COURT UPHOLDS CHICAGO IMMUNITY IN 1992 FLOOD

CHICAGO-A ruling upholding Chicago's sovereign immunity protection against claims stemming from the city's 1992 underground flood runs counter to a nationwide trend toward stricter limits on municipal immunity.

The Feb. 20 Illinois Supreme Court ruling involved negligence claims lodged in two suits.

The first was a class action suit businesses and individuals brought, claiming the city was liable for property losses they suffered after an antiquated freight tunnel system in the city's downtown "Loop" business district flooded when a section beneath the Chicago River collapsed. The flood damaged numerous buildings and forced businesses to close during the subsequent cleanup.

ITT Hartford Group Inc. filed the other suit, seeking to recover various flood-related claims it had paid.

The state's high court ruled that, under Illinois law, Chicago has immunity against any claim of negligence for failing to supervise or monitor the work the city claims led to the breach in the tunnel wall, any claim of willful and wanton misconduct, and for any alleged negligence in failing to repair the tunnel promptly

or warn class plaintiffs of the tunnel damage.

The "Great Chicago Flood of 1992" resulted in an estimated $300 million in insured damage and prompted numerous suits against the city and Great Lakes Dredge & Dock Co., the contractor that the city claims inadvertently drove a bridge piling through the tunnel wall.

Chicago Corporation Counsel Susan S. Sher cheered the 6-1 high court ruling, saying, "Tort immunity exists to protect the taxpayers, who should not have to fund enormous judgments because of the alleged negligence of a few municipal employees."

"We are gratified that the court has recognized and sustained this important principle," Ms. Sher said in a statement.

But an attorney for the class plaintiffs in the case said the ruling didn't close the door on negligence claims against the city, only in the context of some of the specifics of the complaint before it.

"Certainly the court did rule that certain portions of the plaintiffs' claim were prevented by tort immunity," said Aron Robinson, an attorney with Robert Holstein & Associates in Chicago. But, he said, the claimants are considering filing an amended complaint against the city along with other options.

"I think the Supreme Court ruled in certain respects that the tort immunity act would bar certain claims as alleged in the complaint that was at issue," Mr. Robinson said.

The ruling, however, "is really just dealing with some very specific questions that are involved in the complaint that was pending at the time," he said. "It's not the end of the case."

Limited or not, the February ruling is good news for government entities in Illinois, going as it does against a trend toward greater limits on governmental immunity, said George S. Flanigan, insurance industry professor at the Katie Insurance School of Illinois State University in Normal.

"I think that's a fairly important development," Mr. Flanigan said. "Nationally, there's been a fairly dramatic movement away from governmental immunity."

While in a state like California, for example, "governments get sued for virtually everything," the Illinois Supreme Court's holding that Chicago enjoys immunity from the flood claims "is good for the business climate of Illinois," despite the individual business' perspective in this case, the insurance professor said, insofar as it limits potential lawsuits.

In recent years, state court decisions across the country, including California, North Dakota, South Dakota and Louisiana, and federal court decisions in California and Washington, have eroded municipal immunity.

And for businesses that already have recovered from their insurers for damage resulting from the flood, the recent Illinois Supreme Court ruling will have no impact, he said. In the agreements upon which the claims were paid, "ITT Hartford agreed to pay the claim, but the insured gives up any right to recover from a third party who caused the loss," he said.

In such a subrogation arrangement, the claims payment is final and the insurer takes its chances trying to recover in court from the party considered at fault.

"Certainly there's no way there can be any recourse against the insured," Mr. Flanigan said. "Hartford paid the claim and that's it."

ITT Hartford said it is reviewing the ruling and has not decided what, if any, steps it will take next.