Illinois Construction Law Blog : Illinois Construction Lawyer & Attorney : Foran Glennon Palandech & Ponzi Law Firm : Chicago IL

The Second District held as much in its recently released opinion in Thompson v. Gordon.  There, Plaintiff’s husband and daughter were fatally injured when the driver of a vehicle moving in the opposite direction lost control and vaulted over the concrete median separating traffic.  Plaintiff sued the engineer that designed the bridge deck and traffic area where the median was located, alleging the engineer was negligent in failing to design a median barrier that would have prevented the vehicle from crossing the median and causing the accident.  The trial court granted the engineer’s motion for summary judgment, relying on the services contract and holding that it did not require an assessment of the sufficiency of the median barrier and did not require the engineer to modify or redesign the median barrier.

On appeal, the Second District looked first to the plain language of the contract.  The court held that the contract required the engineer to submit design plans for a bridge deck “replacement.”  Viewing the contract as a whole, the court read “replacement” to mean that the engineer’s role was limited to submitting designs to recreate the bridge deck exactly as it had existed, rather than submitting designs for an improved or altered deck.  However, the contract also contained a provision stating that “[t]he standard of care for [defendants’] services will be the degree of skill and diligence normally employed by professional engineers or consultants performing the same or similar services.”  The court therefore concluded that the engineer labored under both of the above-mentioned duties.

Having determined the engineer’s duty, the issue then became whether the plaintiff provided any evidence that the engineer breached its duty.  In the court’s eyes, the plaintiff had proffered such evidence in the form of an expert report indicating that an engineer acting within the standard of care while creating plans to replace the bridge deck would have considered and designed an improved median barrier.  The court noted, “although the interpretation of defendants’ contract is indeed a question of law, our interpretation of that contract leads us to conclude that the contract imposed a professional duty of care on defendants’ work, and the extent of that duty (and whether it was breached) creates a factual question subject to expert testimony.”  Plaintiff’s expert report was, in the Second District’s opinion, sufficient to create questions of fact regarding defendants’ breach of duty and the judgment of the trial court was reversed.

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You may recall our discussion of the Second District’s decision in Artisan Design Build, Inc., v. Bilstrom, in which the Second District was faced with the same decision as the other districts have been faced with… what, if anything, does a contractor’s failure to comply with the Act mean for its claims against the homeowner?

The Second District interpreted the Act to mean that the contractor’s failure to provide the consumer with the brochure does NOT remove the contractor’s right to recover in either equity (quantum meruit) or law (breach of contract, mechanic’s lien).

“To hold that a failure to provide a consumer with the brochure allows the consumer to defeat all legal and equitable claims by the contractor would lead to mischief and a result the legislature could not have intended.”

In reaching this conclusion, the Court said it was looking to legislative intent, which is a phrase and methodology addressed in many of the cases involving this Act. However, the Court attempted to discover the legislative intent through reading the “plain language” of the statute but does not examine what the legislature had to say about the bill in debate or committee.

In Roberts d/b/a Roberts Cleaning, Maintenance and More v. Adkins, the Third District has now added its voice to the discussion and disagreed with the Second District. In, Roberts a contractor sued to enforce a mechanic’s lien and the homeowner asserted, as an affirmative defense, that the contractor violated the Home Repair Act by failing to provide a consumer rights brochure or a written agreement. The Court determined that the failure to obtain a written contract was a violation of the Home Repair Act and further determined that, “[W]hen a contract does not comply with the Act, it is invalid and cannot form the basis of a breach of contract action or an action to foreclose a mechanic’s lien.”

Stay tuned for further discussions regarding SB 2540, introduced by Senator Wilhelmi to address at least part of the confusion regarding the remedy associated with the Home Repair Act. The proposed amendment will entirely replace Section 30 of the Act to clarify and more accurately identify the remedies available to private parties under the Act.

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Owners, developers and builders working in the renovation arena please note that the EPA’s new regulations on lead paint take effect on April 22, 2010.  The regulations are contained at Title 40, Part 745 of the Code of Federal Regulations.  The importance of this legislation and its impact on contractors is clear. However, it should also be noted that it is anticipated that preparation and cleanup alone may double the work time and the costs of extra time on projects and training required may be passed on to the consumer.  

There are some very important highlights:

• Effective April 21, no contractor may offer or perform renovations in “target housing” without certification.  Target housing means any housing constructed prior to 1978, so renovators working in homes, apartments or condominiums built prior to 1978 need to take this seriously.
• There are only very limited exceptions, such as where a certified inspector has determined the project is free of lead paint beyond permitted levels.  Projects with no children or pregnant woman that are owner occupied can also qualify for excluding coverage, but only if the owner signs off that the contractor is not required to meet the regulatory practices.
• Contractors performing renovations have extensive obligations to give disclosure and notice to building occupants in writing prior to renovation, including providing EPA publications.  Persons and contractors performing work in this arena must provide their customers the EPA’s brochure, Renovate Right (pdf).
• The regulations further include specific work practice standards, so watch out for potential employee personal injury claims and OSHA inspections and violations as well.
• Even relatively minor work is swept up in the requirements: generally work disrupting more than 6 square feet of painted area is regulated.
• When working with possible lead issues, workers will need to place heavy plastic sheets on the ground, seal the room, seal off vents to the area where the project is taking place, remove or cover furniture in the area, cover the ground and plants outside of the work area, close all windows, and mark off the work area to keep non-workers away. Contractors will be required to post warning signs, restrict occupants from work areas, prevent dust and debris from spreading, conduct a thorough cleanup and verify that the cleanup was effective.
  
  

This legislation has contractors and building inspectors working to get up to speed on the new rules and licensing requirements. Contractors also must be EPA-certified to work in buildings that could have lead paint. Contractors must be certified by April 22, 2010.  Meetings will be offered for contractors to become certified to work in buildings that might have lead paint. The Illinois Department of Public Health has issued a news release (pdf) which includes list of meetings and locations at which contractors can become certified.

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 Maybe…maybe not. Typically, a party will invoke an indemnity provision to seek protection from claims made by some third party. 

However, consider a situation where an owner files suit against its architect alleging certain errors and omissions. In the Complaint, the owner cites the indemnity provision contained in the Owner-Architect Agreement and alleges that it is entitled to damages associated with the retention of experts to investigate the claimed defects and attorneys’ fees and expenses to prosecute the lawsuit against the architect. 

Is the owner’s indemnity claim viable? Not surprisingly, the answer depends on the particular language of the indemnity provision. In Illinois, courts interpret indemnification agreements like any other contract clause – a court must give effect to the intention of the parties as determined from the language of the agreement as a whole. See Zadak v. Cannon, 59 Ill.2d 118, 319 N.E.2d 469 (1974) and McRaith v. BDO Seidman, LLP, 391 Ill. App. 3d 565, 577-78, 909 N.E.2d 310 (1^st Dist. 2009).

Recently, we successfully defeated an indemnity claim similar to the hypothetical above. Essentially, the owner was seeking indemnification from its own claim against the architect. In the case against our client, the Owner-Architect Agreement contained the following indemnification provision:

Notwithstanding any other terms and conditions stated herein, including any obligations regarding insurance coverage, Architect agrees to defend, indemnify, keep, save and hold harmless fully the Owner, its agents, officials and employees, against all claims, suits or judgments, costs or expenses, including attorneys’ reasonable fees, that may be based on or the result of any error, omission, negligence, or any willful or intentionally tortious conduct of Architect or of any person employed or engaged by Architect to perform Services under this Agreement. 

The Architect shall promptly provide to the Owner copies of such notices as it may receive of any claims, actions or suits as may be given or filed in connection with Architect’s performance or the performance of any person or entity employed or engaged by Architect to perform Services under this Agreement.

In response to the Owner’s Complaint, we filed a motion to dismiss arguing that the Owner’s indemnity claim does not exist in the absence of a claim or judgment against the Owner. To support this argument, we cited Open Kitchens, Inc. v. Gullo International Development Corp., 126 Ill. App. 3d 62, 466 N.E.2d 1313 (1^st Dist. 1984). In Open Kitchens, the indemnity clause in the contract between the plaintiff and Gullo provided:

To the extent permitted by law, [Gullo] shall indemnify and hold harmless the [plaintiff] and their [sic] agents and employees from and against all claims, damages, losses, expenses, liabilities, and demands, including attorneys' fees, of whatsoever kind or nature, arising out of, resulting from or connected with the performance of the Work by the Contractor or any Subcontractor for and in behalf of the [plaintiff] or Architects. The Contractor shall defend at its own expense, any actions based thereon and shall pay all attorneys' fees, costs and other expenses arising therefrom.

Open Kitchens, Inc. v. Gullo International Development Corp., 126 Ill. App. 3d 62, 63-64, 466 N.E.2d 1313 (1^st Dist. 1984). 

The First District Court held that Gullo’s obligations under the indemnity provision did not arise until a third party asserted an action against Open Kitchens. Open Kitchens, Inc. v. Gullo International Development Corp., 126 Ill. App. 3d 62, 65, 466 N.E.2d 1313 (1^st Dist. 1984). The Court explained that in reading the indemnity provision as a whole, including the last portion of the subject provision requiring Gullo to defend actions arising out of its performance of the contract, the agreement indicated that the indemnity was only intended to apply to matters involving losses incurred by third parties. Id. 

As in Open Kitchens, where the indemnity provision contained language referencing actions by third parties, the indemnity provision contained in our client’s Owner-Architect Agreement refers to claims filed by others (i.e. “The Architect shall promptly provide to the Owner copies of such notices as it may receive of any claims, actions or suits as may be given or filed in connection with Architect’s performance”). Accordingly, we argued that the First District’s analysis in Open Kitchens applied and the language of our client’s indemnification clause indicates that the indemnity was only intended to apply in the context of losses incurred by third parties. 

The court agreed with our analysis and dismissed the Owner’s indemnity claim with prejudice. In her order, the judge relied on the language contained in the second paragraph of the indemnity provision stating that “this language immediately follows the indemnity language, making it clear the intent of the parties was to limit the indemnification to instances where third party claims are raised.” 

The lesson here is that not all indemnification provisions are created equal. The specific language must be reviewed so that risks are allocated as intended.

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In the recent decision of Behl Construction v. Gingeric, the Fourth District addressed whether a plaintiff is precluded from recovering the amount he claims is due from a defendant when there was no signed contract and no delivery by him of the consumer-rights brochure to defendant, both of which are required pursuant to the Home Repair and Remodeling Act (Act) (815 ILCS 513/1 through 999 (West 2006)).  The Act requires that for any repair or remodeling work over $1,000, "a person engaged in the business of home repair or remodeling shall furnish to the customer for signature a written contract or work order." This contract or work order must meet certain disclosure requirements, including cost and the name and address of the construction company.  The Act also requires that "any person engaging in the business of home repair and remodeling shall provide to its customers a copy of the 'Home Repair: Know Your Consumer Rights' pamphlet prior to the execution of any home repair and remodeling contract"; the text of this brochure appears in the statute itself. 815 ILCS 513/20 (West 2006). The Act specifies that it is "unlawful for any person engaged in the business of home repairs and remodeling to remodel or make repairs before obtaining a signed contract or work order [when the amount of the work is] over $1,000."

Behl filed a complaint against Gingerich, alleging Gingerich had failed to pay Behl $15,500 for labor and materials plaintiff had provided under a construction contract to remodel defendant's home. Gingerich filed a motion to dismiss, claiming plaintiff was precluded from recovering any amounts from him because plaintiff had violated the Act. 

After trial, the trial court found in plaintiff's favor and awarded him $9,594.03 in damages. Defendant appealed, arguing that plaintiff could not enforce the contract due to the specific requirements of the Act or, in the alternative, if the contract was enforceable; the court erred in calculating the judgment amount. Plaintiff filed a cross-appeal, also arguing that the court erred in its calculation of damages on different grounds. Plaintiff also claimed the court erred in finding that his mechanic's lien was unenforceable as untimely.  There was no dispute that the work order that was provided by Behl wasn’t signed by Gingerich, and that Behl did not provide Gingerich with the brochure.  Accordingly the issue before the Fourth District was whether Behl substantially complied with the Act so as to allow him recovery from Gingerich.

                The court noted that the two pertinent provisions of the Act used the term “shall” (the contractor “shall” provide the brochure and “shall” furnish a contract for signature).  Typically, use of the word "shall" in a statutory provision indicates that the legislature intended a mandatory, rather than a directory, provision. However, a mandatory provision does not always require strict compliance. "Substantial compliance can satisfy even a mandatory provision." Jakstas v. Koske, 352 Ill. App. 3d 861, 864, 817 N.E.2d 200, 203 (2004).  The court looked at (a) the purpose of the Act to determine whether the purpose was achieved without strict compliance, and (b) whether Gingerich suffered any prejudice from Behl’s failure to strictly comply with the Act.  The court determined that the Act’s purpose was to improve communication between consumers and persons engaged in the business of home repairs or remodeling in order to "increase consumer confidence, reduce the likelihood of disputes, and promote fair and honest practices in [the repair and remodeling] business in this State."

                The court ultimately found that Behl substantially complied with the provisions and purpose of the Act by negotiating with Gingerich regarding the scope of the work and cost and by presenting Gingerich with a written work order, which contained the details of the project with "reasonable particularity" and included Behl’s business name and address as required by section 15 of the Act. The court further found that Gingerich was not prejudiced by Behl’s failure to strictly comply with every provision of the Act. 

The court based its decision on the fact that Behl and Gingerich, both engaged in the construction trades, negotiated the scope and cost of the project until they finally reached an agreement regarding the scope of the project. Before beginning construction, Behl supplied Gingerich with a written work order that represented their final agreement, which Gingerich did not dispute. The court also found significant that during the project, Gingerich paid Behl several draws, and the dispute between the parties was unrelated to Behl’s failure to secure Gingerich’s signature on a construction contract.

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 The Second District recently addressed this inquiry in American States Insurance Co. v. CFM Construction Co.  CFM Construction (CFM) was a general contractor which entered into subcontract agreements with NF Construction and International Decorators on a certain project. Under each of its subcontract agreements, CFM required NF Construction and International Decorators to name CFM as an additional insured on their respective general liability policies. NF Construction was insured by American States Insurance Company (American States), and International Decorators was insured by Michigan Mutual Insurance Company (Michigan Mutual). 

During the construction, Francisco Flores, an employee of International Decorators, was injured when he fell from a scaffold. Mr. Flores filed two separate lawsuits to be compensated for his alleged injuries. One lawsuit was against CFM and the other named NF Construction as the defendant. Both lawsuits claimed that the defendants negligently managed, supervised, and controlled the construction site.

The two lawsuits were consolidated, and CFM tendered its defense to Michigan Mutual. In turn, Michigan Mutual sought contribution for the defense of CFM from American States. However, American States denied the requested for contribution and filed a declaratory judgment action seeking a declaration that it had no duty to contribute to the costs of defending CFM in the Flores lawsuit. 

On cross-motions for summary judgment, the trial court ruled against American States, and American States filed its appeal. On appeal, the Second District Appellate Court held that American States owed a duty to defend CFM as an additional insured.

In the interim, the underlying Flores lawsuit was settled. Michigan Mutual paid $700,000 in the settlement, but American States only agreed to pay $200,000 on behalf of NF Construction and refused to contribute to the settlement on behalf of CFM.

On remand from the original appeal, American States filed a second amended complaint seeking a declaration that it had no duty to indemnify CFM. Michigan Mutual filed its counter-complaint seeking reimbursement for half of the $700,000 it paid to settle the Flores claims on behalf of CFM. Furthermore, Michigan Mutual sought attorney fees and prejudgment interest from American States. Again, on cross-motions for summary judgment, the trial court granted Michigan Mutual its requested relief, except for the attorney fees and interest.

American States again filed its appeal. In the appeal, American States argued that equitable contribution does not apply because the policies insured completely different risks. Generally, when an insurer has paid the entire loss, the doctrine of equitable contribution allows it to be reimbursed by other insurers that share the same liability as the insurer seeking contribution. This doctrine applies only where concurrent insurance policies insure the same entities and the same risks. The Second District Appellate Court held that equitable contribution applied as both policies insured the same risks.   

Nonetheless, the decision is puzzling as it fails to explain why CFM’s tender to Michigan Mutual did not foreclose Michigan Mutual from seeking equitable contribution from American States. See Kajima Construction Co. v. St. Paul Fire & Marine Ins. Co., 227 Ill.2d 102, 108, 879 N.E. 2d 305 (2007) (when an insured has knowingly chosen to forego one insurer’s assistance by instructing that insurer not to involve itself in the litigation, the targeted insurer has the sole responsibility to defend and indemnify the insured and is foreclosed from seeking equitable contribution from the other insurer that was not selected by the insured). 

Perhaps CFM’s tender to Michigan Mutual did not state that it was deselecting all other insurance and demanding that Michigan Mutual accept its tender on a primary and non-contributory basis. However, the American States Ins. Co. v. CFM Construction Co. opinion provides no explanation as to why CFM’s tender to Michigan Mutual did not foreclose it from seeking equitable contribution as explained by the Illinois Supreme Court in Kajima.

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In Diaz v. Legat Architects, et al.,  Nos. 1-08-3622 & 1-08-3635 consolidated, the plaintiffs, Jose Diaz and Maria Diaz, filed a complaint against defendant Boller Construction Company, Inc. (Boller), for personal injuries and loss of consortium. Mr. Diaz was injured when scaffolding he was working on collapsed.  Boller filed a third-party complaint against Mr. Diaz’s employer, Larmco Construction Company (Larmco), seeking contribution pursuant to the Joint Tortfeasor Contribution Act.  The jury returned a verdict for the plaintiffs and against Boller. The jury also returned a verdict for Boller and against Larmco. After reducing the award by the percentage of Mr. Diaz’s negligence, the jury awarded Mr. Diaz $1,246,875 on his negligence claim and Mrs. Diaz $50,000 on her loss of consortium action.

Following the filing of post-trial motions, the trial court ordered a remittitur of the jury award based on improper admission into evidence of future medical costs, reducing the personal injury recovery to $1,076,770.06. Further, the trial court granted Larmco’s Motion to Dismiss Boller’s contribution action (presumably based on Briseno, however, it is not specifically stated in the opinion). 

On appeal, Boller contended that it was entitled to a directed verdict or a judgment n.o.v. because plaintiffs had failed to show evidence of its liability pursuant to Section 414 of the Restatement (Second) of Torts. The jury had found Boller to be directly liable stemming from its failure to exercise supervisory control. The First District found that plaintiffs had established a prima facie case that Boller had retained sufficient control over project safety to incur legal responsibility for Mr. Diaz’s injuries. Specifically, the First District focused on the contract between Boller and the owner (which made Boller responsible for all construction means and methods), the testimony of Boller’s own retained safety expert to the effect that Boller was responsible for preventing injuries on the project and was required to maintain and supervise all of the safety precautions and programs in performance of its contract and the conduct of Boller’s superintendent in asserting his authority on site, having stopped excavation work on two prior occasions. 

Boller argued further that it could not be found directly liable because it had no notice of the dangerous condition, a precondition to direct liability under Section 414. Boller’s argument was that its superintendent was not familiar with the scaffolding utilized by Larmco and, therefore, could not be found to have actual or constructive knowledge of any safety hazard associated with the scaffolding. The First District disagreed, citing the contract requirement that Boller provide a competent superintendent. 

Further, it ruled that Boller was entitled to pursue its contribution action against Larmco for the amount of Boller’s liability not covered by the insurance provided to Boller by Larmco and that the trial court’s granting of remittitur was in error as to Mr. Diaz’s future medical expenses. The Court did not address Boller’s liability under Section 343 of the Restatement (Second) of Torts or plaintiff’s argument that the trial court erred in denying their motion to adjudicate the workers’ compensation lien. 

While this case appears to be another arrow in the plaintiff bar’s quiver against general contractors and construction managers, it should be pointed out that Boller’s contract with the owner in this case made it responsible not only for safety, but for all construction means and methods. 

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We’ve been reporting repeatedly on the recent decisions regarding the different Appellate Divisions’ interpretations of the Home Repair Remodeling Act and its use as both a sword and a shield.

Today’s Chicago Daily Law Bulletin has an article by Bethany Krajelis discussing the leave to appeal filed in the case of Artisan Design Build v. Bilstrom.  If granted, the Illinois Supreme Court would be hearing the case and likely putting to rest the district split.

Our entry on Artisan can be found here.

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It’s still in its infancy, but Google Scholar’s beta version allows you to search scholarly articles, patents or legal opinions and journals. Here’s a sample search for “weather tite Illinois”

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