Claims for Breach of Express Indemnity Clause in Construction Contracts Subject to 10-Year Statute of Limitations in Illinois

In 15th Place Condominium Association v. South Campus Development Team LLC, the Appellate Court for the First District of Illinois held that a claim for breach of an express indemnity clause within a construction agreement was subject to the 10-year statute of limitations for written contracts instead of the four-year statute of limitations for construction claims.  In 15th Place, the South Campus Development Team, a developer of two condominium towers, contracted with Linn-Mathes, Inc. to work as a general contractor.  The contract between them included an express indemnity clause.  After the condominium project was completed in 2004, the developer turned over control of the project to 15th Place Condominium Association.

In 2008, the association sued the developer for breach of the implied warranty of fitness and habitability, breach of fiduciary duty, and negligence, alleging that it had discovered latent design and construction defects in the condominium towers.  In 2011, the developer filed a third-party complaint against the general contractor alleging breach of express indemnity.  The general contractor prevailed on its motion to dismiss, arguing that the developer’s breach of express indemnity claim was filed more than four years after substantial completion of the condominium project, and thus was barred by the four-year statute of limitations for construction-related claims.

The developer appealed and on June 26, the Illinois Appellate Court reversed the trial court’s decision. The appellate court relied on the Illinois Supreme Court’s ruling in Travelers Casualty & Surety Co. v. Bowman, which reasoned that when determining whether to apply the four-year statute of limitations for construction matters or the 10-year statute of limitations for written contracts, a court should analyze “the nature of the plaintiff’s injury rather than the nature of the facts from which the claim arises,” focusing on whether the plaintiff’s claim relates to the construction activity or to the underlying contract.

The general contractor attempted to distinguish Travelers because it dealt with construction bonds and not with construction contracts with indemnity clauses, thus arguing that the 10-year statute of limitations for written contracts was inapplicable.  The appellate court in 15th Place rejected this argument, concluding that the nature of the developer’s express indemnity claim against the general contractor related to the failure to indemnify rather than to a construction-related activity.  Therefore, the court found that the express indemnity claim must be governed by the 10-year statute of limitations applicable to written contracts, resulting in the claim not being time-barred.

The recent 15th Place decision should serve to put general contractors and developers throughout Illinois on notice that claims for breach of express indemnity clauses — and their exposure to same — go well beyond the typical four-year statute for construction claims.