United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
Robert Blakey United States District Judge.
James McHugh Construction Company (“McHugh”)
initiated this breach of contract action against Defendant
International Fidelity Insurance Company (“IFIC”)
in the Circuit Court of Cook County on March 21, 2014. Compl.
[1-1] at 6. IFIC removed the case to this Court on April 3,
2014 , and fact discovery was completed by July 8, 2015
parties have filed cross-motions for summary judgment [59,
62] on the limited question of whether McHugh's claim
against IFIC is time-barred. As explained below, disputed
factual issues remain regarding the date the applicable
claims accrued; accordingly, both motions are denied.
case arises out of the construction of two condominiums at
600 North Lake Shore Drive in Chicago, Illinois. PSOF ¶
1. McHugh was the general contractor charged with supervising
the construction of both condominiums. Id. In that
capacity, McHugh subcontracted with Builders Architectural
Products (“BAP”). Id. ¶ 2. BAP was
obligated to install windows, doors and related elements at
the condominiums. Id. The subcontract included a one
year warranty on BAP's work, gave McHugh the right to
complete BAP's work in the event of a default, and
provided for indemnification. Id. ¶¶ 3-6.
In connection with the subcontract between McHugh and BAP,
IFIC issued two performance bonds on October 12, 2006 and
June 13, 2007, respectively. Id. ¶ 7. The bonds
identify IFIC as the surety, BAP as the bond principal, and
McHugh as the obligee. DSOF ¶ 6.
the construction process, BAP failed to meet expectations
regarding both the timing and substance of its work. PSOF
¶ 11. BAP's two principle shortcomings pertained to
problems with window components and balcony doors. DSOF
¶¶ 8, 13, 26. On August 25, 2007, McHugh provided
IFIC with a quality control report outlining problems with
BAP's work. PSOF ¶ 20. In that letter, McHugh
advised IFIC that BAP was in default “due to their
failure to meet the project schedule and their failure to
properly complete installation of the subcontract
work.” Id. On August 31, 2007, IFIC expressed
its expectation “that [McHugh] and our Principal [BAP]
will work together to resolve any outstanding issues.”
Id. ¶ 21; Ex. 6.
IFIC's assurances, McHugh's concerns regarding
BAP's performance continued. On April 3, 2008, McHugh
again advised IFIC that BAP was failing to meet completion
dates or fix its defective work. PSOF ¶ 22. McHugh also
informed IFIC that if BAP did not take corrective action
McHugh would retain another company in its stead.
Id. On April 7, 2008, IFIC asked McHugh for more
information in order to investigate the matter, reserved its
rights, and instructed McHugh to not act without its consent.
Id. ¶ 23.
of IFIC's investigation, on March 16, 2009, IFIC
requested information concerning BAP's work on the
project. Id. ¶ 24. On April 2, 2009, McHugh
outlined BAP's various issues and advised IFIC that
BAP's performance had been untimely throughout the entire
project. Id. ¶ 25. Specifically, McHugh
informed IFIC that BAP was thirteen months behind the
contractually stipulated date for substantial completion of
work on the north condominium tower and eight months behind
the contractually stipulated date for substantial completion
of work on the south condominium tower. Id.
December 31, 2009, McHugh notified BAP that unless BAP
completed their work within seven days, McHugh would be
forced to retain another contractor to finish the job.
Id. ¶ 26. McHugh copied IFIC on this
January 5, 2010, McHugh notified IFIC that BAP was in default
of their contractual obligations. Id. ¶ 27.
McHugh also advised IFIC that, if BAP did not quickly fix the
work, McHugh would have to complete the work and deduct the
costs from any remaining amounts owed to BAP. Id.
McHugh also noted that if the remaining amounts owed to BAP
were insufficient to cover the costs of completing BAP's
work, McHugh would make a claim under the bonds. Id.
On January 7, 2010, IFIC once again expressed its expectation
“that [McHugh] and our Principal [BAP] will work
together to resolve any outstanding issues.”
Id. ¶ 28; Ex. 7.
January 13, 2010, 600 LSD LLC, the properties' developer,
provided McHugh with an inspection list detailing the balcony
and window issues. Id. ¶ 22. On January 27,
2010, the developer sent another email to McHugh enumerating
additional issues with multiple units throughout the project.
Id. ¶ 24. In early February of 2010, McHugh was
notified that the issues identified in the developer's
email would be addressed through the project's window and
door supplier, Traco. Id. ¶ 25. On February 12,
2010, McHugh informed BAP's counsel of defects remaining
in BAP's work and stated that these defects possibly
reflected either negligence or work left purposefully
incomplete. Id. ¶ 26. On February 15, 2010, the
developer sent yet another list outlining BAP's defects
to McHugh. Id. ¶ 27.
developer eventually retained a consultant (Curtainwall
Design Consultants, Inc. or “CDC”) to inspect
BAP's work on the project. PSOF ¶ 29. According to a
field report issued by CDC, defects still existed on March 4,
2010, despite BAP's attempts to address the balcony and
window issues. DSOF ¶¶ 31-32.
April of 2010, CDC advised McHugh of additional defects in
BAP's work. PSOF ¶¶ 33-43. The parties dispute
whether these problems were “new” or related to
the overarching BAP issues from 2007-2010. R. PSOF
1, 2010, McHugh notified IFIC that if BAP did not commence
corrective work by July 9, 2010, McHugh would seek to recover
costs from IFIC to complete the remaining work. PSOF ¶
44. On July 2, 2010, IFIC reserved its rights and asked
McHugh for more information to investigate the claim.
Id. ¶ 45. On July 12, 2010, after BAP failed to
begin corrective work, McHugh advised IFIC that arrangements
were being made for another contractor to perform the work
and that a claim would be made by McHugh under the bonds.
Id. ¶ 46. On July 13, 2010, McHugh sent IFIC an
estimate of the repair costs for the defective work, which
totaled $329, 728.92. PSOF ¶ 47. In this letter, McHugh
reiterated that it would proceed with the corrective work and
make a claim under the bonds. Id. On July 22, 2010,
IFIC responded to McHugh by reserving its rights, questioning
the decision to incur repair costs, and disputing
McHugh's “currently unliquidated claim”
against IFIC. DSOF ¶¶ 36-39; Ex. CC. The parties
dispute whether this correspondence in July of 2010
constituted a formal claim by McHugh against IFIC under the
bonds. See, e.g., R. PSOF ¶ 47.
continued to work on the project until they walked off the
job in October 2010. PSOF ¶¶ 50-51, 54. BAP
eventually filed for bankruptcy on March 2, 2011.
Id. ¶ 54. McHugh completed the process of
finishing BAP's work in late 2012. Id. ¶
55. On April 12, 2013, McHugh submitted a claim to IFIC for
the cost of completing BAP's work, which totaled $966,
7, 2013, IFIC reserved its rights and asked McHugh for more
information in order to investigate the claim. Id.
¶ 56. On September 26, 2013, McHugh responded to
IFIC's request. Id. ¶ 57. In that letter,
McHugh stated that IFIC had possessed notice of McHugh's
claim since 2007 and that McHugh had previously provided much
of the requested documentation to IFIC in March 2009 and July
January 17, 2014, IFIC denied McHugh's claim, invoking a
statute of limitations defense. DSOF ¶ 42. On March 20,
2014, McHugh responded by initiating this lawsuit against
IFIC in the Circuit Court of Cook County, alleging that it
was entitled to recovery of $966, 338.41 under the bonds plus
costs, pre-judgment interest, and attorneys' fees.
Id. ¶ 44.
judgment is appropriate if the movant shows that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law. Spurling v. C
& M Fine Pack, Inc., 739 F.3d 1055, 1060 (7th Cir.
2014). The party seeking summary judgment has the burden of
establishing that there is no genuine dispute as to any
material fact. See Celotex Corp. v. Catrett, 477
U.S. 317, 323 (1986). Further, summary judgment is not
appropriate if the evidence is such that a reasonable jury
could return a verdict for the non-moving party, and the
Court must construe ...