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Construction Defect Insurance Coverage and Implied ...

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ConstructionDefect Insurance Coverage and Implied Warranties FollowingWestfield Ins. Co. v. National Decorating Service and Other Recent Opinions
Donald PatrickEcklerPartnerPretzel & Stouffer, CharteredOne SouthWacker, Suite 2500Chicago, IL 60606312-578-7653 (o)954-540-2037 (c)312-346-8242 (f)Licensed in Illinois, Indiana, and Florida
ORIGINS OF IMPLIEDWARRANTY OF HABITABILITY
The warranty was imported by courts from landlord-tenant law to the construction of housing.“itis socially (and politically) desirable to impose these duties on a property owner—which has rendered the old common-law rule obsolete. To follow the old rule of no implied warranty of habitability in leases would, in our opinion, be inconsistent with the current legislative policy concerning housing standards. The need and social desirability of adequate housing for people in this era of rapid population increases is too important to be rebuffed by that obnoxious legal cliché, caveat emptor. Permitting landlords to rent ‘tumble-down’ houses is at least a contributing cause of such problems as urban blight, juvenile delinquency, andhighproperty taxes for conscientious landowners.”Pines v.Perssion, 14 Wis. 2d590, 595(1961).
ORIGINS OF IMPLIEDWARRANTY OF HABITABILITY
The Illinois Supreme Court adopted thedoctrine inPetersen v.HubschmanConstr. Co., 76 Ill. 2d 31 (1979).“Becauseof the vast change that has taken place in the method of constructing and marketing new houses, we feel that it is appropriate to hold that in the sale of a new house by a builder-vendor, there is an implied warranty of habitability which will support an action against the builder-vendor by the vendee for latent defects and which will avoid the unjust results of caveat emptor and the doctrine of merger.”Petersen,76 Ill. 2dat 39-40.“Thevendee is making a major investment, in many instances the largest single investment of his life. He is usually not knowledgeable in construction practices and, to a substantial degree, must rely upon the integrity and the skill of the builder-vendor, who is in the business of building and sellinghouses.”Id. at 40.
Who can be sued for breach of the implied warranty of habitability?
Mintonv. The Richards Group of Chicago¸116 Ill. App. 3d852 (1st Dist. 1983).Builder-vendorsGeneral contractors – if the builder-vendor is “insolvent.”1324W.Pratt CondominiumAss'nv. Platt Construction Group, Inc.,404 Ill. App. 3d 611,618(2010) (Pratt I).Subcontractors– if thebuilder-vendoris “insolvent.”1324 W. PrattCondominiumAss'nv. Platt Construction Group, Inc.,2013 ILApp (1st)130744(Pratt III).
Who can be sued for breach of the implied warranty of habitability?
Material suppliers?- SiennaCourt Condo.Ass’nv. Champion Aluminum Corp., 2017 IL App (1st)143364.Design professionals? -Board of Managers of Park Point at Wheeling Condo Association v. Park Point at Wheeling, LLC, 2015 IL App (1st)123452.
When does a claim for breach of the implied warranty of habitability need to befiled?
Against a builder-vendor – 4 years, 735 ILCS 13-214Against downstream contractors the statute does not begin to run until the plaintiff knows of the insolvency of the builder vendor.However, inPratt IIIthe court stated:“Wherethe plaintiff timely filed his action against a general contractor for construction defects, and the general contractor subsequently became insolvent, underMinton, the plaintiff could proceed against the subcontractor even if he failed to file the complaint within the applicable statute of limitations so long as the action was timely filed against the generalcontractor.”
When does a claim for breach of the implied warranty of habitability need to be filed?
Is the statute of limitations really only four years?In HendersonSquare Condo.Ass’nv. Lab Townhomes, LLC, 2015 IL 118139the Illinois Supreme Court allowed claims for violation ofChicago Municipal Code §13-72-030 and breach of fiduciary duty on a lawsuit filed over 15 years after the sale of the units.Other claims, including for breach of implied warranty of habitability, were dismissed with prejudice, but not appealed by the plaintiff.
Who can file a claimfor breach of the implied warranty ofhabitability?
A subsequent purchaser who took subject to a waiver of the implied warranty of habitability cannot sued under that theory.Fattah v.Bim, 2016 IL119365.A waiver of the implied warranty of habitability once waived is gone forever and is notrescurectedby transfer of the property
Who can file a claim for breach of the implied warranty of habitability?
A builder-vendor can likely sue the general contractors and subcontractors for contractual indemnity for breach of the implied warranty of habitability, but likely not for fraud claims.933 Van Buren Condo.Ass’nv. Van Buren, 2016 IL App (1st)143490.With respect to issues of coverage, the court held that breach of the implied warranty of habitability is a contract claim, not a tort claim.
Who can file a claim for breach of the implied warranty of habitability?
765 ILCS 506/9.1(b) states:(b) Board of Managers' standing and capacity.Theboard of managers 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.
Who can file a claim for breach of the implied warranty of habitability?
The Illinois Supreme Court has yet to determine whether a condominium association has standing under the Illinois Condominium Property Act (“the Act”) to legally recover for allegations of property damage to condominium unit owners’ personal property.Indicta, 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.”Henderson Square CondoAss’nv. Lab Townhomes, LLC, 2015 IL 118139, ¶ 75.
Who can file a claim for breach of the implied warranty of habitability?
Severalcourts, both state andfederal, haveheld that a condominium associationlacksstanding to advancea claim for damage to personal property of individual unit owners.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.
Who can file a claim for breach of the implied warranty of habitability?
AlliedProp. &Cas. Ins. Co. v. Metro North Condo.Ass’n, 850 F.3d 844, 845 (7th Cir. 2017) andWestfield Ins. Co. v. Nat’l Decorating Serv., 863 F.3d 690 (7th Cir. 2017) have both held that the condominium association does not have standing to assert claims for individual property damage
Where do we go from here?
PLA was granted by the Illinois Supreme Court inSienna Court Condo.Ass’nv. Champion Aluminum Corp., 2017 IL App (1st) 143364.Thiscase 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 habitabilityagainstsubcontractors.

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Construction Defect Insurance Coverage and Implied ...