The Illinois Appellate Court’s recent decision in The Pierre Condominium Association v. Lincoln Park West Associates, LLC., 378 Ill. App. 3d 770 (1st Dist. 2007) addresses the correlations and conflicts between contractual “hold harmless” clauses, the Contribution Act, 740 ILCS 100/2, and the Construction Contract Indemnification for Negligence Act, 740 ILCS 35/1 et. seq. Favoring settlement among parties, the court ultimately determined that the good-faith settlement provision of the Contribution Act could not be waived by a contractual provision.
In Pierre, plaintiffs owned a building at 2100 North Lincoln Park West in Chicago. Defendants, Lincoln Park West Associates (“LPWA”), owned the neighboring property, where they intended to build a high-rise. LPWA hired McCauley Construction (“McCauley”) as the general contractor for the highrise project. In turn, McCauley hired Case Foundation Company (“Case”) to excavate and create the building foundation. The subcontract between McCauley and Case provided, in pertinent part, that:
[Case] shall indemnify and hold harmless the Owner, Contractor, Architect, Architect’s consultants and agents and employees of any of them from and against claims, damages, losses and expenses,…but only to the extent caused by the negligent acts or omissions of the Subcontractor, the Subcontractor’s Sub- Contractors, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such a claim, damage, loss or expense is caused in part by a party indemnified hereunder.
Plaintiff filed suit against LPWA, McCauley and Case seeking recovery for property damages to the association’s building, which occurred during the execution of the excavation. Then, LPWA filed a counterclaim under the Contribution Act and pursuant to the above contract language. Thereafter, Case filed a motion for partial summary judgment. Relying on the Construction Contract Indemnification for Negligence Act, which disallows clauses in construction contracts that would indemnify a party for its own negligence, Case stated that language of the provision required case to indemnify LPWAfor its own negligence. Thus, Case believed the provision was void under the statute. Alternatively, Case argued that the clause was a contractual provision for contribution duplicative of the statutory contribution counterclaim. The court determined that both parties were “presumed to contract with the knowledge of existing laws” and interpreted the clause as “requiring contribution, not indemnification.”
The court also addressed the adjacent issue regarding Case’s settlement with the plaintiff. Case filed a motion for finding that the settlement was made in good-faith. Case also simultaneously sought summary judgment on the third-party counterclaim for contribution, arguing that the settlement would eradicate the contribution claims made by LPWA. LPWA contested Case’s motion for good-faith finding and request for summary judgment. LPWA argued that the contractual clause waived the provisions of the Contribution Act that sets forth that a finding for a good-faith settlement extinguishes the contribution claims. LPWA further argued that the “indemnification clause,” now interpreted to require contribution, created a contractual contribution right separate from the Contribution Act. Defendants/ third-party plaintiff’s contended that the contractual contribution could, in effect, waive the good-faith settlement dismissal of the counterclaim.
The court found that the settlement between Case and the plaintiff was made in good-faith and that LPWA had not met its burden to prove otherwise. Also, the court found that a party may not contract to waive the good-faith settlement provision of the Contribution Act. The court found that to hold otherwise would disregard the public policy favoring settlements. Thus, the court affirmed that the settlement was in good-faith and that summary judgment was properly granted in favor of Case.
