The Illinois Supreme Court Update
Monday, March 4, 2019
Posted by: Hilary Korabik
The Illinois Supreme Court Eliminates Breach of Implied Warranty Of Habitability Claims Against Subcontractors
by Chris Cano of Franco Moroney Buenik LLC
Recently, in Sienna Court Condominium Association v. Champion Aluminum Corporation, et al., 2018 IL 122022, 2018 WL 6818447 (Ill. 2018), the Illinois Supreme Court overruled the Minton decision, which has had a substantial impact on construction defect law in Illinois for the last 35 years. In Minton v. The Richards Group of Chicago, 116 Ill. App. 3d 852 (1st Dist. 1983), the appellate court expanded the implied warranty of habitability beyond the builder-vendor in order to allow homebuyers to maintain direct actions against subcontractors for breach of the implied warranty of habitability “where the innocent purchaser has no recourse to the builder-vendor.” Id., at 855. In overruling Minton, the Supreme Court has abolished implied warranty of habitability claims against subcontractors in Illinois.
In Sienna Court, the condominium association, on behalf of the unit owners, filed suit against the developer, general contractor, subcontractors, designers and material suppliers for alleged construction defects in a two-building, 111-unit property located in Evanston, Illinois. In the atypical scenario, both the developer and general contractor were insolvent. However, prior to the filing of the lawsuit, the condominium association obtained relief from the automatic bankruptcy stay so that it could pursue claims against the developer and general contractor to the extent of their available insurance coverage. The condominium association also recovered approximately $308,000 from the developer in the bankruptcy through a warranty escrow fund that the developer was required to establish. The subcontractors jointly moved to dismiss the association’s implied warranty of habitability claims, arguing that the association had “recourse” to both the developer and general contractor in the form of insurance and the warranty fund, and therefore, under Minton, the association could not directly sue the subcontractors for breach of the implied warranty of habitability.
Following the trial court’s refusal to dismiss the claims against the subcontractors and the appellate court’s subsequent affirmance of the trial court’s decision, the subcontractors appealed the case to the Illinois Supreme Court. There, the subcontractors argued that the Supreme Court should overrule Minton because there was no contractual privity between the homebuyer and subcontractor, and therefore, there could be no implied warranty of habitability. The Supreme Court agreed and expressly overruled Minton.
In overruling Minton, the Illinois Supreme Court in Sienna held that purchasers of newly constructed homes cannot pursue breach of implied warranty of habitability claims against subcontractors where there is no contractual privity between the homebuyer and subcontractor. Although the Supreme Court only addressed whether such claims could be maintained by homebuyers against subcontractors, it is likely that the same rationale will also apply to bar implied warranty of habitability claims by homebuyers against general contractors since there is no privity between the homebuyer and general contractor either. In sum, the decision in Sienna represents a seismic change in Illinois law and may signal the end of implied warranty of habitability claims in construction defect cases.
An expanded version of this piece was published in the Spring 2019 issue of Construction Claims magazine, a publication of The CLM. Reprinted with permission.