The Supreme Court of Washington held that the state’s six-year statute of repose did not violate the state constitution or the equal protection clause of the United States Constitution. Although it found itself compelled to enforce the statute to grant summary judgment on behalf of design professionals who designed condominiums that slid down a hillside during heavy rains, the court clearly felt the statute was distasteful and unfair.
The provision of the statute is: “All claims or causes of action set forth in [the statute] shall accrue, and the applicable statute of limitations shall begin to run only during the period within six years after substantial completion of construction, or during the period within six years after the termination of the services enumerated [ ], whichever is later. … Provided, that this limitation shall not be asserted as a defense by any owner, tenant or other person in possession and control of the improvement at the time such cause of action accrues.”
Plaintiff, condominium association, sought to get out from under the statute of repose by arguing that the phrase “termination of services” means ALL services provided by the A/E on the improvement and that since some minor repairs were completed years after the substantial completion, it was this later date that would trigger the running of the statute.
The court rejected that argument saying that if the statute were read this way there would be no purpose if referencing substantial completion since by definition there are always services to be completed after substantial completion to bring the project to final completion.
The court also rejected an argument by the plaintiffs that until the units were sold the substantial completion could not have occurred. Since the statute defines substantial completion as the date when the improvement MAY be used or occupied it did not matter what date the unit was first actually used or occupied.
On the plaintiff’s argument that the statute unconstitutionally benefited designers and contractors to the detriment of others, including the project owner, the court showed sympathy for the argument. In commenting critically upon the theoretical basis for the statute (i.e., that it provides protection for those in the construction industry who because of the durability of their products would have a long tail of liability), the court stated: “Contractors are not liable for the acts of owners, so that for them the fear of a long tail of liability for acts of others in unfounded, but the reverse is not true: owners may well have liability to third parties where harm is caused by construction defects revealed after the six-year repose period. Yet the statute extinguishes their rights against the responsible contractors. Thus, the statute provides repose to negligent contractors in order to protect them from an illusory risk, while offering no protection to those who actually have a risk – owners or tenants who had no part in creating the harm but who have potential liability for it. The long tail attaches to an innocent owner, while the statute immunizes the wrongdoers.”
Despite its negative view of the wisdom of the statute, the court held that it was constitutional and did not violate the equal protection clause. Lakeview Blvd. Condominium Association v. Apartment Sales Corp., 6 P.3d 74 (Wash. App. 2000).
NOTE: With due respect to the court, there are a number of persuasive reasons why it is appropriate for states to enact statutes of repose to protect those involved in the construction industry. Without such a statute, a firm could be sued indefinitely for something it completed and was paid for years before. In those circumstances it is difficult or even impossible to price the services sufficiently to compensate for this contingent liability that could come back to haunt the design firms or contractors years later. There have been cases where liability has been imposed on parties a half century after a project was completed. In our litigious era where plaintiff’s attorneys are constantly inventing new theories of liability and junk science, there is dire need for some protection for those such as A/Es and contractors who earn only a reasonable (even modest) return on their work and services. Without such protection, they would have to raise their prices to cover the contingencies. Insurance premiums would have to be raised and additional policies would have to be purchased to cover the indefinite tail of liability. This means the project owner and other affected parties would incur greater costs at the time of the construction. But it is not likely that those extra costs paid to the A/Es and contractors for assuming this greater risk would ever inure to the benefit of the owner. In the typical case, one can well imagine that when litigation arises years later, many of the firms would no longer be in business, or they would not otherwise have the resources to cover the damages alleged. In a future issue of this newsletter, we will provide references to other articles and papers that more fully develop the reasoning behind adopting statutes of repose. These statutes have significant benefit for the society at large, even if based upon facts of an occasional situation such as the case reported above, the individual result may seem somewhat unfair to some of the parties involved.
Copyright 2001, ConstructionRisk.com, LLC – Virginia
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report, Vol. 3, No. 3 (May/Jun 2001).