Inside this Issue
- A1 - EIFS Repairs Covered without Insurer's Consent
- A2 - The CGL and the Professional Liability Exclusion
- A3 - Contractually Imposed Time Limit for Filing Suit is Enforced to Dismiss Claim Against Home Builder
- A4 - Contractual Requirement May be Waived Despite “Non-Waiver Clause” Stating to the Contrary
- A5 - Court Bars Defendant’s Expert At Trial And Sanctions Defendant For Bad Faith Response To Requests to Admit – IL 2nd Dist.
Article 1
EIFS Repairs Covered without Insurer's Consent
See similar articles: CGL insurance | EIFS | Insurance Dispute | Notice of Claim | Notice Requirements
J. Kent Holland Jr. and James Rhodes
The Texas Supreme Court affirmed a jury verdict in favor of a construction company against its insurer regarding the company's voluntary remediation efforts to fix water damage at over 400 homes that it had built. The damage was associated with use of a type of synthetic finishing on the exteriors of the homes referred to as "exterior insulation and finish system" (EIFS), which was shown to cause pervasive water damage that was not readily apparent.
The insurance company argued that the extensive remediation work was not covered by the policy because it had not consented to the voluntary payments, which the insurer said was required by multiple policy provisions. The Texas Supreme Court overturned the appeals court, reaffirming the jury's verdict that found that the insurance company was not prejudiced by the builder's failure to get its consent prior to the remediation efforts. Lennar Corp. v. Markel Am. Ins. Co., 56 Tex. Sup. Ct. J. 893 (2013).
Lennar Corporation used EIFS as exterior finish on around 800 homes before ceasing to use the stucco substitute in 1998. Some of the home owners made complaints to Lennar after a segment on NBC's Dateline exposed the propensity of water damage associated with EIFS. In particular, when EIFS is used as an exterior to wood frames—as is common in residential construction—the court explained that EIFS "traps water inside, causing rot and structural damage, mildew and mold, and termite damage." Lennar decided to proactively contact all the home owners and offer to remove the EIFS, replace it with stucco, and fix any related damage in an effort to avoid litigation with the individual home owners. Almost all of the home owners agreed to Lennar's remediation offers, which were conducted between 1999 and 2003.
The Insurance Dispute
Lennar notified its several insurers of this approach, and all denied coverage. Lennar then sued the several insurance companies for indemnification. The lawsuit only continued with one insurer, Markel American Insurance Company, after one settled and others successfully sought summary judgment. Markel had provided Lennar with a $25 million commercial umbrella policy during portions of 1999 and 2000.
During a jury trial, the insurer argued that the builder was not entitled to indemnification because the remediation was voluntary and without the consent of the insurer. The insurer pointed to a policy provision, "Condition E," which stated: "it is a requirement of this policy that ... no insured, except at their own cost, voluntarily make any payment, assume any obligation, or incur any expense ... without [the insurer's] consent." Following court precedent in Hernandez v. Gulf Group Lloyd's, an insurer can only deny coverage for lack of consent to the insured's settlements under a "consent-to-settlement" provision if it was "prejudiced" by the lack of consent.
The insurer argued that it was prejudiced because many of the home owners who were offered remediation would not have sought a legal remedy on their own. The jury found that the insurance company was not prejudiced by the remediation, which it found was a reasonable response to the threat posed by the defective exteriors. The jury awarded approximately $2.5 million in damages, plus nearly as much in attorney fees and over a million dollars in prejudgment interest. However, the court of appeals reversed the trial court's verdict in favor of the insurance company.
The Decision
On appeal at the state's high court, the Texas Supreme Court first addressed the issue of whether the insurance company was legally prejudiced by the lack of consent to the builder's remediation plan. The insurer argued that, despite the jury's finding, the company was prejudiced as a matter of law by the builder's approach to voluntarily fixing the homes as a settlement. The insurer characterized the prejudice as "stark" since the builder "actively solicited claims which might otherwise never have been brought." The court found that the finding of prejudice—whether the unilateral settlement significantly impaired the insurer's position—was a factual issue that was properly determined by the jury.
The insurer also pointed to another "Loss Establishment" provision in the policy that required the insured to receive previous written consent for any settlements. The insurer argued that this provision, unlike the previously quoted "Condition E," did not require a showing of prejudice because the provision was central to the policy and clear in its requirement. In other words, any violation of this provision was a breach, regardless of whether the breach was deemed material by a court. The court disagreed, finding the provisions similar and requiring a showing of prejudice to establish a breach of either.
The court next addressed whether the scope of the remediation efforts was covered by the policy language. The insurer argued in part that the extensive costs of removing the EIFS from the homes to find the damage was not covered by the policy. Instead, only the costs of actually repairing the home damage were covered. The insurer pointed to a familiar commercial insurance provision obligating payment for insured's loss that is "because of" property damage occurring during the policy period. The builder argued that the removal of exteriors was necessary to assess and repair the damage that is usually hidden from sight. The court agreed, pointing out that the builder had not sought recovery at trial for a subset of homes that showed no damage once the EIFS was removed. The court noted that the words "because of," as used in the policy, were clear such that the language covered the remediation effort.
Conclusion
In reversing the court of appeals, the Texas Supreme Court found that the evidence supported the jury's verdict in favor of the builder. The case is a reminder that "consent-to-settlement" and similar provisions may not be strictly enforced by state courts. Perhaps ironically, the insured's efforts to avoid protracted litigation with home owners resulted in 12 years of litigation with its insurer.
Article provided with permission of the publisher, International Risk Management Institute, Inc., Dallas, Texas, from the Expert Commentary section of IRMI.com, copyright International Risk Management Institute, Inc. Further reproduction prohibited. Visit www.IRMI.com for more information.
About the author: Article written by J. Kent Holland, Jr., Esq. and James Rhodes, Esq.
Kent Holland is a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report, Vol. 16, No. 5 (May 2014).
Copyright 2014, ConstructionRisk, LLC
Article 2
The CGL and the Professional Liability Exclusion
See similar articles: CGL Professional Liability Exclusion
Craig F. Stanovich
Austin & Stanovich Risk Managers, LLC
Article provided with permission of International Risk Management Institute, Inc.
In a case filed on March 13, 2014, the California Court of Appeal provided important commentary on the application of the professional services exclusion that is substantially the same (but not identical) to CG 22 43. In the California case, an engineering firm (NCE) designed and built a dam for a winery. Shortly after the dam was built, neighbors complained of excess sediment downstream and that the construction was causing erosion in the surrounding waterways. The state brought a complaint against the owner of the winery, who in turn cross-complained against NCE, alleging NCE's failure to construct the dam in a good and professional manner. Specifically, NCE placed fill for construction of the dam, roadways, and the spillway, and the complaint alleged that the fill resulted in damage to downstream tributaries.
The Trial Court. After a rather astonishing handling of the claim, the insurer denied any duty to defend NCE under the business liability portion of a businessowners policy based in part on the professional liability exclusion. The trial judge granted a directed verdict for the insurer on the coverage matter, finding the project "to be complicated" and therefore to require "professional expertise." On this basis, the judge concluded that all the work that was done, including the construction of the dam, was "professional work" to which the professional liability exclusion applied, ruling there was no conceivable basis for coverage and thus no duty to defend.
Insurer's View. The position taken by the insurer at the trial and adopted by the trial judge was that a professional service is any task requiring skill performed for payment. The insurer's view was the professional liability exclusion applied to any task requiring skill, including any manual work if such work was performed by a professional. According to the insurer, the professional liability exclusion applied to almost any purposeful activity done in furtherance of the insured's business. In other words, the insurer asserted the most expansive view of the professional services exclusion imaginable: Because the named insured was a professional services company, no general liability coverage would apply to virtually any business activity conducted by the named insured.
Appeals Court. It may be an understatement to observe that the appeals court justices sharply disagreed with the trial court judge. The appeals court first remarked that many of the allegations were clearly outside of the professional services exclusion—including damages sought for negligence in construction of the dam.
The appeals court determined that NCE performed ordinary labor and construction work in connection with building the dam and was being sued for construction work. This construction work was not, according to the appeals court, within the policy definition of professional services. The policy defined professional service, and that definition did not include the terms "construction" or "labor." North Cntys. Eng'g, Inc. v. State Farm Gen. Ins. Co., 2014 Cal. App. LEXIS 235 (Cal. App. 1st Dist. Mar. 13, 2014).
Appeals Court Ruling. The appeals court was influenced by the S.T. Hudson Engineers decision in New Jersey and took a similar position. The professional services exclusion also did not apply because the business liability policy provided products-completed operations for "your work."
In the NCE case, one of the allegations was the failure to notify the dam owner of the need for permits and, thus, the "failure to provide warnings or instructions." The appeals court found that this allegation fell within the products-completed operations hazard and was covered by the CGL policy. The California Court of Appeal reversed the trial court's rulings and determined the insurer did have a duty to defend.
Conclusion
Because of the potential for an overly expansive application of the professional services exclusion, the endorsement CG 22 43 is no longer intended by ISO to be used with contractors engaged in construction operations. In 1996, ISO introduced two additional professional services exclusions—CG 22 79 and CG 22 80.
The first exclusion—CG 22 79—"Exclusion—Contractors—Professional Liability" is almost verbatim to CG 22 43 but with one significant difference. Professional services does not include (and therefore the exclusion does not apply) to "services within construction means, methods, techniques, sequences and procedures employed by you in connection with your operations in your capacity as a construction contractor." Thus, allegations of faulty construction should not be excluded, to the extent the operations involve construction "means and methods."
The second exclusion—CG 22 80—"Limited Exclusion—Contractors—Professional Liability" is also almost verbatim to CG 22 43, but the exception to this exclusion is very significant—the professional services exclusion does not apply to the named insured's construction work, including construction work done on behalf of the named insured.
CG 22 80 is intended for design-build contractors; the CGL policy excludes coverageonly if the named insured is providing professional services in connection with construction not performed by or on behalf of the named insured. Design work done as part of the named insured's construction work, including construction work done on behalf of the named insured, is not excluded by this endorsement.
The ruling in NCE has caused at least one legal commentator to observe that any of the professional liability exclusions apply only if the bodily injury, property damage, or personal or advertising injury takes place during the performance of the services—if the allegations are that the bodily injury, property damage, or personal or advertising injury took place after the service was completed, the professional services exclusions should never apply. In other words, the professional services exclusions and products-completed operations coverage are mutually exclusive.
1The engineering firm had purchased professional liability insurance, but the policy excluded claims arising out of completed operations.
From Expert IRMI commentary April 17, 2014
Craig F. Stanovich, CPCU, CIC, CRM, AU, is cofounder and principal of Austin & Stanovich Risk Managers LLC, a risk management and insurance advisory consulting firm specializing in all aspects of commercial insurance and risk management, providing risk management and insurance solutions, not insurance sales. Services include fee-based "rent-a-risk manager" outsourcing, expert witness and litigation support, and technical/educational support to insurance companies, agents, and brokers. E-mail at cstanovich@austinstanovich.com.
Craig F. Stanovich
Principal
Austin & Stanovich Risk Managers, LLC
1174 Main Street, Ste. 300
Holden, MA 01520
Ph.: (888) 540-7604 ext. 102
Fax: (888) 650-7803
cstanovich@austinstanovich.com
austinstanovich.com/
Article provided with permission of the publisher, International Risk Management Institute, Inc., Dallas, Texas, from the Expert Commentary section of IRMI.com, copyright International Risk Management Institute, Inc. Further reproduction prohibited. Visit www.IRMI.com for more information.
Article 3
Contractually Imposed Time Limit for Filing Suit is Enforced to Dismiss Claim Against Home Builder
See similar articles: Discovery Rule | Limitation of Liability | Limited Warranty | Statute of Limitations
Kent Holland, Esq. and James Rhodes, Esq.
A federal court in Maryland granted the dismissal of several counts against the builder of a residential home in Maryland due to a contractually agreed upon shortening of the time otherwise available to file suit . The provision stated that all causes of action falling outside of the contract’s “limited warranty” would be valid only if brought within one year of the property’s closing. The court cited to the general policy in Maryland of allowing parties to bargain for the scope of liability and found this limitation to be reasonable, dismissing breach of contract, negligence and fraud claims. Savage v. Centex/Taylor, LLC, Civil Action No. RDB-11-2134 (D. Md. Mar. 19, 2012)
Craig Savage entered into a contract in 2007 with Centex/Taylor, LLC for the construction and purchase of a single-family home in Berlin, Maryland. This “New Home Sale Agreement” included a limited warranty for the repair and replacement of certain aspects of the construction. However, the same provision indicated that all contractual and tort claims falling outside the scope of the limited warranty must be brought against the builder within one year of the date of closing. This provision expressly stated that the parties “waive all application of the so-called ‘discovery rule’”, a common law legal doctrine that sets the start of the statute of limitations period at the time the damage is discovered, or reasonably should have been discovered.
In the year following closing, the homeowner alerted the builder of structural defects in the home’s construction. The builder initially attempted to fix the problems, but ceased to do so after the company experienced financial difficulty. The homeowner eventually sued the builder on numerous grounds over three years after closing, alleging a breach of contract, breach of warranties, negligence, fraud and negligent misrepresentation. The amended complaint also included an additional count for breach of a statutory warranty for newly built homes, section 10-203 of the Real Property Article of the Maryland Code. Originally brought in circuit court in Worcester Court, the case was removed to federal district court in Maryland.
The builder sought dismissal of all counts, except for claims based on breach of the contract’s limited warranty, due to the expiration of the one year period from the contract’s limitation on liability provision. The court explained that under Maryland law, clear exculpatory causes—i.e. contractual limitations on liability—are generally valid, absent any legislation holding otherwise. The court then stated more specifically that contractually shortened time limits on bringing lawsuits are valid, provided the limitation is reasonable.
The court found that the one year limitation here was reasonable, and dismissed the non-warranty counts. With respect to the added count for breach of the Maryland statutory warranty for new home construction, the court explained that these implied statutory warranties cannot be modified by contract.
The case serves as a reminder that Maryland courts, and courts elsewhere, are likely to enforce limits of liability, even if they give the plaintiff significantly less recourse than would otherwise be available under statute. Here, the provision limited the overall period of bringing claims to one year and “started the clock” at closing, as opposed to the usual discovery of the injury or damage. However, the case also shows that certain statutory warranties available to the plaintiff—in this case section 10-203 of the Real Property Article of the Maryland Code—will be unaffected by the contractually shortened period.
About the author: Article written by J. Kent Holland, Jr. Esq., and James Rhodes, Esq.
Kent Holland is a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report, Vol. 16, No. 5 (May 2014).
Copyright 2014, ConstructionRisk, LLC
Article 4
Contractual Requirement May be Waived Despite “Non-Waiver Clause” Stating to the Contrary
See similar articles: Condition Precedent | Non-Waiver Clause
Kent Holland, Esq. and James Rhodes, Esq.
The Maryland Court of Appeals held that parties’ oral agreements and/or actions can waive a “condition precedent”, notwithstanding an explicit “non-waiver” clause in the contract. Hovnanian Land Investment Group, LLC v. Annapolis Towne Center at Parole, LLC, 421 Md. 94, 25 A.3d 967 (2011).
In this case, a developer sought to terminate its purchase agreement for land to build residential towers in a mixed-use development, when the primary developer had purportedly failed to meet a required condition precedent with respect to funding the maintenance of common areas in the development.
Annapolis Town Centre at Parole, LLC (“ATC”) was the developer of a large, mixed-use town center in Annapolis Maryland. ATC entered into a purchase agreement in 2005 with Hovnanian Land Investment Group, LLC for the sale of two parcels at the development for the construction of three residential towers. Under the development scheme, ATC was to retain ownership over common areas of the development and collect annual common area maintenance (“CAM”) fees from the residential and commercial parcel owners.
The purchase agreement between ATC and Hovnanian indicated that ATC would establish the CAM fees and other details of the common area maintenance via a written “Declaration” as a “condition precedent” before closing. The purchase agreement also contained a familiar non-waiver clause, which read as follows:
No change or modification of this Agreement shall be valid unless the same is in writing and signed by Purchaser and Seller. No purported or alleged waiver of any of the provisions of this Agreement shall be binding or effective unless in writing and signed by the party against whom it is sought to be enforced.
During 2006, ATC provided a draft Declaration pertaining to the CAM fees and related issues of the common areas. The parties discussed Hovnanian’s concerns over various aspects of the draft over several months. In early 2008, the parties could not agree on Hovnanian’s request for a price reduction and a second extension of the closing date to shore up its financing, in the midst of the economic downturn. Hovnanian then sought a termination of the Purchase Agreement, claiming that ATC had not met the “condition precedent” with respect to details of the CAM fees before closing. ATC argued in return that the Declaration met the contract requirements, and that regardless the parties had agreed to address the CAM fees via a future supplemental agreement.
ATC filed a complaint in circuit court seeking a declaratory judgment that Hovnanian’s termination was in breach. The circuit court granted ATC’s motion for summary judgment, finding that ATC had “strictly complied” with the CAM provision of the Purchase Agreement, and that in the alternative Hovnanian had waived the CAM funding condition through its actions. The intermediate appellate court focused on the latter, agreeing with the circuit court that Hovnanian waived the “condition precedent.”
On appeal to Maryland’s high court—the Court of Appeals of Maryland—the court first addressed the legal issue of whether one can waive a contractual right through its actions, despite a “non-waiver” clause. Harkening back to established precedents and treatises, the court explained that the “Maryland approach” is consistent with the “universal approach of commentators to disfavor strict adherence to non-waiver or non-modification clauses.” Despite the usually explicit wording of a non-waiver clause, the court explained the general unwillingness to give a “dispositive and preclusive effect” to a limitation on the parties’ ability to make future changes to the contract.
The court explained that “a party may waive, by its actions or statements, a condition precedent in a contract, even when that contract has a non-waiver clause.” The court was careful to say that the decision does not hold that “non-waiver clauses should be ignored altogether.” Instead, the effect of the disfavored clauses must be construed by the trier of fact, to see if the party alleging waiver can show “an intent to waive both the contract provision at issue and the non-waiver clause.” However, the court explained that the “waiver” of the “non-waiver clause” could be implied through the same actions that waived the condition precedent; the court rejected Honvanian’s argument that waiver of the non-waiver provision itself must be “explicit” and “independent” of the substantive waiver of a legal right at issue.
Finally, the court disagreed with the lower courts ATC was entitled to summary judgment. The court believed further factual inquiry would be needed to determine whether Hovnanian had waived its rights with respect to CAM fees condition. The court noted that such analysis is generally a “highly factual inquiry” that should be addressed at trial, as opposed to legal matter decided on summary judgment. The court also disagreed with the circuit court that the Declaration itself was in strict fulfillment of the condition precedent, making the waiver issue of central importance.
The case highlights that one must be skeptical of the effect of a seemingly explicit non-waiver provision. As explained in detail in the decision, courts are loathe to strictly enforce a provision that purports to limit the parties’ flexibility to adapt and agreement. At the backdrop of this case is also an equitable issue. The real motivator behind Hovnanian backing out of the deal was clearly problems associated with the financial crisis, not the disagreement over the CAM fees standing alone. Under principles of equity, courts will disfavor attempts to play such a condition as a “trump card”, where it conflicts with the parties’ course of conduct on the issue.
About the author: Article written by J. Kent Holland, Jr., Esq. and James Rhodes, Esq.
Kent Holland is a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report, Vol. 16, No. 5 (May 2014).
Copyright 2014, ConstructionRisk, LLC
Article 5
Court Bars Defendant’s Expert At Trial And Sanctions Defendant For Bad Faith Response To Requests to Admit – IL 2nd Dist.
See similar articles: Attorneys Fees | Discovery Disputes | Expert Witnesses
By: Paul Porvaznik, Esq.
A triple shot of defeat. Actually, more like a quadruple shot. The defendant in Fraser v. Jackson, 2014 IL App (2d) 130283, lost at trial in a personal injury suit, his expert was barred from testifying as a discovery sanction, his objections to plaintiff’s medical records request to admit were deemed in bad faith, and, for good measure, he was sanctioned by the appellate court for filing an anemic brief. And how was your day?
The Second District affirmed a jury verdict for the personal injury plaintiff of over $60,000 in damages which included over $30,000 in medical bills. The Court also upheld the trial court’s exclusion of defendant’s medical expert testimony at trial and found that the defendant failed to answer plaintiff’s request to admit medical records in good faith.
Why is this case included in a newsletter about construction law and risk management? Because the principles of law expressed in this decision apply equally to construction litigation.
Discovery Sanctions: Rule 219 and 213 Interplay
Illinois Supreme Court Rule 213(f)(3) requires a party, upon written interrogatory to identify controlled expert witnesses and provide testimonial subjects, conclusions, opinions, qualifications and any written reports. SCR 213(f)(3). The rule demands strict compliance. Rule 219 provides a trial judge with an array of sanctions options including barring testimony from a party or its expert where it fails to comply with discovery rules or orders. SCR 219(c)(iv). Sanctions are committed to the trial court’s discretion and the purpose of sanctions is not to punish; but to motivate discovery compliance. Fraser, ¶¶ 28-29.
The Court found that the trial court properly barred defendant’s medical expert from testifying. The defendant tried the court’s patience to the breaking point by violating numerous discovery orders. The medical witness himself (defendant’s retained expert) failed to properly respond to the plaintiff subpoena for documents and the defendant also didn’t produce adequate documents despite multiple requests from the plaintiff. The trial judge gave defendant many chances to comply with discovery and entered progressive sanctions (sanctions less severe than an outright ban) before barring the defendant’s expert from testifying.
Medical Records: Evidentiary Foundation Rules
The Court also held that plaintiff laid a sufficient foundation for the admission of his medical bills in evidence.
In Illinois, the evidentiary foundation for admitting medical records can be established by a doctor’s deposition testimony or through testimony of a non-doctor employee who is familiar with the medical practice’s billing methods and reasonableness of the charges. (¶40).
At trial, the plaintiff offered evidence deposition testimony of several treating physicians and a medical billing specialist – all of whom testified that plaintiff’s medical treatment and bills were reasonable and commensurate with the type of injury that plaintiff suffered in the car crash. This testimony cumulatively satisfied the foundation requirements for admitting medical bills into evidence.
Costs and Attorneys’ Fees (Rule 219(b) and 216 interplay)
The Court also upheld the trial court’s $4,000 plus sanctions award against defendant for failing to respond in good faith to plaintiff’s request to admit that his medical bills were reasonable and necessary in both substance and amount. Illinois law allows a plaintiff to utilize a Rule 216 Request to Admit to seek admissions that his medical treatment and related expenses were reasonable and necessary in view of the plaintiff’s injury. (¶¶44-45). Rule 219(b) allows a plaintiff to recover fees and costs where he proves a requested fact that the defendant denies where the denial isn’t in good faith, based on privilege or some other permissible reason – even if the defendant doesn’t have a specific intent to obstruct the litigation process. SCR 219(b), (¶46).
Applying these rules, the Second District found the defendant’s failure to admit the reasonableness and amount of plaintiff’s medical bills wasn’t in good faith. Because of defendant’s denial of the records, plaintiff had to open up a case in another state (Wisc.) and subpoena a medical records agent to testify telephonically at trial. The Court found that because defendant made plaintiff jump through so many logistical hoops to get a billing agent to testify on a matter that should have been admitted, the trial court’s fees and costs award was proper. (¶47).
Appeal Sanctions
Lastly, the appeals court sanctioned the defendant for filing a frivolous appeal. Rule 375(b) – unlike Illinois’ discovery rules – is indeed designed to punish a litigant who files an appeal for improper reasons (such as to harass the other side or to needlessly run up costs). The Court found that defendant’s failure to support its various arguments with any cites to the record or, more importantly, to any legal authorities (i.e., “the trial court was wrong because, because, I said so gosh darnit!!), merited sanctions. (¶¶ 51-53).
Take-aways:
A trial court has wide latitude to assess draconian discovery sanctions including barring witnesses. A request to admit a fact that’s not subject to meaningful dispute should be admitted by the opposing side. Otherwise, the party denying the requested fact or document will have to pay the requesting party’s fees and costs (such as the time and effort expended in securing the billing agent’s telephone testimony here) incurred in proving that fact/document. This case also illustrates that appellate briefs must comply with rules: facts must be supported by citations to the trial court record and legal arguments should be bolstered with legal authorities.
Paul B. Porvaznik
Molzahn, Rocco, Reed & Rouse, LLC
20 N. Clark Street
Suite 2300
Chicago, IL 60602
(312) 553-8651
(312) 917-1851 (Fax)
(312) 217-0457 (mobile)
Blog: http://paulporvaznik.com
Copyright 2014, ConstructionRisk, LLC
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