Utah Appellate Court: Homeowners’ Claim for Defective Construction Against Geotechnical Engineer Dismissed Due to Lack of Contract and the Economic Loss Rule

Patrick Johnson | Construction Industry Counselor | July 8, 2019

A recent Utah Appellate Court upheld the dismissal of a homeowners’ claims against a geotechnical engineer because the homeowners did not have a contract with the geotechnical engineer and therefore their claims were barred by the economic loss rule. See Hayes v. Intermountain Geoenvironmental Services, Inc., 2019 UT App 112, 2019 WL 2621931.  In Utah, the economic loss rule only allows lawsuits for defective design or construction to be based on a breach of contract.  Such a claim cannot be brought under a general negligence or tort theory where there is no contract.  Many states have a similar, but often not identical, economic loss rule.

In this case, the plaintiff homeowners purchased land from a developer and constructed a home.   The defendant geotechnical engineer prepared a report for the developer  concluding that the parcel of land was stable and suitable for development.  Fourteen months after construction had concluded, cracks were observed in the foundation of the home and the home began to settle rendering it unlivable.  Because the homeowners did not have a contract with the geotechnical engineer, they could not file a breach of contract claim against the geotechnical engineer. As a result, the homeowners tried to bring a claim under a general negligence theory against the geotechnical engineer for their damages.  The trial court and appellate court agreed that the homeowners were barred from asserting a negligence claim due to the economic loss rule. 

This case serves as a reminder that, in many states, recovery of purely economic losses based on theories of tort are generally not recoverable. Developers and parties to a construction project should  document their agreements in writing.  Likewise, a purchaser of a construction project should receive assignments of the developer’s and/or seller’s written contracts with third-parties involved in the development.   

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

Rahul Gogineni | The Subrogation Strategist | October 29, 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.

Utah’s Highest Court Holds That Plaintiffs Must Properly Commence an Action to Rely on the Relation-Back Doctrine to Overcome the Statute of Repose

Shannon M. Warren | The Subrogation Stategist | August 7, 2018

Earlier this summer, in Gables & Villas at River Oaks Homeowners Ass’n v. Castlewood Builders LLC, 2018 UT 28, the Supreme Court of Utah addressed the question of whether the plaintiff’s construction defects claims against the general contractor for a construction project were timely-filed, or barred by the statute of repose. In Utah, the statute of repose requires that an action be “commenced within six years of the date of completion.” The plaintiff alleged that its 2014 amended complaint naming the general contractor as a defendant was timely-commenced because, before the date on which Utah’s statute of repose ran, a defendant filed a motion to amend its third-party complaint to name the general contractor as a defendant, and the defendant subsequently assigned its claims to the plaintiff. The plaintiff argued that the filing of its 2014 amended complaint related back[1] to the date of its original complaint. The Supreme Court disagreed, holding that an action is “commenced” by filing a complaint and that a motion for leave to amend does not count as “commencing” an action.

In Gables & Villas, the plaintiff, Gables & Villas at River Oaks Homeowners Association (the Association), a homeowner’s association, filed suit against the developers of the project. Shortly after the plaintiff filed suit, the developers filed a third-party action against multiple sub-contractors. At this juncture, the Association and sub-contractors were not aware of the general contractor’s involvement with the construction at issue.

At a later date, the parties identified Castlewood Builders LLC (Castlewood) as the general contractor involved with the original construction project. On May 2, 2012, the developers filed a motion for leave to amend their third-party complaint to bring Castlewood into the action. After the court granted the developers’ motion, the developers assigned their claims to the Association. The Association then filed an amended complaint and Castlewood accepted service. However, the court struck the amended complaint because the Association, the filing party, had not obtained leave to amend the complaint. The court found that the leave it granted to the developers did not permit the Association to file an amended complaint, even if the developers assigned their claims to the Association.

Over six months after the general contractor accepted service of the Association’s amended complaint, the Association filed a motion for leave to amend. Its motion was finally granted approximately eight months later. Within two months, on May 13, 2014, the association filed its amended complaint.

In response, Castlewood filed a motion for summary judgment, alleging that the statute of repose precluded the Association from bringing claims against it related to six buildings that were completed in 2006 and 2007. There was no dispute that the amended complaint was filed more than six years after the final building was completed. However, the Association argued that its amended complaint was timely because it related back to the date of its original complaint.

The district court denied Castlewood’s motion, finding that the general contractor and developers were so closely related that the general contractor was on notice of the claims against it when the developers filed its motion to amend the complaint within the statute of repose period. Because the general contractor had notice of the motion to amend before the statute of repose period expired, the district court found that the relation-back doctrine was satisfied.

In response to Castlewood’s interlocutory appeal, the Association argued that its action against Castlewood “commenced” when the developers filed their motion for leave to amend. To decide when an action commences within the meaning of the statute of repose, the court looked to Utah R. Civ. P. 3(a) for guidance. Rule 3(a) states that a civil action is commenced by filing a complaint or by service of the summons and a copy of the complaint. It makes no mention of motions to amend, which the court considered fatal to the Association’s position.

Ultimately, the court found that the letter of the law was clear in what is meant by commencing an action and ­­was unwilling to accept policy arguments that were inconsistent with the plain meaning of Rule 3(a). Thus, the court held that the Association “commenced” its action when it filed its amended complaint, which was after the statute of repose period had expired. In support of its holding, the Supreme Court rejected the Association’s position that an injustice would result if motions to amend did not “commence” an action subject to the statute of repose because the moving party has no control over when a motion to amend is granted, and accordingly cannot control when the amended pleading is filed. However, as the court pointed out, while a party cannot control when a motion to amend is granted, it does have the option of filing a separate lawsuit to prevent its claims from being time-barred.

The procedural errors and delays in the Gables & Villas case ultimately led to the Association’s claims against Castlewood being time-barred by the statute of repose. This case is a reminder that subrogation practitioners should be diligent in meeting statutory and procedural requirements, and that failure to do so may lead to a dismissal of the subrogating insurer’s claims. Additionally, it is good practice to conduct prompt, thorough investigations to identify all potentially liable parties, rather than waiting until litigation is underway and there is a greater risk of statutory time limitations being an issue.


[1] The relation-back doctrine allows amended pleadings to relate back to the time an original pleading is filed in certain circumstances, including when the party to be brought in by amendment received notice of the action and knew that an action would be brought against it once properly identified by the party asserting such claims. See Utah R. Civ. P. 15(c).

Battle of Experts Cannot Be Decided on Summary Judgment

Tred R. Eyerly | Insurance Law Hawaii | June 6, 2018

When two competing experts disagreed on the cause of the loss, the trial court erred in granting summary judgment to the insurer. Garcia v. Firs Community Ins. Co., Fla. App. LEXIS 4237 (Fla. Ct. App. March 28, 2018).

Garcia, the homeowner, discovered water damage in his home, allegedly due to a roof leak. Garcia notified his insurer, First Community Insurance Company. A forensic engineer, Ivette Acosta, was retained by First Community to inspect the property. After the inspection, coverage was denied.

The homeowner’s policy covered direct loss to property only if the loss was a physical loss. Loss caused by “”rain snow, sleet, sand or dust to the interior of a building was excluded unless a covered peril first damaged the building causing an opening in a roof or wall and the rain, snow, sleet, sand or dust enters through this opening.” Loss caused by wear and tear, marring, or deterioration was also excluded.

Garcia filed a complaint against First Community. The insurer moved for summary judgment arguing that the cause of the water intrusion through the roof was a combination of deterioration, tree branch abrasions, and construction defects. Acosta also found that the nails observed in the roof’s shingles created a direct path for water to penetrate the shingles, which was considered a construction defect.

Garcia opposed the motion for summary judgment and submitted a report by a professional engineer, Alfredo Brizuela, who also inspected the property. Brizuela found there was insufficient evidence to rule out that the damages were caused by hail impact or wind uplift damage caused by a one-time occurrence. He also opined the damage was not age-related or long term in nature. Instead, there was evidence that the damage was caused by high rain and/or wind. The trial court granted First Community’s motion and entered final judgment.

On appeal, it was noted that in ruling on summary judgment, the trial court may neither adjudge the credibility of the witnesses nor weigh the evidence. The court agreed with Garcia that the trial court erred in granting summary judgment in favor of First Community where the conflicting reports of the parties’ experts established that there was a genuine issue of material fact as to the cause of the loss. Given the conflict in the material evidence as to the cause of the loss, the trial erred in entering final judgment in favor of First Community.

Time’s Up! Or Is It?

Dara Jebrock and Lindy Keown | CLM | Spring 2018

Proposed legislation in Florida would lengthen the statute of repose for counter, cross and third-party claims in construction defect.

The time for bringing certain actions for latent construction defects in Florida may be relaxed, depending on the outcome of proposed legislation. Senate Bill 536 and House Bill 875 – both up for vote during the 2018 legislative session – propose new language to Florida’s 10-year statute of of repose to allow counterclaims, cross-claims, and third-party claims up to one year after the statute of repose has otherwise expired.

To understand the effect of this proposed legislation, a quick primer on the statute of repose is necessary.  Unlike the statute of limitations, which establishes a time limit within which an action must be brought after a cause of action accrues, the statute of repose “cuts off the right of action after a specified time measured from the delivery of a product or the completion of work…regardless of the time of the accrual of the cause of action or of notice of the invasion of a legal right,” according to Sabal Chase Homeowners Ass’n, Inc. v. Walt Disney World Co. quoting Bauld v J.A. Jones Const. Co.

Now imagine a general contractor – let’s call it Better Builders – has been served with a construction defect suit on the afternoon of the day the 10-year statute of repose expires. Of course, Better Builders wants to sue the involved subcontractors whose scopes of work are implicated by the alleged defects. However, Better Builders’ project files on this 10-year-old project are at an offsite storage unit – inaccessible for review. Sadly for Better Builders, its potential third-party action will likely be time-barred because the statute of repose expired the day it was served – that is, unless a lucky lawyer has immediate access to the project files and works against time to detect issues and file suit against the responsible subcontractors on the same day Better Builders was served. Without a remedy, Better Builders may be liable for the entirety of any construction defect damages.

While the statute of repose is purposefully unforgiving – recognizing that an aging building should not be the subject of construction defect litigation in perpetuity – the new, proposed legislative language is a game changer for a time-pressed construction defect defendant. Practically, the pending legislation will allow a defendant, sued right before the statute of repose expires, to investigate and bring counterclaims, cross-claims and third-party actions against potentially liable entities for an additional year after the expiration of the statute of repose. Without this revision, time-barred defendants are left without recourse against parties that should be on the hook.

Current State of the Law

For construction defect claims, section 95.11(3)(c) of the Florida Statutes sets forth time periods within which a party must bring suit for a deficiency in construction. If the party does not file a suit within the given time frames, any claims regarding the defect(s) will be barred. One legislative purpose for enacting this statute was to “limit the amount of time an architect, engineer or contractor could be exposed to potential liability for the design or construction of an improvement to real property,” as found in Long v. First Fed. Sav. & Loan Ass’n.

Under the statute’s guidelines, the statute of repose applicable to “[a]n action founded on the design, planning, or construction of an improvement to real property” must be commenced within 10 years after the latest of the following four events:

1) Date of actual possession by the owner

2) Date of the issuance of a certificate of occupancy

3) Date of abandonment of construction if not completed

4) Date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his employer.

At least on Florida court has held the repose periods in Fla. Stat. § 95.11(3)(c) apply to “all claims,” including claims for indemnity and contribution. See Fla. Dep’t of Transp. v. Echeverri, 736 So. 2d 791, 792 (Fla. 3d DCA 1999), finding that the plain language of the statute indicates it applies to indemnity and contribution actions.

Proposed Legislation

The proposed legislation is simple but powerful. The legislation recommends the following language be added to Section 95.11(3)(c) of the Florida Statutes:

[C]ounterclaims, cross-claims, and third-party claims that arise out of the conduct, transaction or occurrence set out or attempted to be set out in a pleading may be commenced up to 1 year after the pleading to which such claims relate is served, even if such claims would otherwise be time barred.

If passed, this legislation will undoubtedly benefit construction defect defendants, such as general contractors. For instance, our hypothetical Better Builders, which was served with a lawsuit in the 11th hour on the very day the statute of repose expired, would have a meaningful opportunity to investigate and pursue claims against the subcontractors whose scopes of work are implicated by the defect claims and may therefore be liable. Likewise, if Better Builders has a counterclaim or cross-claim, it can pursue those claims in the year that follows service of process.

Florida’s legislative session began Jan. 9, 2018. As of press time, the bills were both being evaluated by legislative subcommittees. If passed, the new legislation will go into effect July 1, 2019.