Timing is Everything: Defending Subcontractors Against Breach of Construction Contract Claims

Andrew T. Marshall | Butler Weihmuller Katz Craig | October 31, 2018

Transfer of risk and liability are common occurrences in the field of construction. National builders often employ a single licensed general contractor to oversee the totality of its construction projects throughout the state of Florida. While this use of a “qualifier” technically complies with Florida law, it leaves unlicensed superintendents with the lion share of day-to-day responsibility for the quality of a project’s overall construction. In order to shift the responsibility of quality construction away from the builder, subcontract agreements are often drafted in such a manner that requires every subcontractor to agree to comply with all applicable plans, specifications, building codes, ASTM and industry standards. Additionally, to ensure risk transfer is accomplished, builders mandate, through its subcontract agreements, the placement of the builder as an additional insured on the subcontractors commercial general liability (“CGL”) policy.

Residents who begin to experience damage to their property as a result of construction defects  often file suit against the builder directly. The builder in turn initiates suit against its subcontractors to effectively transfer its potential liability exposure. While builders often assert a multitude of claims against each subcontractor, it is almost guaranteed that a breach of contract claim will be one of the claims asserted. Two of the more common breach of contract allegations proclaim that pursuant to the contract, the subcontractor was obligated but failed: 1) to construct the project in accordance with the plans and specifications, applicable building codes, and industry standards, and 2) to name the builder as an additional insured on the subcontractors CGL policy.

Because builders often assert these claims several years after original construction, it is important to consider and evaluate the statute of limitations for every such claim. Generally, the applicable statute of limitations period for a breach of contract action is five (5) years. 95.11(2). However, an action founded on the design, planning, or construction of an improvement to real property must be brought within (4) years.  95.11(3)(c).  When two statutes ostensibly conflict, the more specific statute controls, even when the more specific statute provides for a shorter limitation period. Therefore, a claim for breach of a construction contract has a four (4) year limitations period.[1]

As with any statute of limitations analysis, the date of accrual is the most important factor involved.  As such, practitioners would be wise to also remember that accrual of a breach of contract claim begins at the date of breach.[2] Any breach of the contract based upon the subcontractor’s failure to construct in accordance with the plans must begin to accrue no later than the date the subcontractor’s work on the project was completed. If the subcontractor completed its work on the project over four (4) years prior to the filing of the lawsuit by the general contractor, a motion for summary judgment based upon statute of limitations should be filed.

Likewise, a similar analysis should occur when defending a subcontractor from a breach of contract claim based upon the failure to add the builder as an additional insured. Unless specified within the contract, the accrual date for this type of claim is more fluid as it is subject to when the subcontractor was required to add the builder to its CGL policy. The accrual date should be confirmed through requests for admissions, interrogatories or deposition testimony provided by the builder’s corporate representative.[3] Armed with a confirmed accrual date, a practitioner can determine whether suit was filed within the four (4) year limitations period and possibly secure dismissal through the filing of a dispositive motion.

[1] Suntrust Bank of Florida, Inc. v. Don Wood, Inc., 693 So. 2d 99 (Fla. 5th DCA 1997)“General rule that more specific statute controls when two statutes ostensibly conflict applies to construction of statutes of limitations, even when more specific statute provides for shorter limitation period.”

[2] Hartford First Ins. Co., 995 So. 2d 576 “We hold that in the context of a subcontract, where a contractor accepted the work of the subcontractor and paid in full for that work, the action accrued when the subcontractor finished its work.” See also Access Ins. Planners, Inc. v. Gee, 175 So. 3d 921 (Fla. 4th DCA 2015)(“For purposes of the statute of limitations, a cause of action for breach of contract accrues at the time of the breach”); State Farm Mut. Auto. Ins. Co. v. Lee, 678 So.2d 818, 820 (Fla.1996); Med. Jet, S.A. v. Signature Flight Support–Palm Beach, Inc., 941 So.2d 576, 578 (Fla. 4th DCA 2006) (“Florida has followed this general rule that a cause of action for breach of contract accrues at the time of the breach, ‘not from the time when consequential damages result or become ascertained.’ ”) (quoting Fradley v. Cnty. of Dade, 187 So.2d 48, 49 (Fla. 3d DCA 1966)).

[3] Make certain that the corporate representative deposition is properly noticed and that you have identified the subcontract and the requirement of additional insured placement as a topic of inquiry within the Notice of Taking Deposition.