to the unit owners in late 1996.25 The plaintiffs alleged that the developer began to sell units in 1996 and upon moving in the unit owners noticed water seepage.26 In 2009, an exterior restoration consultant and engineer submitted a report that water was infiltrating the units at several locations because the overall workmanship was “very poor.”27 The condominium association hired a contractor to begin to mitigate the defects and found numerous problems that required rebuilding of several of the units.28 The plaintiffs alleged that they could not find these defects without performing extensive testing and that therefore the defects were concealed.29 The plaintiffs filed their complaint in October 2011 and the defendants moved to dismiss.30 The defendants argued that the plaintiffs’ claims were all time barred and the trial court dismissed Counts I, II, and III with prejudice, but gave the plaintiffs leave to file an amended complaint with respect to Counts IV and V.31 The amended complaint added allegations that the developer and the general contractor violated Section 13-72-030 of the Chicago Municipal Code by marketing the units using false information and omitting other information.32 In addition, the plaintiffs’ amended complaint alleged that the Shipkas breached their fiduciary duty to — Continued on next page
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the condominium association by failing to share in the common expenses and to fund sufficient reserves.33 The plaintiffs also alleged that while in control of the developer board the Shipkas knew or should have known of the defects and failed to either repair them or leave sufficient reserves to repair the defects.34 The defendants again filed a motion to dismiss arguing that the plaintiffs’ claims were time barred because the units were occupied more than 14 years prior to the filing of the original lawsuit.35 The defendants relied on the four year statute of limitations for constructionrelated claims in 735 ILCS 5/13-214(a) and the ten year statute of repose in 735 ILCS 5/13-214(b).36 The defendants also asserted that the claims were time barred by 735 ILCS 5/13-205 which provides a five year statute of limitations to “recover damages for injury done to property, real or personal.”37 In response to the second motion to dismiss, citing 735 ILCS 5/13-214(e), the plaintiffs argued that sections 13-214(a) and (b) do not apply to causes of action arising out of fraudulent misrepresentations or fraudulent concealment.38 The plaintiffs asserted that given that section 13-205 does not have a period of repose that applies and that a claim under that theory can be advanced within five years after the plaintiff discovers the claim.39 The trial court was not persuaded by the plaintiffs’ arguments because the amended complaint did not plead the claims of fraudulent concealment and fraudulent misrepresentation with sufficient specificity and the remainder of the complaint was dismissed.40 The plaintiffs appealed and the appellate court reversed, finding that section 13-214 applied, the fraud exception of 13-214(e) applied, and there was a question of fact as to whether there were
misrepresentations or actions that could support fraudulent concealment.41 The defendants petitioned for leave to appeal, which was granted.42 The Illinois Supreme Court began by analyzing the plaintiffs’ fraudulent concealment allegations and rejected the defendants’ contention that the allegations of concealment must occur after the alleged conduct to be concealed.43 The court, citing to Keithley v. Mutual Life Insurance Co. of New York,44 stated that it has long been held that the alleged acts of concealment “ordinarily must be subsequent to the accruing of the cause of action, . . . they may be concurrent or coincident with it, or even precede it, provided they are of such a nature . . . as to operate after the time when the cause of action arose and thereby prevent its discovery, and were so designed and intended.”45 In this case, the amended complaint alleged that the Shipkas, who owned and controlled the developer and the general contractor, knew and intended the materials in the marketing packages, wherein it was stated that the construction would be in conformity with the specifications, to be false.46 With respect to the fiduciary duty claim, the court held that silence as to the alleged defects was not permitted as it related to that kind of relationship.47 The plaintiffs alleged that in their role on the developer board, the Shipkas had a duty pursuant to the Illinois Condominium Property Act, to properly prepare budgets for the association and the court found there existed a question of fact on whether they fulfilled that duty.48 The court then turned its attention to the statute of limitations provided under Section 13-205 and held that the discovery rule applied to toll the start of the statute until the plaintiffs knew or should have known of both injury and
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wrongful cause.49 The court found the pleading unclear on when the leakage began (the plaintiffs suggest it was not until 2007 or 2008), but held that simply showing leakage was insufficient to start the statute of limitations running because the plaintiff must also know of the wrongful cause of the leaks.50 In particular, the plaintiffs did not know how insufficient the association’s reserve account was until 2009.51 In concluding that there were questions of fact as to when the plaintiffs knew or reasonably should have known that their injury was wrongfully caused, the court stated “[i]t is apparent . . . that after plaintiffs began experiencing water problems from the wood decks, they ‘hired a contractor to perform minor suggested repairs and undertake certain maintenance work to abate the problems.’”52 The plaintiffs then commissioned a more robust investigation of the water infiltration problems and conducted testing that showed that there were significant problems with the construction.53 The plaintiffs also alleged that the defects could not have been discovered sooner.54 The court found that the plaintiffs had sufficiently alleged a breach of the Chicago Municipal Code related to making a material misstatement in the sale of a condominium.55 Section 13-72-030 of the Code states: “[n]o person shall with the intent that a prospective purchaser rely on such act or omission, advertise, sell or offer for sale any condominium unit by (a) employing any statement or pictorial representation which is false or (b) omitting any material statement or pictorial representation.”56 The trial court had found that a claim under the ordinance was similar to fraud claim and does not apply to future conduct; in this case, the construction of the
condominium units in conformity with the plans and specifications.57 The appellate court found that the ordinance was in addition to common law and because it dealt with the sale of units that may not yet be completed, it could apply to prospective statements.58 The Illinois Supreme Court agreed with the appellate court and focused on the language of the ordinance that forbids “any” false statement. 59 This could include statements about construction that was not yet complete.60 The court also noted the exception to promissory fraud actions where the false statements are part of a scheme to accomplish the fraud, as alleged by the plaintiffs in this case.61 The court found that the false statements could be actionable by both the original purchasers as well as subsequent purchasers through the association as their representative.62 Finally, the court turned to the breach of fiduciary duty claim.63 The defendants argued that the facts alleged by the plaintiffs did not overcome the business judgment rule with respect to the budgeting and reserve setting.64 The court rejected this argument out of hand, finding that the plaintiffs had sufficiently alleged that the defendants acted fraudulently and in bad faith when they knew of “the shoddy construction yet failed to account for those repairs.”65 The decision by the court to uphold the reversal of the dismissal of Counts IV and V of the complaint drew a dissent from Justice Burke joined by Justices Freeman and Karmeier.66 The dissenting Justices began by pointing out that the complaint was filed 15 years after the construction was completed.67 The statements that the majority claimed were fraudulent and supported application of fraudulent concealment were statements related to the “quality” of the construc-
tion, which the dissent found could not be fraudulent, but merely a statement of subjective opinion.68 The dissent also asserted that the plaintiffs had failed to allege that they detrimentally relied on the statements in order to invoke fraudulent concealment and thus the complaint was bereft of any allegations of causation.69 The dissent argued that this defect in pleading no only infects the fraudulent concealment claim with respect to the quality of the construction, but also with respect to the claim of inadequate reserving and the violation of Chicago Municipal Code.70 The Henderson decision, though not directly related to claims of implied warranty of habitability, is likely to be used to extend the already expansive statute of limitations for that cause of action if it can be coupled with claims of inadequate reserve funding and fraudulent concealment. As almost every case involving the construction of condominiums involves marketing materials from the developer that claim some form of quality construction and the developer having control of the original board that budgets and sets initial reserves, it can be expected that these claims will be asserted in almost every case. This will likely lead to claims of breach of implied warranty of habitability being asserted well more than a decade after construction is completed and on buildings that were built before waivers of those claims were common. Can a Purchaser Who Takes Subsequent to the Execution of a Waiver of the Warranty of Habitability Sue For a Breach? The running issue of whether a claim for breach of implied warranty of habitability has been or can be released by a waiver of the warranty continues to vex
courts and parties alike. Turning again to Park Point, after concluding that there is no liability against design professionals, the court was asked to decide whether a waiver of the implied warranty of habitability operated to exculpate the original and subsequent general contractor, the masonry contractor, and the carpentry subcontractor.71 Illinois courts have long held that a purchaser can waive the warranty but that the waiver will be strictly construed against the party benefitted by the waiver.72 After finding that the waiver executed with the purchase documents applied to the developer, the Park Point court turned to whether it applied to the other parties. 73 The language of the disclaimer at issue stated: “THE SELLER HEREBY DISCLAIMS AND THE PURCHASER HEREBY WAIVES THE IMPLIED WARRANTY OF HABITABILITY.”74 The definition of “seller” in the document was “seller (and its owners, officers, agents, and the other representatives).”75 The court held that the definition did not include the general contractor or subcontractors as they were not specifically identified in the waiver.76 More important in a wave of cases that are unfavorable to defendants, in Fattah v. Bim, the Illinois Supreme Court held that a waiver of the implied warranty of habitability once waived is not resurrected simply because the property is sold to another purchaser who was unaware of the waiver.77 In Fattah, the court was faced with a situation in which a general contractor, Mirek Bim, through his company built a single family home for Beth Lubeck.78 This sale occurred in 2007.79 The real estate sales contract included a waiver of the implied warranty of habitability given in exchange for a one year express — Continued on next page
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warranty, which was honored by Bim.80 Subsequently, in 2010, the home was sold to John Fattah in an “as is” condition.81 Less than a year after the sale to Fattah, the retaining wall around the property collapsed.82 Fattah timely filed a lawsuit against Bim claiming latent defects.83 After a bench trial, the trial court found that even though the damage was a result of a latent defect, the implied warranty of habitability was waived in the contract between Bim and Lubeck.84 The trial court held that no “builder or developer can predict who will buy” a newly constructed house after its first purchaser.85 The trial court based its ruling on a finding that holding otherwise would “frustrate the policy favoring the enforcement of knowing waivers” of the implied warranty of habitability.86 The appellate court reversed the judgment in favor of the defendant and held that the original waiver did not preclude the imposition of the breach of the implied warranty of habitability against a builder by a subsequent purchaser.87 The Illinois Supreme Court granted the petition for leave to appeal and considered several issues, including whether the waiver was effective against the subsequent purchaser.88 The court first noted that the appellate court relied on Redarowicz v. Ohlendorf when it concluded that the implied warranty of habitability extends to a subsequent purchaser.89 Next, and building on that point, the appellate court concluded that the subsequent purchaser never waived the warranty.90 In rejecting that reasoning, the court first noted that Redarowicz did not involve a situation in which the original purchaser had waived the warranty.91 Applying that distinction, the court then determined, based upon application of Peterson v. Hubschman Construction
Co.,92 that the implied warranty had been waived by Lubeck and that if the court extended the implied warranty of habitability to cover Fattah that it would “significantly alter the burdens and expectations of the defendants and would be inequitable.”93 In addition, the court observed that the builder-vendor would have no ability to know when the house would be sold and if liability for latent defects may reappear based upon the sale.94 As a result, and in order to prevent confusion, inequity, and potential for malfeasance (such as a sale of a home to a husband by a builder including a lower price based upon the inclusion of a waiver and the next day a sale of the home to the wife to void the waiver), the court concluded that the implied warranty of habitability once waived, is waived for all future purchasers.95 933 Van Buren Condominium Association In nearly every situation in which claims are advanced against the developer, they are also advanced against the general contractor and subcontractors. As the ability to plead claims of breach of implied warranty of habitability against general contractor and subcontractors has expanded, so too has the filing of counterclaims by developers against those defendants. In 933 Van Buren Condominium Association v. Van Buren, the court addressed the nature of those counterclaims and how they might be advanced.96 The developer hired two roofing contractors to assist in building a condominium.97 After the condominium association discovered leaking in the common area roof and sued the developer, the developer asserted counterclaims against the roofing contractors
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asserting that they had failed to defend and indemnify the developer pursuant to their contracts.98 The developer settled with the condominium association and the only remaining claims were those between the developer and the roofing subcontractors.99 The trial court granted summary judgment to the roofing subcontractors on the indemnification counterclaims, finding that they had no duty to defend or indemnify the developer.100 The appellate court reversed the grant of summary judgment in favor of the roofing subcontractors on the claims for indemnity as to the breach of the implied warranty of habitability claim advanced against the developer, but affirmed with respect to the fraud claims that had been advanced by the condominium association against the developer.101 The court reached this conclusion by first finding that the indemnity provisions were valid under the Construction Contract Indemnification Negligence Act, which states: With respect to contracts or agreements, either public or private, for the construction, alteration, repair or maintenance of a building, structure, highway bridge, viaducts or other work dealing with construction, or for any moving, demolition or excavation connected therewith, every covenant, 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.102 This provision prohibits indemnity in the construction context for the negligence of the party to be indemnified. The court then compared the language of the statute
to the indemnity provisions in the two roofing subcontractors’ contracts with the developer.103 Citing to Braye v. ArcherDaniels-Midland Co.104 and Buenz v. Frontline Transportation Co.,105 the court held that because the indemnity clauses did expressly require that the developer be indemnified for its own negligence, the provisions were enforceable.106 The court next turned to whether the subcontractors breached their duty to defend the developer.107 As an initial matter, the court rejected the argument that the indemnification clauses were subject to the four year statute of limitations in 735 ILCS 5/13-214(a).108 Instead, the court held that those claims are subject to the 10 year statute of limitations applicable to breach of contract claims.109 In analyzing the merits, the court divided the claims for indemnity into the fraud claims and the claims related to the breach of the implied warranty of habitability. With respect to the fraud claims, the court concluded that those claims were not covered by the indemnity clauses.110 The fraud claims asserted by the plaintiffs arose out of the failure of the developer to disclose the defects in the construction of the roof and did relate to the conduct of the subcontractors.111 Both indemnity clauses only provided for indemnity for conduct related to alleged wrongdoing of the subcontractors (the basis for the court to find the indemnity clauses were enforceable).112 With regards to the claim of breach of the implied warranty of habitability, the court determined that those claims triggered the subcontractors’ duty to defend under the indemnity clauses.113 Specifically, the court analyzed the plaintiff’s allegations which arose out of the faulty work on the roof which fell into the scope of work for both subcontractors.114 One of the subcontractors asserted
that the two year statute of limitations in 735 ILCS 5/13-204(c) (the limitation of time in which a counterclaim must be filed) but this argument was rejected by the court, again finding that the 10 year statute of limitations for breach of contracts applied.115 Most importantly, the court also rejected the argument that a claim for breach of implied warranty of habitability is a claim sounding in tort.116 This conclusion, which is consistent with prior opinions of the Illinois Supreme Court, has important implications for whether there is insurance coverage for claims of breach of the implied warranty of habitability.117 Can a Condominium Association Seek Recovery for Property Damage to Individual Units? In the prior Monograph on this issue, it was taken for granted that the condominium associations could advance claims for property damage to individual units without the individual unit owners filing a lawsuit. However, several courts, both state and federal, have disagreed and have held that a condominium association lacks standing to advance such claims. Surprisingly, this holding has so far been provided in the insurance coverage cases that have arisen out of disputes related to underlying claims of breach of the implied warranty of habitability. Under a commercial general liability insurance policy (CGL), an insurer owes a duty to defend its insured if a complaint alleges facts within or potentially within coverage.118 Generally, CGL policies cover bodily injury or property damage caused by an occurrence. 119 An occurrence is generally defined as an accident.120 CGL policies do not cover
the cost of repairs or replacement of defective work.121 Rather, CGL policies provide coverage for the negligent damage to other property outside of the scope of the project.122 In a multi-unit condominium association, a CGL policy may provide coverage to a claim involving allegations of negligence that cause property damage to other property outside the scope of the project.123 That is, absent allegations of possible property damage to some property outside the scope of the project the contractor or subcontractor was hired for, a CGL policy will not be triggered and the insurer will generally not owe a duty to defend.124 Some Illinois and federal courts have considered whether an insurer owes a duty to defend a contractor when a condominium association sues. As discussed in greater detail below, courts have considered whether an association has alleged negligent conduct that led to property damage to other property than that within the scope of the project the contractor was hired to perform. These courts have generally held that allegations of property damage to personal property of the individual condominium owner are insufficient to trigger coverage. The principal basis for this conclusion that condominium associations do not have standing to assert the claims regarding personal property damage of individual unit owners. Absent standing, courts have held that allegations of property damage to personal property of the individual condominium owners are not recoverable in the underlying lawsuit, and thus, there is no possible or potential liability to the contractor or subcontractor. That is, absent allegations of covered or potentially covered claims, there is no duty to defend. — Continued on next page
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The Illinois Supreme Court has yet to determine whether a condominium association has standing under the Illinois Condominium Property Act (Act) to recover for damage to condominium unit owners’ personal property. In Henderson Square Condo Association v. Lab Townhomes, LLC, the Illinois Supreme Court considered whether the governing body of a property of townhomes had standing to bring a claim of fraudulent concealment.125 In dicta, the court stated that “it is clear that a condominium association generally has standing to pursue claims that affect the unit owners or the common elements.”126 However, as the issues before the court did not relate to allegations of individual condominium unit owners’ personal property, whether the Act provides standing to associations to bring such claims has yet to be definitely determined. The Act provides that a condominium association “shall have standing and capacity to act in a representative capacity in relation to matters involving the common elements or more than one unit, on behalf of the unit owners, as their interests may appear.”127 Thus, there are essentially two issues: (1) can (or should) a court considering insurance coverage determine whether a condominium association has standing to assert such claims in the underlying litigation; and (2) do such claims relate to matters involving the common elements or relate to matters involving more than one unit? Westfield Insurance Co. v. West Van Buren, LLC In Westfield Insurance Co. v. West Van Buren, LLC, the developer subcontracted installation of a roof.128 The sub-contractor obtained a CGL policy through Westfield Insurance Company for occurrence-based
coverage.129 A year after construction, the condominium association took control of the building.130 The association claimed construction defects in the roof caused water to infiltrate the building and individual condominium units and demanded the developer reconstruct the roof.131 The association sought reimbursement for the cost of the repair work after the developer refused.132 The developer claimed to be an additional insured under Westfield’s policy.133 The underlying complaint alleged breach of warranty, violation of the Consumer Fraud and Deceptive Business Practices Act, fraud, and breach of the implied warranty of habitability.134 The complaint alleged water infiltrated the common elements and individual units.135 The court’s majority first considered whether there were allegations of an occurrence or property damage as defined within the policy.136 The policy defined “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions,” and “property damage” as “a. Physical loss to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the ‘occurrence’ that caused it.”137 The majority, citing Stoneridge Development Co. v. Essex Insurance Co.,138 first held the underlying complaint failed to allege an occurrence.139 The court next held that the allegations did not constitute property damage, finding the allegations “sought only to hold the developer responsible for the shoddy workmanship of its roofing subcontrac-
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tor,” and the court held the complaint only sought purely economic losses not covered by the policy.140 The developer argued that the underlying complaint alleged actual physical harm to personal property as well.141 The majority noted that while “construction defects that damage something other than the project itself can constitute an occurrence and property damage, they do not in this case,” holding that the allegations were meant to “simply bolster the contention that water infiltration generally occurred and caused damages.”142 The majority noted that “the complaint did not seek damages for any personal property damage.”143 Instead, the complaint merely referenced a free-standing fact but did not attach the personal property damage to any theory of recovery, which was insufficient to trigger coverage.144 The majority also noted that the “allegations of personal property damage were not offered for the purpose of recovery,” but rather were purely tangential to the association’s claim for damages for repair and remediation of the roof.145 The developer also argued that Westfield should have raised the issue of standing as an affirmative defense in the underlying lawsuit.146 However, the majority did not answer whether the association had the capacity to represent the individual unit owners, instead holding, as there was no duty to defend, that the issue did not necessarily involve standing.147 The dissenting Justice disagreed with the majority and would have held there was a claim for property damage caused by an occurrence.148 The dissent also criticized the majority’s analysis on standing, noting that standing is an affirmative defense which is the defendant’s burden to plead and prove.149 The
dissent would have held an affirmative defense is not an exclusion or a basis to decline a tender of defense.150 Rather, the dissent would have required the insurer to have defended and raised the affirmative defense itself in the underlying matter.151 Acuity v. Lenny Szarek, Inc. In Acuity v. Lenny Szarek, Inc., the defendant-insureds argued that the Act gave the condominium association the right to sue for property damage suffered by individual unit owners.152 Szarek, a carpentry contractor, agreed to perform work at two separate condominium projects.153 The condominium unit owners investigated apparent water infiltration issues and ultimately took action against the condominium developers and builders.154 One of the condominium associations brought suit against the developer and its two members, and later amended the complaint to add claims against various contractors, including Szarek.155 The “complaint included allegations that Szarek’s improper construction and installation of building materials resulted in water infiltration that ‘caused substantial damages to common elements *** drywall, garage walls and ceilings, and interior finishings of the units, as well as wood floors, carpeting, window coverings and personal property, all located inside the affected unit.’”156 The other association, after unsuccessfully attempting mediation and arbitration, filed a complaint against Szarek and other contractors for “breach of contract, indemnification and declaratory relief, contending that Szarek failed to provide work ‘free from defects in workmanship, materials and design,’ ***.”157 Acuity had issued a CGL policy to Szarek which covered damages to bodily
injury or property damage to which the insurance applied, caused by an occurrence.158 The policy defined “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions, and “property damage” as “[a] a physical injury to tangible property, including all resulting loss of use of that property ***; or [b]. loss of use of tangible property that is not physically injured.”159 Acuity sought a declaration that it owed no duty to defend or indemnify Szarek in the underlying complaint.160 The defendants argued that the Act allowed the condominium association the right to sue for property damage suffered by individual unit owners.161 The court noted that “the statute by its plain language alone certainly does not establish any such right.”162 Both parties cited Poulet v. H.F.O, LLC,163 in support of their argument. The court found that Poulet suggested “it remains for an individual unit owner to bring any claim he may have for damage to his own personal property.”164 The court ultimately held that there was “no need to determine precisely what right a condominium association may have to act on behalf of the individual unit owners.”165 The court noted that the condominium association merely mentioned damage to the personal property of the individual unit owners, but did not seek to recover for those damages.166 Allied Property & Casualty Ins. Co v. Metro North Condo Association In Allied Property & Casualty Insurance Co v. Metro North Condo Association, a condominium building sustained extensive water damage caused by a subcontractor’s defective window installation.167 The condominium association
brought suit against the developer, who turned out to be insolvent, and then filed a fourth amended complaint adding a claim against the subcontractors for breach of the implied warranty of habitability.168 The association and the subcontractors reached a settlement, and the association dismissed its pending lawsuit in exchange for the assignment of the subcontractors’ rights against its insurer.169 At the time of the settlement, the only pending claim was for breach of the implied warranty of habitability.170 The settlement also specified that it was not intended to compensate the association for the cost of repairing or replacing the defectively installed windows, but for the resultant damage to the remaining parts of the building and to the unit owners’ personal property.171 The subcontractors were insured under a standard CGL policy.172 The policy required the insurer to pay “those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.”173 The policy also contained a number of exclusions to limit coverage.174 The court considered whether the policy required the insurer to indemnify the subcontractors.175 The court first held that the cost of repairing the defective completed work was not covered under the policy.176 The court next held that the implied warranty of habitability did not allow for recovery of damages covered by the policy.177 The court then noted that the cost of remedying the subcontractors’ defectively installed windows was not covered and was the only cost for which the subcontractors were liable.178 Finally, the court held that the association lacked standing to sue on behalf of the — Continued on next page
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individual unit owners for damage to the owners’ personal property.179 The court noted that in the settlement, the association claimed it was “entitled to recover (in part) for the unit owners’ loss of personal property resulting from water damage caused by [the subcontractors]. But individual damage to the unit owners’ privately-owned belongings is an individual loss that affects each owner separately; it is not a collective loss affecting multiple units or the ‘common elements’ of the building.”180 Westfield Insurance Co. v. National Decorating Service Most recently, in Westfield Insurance Co. v. National Decorating Service, the Court of Appeals for the Seventh Circuit once against considered the issue.181 In a third amended complaint, the condominium association identified the following damages: “(1) significant cracking of the exterior concrete walls, interior walls, and ceilings; (2) significant leakage through the exterior concrete walls, balconies, and windows; (3) defects to the common elements of the building; and (4) damage to the interior ceilings, floors, interior painting, drywall, and furniture in the units.” 182 The court noted that the furniture allegation was only added after the filing of the third amended complaint.183 The court first held that while a condominium association may act in a representative capacity on behalf of its unit owners, the Act limits “the scope of such representation to matters involving the common elements or more than one unit, on behalf of the unit owners, as their interests may appear.”184 The court held the Act “precludes the Association from being able to pursue a legal remedy for the damage that it alleges [the contrac-
tor’s] action caused to the individual unit owners’ furniture.”185 The court found the allegations insufficient to invoke the duty to defend as the association could not legally recover for the alleged damage to the furniture.186 The court ultimately held there were other allegations of negligence that caused property damage and ultimately held there was a duty to defend.187 Unless and until the Illinois Supreme Court definitively decides whether the Act extends a condominium association’s standing to allege property damage of unit owner’s personal property or the legislature clarifies the statute, courts will likely rely on the recent opinions that preclude condominium associations from asserting claims for property damage to individual units. That is, in a coverage dispute involving the implied warranty of habitability in the underlying cause of action against a contractor or subcontractor, the court will likely first look to the allegations in the underlying complaint to see if there was an occurrence caused by property damage. If there are allegations of property damage involving the personal property of the individual unit owners, the court will have to determine whether to follow the above opinions to determine if the condominium association has standing to assert such claims. If the court determines there is no standing, the court will have to consider whether there are any other allegations of property damage sufficient to bring the claim within, or potentially within, coverage under the policy. As a reminder, even if a court determines that a condominium association lacks standing to assert such claims, litigators must be aware to look for allegations of property damage to other property, which may trigger coverage.
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Conclusion The judge-made doctrine of the implied warranty of habitability continues to evolve and in ways that could not have been anticipated by the courts that first invoked the doctrine nearly four decades ago. Claims for breach of the implied warranty of habitability have become the favored theory of recovery in residential construction cases and developers, general contractors, subcontractors, and their insurers will have to adapt to these continued developments. The Illinois Supreme Court will likely issue a very important decision later in its current term when it decides the appeal in Sienna Court Condominium Association v. Champion Aluminum Corp. 188 This case concerns several important issues, including whether a claim for breach implied warranty of habitability can be asserted against material suppliers and design professionals who did not perform construction work and whether an otherwise insolvent builder who had recoverable insurance would preclude claims of breach of the implied warranty of habitability against subcontractors.
(Endnotes) Bd. of Managers of Park Point at Wheeling Condo Ass’n v. Park Point at Wheeling, LLC, 2015 IL App (1st) 123452, ¶ 31. 1
Minton v. The Richards Grp. of Chicago, 116 Ill. App. 3d 852 (1st Dist. 1983). 2
Park Point, 2015 IL App (1st) 123452, ¶ 4. 3
4
Id.
5
Id.
6
Id. ¶ 5.
7
Id. ¶ 6.
Id. ¶ 14.
Id. ¶ 24.
8
39
Park Point, 2015 IL App (1st) 123452, ¶ 15.
40
9
10
Id.
Paulkovitz v. Imperial Homes, Inc., 271 Ill. App. 3d 1037 (3d Dist. 1995). 11
Park Point, 2015 IL App (1st) 123452, ¶¶ 16-22. 12
Id. ¶¶ 25-26.
72
Id. ¶ 34
73
Id. ¶¶ 45-46.
74
Id. ¶ 47 (emphasis in original).
75
Id. ¶ 48.
76
Id. ¶¶ 49-50
77
Fattah v. Bim, 2016 IL 119365, ¶ 35.
78
Fattah, 2016 IL 119365, ¶¶ 4-5.
79
Id. ¶ 5.
80
Id.
81
Id. ¶ 6.
82
Id.
83
Id. ¶ 7.
84
Fattah, 2016 IL 119365, ¶ 9.
85
Id.
Id. ¶ 56.
86
Id.
Id.
87
Id. ¶ 11.
Id.
88
Id. ¶ 14.
55
Id. ¶ 75.
89
Id. ¶ 63; Municipal Code of Chicago § 13-72-030.
90
Fattah, 2016 IL 119365, ¶ 16.
91
Id. ¶ 17.
Id. ¶ 28.
41
Id. ¶ 30.
42
Id. ¶¶ 36-38.
43
Keithley v. Mut. Life Ins. Co. of New York, 271 Ill. 584, 588 (1916). 44
Henderson Square Condo. Ass’n, 2015 IL 118139, ¶ 39 (quoting Keithley v. Mut. Life Ins. Co. of New York, 271 Ill. at 598). 45
13
Id. ¶ 22.
14
Id. ¶ 24.
15
Id.
46
Id. ¶ 27.
47
Id.
48
16 17
Park Point, 2015 IL App (1st) 123452, ¶¶ 28-31. 18
Id. Id. ¶ 40. Id. ¶ 41. Id. ¶¶ 50-52.
49
Id. ¶ 55.
50
Henderson Square Condo. Ass’n v. Lab Townhomes, LLC, 2015 IL 118139.
51
Henderson Square Condo. Ass’n, 2015 IL 118139, ¶ 38-42.
52
19
20
21
Id. ¶ 1.
22
Id.
23
Id.
24
Id. ¶¶ 4-5.
25
Id. ¶ 6.
Henderson Square Condo. Ass’n, 2015 IL 118139, ¶ 7. 26
Henderson Square Condo. Ass’n, 2015 IL 118139, ¶ 54. 53 54
56
Henderson Square Condo. Ass’n, 2015 IL 118139, ¶ 64. 57
Id. ¶ 65.
58
27
Id. ¶ 8.
59
28
Id. ¶ 9.
60
29
Id. ¶ 10.
61
30 31
Id. ¶¶ 3, 11. Id. ¶¶ 11-12.
Henderson Square Condo. Ass’n, 2015 IL 118139, ¶ 13. 32
Id. ¶ 69. Id. ¶ 75.
62
Henderson Square Condo. Ass’n, 2015 IL 118139, ¶ 77. 63
Id.
64 65
34
Id.
66
Id. ¶¶ 17-18.
67
36
Id. ¶ 18.
68
37
Id. ¶ 21.
69
Henderson Square Condo. Ass’n, 2015 IL 118139, ¶ 23. 38
Peterson v. Hubschman Constr. Co, 76 Ill. 2d 31 (1979). 92
Fattah, 2016 IL 119365, ¶¶ 19-21, 2728.
Id.
Id. ¶ 16.
Id. ¶ 15 (citing Redarowicz v. Ohlendorf, 92 Ill. 2d 171 (1982)).
93
Id. ¶ 68.
33
35
Park Point, 2015 IL App (1st) 123452, ¶ 32. 71
Id. ¶ 79.
94
Id. ¶ 30.
95
Id. ¶¶ 32, 35.
933 Van Buren Condo. Ass’n v. Van Buren, 2016 IL App (1st) 143490. 96
933 Van Buren Condo. Ass’n, 2016 IL App (1st) 143490, ¶ 1 97
98
Id. ¶¶ 84-120.
Id. ¶ 1
99
Id. ¶ 87.
Id. ¶ 2.
100
933 Van Buren Condo. Ass’n v. Van Buren, 2016 IL App (1st) 143490, ¶ 2.
Id. ¶¶ 90-93.
Henderson Square Condo. Ass’n, 2015 IL 118139, ¶¶ 97-98. Id. ¶¶ 106-107, 118.
101
Id.
102
740 ILCS 35/1.
70
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933 Van Buren Condo. Ass’n v, 2016 IL App (1st) 143490, ¶¶ 35-41. 103
Braye v. Archer-Daniels-Midland Co., 175 Ill. 2d 201 (1997). 104
127
765 ILCS 506/9.1(b).
West Van Buren, 2016 IL App (1st) 140862, ¶ 3. 128
156
Id.
157
Id. at 1057.
158
Id.
129
Id.
159
Id. ¶ 4.
Acuity, 128 F. Supp. 3d at 1057.
130
160
Id.
Id.
131
161
Id. ¶¶ 4-5.
Id. at 1062.
132
162
Id. ¶ 43.
Id. ¶ 5.
Id.
133
163
Id. ¶ 44.
134
Buenz v. Frontline Transp. Co., 227 Ill. 2d 302 (2008). 105
933 Van Buren Condo. Ass’n, 2016 IL App (1st) 143490, ¶ 38. 106
107 108
Id.
109
Id. ¶¶ 47-49.
110
Id. ¶ 47.
111
933 Van Buren Condo. Ass’n, 2016 IL App (1st) 143490, ¶¶ 48-49. 112
Id. ¶¶ 51-59.
113
Id. ¶ 52.
114
Id. ¶ 55.
115
Id. ¶ 58.
116
Id.
117
Pekin Ins. Co. v. Wilson, 237 Ill. 2d 446, 455 (2010). 118
See generally Am. States Ins. Co. v. Koloms, 177 Ill. 2d 473, 489 (1997). 119
Am. Family Mut. Ins. v. Enright, 334 Ill. App. 3d 1026, 1031 (1st Dist. 2002). 120
Westfield Ins. Co. v. West Van Buren, LLC, 2016 IL App (1st) 140862, ¶ 19, 59; Viking Constr. Mgmt. v. Liberty Mut. Ins. Co., 358 Ill. App. 3d 34, 55 (1st Dist. 2005); State Farm Fire & Cas. Co. v. Tillerson, 334 Ill. App. 3d 404, 412 (5th Dist. 2002). 121
West Van Buren, 2016 IL App (1st) 140862, ¶ 20; CMK Dev. Corp. v. West Bend Mutual Ins. Co., 395 Ill. App. 3d 830, 840 (1st Dist. 2009). 122
West Van Buren, 2016 IL App (1st) 140862, ¶¶ 18-20. 123
Id.
124
Henderson Square Condo Ass’n v. Lab Townhomes, LLC, 2015 IL 118139, ¶ 75. 125
Henderson Square, 2015 IL 118139, ¶ 75. 126
West Van Buren, 2016 IL App (1st) 140862, ¶ 6.
Poulet v. H.F.O, L.L.C., 353 Ill. App. 3d 82 (1st Dist. 2004). 164
Id.
Acuity, 128 F. Supp. 3d at 1062.
165
Id. ¶¶ 18-19.
Id. at 1062.
136
166
Id. ¶ 16.
Id. at 1062.
137
167
135
Stoneridge Dev. Co. v. Essex Ins. Co., 382 Ill. App. 3d 731, 747 (2d Dist. 2008) (holding the implied warranty of habitability is contractual in nature and not an occurrence). 138
West Van Buren, 2016 IL App (1st) 140862, ¶¶ 17-18. 139
Allied Prop. & Cas. Ins. Co. v. Metro North Condo. Ass’n, 850 F.3d 844, 845 (7th Cir. 2017). 168
Metro North, 850 F.3d at 846.
169
Id.
170
Id.
171
Id.
140
Id. ¶ 19.
172
Id.
141
Id. ¶ 20.
173
Id.
174
Metro North, 850 F.3d at 846.
175
Id. at 847.
176
Id. at 846.
177
Id. at 848.
178
Id.
179
Id.
180
Metro North, 850 F.3d at 849.
Id. (emphasis added) (internal citation omitted). 142
143 144
Id. Id.
West Van Buren, 2016 IL App (1st) 140862, ¶ 22. 145
146 147 148
Id. ¶ 23. Id. Id. ¶ 34.
Id. ¶ 39 (quoting Lebron v. Gottlieb Mem’l Hosp., 237 Ill. 2d 217, 252 (2010)). 149
West Van Buren, 2016 IL App (1st) 140862, ¶ 39. 150
151
Id. ¶ 41.
Acuity v. Lenny Szarek, Inc., 128 F. Supp. 3d 1053, 1062 (N.D. Ill. 2015). 152
153
Acuity, 128 F. Supp. 3d at 1056.
154
Id.
155
Id.
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Westfield Ins. Co. v. Nat’l Decorating Serv., 863 F.3d 690 (7th Cir. 2017). 181
182
Nat’l Decorating, 863 F.3d at 693.
183
Id.
184
Id. at 696 (citations omitted).
185
Id.
186
Id.
187
Id. at 697-98.
Sienna Court Condo. Ass’n v. Champion Aluminum Corp., 2017 IL App (1st) 143364. 188
