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William J. Templeman Co. v. United States Fidelity And Guaranty Co.

November 16, 2000


Appeal from the Circuit Court of Cook County. No. 93 CH 7658 Honorable Thomas A. Hett, Judge Presiding.

The opinion of the court was delivered by: Justice Barth

Modified Upon Denial of Rehearing

This appeal arises out of an action by William J. Templeman Company, f/k/a Premier Electrical Construction Company (Premier), individually and as assignee of Gim Electric Co. (Gim), against United States Fidelity and Guaranty Company (USF&G) for payment under the terms and provisions of a labor and material payment bond. The bond was furnished by USF&G as surety and J.W. Halm Construction Company (Halm), as principal, to the Regional Transportation Authority (RTA), as obligee, and was related to construction of a commuter train layover facility in Joliet, Illinois. Premier sought allegedly unpaid contract balances of $18,293.00 due on its own subcontract with Halm, and $28,750.00 due on its sub-subcontract with Gim, and as assignee of Gim.

The trial court granted summary judgment to USF&G, finding that an unverified letter dated May 7, 1987, from Premier to USF&G which did not state an amount was not a notice of claim within the meaning of section 2 of the Illinois Public Construction Bond Act (30 ILCS 550/1 et seq. (West 1996)) (the Act or the Bond Act).

Our task on appeal is to determine whether the notice requirements in section 2 of the Bond Act can be waived, and, if so, whether USF&G waived such requirements.

The facts revealed by the record are as follows.

On or about August 30, 1984, the RTA (predecessor of Metra), contracted with Halm to construct a commuter railroad coach layover facility known as RTA Project No. A50230 (the Project). Pursuant to the Bond Act, Halm was required to furnish a payment and performance bond to the RTA for the value of the construction contract. Separate payment and performance bonds were issued by USF&G in the total amount of $2,793,000.

On December 28, 1984, Premier entered into a subcontract with Halm in the amount of $150,000 to perform underground electrical work on the Project. Halm separately subcontracted with Gim in the amount of $575,000 to furnish and install certain electrical equipment on the Project. Gim then sub-subcontracted portions of its work to Premier.*fn1

While the parties do not agree as to when, if ever, acceptance of the Project occurred, it is undisputed that all work in connection therewith was completed by the end of 1986, and the facility became operational at that time.

Subsequently, USF&G received an unverified letter dated May 7, 1987, from Premier. That letter identified the Project by number, named Halm as the general contractor, and stated that Premier had not yet been paid by Halm for work it performed on the Project. The letter also stated that Gim had not been paid for portions of its work on the Project. There was no mention of the assignment by Gim to Premier. Premier received no response.

Fifteen months later, on or shortly after September 28, 1988, USF&G received a second letter from Premier. This letter contained a demand for payment from USF&G for specific dollar amounts due and owing to Premier from Halm and to Premier from Gim, which, to Premier's knowledge, had not yet been paid in full by Halm. There was also a request for payment based on miscellaneous change work performed by Premier in connection with the Project. USF&G acknowledged receipt of the September 28 letter on September 30 and requested that Premier complete a verified proof of loss form, a blank copy of which was provided.

Premier returned the verified proof of loss form on February 25, 1989, but omitted the date of its last payment from Halm and the date on which it last furnished material to the Project. On March 7, 1989, Edward Wright, an outside consultant hired by USF&G to handle the Premier claim, wrote a letter to Premier acknowledging receipt of the February 25 letter and requesting that the information omitted from the proof of loss form be supplied. This letter was sent to the return address listed on Premier's last correspondence. Evidently, Premier had since moved and claimed never to have received Mr. Wright's March 7th letter and request.

In late 1992, Dennis O'Brien, an attorney for Premier, contacted Mr. Wright and requested an update on the Premier claim. A meeting took place between Mr. Wright, Mr. O'Brien and Bill Templeman on November 20, 1992, to discuss the claim. Following the meeting, Mr. Wright advised Mr. Templeman of USF&G's decision to deny the claim and that the decision was final. On August 27, 1993, Premier filed this action. *fn2

Premier's complaint consisted of five counts, four of which were dismissed pursuant to motion. *fn3 Following the dismissal of counts III and IV, the case proceeded solely on count II, Premier's bond claim against USF&G. As part of that cause of action, Premier alleged that on May 7, 1987, it "notified USF&G of non-payment of funds due from Halm Construction on its own behalf and on behalf of Gim." As part of its answer to plaintiff's complaint, USF&G asserted several affirmative defenses. The first of these alleged that Premier did not serve a notice of claim in the manner ...

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