January 07, 2009

Cases of the Quarter

January 07, 2009

Garcia v. Wooton Construction Ltd.

(1st Dist. December 22, 2008)

The First District Appellate Court reversed the Circuit Court’s finding of summary judgment when it decided that a general contractor owed a duty of care to an ironworker who was injured unloading bolts at a Chicago condominium development.  The Plaintiff, an ironworker employed by a subcontractor, alleged the general contractor was negligent for reassigning a crane basket on the day of his injury, forcing him to move 100-200 pound kegs of bolts manually.

The Circuit Court granted summary judgment to the defendant, finding that the general contractor did not owe the Plaintiff a duty of care.  The Circuit Court further found that the Plaintiff failed to establish that the general contractor’s actions were the proximate cause of his injuries.

The Appellate Court reversed on the grounds that the “retained control” exception applied to override the general rule that employers of independent contractors are not liable for the contractors’ acts or omissions.  The retained control exception provides that one who entrusts work to an independent contractor, but retains the control of any part of the work, can be liable for physical harm to others caused by his failure to exercise his control with reasonable care.

The Appellate Court relied on deposition testimony establishing that the general contractor retained ultimate authority over the use of the crane in determining that the “retained control” exception applied.

This ruling is important in that it makes clear that when someone has control over safety aspects at a job site they have a duty to exercise that control with reasonable care.

Westport Insurance Corp. v. Jackson National Life Insurance Co.

(2nd Dist. December 19, 2008)

The Second District Appellate Court affirmed the Circuit Court’s holding that the transmission of advertisements was not a service as an insurance professional within the meaning of a professional liability insurance policy.

This case arises from a class action suit filed by Defendant Stonecrafters against Defendant Handleman alleging that the transmission of unsolicited faxes to it violated federal law and gave rise to a private cause of action for damages.  The parties settled the case for $2 million dollars in favor of the plaintiff class.  As part of the settlement, Handleman assigned to the plaintiff class all of its rights to indemnity from its insurers, including Plaintiff Westport.

The Appellate Court agreed with Westport’s assertion that Handleman’s liability in the class action lawsuit did not arise from the conduct of Handleman’s business in rendering services for others as a licensed insurance agent.  Services of that nature would have been covered; however the court determined that the unsolicited faxes were not that type of service.

The Court relied on a Texas Appellate Court holding that an act is not a professional service merely because it is performed by a professional; it has to be necessary for the professional to use his “specialized knowledge or training”.  The Court used this analysis to determine that the unsolicited faxes sent by Handleman were merely an overture to potential customers and did not constitute “a service as an insurance professional.”

Clarendon America Insurance Company v. B.G.K. Security Services, Inc.

(1st Dist., December 19, 2008)

In this insurance coverage dispute, the First District affirmed the trial court’s award of summary judgment declaring that an insurer had a duty to defend its insured in multiple lawsuits even though the insured entered into a joint venture to perform the security services covered by the insurance policy and the policy did not cover the joint venture.

The multiple lawsuits against the insured, B.G.K. Security Services, Inc. (BGK), arose out of a 2003 fire at the Cook County Administration Building at 69 W. Washington St. in Chicago that resulted in multiple deaths and injuries.  Richard J. Leamy and Robert H. Fredian of Wiedner & McAuliffe represented a separate defendant in the lawsuits and persuaded the court to grant summary judgment for the defendant declaring that it was not liable for any damages. Recently, the remaining defendants, including BGK, paid over $100 million dollars to settle all claims.

In this case, BGK maintained that Clarendon America Insurance Company’s (Clarendon) duty to defend BGK arose because the complaints alleged negligence on the part of BGK, not the alleged joint venture, and BGK was the “Named Insured” on the policy. Conversely, Clarendon asserted that the trial court should have considered the alleged joint venture agreement in addition to the language in BGK’s insurance policy in order to determine whether the formation of the joint venture to perform the services covered by the insurance policy negated its duty to defend BGK.

The First District held that it could not consider the joint venture agreement in addition to the policy because it would force the Court to effectively resolve an “ultimate fact” issue in the underlying claims- whether the joint venture or BGK should have been named in the lawsuits.  Illinois courts have firmly established that extrinsic evidence may not be considered in a declaratory judgment action if allowing the evidence forces the insured to litigate an “ultimate fact” before trial or affects the Plaintiffs’ ability to recover.

Therefore, relying solely on BGK’s insurance policy and the underlying claims, the Appellate Court held that the lower court properly granted summary judgment to BGK because the policy did not cover the Joint Venture and the lawsuits named BGK in its individual capacity.

Hester v. Gilster-Mary Lee Corp.,

(5th Dist., December 18, 2008)

In a case of first impression, the Fifth District reversed and remanded the trial court’s order dismissing the Plaintiff’s complaint for retaliatory discharge against a borrowing employer.

In this case, the Plaintiff filed an amended complaint for retaliatory discharge against Gilster-Mary Lee Corp (Gilster) alleging that she was terminated after she testified at a co-worker’s workers’ compensation hearing.  The Plaintiff was loaned to Gilster by an employment agency, Manpower, Inc. (Manpower).

In her complaint, the Plaintiff alleged that Gilster was her “de facto employer,” because she worked with and was undistinguishable from other Gilster employees, Manpower did not supervise her work, and Gilster set her hours, schedule, wage, daily assignments and workplace.  She also alleged that future employers would seek references from Gilster, not Manpower.

Thereafter, Gilster filed a motion to dismiss the lawsuit, asserting that the Plaintiff admitted that Manpower was her employer and therefore, the Plaintiff was merely temporarily loaned to Gilster.  The trial court granted Gilster’s motion and the Plaintiff appealed.

The Fifth District held that the trial court erred when it decided that Gilster could not be liable for the Plaintiff’s termination. In its holding, the Appellate Court relied on Section 1(a)(4) of the Illinois Workers’ Compensation Act (Act) which directs that borrowing employers are primarily liable for the payment of a borrowed employee’s workers compensation claim.  Similarly, the Court determined, borrowing employers must be held primarily accountable if a borrowed employee is wrongfully terminated.

The Fifth District added that because Illinois public policy favors the “prompt and efficient” resolution of workers’ compensation cases, all employees, including borrowed employees, should be protected from discharge for testifying at a co-workers claim hearing, and thus promoting the purpose of the Act.

Taylorv. Pekin Insurance Co.,

(Illinois Supreme Court, November 20, 2008)

The Illinois Supreme Court reversed the appellate court and held that the Illinois Workers’ Compensation Act provision that requires an employer to pay 25% of its recovered lien to the employee’s attorney in a third-party action does not apply in cases where the injured employee receives benefits under an uninsured-motorist provision of his employer’s automobile liability policy.

In this case, the Plaintiff was injured in a car accident in the course and scope of his employment.  The Plaintiff filed a workers’ compensation claim under his employer’s workers’ compensation policy and received $162,588.33 in benefits.  He then filed a claim under his employer’s uninsured-motorist automobile liability policy.  Pekin Insurance Company (Pekin) was the employer’s insurance carrier for both policies.

The uninsured-motorist claim was submitted to arbitration, where a $250,000 award was entered in the Plaintiff’s favor.  The arbitration award was reduced to $87,411.67, the difference between the arbitrator’s award and the workers compensation benefits that the Plaintiff received.  The Plaintiff then filed a complaint seeking a declaration that he, not his attorney, was entitled to an additional $40,467 (25% of the $162,588.33 that was reduced from the arbitration award for paid workers compensation benefits) from Pekin for attorney’s fees pursuant to Section 5(b) of the Illinois Workers’ Compensation Act.

Pekinfiled a motion to dismiss the Plaintiff’s declaratory judgment action, arguing that neither the employer’s automobile policy nor the Act authorized the Plaintiff to recover attorney fees, which the trial court granted.  On appeal, the appellate court reversed, finding that Section 5(b) was triggered because the Plaintiff’s employer successfully recovered its workers compensation lien when the arbitration award was reduced by the amount of workers compensation benefits that Pekin paid to the Plaintiff.  Thereafter, Pekin appealed to the Illinois Supreme Court.

The Supreme Court reversed the appellate court’s ruling and held that Section 5(b) is only triggered when an employee recovers from a third-party tortfeasor. Therefore, because the Plaintiff recovered under his employer’s uninsured-motorist insurance policy, the award did not trigger the requirements of Section 5(b).

In its analysis, the Supreme Court also noted that public policy did not favor allowing the Plaintiff to recover the 25% attorney fee because Section 5(b) was enacted to compensate an employee’s attorney for their services rendered in efforts to recover against a negligent third party, not for work done in the workers’ compensation case. The Court further remarked that the 25% fee is payable to the employee’s attorney, not the Plaintiff.

Garcia v. Wooten Construction, Ltd.,

(1st Dist. Dec. 29, 2008)

The First District reversed and remanded the trial court’s grant of summary judgment in favor of the defendant and held that the defendant general contractor retained control over the plaintiff by leasing and directing the use of the crane that injured the plaintiff.

In this case, the plaintiff was injured while unloading a crane basket of 100-200 lb. bolts on a construction site in Chicago.  Plaintiff was an employee of JP Cullen & Sons (Cullen), the subcontractor hired to erect steel on the project.

Thereafter, the Plaintiff filed a second amended complaint alleging negligence pursuant to the retained control exception from §414 of the Restatement (Second) of Torts against the general contractor, Wooten, the property owner, the steel fabricator and the project management company.  Under the retained control exception, an independent contractor’s liability may be imputed to the general contractor or owner if the general contractor retains sufficient control over the work of the independent contractor such that the law recognizes the existence of a duty on the part of the general contractor.

Several of the defendants, including Wooten, filed motions for summary judgment, arguing that they did not owe the plaintiff a duty of care because they did not retain control over Cullen’s work.  Wooten’s motion was supported by its contract provisions that declared that the subcontractors were responsible for their own work and safety, and the Plaintiff’s testimony that his work was not directed by Wooten.

The trial court agreed with Wooten, holding that Wooten only retained a general right of supervision, which was insufficient to invoke a duty of care under §414.  Plaintiff timely appealed.

On appeal, the First District held that Wooten retained control over the Plaintiff’s work because it leased the only crane on the construction site and determined the scheduled use of crane by the subcontractors. The Appellate Court noted that although Wooten claimed that Cullen controlled its own use of the crane, Wooten admitted that it was the general custom in the construction industry that the general contractor had “ultimate control of jobsite cranes.”

Furthermore, the First District stated Wooten’s control over the use of the crane was essentially the same as retaining control over the Plaintiff’s work because Cullen was unable to perform its work safely without the use of the crane.  Therefore, because Wooten retained sufficient control over the use of the crane, it followed that Wooten owed a duty of reasonable care under §414 to the Plaintiff.