By Daniel E. Raymond and Jesse G. Shallcross, K&L Gates, Chicago
General contractors and developers beware—suits for breach of express indemnity now have a longer shelf life in Illinois.
In 15th Place Condominium Association v. South Campus Development Team, LLC, the Appellate Court for First District of Illinois held that a claim for breach of an express indemnity clause contained in a construction contract is subject to a ten-year statute of limitations instead of four.[1] The subject of the dispute was a contract between 15th Place Condominium Association (the “Association”) and South Campus Development Team (the “Developer”) to develop two condominium towers (the “Project”). The Developer contracted with Linn-Mathes, Inc. (the “General Contractor”), who would act as general contractor.[2] The contract between the Developer and the General Contractor included an express indemnity clause and a cause of action accrual provision.[3] By 2003 and 2004, the Project was substantially completed, and, in 2005, the Developer turned over the property to the Association.[4]
Unhappy with the Project, the Association sued the Developer for breach of the implied warranty of fitness and habitability, breach of fiduciary duty, and negligence in 2008.[5] In turn, in 2011, the Developer filed a third-party complaint against the General Contractor for breach of express indemnity, among other claims.[6] At the trial level, the General Contractor successfully argued that the Developer’s claim for breach of express indemnity was untimely and barred by the four-year statute of limitations for construction-related claims.[7]
The appellate court, however, disagreed. Relying on the Illinois Supreme Court’s ruling in Travelers Casualty & Surety Co. v. Bowman, the court overturned the trial court and applied the ten-year statute of limitations for contract claims.[8] In Travelers, the Illinois Supreme Court instructed that when determining whether to apply the ten-year statute of limitations for contract claims or the four-year statute of limitations for construction-related claims, courts must look to the nature of the claim—meaning whether the claims emanates from construction-related activity or a contractual obligation.[9] Applying this test to the express indemnity clause at issue, the court determined that the nature of the claim was for failure to indemnify, a contractual obligation, not from any “act or omission relating to construction activity.”[10] Thus, the ten-year statute of limitations applied and the Developer’s claim for breach of express indemnity was not barred by the passage of time.
[1] 2014 IL App (1st) 122292.
