Court Opinion

ID: 4681492
Source: CourtListenerOpinion
Date Created: 2021-04-27 22:05:14.258632+00
Date Added: 2024-06-11T08:04:01.690313
License: Public Domain

2021 IL App (1st) 192427

                                          No. 1-19-2427

                                   Opinion filed April 27, 2021.

                                                                                    Second Division

                                              IN THE

                              APPELLATE COURT OF ILLINOIS

                                        FIRST DISTRICT

HARLEYSVILLE INSURANCE CO., as            )                   Appeal from the
Subrogee of Navigant Development, LLC,    )                   Circuit Court of
                                          )                   Cook County.
                    Plaintiff-Appellant,  )
                                          )
       v.                                 )                   No. 2018 L 008623
                                          )
MOHR ARCHITECTURE, INC.; FOX VALLEY )
ENGINEERING, INC., n/k/a Fox              )
Valley OCD, Inc.; BRAMCO                  )
CONSTRUCTION COMPANY; CAMPBELL            )
TRUSS, INC.; ARCH-H, LLC; and ADVANCE     )
CONSULTING GROUP INTERNATIONAL,           )                   The Honorable
                                          )                   Margaret A. Brennan,
                    Defendants-Appellees. )                   Judge Presiding.

       JUSTICE LAVIN delivered the judgment of the court, with opinion.
       Justices Pucinski and Cobbs concurred in the judgment and opinion.

                                            OPINION

¶1     Navigant Development, LLC (Navigant), owned a restaurant property at 1419 N. Wells

Street in Chicago (the property). After two separate tenants completed two separate renovations

at the property, defects surfaced with respect to the trusses supporting the property’s ceiling.

Harleysville Insurance Co. (Harleysville), Navigant’s insurer, paid Navigant for repairs and lost
No. 1-19-2427

rent. Harleysville, as Navigant’s subrogee, then brought this action against various contractors

and subcontractors involved in the two renovation projects, alleging multiple counts of breach of

contract and negligence.

¶2      Ultimately, the circuit court granted several defendants’ motions to dismiss and one

defendant’s motion for summary judgment, finding that Navigant was not an intended third-party

beneficiary to contracts between its tenants, contractors, and subcontractors. Consequently,

Harleysville could not bring breach of contract claims based on those contracts. Additionally, the

economic loss doctrine barred Harleysville’s negligence claims. In this interlocutory appeal,

Harleysville maintains that Navigant was an intended third-party beneficiary of the contracts at

issue and that the economic loss doctrine does not apply. For the following reasons, we affirm

the court’s judgment.

¶3                                             I. Background

¶4                                     A. Renovation From 2008-09

¶5      From about 2008 to 2009, Old Town Entertainment, LLC (Old Town), Navigant’s tenant,

renovated the property to operate a restaurant and bar called 33 Club. 1 Old Town hired Mohr

Architecture, Inc. (Mohr), to design and prepare the renovation plans. In turn, Mohr hired Fox

Valley Engineering, Inc., now known as Fox Valley OCD, Inc. (Fox), to perform the engineering

work. Old Town also hired Campbell Truss, Inc. (CTI), to maintain and repair trusses during the

renovation. According to Harleysville, these entities knew that Navigant owned the property, and

Old Town was required to submit all proposed work to Navigant and/or Anthony Tomaska for

approval before work commenced. Tomaska was Navigant’s sole member and manager as well

as a member of Old Town.

        1
            These facts are taken from Harleysville’s amended complaint or are otherwise undisputed at this
juncture.

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No. 1-19-2427

¶6                                 B. Renovation From 2011-12

¶7     In October 2011, Navigant leased the property to Bottleneck Wells, LLC (Bottleneck),

which planned to renovate the property to operate a restaurant called the Old Town Pour House

(Pour House). Bottleneck hired Bramco Construction Company (Bramco) to be the general

contractor and Arch-H, LLC (Arch-H), to provide architectural design services. In turn, Arch-H

hired Advance Consulting Group International (Advance) to provide engineering and design

specifications. Additionally, Bottleneck’s lease required it to submit all proposed alterations to

Navigant for approval.

¶8                                  C. 2016 Damage Discovery

¶9     In 2016, Navigant or Bottleneck discovered that the property’s ceiling was sagging and

damaged in places. Further investigation revealed that several trusses supporting the roof and

ceiling were bowed, cracked, or damaged. Harleysville then paid Navigant approximately

$870,000 for damages to the trusses and lost rent. Harleysville claims that improper work during

either or both of the renovations damaged the trusses.

¶ 10                                       D. Litigation

¶ 11   Harleysville, as Navigant’s subrogee, filed this action in August 2018, naming as

defendants the entities involved in the two renovations. Old Town and Bottleneck, however, are

not parties to this litigation. In January 2019, Harleysville filed an amended complaint, alleging

that Navigant was an intended third-party beneficiary of the renovation contracts and that

defendants breached those contracts. According to Harleysville, Navigant was an intended third-

party beneficiary because defendants knew the work was to be performed at a property owned by

Navigant. Harleysville further argued that defendants’ negligence with respect to the trusswork

damaged the trusses.

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No. 1-19-2427

¶ 12   Harleysville attached to its amended complaint the tenants’ respective agreements with

Mohr, Bramco, CTI, and Arch-H, which we will later address in further detail. Harleysville did

not attach, however, any contract involving Advance or Fox. Additionally, Harleysville did not

attach Navigant’s lease agreements with Old Town and Bottleneck.

¶ 13   Advance filed an answer and affirmative defenses, denying that (1) it knew Navigant

owned the property, (2) it knew Navigant would benefit from Advance’s work, (3) Navigant was

an intended third-party beneficiary, and (4) it had a duty to prevent harm to Navigant. Advance

also argued that Navigant claimed only economic loss and, thus, the economic loss doctrine

barred Harleysville’s negligence claim. Advance later filed a motion for summary judgment,

attaching an affidavit from its owner. According to the affidavit, Advance and Arch-H engaged

in a series of e-mails, which led Advance to work at the property. Advance never entered into an

agreement with Navigant or Bottleneck, however. The e-mails attached to the affidavit did not

mention those entities.

¶ 14   CTI filed a combined motion to dismiss the counts against it. 735 ILCS 5/2-619.1 (West

2018). Similar to Advance, CTI argued that Navigant was not an intended third-party beneficiary

to CTI’s contract with Old Town and the economic loss doctrine precluded Harleysville’s

negligence claim. Mohr and Bramco then filed their own combined motions to dismiss, raising

similar defects. Additionally, Arch-H moved to dismiss the breach of contract count against it

under section 2-615 of the Code of Civil Procedure (id. § 2-615), arguing that Navigant was not

an intended third-party beneficiary to its contract, and Fox moved to dismiss the negligence

claim against it under section 2-615, arguing the claim was barred by the economic loss doctrine.

¶ 15   In response to defendants’ motions, Harleysville argued that Navigant was an intended

third-party beneficiary of defendants’ contracts because they knew that Navigant, rather than Old

                                              -4-
No. 1-19-2427

Town or Bottleneck, owned the property where work was to be completed, and “that Navigant

would be, in part, a party benefitting from and enjoying the fruits of their work.” Additionally,

Navigant’s leases with its tenants included plans for renovation and required the tenants to

submit proposed alterations to Navigant for approval.

¶ 16   Harleysville further argued that the economic loss doctrine did not preclude

Harleysville’s negligence claims because “this is not a case of an unsatisfied customer nor the

case of merely a defective product, but rather the case of property damage, and other property

damage that extends well beyond just the work previously performed by the Defendants.” We

note that the amended complaint did not allege property damage beyond the trusses, which were

subjects of both renovation projects. Additionally, Harleysville argued that Navigant’s damages

reflected physical injury resulting from a sudden and calamitous event, satisfying an exception to

the economic loss doctrine. See Fireman’s Fund Insurance Co. v. SEC Donohue, Inc., 176 Ill. 2d

160, 165 (1997). Harleysville’s attachments to the response included Bottleneck’s lease with

Navigant.

¶ 17   On June 28, 2019, the circuit court granted defendants’ motions with prejudice. The court

found that the sudden and calamitous event exception to the economic loss doctrine did not

apply, as the amended complaint alleged only that the trusses bowed and cracked over a period

of eight years. In re Chicago Flood Litigation, 176 Ill. 2d 179, 200-01 (1997) (stating that

gradual deterioration is insufficient to satisfy this exception); Westfield Insurance Co. v. Birkey’s

Farm Store, Inc., 399 Ill. App. 3d 219, 232 (2010) (recognizing that this exception requires

damage to property other than the property that is the subject of the contract). Additionally,

Navigant was not an intended third-party beneficiary to the renovation contracts. Even if

defendants knew Navigant owned the property, it did not follow that they intended to benefit

                                                -5-
No. 1-19-2427

Navigant. Furthermore, Mohr’s contract and CTI’s contract with Old Town did not mention

Navigant. Similarly, Bramco’s contract and Advance’s contract contained no affirmative

statement showing an intent to benefit Navigant. Moreover, the contract between Arch-H and

Bottleneck explicitly stated that the contract would not create a contractual relationship or cause

of action in favor of a third party.

¶ 18    Arch-H subsequently filed a section 2-615 motion to dismiss the negligence claim against

it, citing the court’s order granting codefendants’ motions. Additionally, Fox moved to dismiss

the breach of contract claim against it under section 2-619. Fox argued that it had entered into a

contract with only Mohr, through informal e-mails and an invoice, which were attached to Fox’s

motion. Furthermore, Navigant was not an intended third-party beneficiary of that contract.

¶ 19    Harleysville, however, filed a motion to reconsider the court’s dismissal/summary

judgment order. According to Harleysville, while ownership of a property after the contract’s

formation and execution may be insufficient to render one an intended third-party beneficiary,

ownership of a property at the time of the contract’s formation and execution was sufficient.

Harleysville also argued that it was an intended third-party beneficiary of Bramco’s contract with

Bottleneck because Bramco’s subcontracts named Navigant as an additional insured.

Harleysville attached several agreements between Bramco and its subcontractors.

¶ 20    Harleysville also responded to Arch-H’s motion to dismiss the negligence claim against

it, arguing that the economic loss doctrine did not bar its negligence claim because Arch-H was

in the business of supplying information for the guidance of others. We note that Harleysville has

since abandoned any reliance on that exception. Harleysville further argued, however, that the

doctrine did not apply because defendants owed extracontractual duties to Navigant, the property

owner, and Navigant did not have the opportunity to bargain for Arch-H’s services.

                                                -6-
No. 1-19-2427

¶ 21   Defendants responded to the motion for reconsideration, arguing, among other things,

that Harleysville’s motion improperly raised new arguments and that Navigant’s ownership of

the property at the time the contract was formed and executed did not render it an intended third-

party beneficiary.

¶ 22   In reply, Harleysville denied that its motion to reconsider had raised a new argument.

Yet, in the same breath, Harleysville’s reply argued for the first time that if the court sustained

the dismissal of the breach of contract claims, it was required to reinstate the negligence claims.

Specifically, Harleysville reasoned that if there were no commercial dealings between Navigant

and defendants, the economic loss doctrine did not apply. The circuit court subsequently allowed

defendants to file surreplies challenging the reasoning behind Harleysville’s new contention.

¶ 23   On October 29, 2019, the circuit court denied Harleysville’s motion to reconsider and

granted the pending motions to dismiss. The circuit court, on November 19, 2019, found that the

dismissal order, summary judgment order, and denial of reconsideration order were final and

appealable, “there being no just reason for delay of the appeal on the issues contained within

those orders.” Harleysville now appeals.

¶ 24                                           II. Analysis

¶ 25   On appeal, Harleysville challenges the circuit court’s dismissal orders. Section 2-619.1 of

the Code of Civil Procedure permits a party to move for dismissal under both section 2-615 and

section 2-619. Lutkauskas v. Ricker, 2015 IL 117090, ¶ 29. In addition, a section 2-615 motion

challenges a complaint’s legal sufficiency (Cochran v. Securitas Security Services USA, Inc.,

2017 IL 121200, ¶ 11), while a section 2-619 motion admits the complaint’s legal sufficiency but

raises a defense defeating the complaint (State ex rel. Leibowitz v. Family Vision Care, LLC,

2020 IL 124754, ¶ 31). That being said, a confluence between section 2-615 and section 2-619

                                                -7-
No. 1-19-2427

exists when an affirmative matter is apparent from the complaint. O’Callaghan v. Satherlie, 2015

IL App (1st) 142152, ¶ 19.

¶ 26   In reviewing a combined motion to dismiss, we accept all well-pleaded facts in the

complaint as true. Zander v. Carlson, 2020 IL 125691, ¶ 3. Furthermore, we review an order

granting a motion to dismiss de novo. Id. ¶ 18. Consequently, we may affirm the court’s

judgment on any basis in the record. Kucinsky v. Pfister, 2020 IL App (3d) 170719, ¶ 34.

¶ 27   Harleysville also asserts that the circuit court erroneously entered summary judgment in

favor of Advance. Summary judgment is warranted where the pleadings, admissions on file,

depositions and affidavits demonstrate that no genuine issue of material fact exists so that the

movant is entitled to judgment as a matter of law. Lewis v. Lead Industries Ass’n, 2020 IL

124107, ¶ 14. In making this determination, courts construe the pleadings, admissions,

depositions, and affidavits strictly against the movant and liberally in favor of the nonmovant.

Gillespie v. Edmier, 2020 IL 125262, ¶ 9. Like the circuit court’s dismissal orders, we review

summary judgment rulings de novo. Id.

¶ 28   Finally, Harleysville challenges the denial of its motion to reconsider. Our standard of

review with respect to such motion depends on whether the motion raised the circuit court’s

misapplication of law, which we review de novo, or raised new facts, arguments, or legal

theories, which we review for an abuse of discretion. Liceaga v. Baez, 2019 IL App (1st)

181170, ¶ 26. Harleysville’s motion to reconsider argued the misapplication of law but also

added a new argument. Because the circuit court ruled upon the merits of all of Harleysville’s

contentions, however, we review the denial of that motion de novo, although the result here

would be the same under any standard of review.

¶ 29                                  A. Breach of Contract

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No. 1-19-2427

¶ 30    We begin by addressing the circuit court’s dismissal of Harleysville’s breach of contract

claims. 2 Absent privity of contract, an owner of real property cannot sue a defendant for breach

of contract unless he can show that the contracting parties undertook duties and obligations for

the owner’s direct benefit. Waterford Condominium Ass’n v. Dunbar Corp., 104 Ill. App. 3d 371,

373 (1982). Stated differently, the contracting parties must have intended for the performance of

the contract to directly benefit the third party. Doyle v. Village of Tinley Park, 2018 IL App (1st)

170357, ¶ 33. “[I]f the promisee bargains with the promisor to render a performance directly to a

third party, in nearly every case the promisee will have intended to benefit that third party.” 3

Advanced Concepts Chicago, Inc. v. CDW Corp., 405 Ill. App. 3d 289, 293 (2010). Furthermore,

it is unnecessary for the contract to specifically name the third-party beneficiary, but the contract

must at least define a class of individual beneficiaries that would include the plaintiff. Estate of

Willis v. Kiferbaum Construction Corp., 357 Ill. App. 3d 1002, 1008 (2005).

¶ 31    In contrast, incidental beneficiaries have no contractual rights or standing to enforce a

contract’s terms. Id. at 1007. With respect to construction contracts, it is insufficient for the

contracting parties to merely know, expect, or intend that others will benefit from the

construction. 155 Harbor Drive Condominium Ass’n v. Harbor Point Inc., 209 Ill. App. 3d 631,

646 (1991). It is also insufficient for the contracting parties to know, expect, or intend that a third

party will use the building constructed. Estate of Willis, 357 Ill. App. 3d at 1008; Altevogt v.

Brinkoetter, 85 Ill. 2d 44, 52, 56 (1981) (finding that even if the defendant builder of the house

        2
          Reviewing courts have addressed whether a party constitutes a third-party beneficiary in the
context of a section 2-619 motion to dismiss, a section 2-615 motion to dismiss, and a motion for
summary judgment. See, e.g., Carlson v. Rehabilitation Institute of Chicago, 2016 IL App (1st) 143853,
¶ 15; Bernstein v. Lind-Waldock & Co., 153 Ill. App. 3d 108, 110 (1987); Federal Insurance Co. v.
Turner Construction Co., 277 Ill. App. 3d 262, 266, 268 (1995).
        3
          Contrary to Harleysville’s assertion, this rule does not set forth a separate test for instances
where the third-party beneficiary owned the property subject to the contract. Rather, it is an aid to
deciphering the contracting parties’ intent.

                                                   -9-
No. 1-19-2427

knew that the party with whom he contracted would not be the party to live there, knowledge that

unknown third parties would reside in the house was insufficient to make those third parties

direct beneficiaries). Simply put, building owners cannot enforce contractual terms absent

“specific references to or obligations toward those owners.” 4 Estate of Willis, 357 Ill. App. 3d at

1009; see also Restatement (Second) of Contracts § 302 cmt. e, illus. 19 (1981).

¶ 32    Moreover, a presumption exists that contracting parties did not intend to confer

beneficiary status on a third party, as parties typically enter into contracts for their own benefit.

Doyle, 2018 IL App (1st) 170357, ¶ 33. The plaintiff has the burden of overcoming that

presumption. 155 Harbor Drive Condominium Ass’n, 209 Ill. App. 3d at 647. Additionally,

courts consider the contract’s language “and the circumstances surrounding its execution” to

determine whether the contracting parties intended to benefit a third party. Doyle, 2018 IL App

(1st) 170357, ¶ 33. Yet, the contract itself must make clear that it is undertaken for the plaintiff’s

direct benefit. Waterford Condominium Ass’n, 104 Ill. App. 3d at 373. Liability to a third party

cannot be expanded merely because the circumstances justify or demand further liability. 155

Harbor Drive Condominium Ass’n, 209 Ill. App. 3d at 646.

¶ 33    While Harleysville contends that we are not limited to considering the contract’s

language and may look to external circumstances surrounding the contract’s execution to assess

the contracting parties’ intent, we adhere to the well-settled rule that we may only look outside of

a contract when the contract is ambiguous, an argument that Harleysville has not made with

respect to the contracts at issue here. Mt. Hawley Insurance Co. v. Robinette Demolition, Inc.,

2013 IL App (1st) 112847, ¶ 45; see also Stichter v. Zuidema, 269 Ill. App. 3d 455, 456, 459,

        4
         Given that Illinois law is well settled, we decline to address decisions from other jurisdictions.
See Nicholson v. Shapiro & Associates, LLC, 2017 IL App (1st) 162551, ¶ 11 (stating that Illinois courts
are not bound by decisions from other jurisdictions).

                                                   - 10 -
No. 1-19-2427

461-62 (1995) (finding the circuit court improperly considered extrinsic evidence in determining

whether an unambiguous contract made the plaintiffs third-party beneficiaries). We find that

where a contract is unambiguous, we must consider the circumstances surrounding execution as

discerned from the contract itself. In any event, Harleysville has not identified any circumstances

external to these contracts that would have rendered Navigant an intended third-party beneficiary

thereof.

¶ 34                                  i. Mohr’s Contract

¶ 35   Harleysville attached to its amended complaint a “project contract,” which took the form

of a letter setting forth the work Mohr proposed to perform. While Harleysville states on appeal

that Old Town hired Mohr, the document was addressed to Tomaska, Jerry Kleiner, and Sam

Madonia at the property’s address. The record does not reveal the connection of Kleiner or

Madonia to the property or the parties. Assuming the contract was entered into with Old Town, it

omitted any reference to Navigant. See 155 Harbor Drive Condominium Ass’n, 209 Ill. App. 3d

at 647 (finding the condo association failed to meet its burden of proving the parties to a

subcontract intended confer a direct benefit upon it where the subcontract did not mention the

association or its members, did not express an intent to directly benefit them, and contained

guarantees that did not mention the unit owners). Mohr’s inclusion of the property’s address does

not otherwise show an intent to benefit the property’s owner. See Wheeling Trust & Savings

Bank v. Tremco Inc., 153 Ill. App. 3d 136, 140-41 (1987) (finding that a purchase order’s

identification of the property owner’s construction location as the place where materials were to

be delivered did not make the owner an intended third-party beneficiary).

¶ 36   Assuming further still that Mohr knew Navigant owned the property, the omission of any

reference to Navigant could very well indicate that Mohr and Old Town intentionally declined to

                                               - 11 -
No. 1-19-2427

make Navigant a third-party beneficiary. Salvi v. Village of Lake Zurich, 2016 IL App (2d)

150249, ¶ 55 (finding that where the contracting parties omitted from the contract any reference

to a third party known to benefit therefrom, the omission was deliberate). At best, Mohr’s

knowledge that Navigant owned the property would make Navigant an incidental beneficiary.

¶ 37   Furthermore, Old Town, not Navigant, was to be the user of the contractual benefit. Old

Town wanted the work done for its own benefit so that it could operate 33 Club. Mohr wanted

the work to be done so Mohr would be paid. Nothing shows that either entity was concerned with

benefiting Navigant. See Midwest Concrete Products Co. v. La Salle National Bank, 94 Ill. App.

3d 394, 397-98 (1981) (finding that the subcontract was entered into entirely in the interest of the

general contractor, who was fulfilling its obligations under the general contract, and the

subcontractor, who thought it would profit from the project; the benefit to the entity occupying

the property involved was incidental).

¶ 38   Harleysville further argues, however, that Mohr and Old Town intended to benefit

Navigant because the contract stated, “Owners to provide preliminary restaurant & kitchen

equipment layout.” While Harleysville assumes “owner” referred to the owner of the property, a

more natural reading is that “owner” referred to the owner of the business with whom Mohr was

contracting, as this provision purported to impose an obligation on the owner. This provision did

not confer any right upon Navigant, call for Mohr to perform the contract directly to Navigant, or

set forth a mechanism for Navigant to enforce the contract. See People ex rel. Resnik v. Curtis &

Davis, Architects & Planners, 78 Ill. 2d 381, 385-86 (1980) (finding the State was an intended

third-party beneficiary of a construction contract to build a prison where, among other things, the

contract required the architect to indemnify the State and hold it harmless); Estate of Willis, 357

Ill. App. 3d at 1009 (finding that, per Resnik, an owner may be a third-party beneficiary of a

                                               - 12 -
No. 1-19-2427

contract where the contract requires subcontractors to consult him and sets forth a method for the

owner may recover); 155 Harbor Drive Condominium Ass’n, 209 Ill. App. 3d at 648 (finding

Resnick to be distinguishable where the subcontracts at hand did “not describe an actual method

by which the Association may recover from the subcontractors”); Village of Fox Lake v. Aetna

Casualty & Surety Co., 178 Ill. App. 3d 887, 911 (1989) (finding that where a statute required

every contractor entering into a construction contract with a public entity to furnish a bond for

work to be completed by a surety absent the contractor’s performance, the public entity was an

intended third-party beneficiary to the contractor’s agreement with the surety).

¶ 39   Harleysville nonetheless argues that Navigant was an intended third-party beneficiary

because Old Town was required to obtain Navigant’s approval of renovation plans. While the

amended complaint never set forth the source of that obligation, a very liberal reading of that

pleading suggests that Old Town’s lease with Navigant imposed this obligation. Harleysville,

however, failed to attach a copy of that lease to its amended complaint or attach it to any other

pleading. See 735 ILCS 5/2-606 (West 2018) (stating that “[i]f a claim or defense is founded

upon a written instrument, a copy thereof *** must be attached to the pleading as an exhibit or

recited therein, unless the pleader attaches to his or her pleading an affidavit stating facts

showing that the instrument is not accessible to him or her”). Even assuming the lease contained

such a requirement, the lease was not incorporated into the Mohr contract and Mohr did not

otherwise contractually promise to submit plans to Navigant for review.

¶ 40   Harleysville has not met its burden or overcome the presumption that Navigant was not

an intended, direct third-party beneficiary. To find otherwise merely because Navigant owned

the property at the time the contract was formed and executed would create the exception that

swallowed the rule. “Logically, an owner will always benefit from any work done on his

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No. 1-19-2427

property.” Ball Corp. v. Bohlin Building Corp., 187 Ill. App. 3d 175, 179 (1989). Accordingly,

the circuit court properly dismissed the breach of contract claim against Mohr.

¶ 41                                  ii. Fox Old Town Contract

¶ 42    For the same reasons, we reject Harleysville’s assertion that Navigant was an intended

third-party beneficiary of the contract between Fox and Mohr merely because Navigant owned

the property at the time the contract was formed and executed. Additionally, the affidavit

submitted by Fox clearly stated that Fox had no relationship with Old Town, let alone Navigant.

The e-mails and invoice forming Fox’s contract with Mohr did not mention Navigant.

Furthermore, we reiterate that Old Town, rather than Navigant, was to be the user of the

renovated property. Accordingly, the circuit court properly dismissed the breach of contract

claim against Fox. 5

¶ 43                                     iii. Bramco’s Contract

¶ 44    We also reject Harleysville’s assertion that Navigant was an intended third-party

beneficiary of the contract between Bramco and Bottleneck. The “Standard Form of Agreement

Between Owner and Contractor” identified Bottleneck as the owner and required “the owner” to

furnish information to the contractor. Additionally, the contract identified the Pour House as the

project location and set forth the property’s address. The contract did not mention Navigant or

otherwise refer to the owner of the property. Thus, this unambiguous contract did not come

anywhere close to an express declaration of intent, by either Bramco or Bottleneck, to make

Navigant a third-party beneficiary.

        5
          We reject Harleysville’s contention that we must reinstate this count because Fox Valley has not
filed an appellee brief in this appeal. Because the issues are simple, we can easily decide this matter
without the assistance of Fox’s appellee’s brief. See First Capitol Mortgage Corp. v. Talandis
Construction Corp., 63 Ill. 2d 128, 133 (1976).

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No. 1-19-2427

¶ 45   Harleysville nonetheless states that “Bramco expressly incorporated a term in its contract

for the benefit of Navigant, by requiring its subcontractors to name Navigant as an additional

insured on the insurance policies obtained in relation to the work at the subject policy.” Rather

than citing any particular contractual provision in support of the statement, Harleysville cites its

own motion to reconsider. See Ill. S. Ct. R. 341(h)(7) (eff. May 25, 2018) (requiring argument to

be supported by citations to the pages of the record relied on). In any event, the contract between

Bramco and Bottleneck required only that Bramco maintain insurance: it did not require Bramco

to ensure that its subcontractors name Navigant as an additional insured. To the extent that

Harleysville refers to Bramco’s agreements with its subcontractors, rather than the agreement

between Bramco and Bottleneck, Harleysville has not alleged that Bramco or its subcontractors

breached those agreements. Furthermore, Harleysville’s opening brief did not explain how the

subcontracts are relevant to determining Bramco’s intent as to its contract with Bottleneck.

¶ 46   In its reply brief, Harleysville, states that “Bramco expressly incorporated its contracts

with its subcontractors into its contract with Bottleneck.” Yet, Harleysville cites Bramco’s

subcontract with Ameriscan Designs, Inc., not its contract with Bottleneck, once again failing to

support its contention with a citation to the record. Harleysville has also failed to develop this

into a cohesive argument explaining how this would render Navigant an intended beneficiary of

Bramco’s contract with Bottleneck. See also Midwest Concrete Products Co., 94 Ill. App. 3d at

398 (finding that while the subcontract stated it was “ ‘subject to’ ” the terms of the general

contract entered into with the entity that occupied and used the property, that entity was not a

third-party beneficiary of the subcontract). Furthermore, a promise to obtain insurance reflects an

intent to protect the contracting parties from liability, not necessarily an intent to confer a benefit

upon the additional insured. See Estate of Willis, 357 Ill. App. 3d at 1009-10 (finding the

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No. 1-19-2427

claimant was not a third-party beneficiary where no contractual language granted the claimant

the right to enforce the subcontracts at issue, notwithstanding that the claimant was named as the

general contractor in the insurance rider).

¶ 47   Harleysville further cites the following language found in Bramco’s subcontracts:

                “Subcontractor agrees and acknowledges that Owner is an intended third party

       beneficiary of this Subcontract. Subcontractor further agrees and acknowledges that it

       shall have no recourse against Owner for any default by Contractor under this

       Subcontract other than under applicable mechanics lien law.” (Emphases added.)

Harleysville ignores, however, that the subcontracts clearly identify Bottleneck, rather than

Navigant, as owner.

¶ 48   Finally, even if it were appropriate to examine evidence outside of Bramco’s

unambiguous contract, we reject Harleysville’s assertion that it was an intended third-party

beneficiary of the contract because Bottleneck’s lease required it to obtain approval from

Navigant for alternations. At best, it shows an intent to abstain from harming Navigant or to limit

Bottleneck’s own liability to Navigant. The circuit court properly dismissed this claim.

¶ 49                                     iv. CTI’s Contract

¶ 50   We are also unpersuaded by Harleysville’s assertion that Navigant was an intended third-

party beneficiary to the contract between CTI and Old Town. The contract did not mention

Navigant or the owner of the property. While the contract refers to Tomaska, it clearly identifies

him as a representative of Old Town, not Navigant. Assuming CTI knew that Navigant owned

the property at the time the contract was formed and executed, we reiterate that this alone falls

short of showing anything near an express intent to make Navigant a third-party beneficiary of

the contract. The circuit court properly dismissed this breach of contract claim as well.

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No. 1-19-2427

¶ 51                                    v. Arch-H’s Contract

¶ 52   Harleysville further failed to show that Navigant was an intended third-party beneficiary

of the agreement between Arch-H and Bottleneck. The agreement did not refer to Navigant. The

agreement identified Bottleneck as “the Owner” and did not otherwise refer to the owner of the

property. Additionally, the agreement did not purport to confer any rights upon Navigant or

provide a means for it to enforce any rights. See 155 Harbor Drive Condominium Ass’n, 209 Ill.

App. 3d at 648. Furthermore, Bottleneck, rather than Navigant, was the recipient of Arch-H’s

performance.

¶ 53   Moreover, section 10.5 of the agreement explicitly and unambiguously stated that

“Nothing contained in the Agreement shall create a contractual relationship with or a cause of

action in favor of a third party against either the Owner or Architect.” See Barry v. St. Mary’s

Hospital Decatur, 2016 IL App (4th) 150961, ¶¶ 83-84 (finding the plaintiff was not a third-

party beneficiary where the contract explicitly named one third-party beneficiary and disavowed

the parties’ liability to any other third parties); Ball Corp., 187 Ill. App. 3d at 178 (finding no

third-party beneficiary was intended where the contract stated that “ ‘[n]othing contained in the

contract documents shall create any contractual relation between any subcontractor and the

Owner’ ”). In light of this provision, we find Harleysville’s position to be disingenuous.

¶ 54   Finally, Arch-H’s contract with Bottleneck did not incorporate Bottleneck’s lease with

Navigant. Thus, the lease, which required Bottleneck to submit proposed alterations to Navigant

or Tomaska for review and approval, has no bearing on this issue. The circuit court properly

dismissed this claim.

¶ 55                                   vi. Advance’s Contract

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No. 1-19-2427

¶ 56   We further reject Harleysville’s contention that a genuine issue of material fact exists as

to whether Navigant was an intended third-party beneficiary of Advance’s contract with

Bottleneck, precluding summary judgment. Contrary to Harleysville’s assertion, the record does

not show that Advance had a contract with Bottleneck. Rather, Advance was a subcontractor of

Arch-H. To the extent Harleysville believes that Navigant was an intended third-party

beneficiary of that contract, Harleysville’s contention is forfeited, as its opening brief did not

make this argument. See Ill. S. Ct. R. 341(h)(7) (eff. May 25, 2018).

¶ 57   Forfeiture aside, the argument is meritless. The e-mails comprising Advance’s contract

with Arch-H did not mention Navigant. We reiterate that even if Advance knew Navigant owned

the property, this alone was insufficient to overcome the presumption that Navigant was not an

intended third-party beneficiary of the contract. Accordingly, the circuit court properly entered

summary judgment in Advance’s favor.

¶ 58                              B. The Economic Loss Doctrine

¶ 59   Next, we find the circuit court properly ruled in favor of defendants with respect to

Harleysville’s negligence claims.

¶ 60   The economic loss doctrine denies a tort remedy for those whose complaint is rooted in

the disappointment of commercial or contractual expectations. Sienna Court Condominium Ass’n

v. Champion Aluminum Corp., 2018 IL 122022, ¶ 21. Under that doctrine, a plaintiff cannot

recover in tort for solely economic loss. Id. Economic losses are damages for inadequate value,

the cost of repairing or replacing a defective product, or resulting lost profits, excluding any

claim for personal injury or damage to other property. Scott & Fetzer Co. v. Montgomery Ward

& Co., 112 Ill. 2d 378, 387 (1986). The doctrine also extends defective services. Congregation of

the Passion, Holy Cross Province v. Touche Ross & Co., 159 Ill. 2d 137, 160 (1994).

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No. 1-19-2427

¶ 61   Much has been said with respect to the policies behind the economic loss doctrine. The

doctrine recognizes that the economic losses of one event are virtually limitless and “avoids the

consequences of open-ended tort liability.” In re Chicago Flood Litigation, 176 Ill. 2d at 198. A

qualitative defect and harm relating to a consumer’s expectations as to a product’s quality and

fitness for ordinary use is addressed by contract law. Scott & Fetzer Co., 112 Ill. 2d at 387-88.

Additionally, a service provider and their client have an important interest in defining the terms

of its relationship before finalizing an agreement. Congregation of the Passion, Holy Cross

Province, 159 Ill. 2d at 161. As our supreme court has recognized, subcontractors depend on

their contacts with general contractors to define their risks and liability exposure, which in turn

impacts the fees they set in their contracts. Sienna Court Condominium Ass’n, 2018 IL 122022,

¶ 24. Furthermore, the doctrine applies even where the plaintiff is unable to recover in contract.

Congregation of the Passion, Holy Cross Province, 159 Ill. 2d at 160-61; Anderson Electric, Inc.

v. Ledbetter Erection Corp., 115 Ill. 2d 146, 150, 153 (1986); see also Sienna Court

Condominium Ass’n, 2018 IL 122022, ¶ 21 (stating that an action for economic loss generally

requires the plaintiff and the defendant to be in contractual privity).

¶ 62   The economic loss doctrine also seeks to define the contours of duty. 2314 Lincoln Park

West Condominium Ass’n v. Mann, Gin, Ebel & Frazier, Ltd., 136 Ill. 2d 302, 315 (1990).

Specifically, recovery in tort for purely economic loss is precluded where a service provider’s

duties are defined by contract. Sienna Court Condominium Ass’n, 2018 IL 122022, ¶ 24.

Conversely, the doctrine does not bar recovery in tort where a defendant breaches a duty that

existed independently of a contract. Congregation of the Passion, Holy Cross Province, 159 Ill.

2d at 164. Yet, courts have frequently applied the economic loss rule in construction cases.

Sienna Court Condominium Ass’n, 2018 IL 122022, ¶ 21; see, e.g., 2314 Lincoln Park West

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No. 1-19-2427

Condominium Ass’n, 136 Ill. 2d at 316-17 (finding “the plaintiff’s theory that the defendant

architectural firm was negligent in its design of the structure” concerned the quality, rather than

the safety, of the building and consequently was more appropriately resolved through contract

law); Fireman’s Fund Insurance Co., 176 Ill. 2d at 161 (holding that the economic loss doctrine

prohibits a tort action against an engineer for purely economic losses). Latent construction

defects that cause solely economic damages are not properly raised in a negligence claim.

Foxcroft Townhome Owners Ass’n v. Hoffman Rosner Corp., 96 Ill. 2d 150, 156 (1983).

¶ 63   Here, Harleysville’s negligence claims, as alleged in the amended complaint, were clearly

based on commercial expectations. Those claims expressly relied on the duties defined by

defendants’ contracts. Additionally, Navigant and Harleysville were disappointed that

defendants’ work did not live up to commercial expectations, notwithstanding that Navigant was

a stranger to the contracts. Furthermore, Harleysville sought damages for repairs to trusses that

were subject to the contracts as well as lost rent. These damages are the epitome of economic

loss. Moreover, we note that just as defendants defined their liabilities and rights through

contract, Navigant had the same ability with respect to its lease agreements. Navigant could have

negotiated for a term requiring its tenants to ensure that Navigant had express contractual rights

in any renovation contracts they might enter into. Thus, we find that the economic loss doctrine

barred Harleysville’s claims.

¶ 64   Harleysville has wisely abandoned its reliance on the sudden and calamitous occurrence

exception to the economic loss doctrine. See also Hecktman v. Pacific Indemnity Co., 2016 IL

App (1st) 151459, ¶ 18 (finding that the plaintiffs failed to allege a sudden, dangerous, or

calamitous event and that their complaint instead alleged that their floors displayed damage over

a period of time). Yet, Harleysville maintains that the damages sought cannot reflect

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No. 1-19-2427

disappointed commercial expectations because Navigant did not directly negotiate with

defendants. Once again, Harleysville’s inability to succeed in contract does not preclude

application of the doctrine. See Congregation of the Passion, Holy Cross Province, 159 Ill. 2d at

160-61; Anderson Electric, Inc., 115 Ill. 2d at 150, 153. But see Ferentchak v. Village of

Frankfort, 121 Ill. App. 3d 599, 606 (1984) (stating that the economic loss doctrine applies

where the plaintiff’s injuries directly relate to reasonable commercial expectations and the

plaintiff has an adequate contract action against the defendant), rev’d in part on other grounds,

105 Ill. 2d 474 (1985); Scott & Fetzer Co. v. Montgomery Ward & Co., 129 Ill. App. 3d 1011,

1017 (1984) (finding that the doctrine did not bar the warehouse tenants’ recovery for fire

damage because there were no commercial dealings between those tenants and the defendant

who installed the fire alarm system in the space adjacent to them), aff’d on other grounds by 112

Ill. 2d at 388 (finding the economic loss doctrine did not apply because the plaintiff’s sought

damages for the loss of property other than the defective product and the loss resulted from a

sudden and dangerous event). Moreover, Navigant’s lack of negotiation with these defendants

demonstrates why the rule should apply.

¶ 65   These defendants negotiated with Navigant’s tenants, or each other, to define their rights

and duties under their respective contracts. These negotiations informed defendants’ assessment

of liability and their fees. Because Navigant has suffered only economic loss, it would be

inappropriate to subject defendants to liability beyond the terms of their contracts. Had someone

been hurt in this case, or had Navigant sustained other property damage, the same could not be

said. We take the case as we find it, however. See also 2314 Lincoln Park West Condominium

Ass’n, 136 Ill. 2d at 317 (stating that “if the purchaser buys goods which turn out to be below its

                                               - 21 -
No. 1-19-2427

expectations, its remedy should be against the person from whom it bought the goods, based

upon the contract with that person”).

¶ 66   Harleysville’s opening brief further represents that defendants had a duty to Navigant

independent of defendants’ contracts because Navigant owned the property where defendants

performed their work. That brief fails to explain how the status of one party created a

relationship between two or why such relationship would create an independent duty in tort.

¶ 67   In its reply brief, Harleysville argues that defendants entered into a voluntary

undertaking, thereby creating a duty per section 324A of the Restatement (Second) of Torts

(Restatement (Second) of Torts § 324A (1965)). This contention is entirely forfeited. None of

Harleysville’s prior pleadings in the circuit court or this court raised duty based on a voluntary

undertaking. Moreover, section 324A does not apply to these facts:

                “One who undertakes, gratuitously or for consideration, to render services to

       another which he should recognize as necessary for the protection of a third person or his

       things, is subject to liability to the third person for physical harm resulting from his

       failure to exercise reasonable care to protect his undertaking, if

                (a) his failure to exercise reasonable care increases the risk of such harm, or

                (b) he has undertaken to perform a duty owed by the other to the third person, or

                (c) the harm is suffered because of reliance of the other or the third person upon

       the undertaking.” (Emphasis added.) Restatement (Second) of Torts § 324A (1965).

¶ 68   Here, defendants had no reason to know that their services were “necessary for the

protection of a third person or his things.” This is because defendants entered into contracts to

renovate a restaurant and their services were not necessary to protect anyone or anything. See.

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No. 1-19-2427

Scott & Fetzer Co., 112 Ill. 2d at 388 (finding the economic loss doctrine did not apply where the

defendant supplied a defective fire alarm system).

¶ 69   Having determined that the economic loss doctrine barred Harleysville’s negligence

claims, we find that the circuit court properly entered judgment in favor of defendants.

¶ 70                                     III. Conclusion

¶ 71   Navigant was not an intended third-party beneficiary of defendants’ contracts. It follows

that the circuit court properly entered judgment in defendants’ favor on Harleysville’s breach of

contract claims. Additionally, the economic loss doctrine precluded Harleysville’s negligence

claims seeking the recovery of purely economic loss. In light of our determination, we need not

consider the parties’ remaining contentions.

¶ 72   For the foregoing reasons, we affirm the circuit court’s judgment.

¶ 73   Affirmed.

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No. 1-19-2427

                                   No. 1-19-2427

Cite as:                 Harleysville Insurance Co. v. Mohr Architecture, Inc., 2021 IL
                         App (1st) 192427

Decision Under Review:   Appeal from the Circuit Court of Cook County, No. 2018-L-
                         008623; the Hon. Margaret A. Brennan, Judge, presiding.

Attorneys                Stuart M. Brody and Bradley M. Hamblock, of Thompson Brody
for                      & Kaplan, LLP, of Chicago, for appellant.
Appellant:

Attorneys                Thomas G. Cronin and Brian H. Myers, of Gordon Rees
for                      Scully Mansukhani, LLP, of Chicago, for appellee Mohr
Appellee:                Architecture, Inc.

                         Omar Odland and Christopher Zann, of Cincinnati Insurance
                         Company Staff       Defense,      of   Chicago,       for
                         appellee Bramco Construction Company.

                         Hillary L. Weigle and Ellen L. Green, of SmithAmundsen LLC, of
                         Chicago, for appellee Campbell Truss, Inc.

                         Newton C. Marshall, Douglas R. Garmager, and Michelle M.
                         Blum, of Karbal, Cohen, Economou, Silk & Dunne, LLC, of
                         Chicago, for appellee Arch-H, LLC.

                         Thomas B. Orlando, Douglas J. Palandech, and Joel B. Daniel,
                         of Foran Glennon Palandech Ponzi & Rudloff PC, of Chicago, for
                         appellee Advance Consulting Group International.

                         No brief filed for other appellee.

                                        - 24 -