The Home Repair and Remodeling Act Does Not Apply to Subcontractors

In MD Electrical Contractors, Inc., v. Fred Abrams (Il. Sup. Ct. 2008; Doc. No. 104000)  the plaintiff had sued under the theory of quantum meruit, stating that it had no contract with the defendant for electrical work performed on the defendant's home.  The defendant claimed that the Home Repair and Remodeling Act prohibited a suit by the plaintiff.  The circuit court had reasoned that quantum meruit was a legal theory that implied a contract where none existed.  Since the Home Repair and Remodeling Act was against the contract, and the subcontactor fell under it, the court could not imply a contract where the act would forbid such a contract.  The Appellate Court had disagreed and remanded the decision.  And now, the Supreme Court's decision has squarely stated that the act does not apply to subcontractors.

  • The Home Repair and Remodeling Act applies only to those who contract directly with the Home Owner.

The court refused to address the intriguing issue of whether or not a sub-contractor could have any recourse in quantum meruit, or outside the Mechanic's Lien Statute.

In a strong-toned dissent, Justice Freeman points out that the complaint was insufficient on its face to offer the factual issues that the court relied upon in determining this matter.  The complaint asserts that MD Electrical was a sub-contractor, but there is no evidence of that fact anywhere in the record.  The dissent goes on to argue that the court did not have to reach the issue of the Home Repair and Remodeling Act's application to sub-contractors and should not have done so.

Statutes of Repose and a Duty to Maintain

We've previously discussed the Illinois construction statute of repose (735 ILCS 5/13-214).  The benefits it conferred to design professionals and others by the statute's ten-year limitation cannot be underestimated. 

In Ryan v. Commonwealth Edison Company (Doc. No. 1-06-3309, 1st Dist. Ill. App.) the Illinois first district appellate court has broken with itself and sided with the third district in asserting a "status/activity" distinction for claims that will be barred under the statute of repose.

The court was confronted with the issue of whether Com Ed's duty to maintain a transformer that exploded and injured the plaintiff was separate and apart from its installation work and therefore, not subject to the statute of repose.  The court found that Com Ed's status as an installer and any claims that arose from the installation might fall under the statute of repose, but made a determination that since Com Ed had a duty to maintain the equipment (derived from its capacity as the power supplier and not its status as the installer) the statute would not apply.

  • Now that we have a definite split, we could see the Illinois Supreme Court address the "status/activity" distinction.  More importantly, because the court made the determination regarding Com Ed's duty in this case, we should be alert for more judicial determinations of ongoing duty.  Will the decision only apply to utility companies supplying services which necessitate a duty to maintain equipment?  Even apart from any undertaking to maintain structures/equipment after installation?  Even when the duty has been contracted or left in the hands of some other entity like a municipality?

Sometimes a Suit Just Isn't Worth It.

The concept of having to obtain a surety bond shouldn't be of any new relevance to anyone doing public work.  Knowing the full extent of the provisions in the surety instrument and having a chance to properly negotiate might not seem all that important to a contractor who plans on completing its obligations.   Negotiating those terms or being aware of the full force of any personal indemnity provisions could be the difference between large-scale financial ruin and being able to get out of trouble with your reputation and bank account in tact.  On the flip-side, knowing whom you're granting surety to, and whether or not they're worth it is equally important.

The recited facts in United Fire v. Bartlett Bituminous should allow everyone to understand that the plaintiff will likely never see its money. (The defendants didn't even bother to respond to a motion for summary judgment.)  With the amount in controversy close to exceeding six million dollars, the point well taken is actually two-fold; one, sometimes you should cut your losses and know when you're sunk and two, performing research on the assets and background of the company you're dealing with is research worth doing.  A little foresight can go a long way.

Is the Benefit Worth The Risk For A General Contractor to Get Involved in Safety?

   


        In this recent opinion from the First District, the Court has upheld that a general's control through asserting its authority to stop work due to safety violations by its sub; the mandate that the sub hold weekly safety meetings and submit the minutes of those meetings for the general's review; and the subs contractual obligation to submit a site-specific safety plan all amount to enough retained control to present an issue of fact as to the general's liability under §414 of the restatement of torts.

            §414 states in relevant part that:

            "One who entrusts work to an independent contractor, but who retains the control of any part of the work, is subject to liability for physical harm to others for whose safety the employer owes a duty to exercise reasonable care, which is caused by his failure to exercise his control with reasonable care."

            In the case of Wilkerson v. Schwendener (1-06-2653) the plaintiff was the employee of a sub and was placing some joists on a second floor of a retirement home project when his co-worker handed him a joist and struck him in the foot.

            The general had won summary judgment on the issue of §414 liability where it claimed to not have retained control of its subs work.  The Court found that the general had retained control where it required its sub to (1) comply with a 21 part list of safety regulations generated by the general; (2) hold weekly safety meetings and submit the minutes of those meetings; (3) prepare and submit a site-specific safety plan; and (4) attend the general's weekly safety meetings.  Additionally, at some point prior to the plaintiff's accident the general had sent a letter to the sub stating that the sub needed to get its safety program in order or the general "WILL STOP" (yes, it was all caps in the actual letter) the sub from continuing its work.

            The Court noted that generally, just having a supervisory role over safety would not have implicated the general in §414 liability, but here, with all the factors taken into account, and the threat of stopping the work if safety was not performed properly, the general did retain sufficient control and with it, liability.

            This raises some interesting questions regarding safety.  We know that a general wants to eliminate workplace accidents and that if it is not in charge of workplace safety, its subs might not toe the line (as here).  We also know that a general can't be everywhere at once on a job site.  So what should a general do now?  Should they be standing back and not getting involved in safety programs and full-on supervision?  Would that increase the number of accidents, but shield generals from liability under §414?  It seems a bit ridiculous that because a general was concerned with safety (preventing accidents) and interceded in different ways to increase safety (increase the prevention of accidents) that it should be held to be liable under §414 where its sub didn't have adequate safety in place in order to protect its own employees but where it did try to get the sub to conform to the plan and put adequate protections in place.  If the general hadn't had a plan and hadn't butted in, and hadn't threatened to stop the subs work, the accident would have happened, probably sooner, but it would be able to stand back and have a better argument against §414 liability.  The general didn't control all the safety, and unless there's a reason to believe that the sub would have put in place different and better safety measures than it could under the general's program, it's a bit ridiculous to say that the general should be at fault because it took certain steps to get the safety program of its lackadaisical subcontractor.

Contractor Prompt Payment Act... Can you really contract around it?

            We haven't seen as much discussion as would seem to be merited by the provisions of the Illinois Contractor Prompt Payment Act (815 ILCS 603/1 et seq.).   This act has written itself into every construction contract in the State of Illinois (excepting public works, single family homes and buildings with fewer than 12 family units, of course).  This lack of constructive commenting is likely because the Act didn't become law until August 31, 2007.  However, from the comments and criticisms we have seen, there's an extremely important and sure to be contested issue that needs to be addressed:  Is it possible to "opt" out of the provisions of the Act?

The original version of the House Bill (HB 0743) that introduced what later became the Act included language at the beginning of Section 10 which read:

  • "Construction contracts.  All construction contracts shall be deemed to provide the following unless they expressly exclude the provisions of this Act"

            This provision was the sole subject of Senate Committee Amendment No. 1, which was adopted by the Senate and the House and incorporated into the Act and struck the "unless they expressly exclude the provisions of this Act" language from the Act.

            This creates a strong argument for anyone wishing to claim that it was the express intent of the legislature to not allow parties to "opt" out of the act.  Combine this with the ideas that the public policy of the act was to ensure prompt payment to contractors and subs as defined by the Mechanic's Lien act; to allow contractors and subs an additional recourse should payments not be forthcoming; to shorten the time it takes for payment and approval of work, and we end up with a decent case that parties could end up contracting around the act for naught.



Forced to litigate in Florida?

            For those out-of-state contractors, architects, and builders working on projects in some other place for Illinois' residents, there are some interesting lessons in the Fourth District's Isringhausen v. Prime Contractors and Associates, Inc., opinion regarding keeping yourselves from being subjected to Illinois law.

            It should come as no surprise that a Florida company working on building a house in Florida that was contacted and did no business in Illinois was not subject to Illinois jurisdiction.  But, what if the Florida contractor was advertising here in Illinois, or had made a few trips to Illinois to complete the contract?  What if the escrow or some other portion of the contract were to be completed in Illinois so that the contractor, although minimally, were availing itself of Illinois law?  It would be wise to work out the full details for out-of-state construction both for owners in Illinois and contractors elsewhere, lest the parties find themselves in costly litigation hundreds or even thousands of miles away.