## Facts

- In April 1992, an underground freight tunnel system beneath downtown Chicago flooded, disrupting the central business district.
- Property owners, businesses, and an insurer-subrogee alleged Great Lakes’ pile-driving in the Chicago River damaged a tunnel wall, allowing water to breach and flood the tunnel network.
- Plaintiffs alleged resulting basement and property inundation, including damage to buildings, personal property, and perishable inventory spoiled after flood-related power loss.
- Plaintiffs also sought damages for lost profits, lost wages, and business interruption, including claims by parties alleging no direct physical damage to their own property.
- Claims asserted against the City and Great Lakes included negligence, willful and wanton misconduct, strict liability (ultrahazardous/inherently dangerous activity), and public and private nuisance.
- The trial court dismissed substantial portions of the claims, including many claims against the City under the Tort Immunity Act and claims for purely economic losses under the Moorman doctrine; interlocutory review followed and the Illinois Supreme Court considered consolidated appeals and a municipal cross-appeal.

## Issues

1. Whether the City was immune under § 2-201 of the Illinois Local Governmental and Governmental Employees Tort Immunity Act for conduct involving policy determinations and discretion relating to permitting, supervision, and response to the tunnel breach.
2. Whether § 2-201 immunity is defeated by allegations of willful and wanton misconduct when the challenged conduct satisfies the statute’s policy-and-discretion requirements.
3. Whether the Moorman economic-loss doctrine bars recovery in tort for purely economic damages (lost profits, wages, and business interruption) absent personal injury or property damage.
4. Whether pile-driving and related conduct supports strict liability as ultrahazardous/abnormally dangerous activity or supports nuisance theories, including to recover economic losses.

## Decision

- The Illinois Supreme Court affirmed in part and reversed in part, and remanded for further proceedings.
- The Court held the City was immune under § 2-201 for alleged acts and omissions that involved both policy determinations and discretionary decision-making concerning the tunnel breach and related response.
- The Court held § 2-201 contains no separate willful-and-wanton exception where the policy-and-discretion elements are met.
- The Court applied the Moorman doctrine to bar claims seeking purely economic losses unaccompanied by personal injury or physical damage to the plaintiff’s property.
- The Court allowed claims seeking recovery for physical property damage and consequential losses tied to that physical damage, including spoilage of perishable inventory attributable to flood-related loss of power.
- The Court rejected strict-liability theories, concluding pile-driving and related conduct did not qualify as ultrahazardous or inherently dangerous under Illinois law.
- The Court limited nuisance theories, holding they could not be used to bypass Tort Immunity Act protections or the Moorman bar on purely economic-loss recovery.

## Legal Principles

- Under § 2-201, a municipality is immune from liability for conduct that involves both (i) a policy determination and (ii) an exercise of discretion.
- When § 2-201’s policy-and-discretion requirements are satisfied, allegations of willful and wanton misconduct do not remove that immunity.
- Negligence and similar tort theories generally do not permit recovery for purely economic loss unconnected to personal injury or physical damage to the plaintiff’s property (Moorman doctrine).
- Consequential economic damages may be recoverable when they are derived from physical damage to the plaintiff’s property.
- Ordinary construction activities such as pile-driving are not subject to strict liability absent satisfaction of the abnormally dangerous/ultrahazardous activity standard.
- Nuisance claims cannot be used as a substitute basis to recover barred economic losses or to avoid statutory governmental immunity.

## Conclusion

The Illinois Supreme Court limited flood-related tort liability by enforcing discretionary municipal immunity under § 2-201 and barring purely economic-loss claims under Moorman, while permitting recovery for physical property damage and consequential damages stemming from that damage, and rejecting strict-liability and expansive nuisance theories for ordinary construction activity.


In re Chi. Flood Litig., 176 Ill. 2d 179, 680 N.E.2d 265 (Ill. 1997)