Florida Court Expands Statute of Repose for Improvements to Real Property

Madeline Hughes | Baker Donelson | November 1, 2018

The Fourth District Court of Appeals in Florida recently issued a decision in Gindel v. Centex Homes, that increases the amount of time homeowners have to file a lawsuit against homebuilders. The Court relied on basic principles of statutory interpretation to conclude that issuing pre-suit notice is an “action” under Florida’s statute of repose.

The statute of repose for improvements to real property provides a ten-year time period for homeowners to file an action against the homebuilder.1 In the Gindel case, homeowners moved into a townhome complex built by Centex Homes on March 31, 2004. Based on the statutory timeline, the homeowners had until March 31, 2014 to file an action against Centex Homes for any defects in the townhomes.

On February 6, 2014, before the ten-year deadline, the homeowners sent Centex a pre-suit notice of defect. The homeowners sent the notice to Centex in compliance with Florida’s mandatory pre-suit procedure statute. The statute requires a homeowner to notify the homebuilder of any construction defects before filing a lawsuit.2 The purpose of the statute is to give the homebuilder a chance to cure the defect as an alternative to litigation.

For the homeowners in this case, the additional procedural steps almost cost them their entire claim. Once Centex notified the homeowners that it would not cure the defects described in the pre-suit notice, the homeowners filed a lawsuit on May 2, 2014, a month past their ten-year deadline. Centex filed a motion to dismiss based on the statute of repose.

The issue before the court centered on whether the statute of repose was satisfied by the pre-suit notice given on February 6th. The court explained that because the statute of repose defines “action” as a civil action or proceeding, and because pre-suit notice is a proceeding, the pre-suit notice satisfies the statute of repose. The court reasoned that requiring homeowners to file a lawsuit to satisfy the statute of repose would render the term “proceeding” superfluous. The court explained that a better reading of the statute includes pre-suit notice as a proceeding that is part of an “action.”

The court held that the requisite pre-suit notice was sufficient to satisfy the statute of repose. Because the action commenced prior to the March 31, 2014 deadline, the homeowners were not barred from then filing suit.

The court’s interpretation of the statute of repose allows the homeowners to continue their suit against Centex to recover damages for construction defects made over 14 years ago. While this ruling likely will not open the flood gates of litigation, lawyers representing both homeowners and homebuilders should be aware that the statute of repose for improvements to real property does not require a formal lawsuit; rather pre-suit notice of a construction defect will protect plaintiffs from having their case dismissed.

1 Section 95.11(3)(c), Florida Statutes (2014).

2 Section 558.004, Florida Statutes (2014).

Florida’s Fourth District Appeals Court Clarifies What Actions Satisfy Florida’s Construction Defect Statute of Repose

Rahul Gogineni | The Subrogation Strategist | October 30, 2018

In Gindel v. Centex Homes, 2018 Fla.App. LEXIS 13019, Florida’s Fourth District Court of Appeal recently concluded that the date on which the plaintiffs provided a pre-suit notice in compliance with §558.004 of Florida’s construction defect Right-to-Cure statute, Fla. Stat. §§ 558.001 to 558.005, et. seq., is the date on which the plaintiff commenced a “civil action or proceeding,” i.e. an “action,” within the meaning of Florida’s construction defect statute of repose, Florida Statue § 95.11(3)(c). Thus, reversing the decision of the trial court, the Fourth District held that the plaintiffs timely-filed their construction defect action against the defendants.

The Gindel case arises from the allegedly defective construction of a group of homes by Centex Homes. On March 31, 2004, Mr. Gindel (the lead plaintiff) as well as the other homeowners (hereinafter collectively referred to as either “plaintiffs” or “homeowners”) took possession of their homes. After discovering an alleged construction defect, the homeowners provided a pre-suit notice of defect to Centex on February 4, 2014. After being notified that Centex would not cure the defect, the homeowners filed suit on May 2, 2014, against Centex and its subcontractor, Reliable Roofing and Gutters, Inc. Upon motion, the district court dismissed the case against Centex, finding that: (1) Florida’s 10-year statute of repose applied; and (2) the plaintiffs failed to bring their action within 10 years of taking possession of their homes.

Statute of Repose

In the United States, almost all states have adopted a statute of repose in connection with improvements to real property. Similar to a statute of limitations, a statute of repose imposes a time limitation within which a plaintiff has to file suit. However, a statute of repose is different from a statute of limitations in that it can start to run even before the plaintiff’s claim arises. Accordingly, a plaintiff’s claim may be barred by a statute of repose before the plaintiff is even aware of the latent construction defect giving rise to the plaintiff’s claim.

In Florida, there is a 10-year statute of repose for claims brought in connection with an improvement to real property. Under § 95.011 of the Florida Statutes, “[a] civil action or proceeding, called “action” in this chapter… shall be barred unless begun within the time prescribed in this chapter.” That time is further defined in §95.11(3)(c) of the Florida Statutes, which states:

An action founded on the design, planning or construction of an improvement to real property… must be commenced within 10 years after the date of actual possession by the owner, the date of the issuance of the certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.” (Emphasis added).

In overturning the lower court’s decision, the appellate court concluded that, by including both “civil action” and “proceeding” within the definition of the term “action,” the statute contemplated that more than the filing of a civil action would satisfy the time requirement for the Statute of Repose. It further concluded that, because the Right-to-Cure statute, §558 of the Florida Statutes, sets out a series of mandatory steps that must be taken prior to bringing a judicial action, it sufficiently constituted an “action” for purposes of Florida’s Statute of Repose. Accordingly, the appellate court found that the plaintiffs, through their pre-suit notice sent on February 4, 2014, brought their “action” against Centex within 10 years of taking possession of the property. Thus, the court held that the plaintiffs were not time-barred from bringing their claims in a subsequent civil action.

This case serves as a good reminder to review the applicable statute of repose for any possible exception that may apply to your case. Additionally, it should be noted that some jurisdictions have “Right-to-Cure” statutes, which should also be reviewed prior to bringing litigation related to a construction defect.

Post-Opinion Motions

As of this writing, the parties have filed post-opinion motions related to the case, including a motion to certify the matter for appeal to Florida’s Supreme Court. Thus, the precedential value of the case, whether in the Fourth District or in other Florida appellate districts, is subject to change. Accordingly, until the Supreme Court of Florida addresses this issue, subrogation practitioners should contemporaneously file both the pre-suit notice required by Florida’s Right-to-Cure statute and a civil suit in the appropriate court. To the extent that the defendant contends that the suit is premature, a court should, pursuant to Florida Statute § 558.003, stay the suit to allow the parties time to comply with the Right-to-Cure statute.

Construction One-Minute Read: “OH No!” Buckeye State’s Supreme Court Nixes Insurance For Subcontractors’ Defective Work

Eric A. Berg | Ogletree Deakins | October 15, 2018

In an opinion released on October 9, 2018, the Supreme Court of Ohio held that a general contractor’s commercial general liability insurance did not cover the defective work of either that contractor or its subcontractors. Ohio Northern University v. Charles Construction Services, Inc., No. 2017-0514 (2018).

Breaking with an emerging national trend extending commercial general liability (CGL) insurance coverage to construction defects, the Supreme Court of Ohio reversed an intermediate appellate court’s interpretation of policy language. Per the Supreme Court of Ohio’s opinion, CGL insurance is not intended to cover defects.

The facts before the court were familiar to any general contractor: An owner hired a contractor to build a building, and the contractor obtained CGL insurance and hired subcontractors to complete the task. The project having been completed, the contractor closed it out, demobilized, and handed the building over to the owner. Three years after the owner hired the contractor, defective work by the contractor and its subcontractors allegedly led to water leaks and property damage. Further investigation uncovered structural defects, all of which required repairs in excess of $6 million. The owner sued the contractor for breach of contract and for other claims related to the damage.

The contractor tendered the claim to its CGL insurer, citing its products and completed operations endorsement. The insurer denied coverage and filed a separate lawsuit asking the court to confirm the denial.

After the dispute made its way to the Supreme Court of Ohio, the court sided with the insurer and denied coverage. The court reasoned that the insurance policy was basically a contract and therefore should be interpreted according to contract-law principles. The contract said in its plain language that coverage would only be in place in the case of an “occurrence” which the policy defined as an “accident, including continuous or repeated exposure to substantially the same general harmful conditions.” An accident, the court noted, is something that is “‘unexpected, as well as unintended.’” Faulty workmanship claims therefore are generally not covered, except for their consequential damages, “because they are not fortuitous.”

The Supreme Court of Ohio had previously held that a contractor’s faulty work was not an “occurrence”; now it has extended that holding to the faulty work of subcontractors. Faulty workmanship, the court found, is a business risk and therefore not covered. (Derivative damages are covered, however.)

The court’s reasoning was based on its prior holding that CGL policies are not intended to protect owners from ordinary “business risks” that are “normal, frequent or predictable consequences of doing business that the insured can manage.” In other words, these risks are better dealt with in the project contract’s language and reflected in the price the contractor charges the owner.

The Supreme Court of Ohio admitted that its ruling runs counter to the current trend across the country that expands CGL coverage to faulty workmanship by contractors and their subcontractors.

Avoiding Spoliation of Evidence is an Ongoing Obligation

Julian E. Nelser | Spilman Thomas & Battle | October 17, 2018

Destruction of evidence can be fatal in any lawsuit, but it is especially troubling in construction defect disputes. It’s always important to allow an opponent and their expert the opportunity to inspect premises and review the alleged defects.

A recent Pennsylvania appellate decision highlights the need to do more than just allow a site visit in a defect case. It also drives home the need for clients to advise counsel of any repairs or changes to work at issue in a lawsuit.

The plaintiff in Kinder v. Heritage Lower Salford, L.P., 2017 WL 2333765 alleged several residential construction defects, specifically water intrusion due to improper stucco installation (a real problem in Pennsylvania). All defendants except one were able to inspect the home and take photographs. The Court considered this to be a “visual” inspection.

According to the opinion, the clients had the defects repaired a few months after the visual inspection, but didn’t tell their lawyer. In turn, no one notified the defendants or their lawyers. The defendants subsequently requested a “physical” inspection with expert witnesses and learned the site had been materially and permanently altered.

The trial court granted a spoliation motion in favor of the defendants because—despite the previous inspection and the defendants’ ability to take literally thousands of photographs—no physical inspection of the property could be done in the unaltered state. They argued that experts needed to physically inspect the property and this inspection could not be duplicated by photographic or video evidence. Thus, prejudice existed.

With a spoliation sanction in hand, the defendants filed for summary judgment, which was granted. The Superior Court sustained the trial court, reiterating the affirmative duty the plaintiffs had to preserve evidence. Also, the court noted the plaintiffs had counsel. Counsel stated on the record he was unaware of the remedial work. The court was unmoved.

Moral of the story: Don’t materially change the conditions in a construction case unless you have a court order allowing it, or everyone involved in the litigation is aware and has a reasonable opportunity to do a physical inspection, not just a visual. The only exception occurs when exigent circumstances exist, e.g., a collapse, major leak, etc.

While this is an unreported case and involved residential construction, the principles hold true on any construction case (or any litigation for that matter).

The “Right to Repair” Construction Defects in the Rocky Mountain and Plains Region

Jean Meyer and Sheri Roswell | Higgins, Hopkins, McLain & Roswell, LLC | September 25, 2018

In excess of 30 states have enacted tort reform legislation requiring property owners to notify construction professionals of the presence of alleged construction defects prior to the commencement of a lawsuit. These statutes also often permit construction professionals to make an offer of repair within a statutorily defined period of time after receipt of a notice of claim letter. Undoubtedly, the notice-of-claim process has played a meaningful part in bringing construction professionals and claimants to timely resolutions of construction defect concerns in isolated instances.

However, while these statutes are commonly referred to as “right to repair” legislation, their practical effect is often reduced to little more than procedural empty gestures serving as a prelude to litigation. This article will briefly survey the “right to repair” statutes in Colorado, Montana, North Dakota and South Dakota. In Nebraska, New Mexico, Utah and Wyoming there is no right to repair or notice-of claim statue.

COLORADO

Pursuant to C.R.S. § 13-20-803.5, the “right to repair” process begins when a property owner delivers a “notice of claim” letter to the construction professional. The construction professional then has 30 days to inspect the property, according to C.R.S. § 13-20-803.5(2). Upon completing the inspection, the construction professional has an additional 30 days to offer to settle the alleged construction defects by means of payment or by offering to remedy the alleged construction defects through remedial work. “A written offer to remedy the construction defect shall include a report of the inspection, the findings and results of the inspection, a description of the additional construction work necessary to remedy the defect described in the notice of claim and all damage to the improvement to real property caused by the defect, and a timetable for the completion of the remedial construction work” as stated in C.R.S § 13-20-803.5(3).

However, an owner is under no obligation to accept a construction professional’s offer of monetary compensation or repairs, regardless of how reasonable it may be based on C.R.S § 13-20-803.5(6). Recognizing the practical reality that the “right to repair” exists in name only for Colorado construction professionals, Colorado’s legislature introduced House Bill 17-1169 on February 6, 2017. HB 17-1169 would have statutorily permitted construction professionals to perform repairs in response to a notice of claim letter. In the words of the bill: “[i]f the Construction Professional [were to give] notice of an election to repair the defect in accordance with [the statute], the Claimant shall provide the construction professional with unfettered access to the subject property as necessary to correct the construction defect. . .” Unfortunately, on March 1, 2017, Colorado’s House Committee elected to postpone any vote on HB-1169 indefinitely.

In sum, in Colorado, construction professionals have the right to offer to make a repair. Owners have no obligation to accept a construction professional’s offer of repair.

MONTANA 

Montana’s construction defect statute is substantially similar to that of Colorado’s. Specifically, M.C.A. § 70-19-427 requires a residential homeowner to serve a written notice of claim on the construction professional prior to the commencement of a lawsuit. The notice of claim must state that the homeowner is asserting a construction defect claim against the construction professional and must describe the claim in reasonable detail. Thereafter, the construction professional has 21 days to respond to the homeowner by proposing an inspection of the property, offering to compromise or settle through a financial settlement or repair, or denying liability. As with Colorado’s statute, the homeowner is under no obligation to accept a construction professional’s offer.

Additionally, M.C.A. § 70-19-427(3)(b) allows the homeowner to reject the inspection proposal. Nevertheless, if the homeowner elects to allow the construction professional to inspect the property, within 14 days following the completion of the inspection, the construction professional is obliged to provide the homeowner with an offer to compromise via a monetary payment, a written offer to remedy the claim through a combination of repair and monetary payment, or a written statement setting forth the reasons why the construction professional will not proceed to remedy the alleged defect. The homeowner must then, within 30 days, accept or reject the construction professional’s proposed resolution. If the homeowner rejects the offer of repair or settlement presented by the construction professional, the homeowner must serve written notice of the homeowner’s rejection to the construction professional. After delivery of the homeowner’s rejection of the proposed settlement, the homeowner is free to commence a lawsuit against the construction professional.

NORTH DAKOTA

North Dakota’s statutory construction defect notice and offer of repair requirements are unique compared to the foregoing states. Specifically, N.D.C. § 43-07-26 precludes residential homeowners from undertaking any repair, other than emergency repairs, or commencing a lawsuit prior to providing notice to the construction professional of the alleged defect. Thereafter, “within a reasonable time after receiving the notice, the contractor shall inspect the defect and provide a response to the purchaser or owner, and, if appropriate, remedy the defect within a reasonable time thereafter,” according to N.D.C. § 43-07-26. Compared to the language of the other states examined in this article, North Dakota has, by far, the most favorable statutory regime for construction professionals. The homeowner must allow the construction professional to inspect the property and the construction professional is actually afforded the “right to repair.”

SOUTH DAKOTA

Pursuant to S.D.C.L. § 21-1-16, South Dakota maintains a statutory regime requiring residential homeowners, prior to commencing an action, to serve a written notice on construction professionals setting forth the alleged construction defects present at the property. Additionally, the statute requires that the residential homeowner allow the construction professional to inspect the property within 30 days after service of the notice and allow the construction professional to make a written offer to repair or an offer of monetary settlement. While the homeowner is under no obligation to allow the construction professional to perform the repair offered, if any, the homeowner is required to wait until 30 days after the notice of claim is served on the construction professional or until the construction professional refuses to remedy the alleged construction defect prior to commencing suit.

CONCLUSION 

The statutory right to repair for construction professionals is often an illusory remedy under the current statutory framework. While the legislative intent in enacting construction defect reform statutes was presumably to streamline construction defect litigation, these right to repair provisions are often rendered ineffective as a result of property owners’ ability to refuse reasonable repairs.