Business Law - Commercial General Liability Insurance Policies

In Hartford Casualty v. Construction Builders in Motion, a homeowner brought a breach of contract action against her general and sub-contractors for defective workmanship on the construction of a single-family residence.  The contractors filed claims with their insurers seeking defense and indemnification.  The insurers then sued in Federal Court seeking a declaratory judgment that they were not obligated to defend or indemnify the contractors in the underlying suit under their Commercial General Liability policies, since the actions complained of were not covered.  The District Court agreed and granted summary judgment in their favor.  The Court ruled that, based on the language of the policies, in order for the contractors to be covered in the underlying action the plaintiff would have had to allege property damage as a result of an "occurrence" that was essentially accidental in nature.  The Court stated that there is no coverage where the underlying suit alleges damages that extend only to the construction project itself as a result of construction defects or faulty workmanship.  Instead, only when the alleged damage is to property other than the construction project itself (such as the property of others) does coverage exist.  The Court was reluctant to extend the coverage further (i.e., to cover defective workmanship), fearing that doing so would turn the CGL policy into something akin to a performance bond.  Even consequential damages suffered by the homeowner were not enough to extend the coverage, and no exceptions to the policy exclusions applied either, since there was no original coverage to begin with.


Tax Law - Illinois ROTA/Use Taxes

In Nava v. Sears, Roebuck & Co. (1st Dist., 2013), the plaintiff complained that he had been charged sales tax on the full purchase price of a digital cable converter box, despite the fact that he (among other consumers) had received a voucher for a portion of the retail purchase price.  The $40.00 voucher was from the federal government, to be redeemed by the retailer.  The Illinois Department fo Revenue advised that sales tax was not required to be collected on the portion of the purchase paid for by the vouchers, which was exempt from the tax, but the Circuit Court disagreed and granted summary judgment in favor of Sears.  On appeal, the Court reviewed the different types of sales taxes assessed on retailers and purchasers in Illinois: the Retailers' Occupation Tax (ROTA) and the Use Tax.  It noted that, although ROTA obligates payment of a tax on tangible personal property sold in Illinois by a retailer, and the Use Tax Act mandates payment of a tax on the privilege of using such property in Illinois by the consumer, only one tax from that transaction is remitted to the Department, and the single payment by the retailer satisfies both taxes.  A retailer's tax liability under both Acts is a percentage of gross receipts (selling price), and the tax rate under both statutes is currently set at 6.25%.  However, the Acts set forth numerous exceptions to the gross receipts rule, one of which includes government purchasers.  Since a portion of the box was, in effect, paid for by the federal government, which is exempt from Illinois sales taxes, Sears was not obligated to collect them on that portion of the converter's purchase price.


Real Estate - HUD's Buyer Select Program

Under HUD's new Buyer Select Program, effective March 1, 2013, for Cook and the collar counties, Buyers may choose their own closing agent.  Currently, three asset managers administer the program for HUD in Illinois.  The closing agent will generally be either the Buyer's attorney, or the closing/escrow agent for the title company.  The closing agent will be responsible for, among other things, the preparation of the Seller's closing statement (a RESPA or HUD-1 form), the preparation of the Deed, clearing exceptions to title, and advancing costs for any pre-closing expenses.  HUD is not represented by an attorney in the transaction, so therefore, many of the tasks now typically handled by the Seller's attorney (deed and RESPA preparation, for example) will be handled instead by the Buyer's attorney or the closing/escrow agent. Ralph J. Schumann, President of the Illinois Real Estate Lawyers' Association, has sent a letter to the three major Illinois title companies contending that the new program may be violative of Illinois law in that it may facilitate the unauthorized practice of law by non-attorney closing agents, and may perhaps also result in dual representation issues and/or conflicts of interest for the Buyer's attorney.  (A complete copy of his May 14, 2013, letter can be found on IRELA's website.)  IRELA has requested that instead, HUD (as the Seller) be represented in Illinois by an Illinois lawyer.  HUD and the title companies have not yet responded to the letter.  

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