Washington Court Tunnels Deeper Into the Discovery Rule

Lian Skaf | The Subrogation Strategist | May 10, 2019

Often times, properly analyzing when a statute of limitations begins to run – not just how long it runs – is crucial to timely pleading. In Dep’t of Transp. v. Seattle Tunnel Partners, 2019 Wash.App. LEXIS 281 (Was. Ct. App. Feb. 5, 2019), Division Two of the Court of Appeals of Washington addressed when the discovery rule starts the statute of limitations clock on a negligence cause of action. The court held that the statute of limitations begins to run when the plaintiff knows that the factual elements of the claim against the defendant exist. The clock starts to run even if the plaintiff wants to investigate the possibility of other contributing factors or the defendant identifies opposing viewpoints on the theory of the claim.

In this matter, the Washington State Department of Transportation (WSDOT) contracted with an engineering firm, WSP USA, Inc. (WSP), for an evaluation of the Alaskan Way Viaduct in 2001. As part of this project, WSP retained the services of Shannon and Wilson (S&W), another engineering firm, to conduct geological profile logs, groundwater-pumping tests, and prepare technical memoranda. In 2002, WSP and S&W installed a pumping well with an eight-inch steel casing (TW-2). In 2009, apparently based on the work done by WSP and S&W, WSDOT determined that a bored underground tunnel was the best option for replacing the viaduct.

In January of 2011, WSDOT and Seattle Tunnel Partners (STP) entered into a contract to construct an underground bored tunnel. STP launched its tunnel-boring machine (TBM) on July 30, 2013. A hollow steel casing emerged from the project surface site on December 4, 2013 and STP stopped its boring work two days later to investigate the slow rate of tunneling and rise in temperature of the TBM that ensued after seeing the casing. From December 6, 2013 to January 28, 2014, STP conducted an investigation into the cause of the boring issue. The relevant dates and events are as follows:

December 9, 2013:STP’s project manager sent an email stating that STP hit a WSDOT well
December 10, 2013:WSP’s engineer sent an email casting doubt on the issue
December 12, 2013:STP sent a letter to WSDOT stating they were investigating
December 17, 2013:WSDOT identified the damaged casing as being from TW-2
January 11, 2014:STP laid out a plan to resume tunneling
January 15, 2014:STP responded to questioning from WSDOT, identifying the well casing as the cause of damage
January 28, 2014:STP resumed tunneling
February 2, 2014:STP stopped tunneling indefinitely due to damage to the TBM

WSDOT filed suit against STP for breach of contract on October 9, 2015. STP subsequently answered and counterclaimed, alleging that WSDOT failed to disclose the presence of TW-2. In addition, on January 26, 2017, STP filed a complaint against S&W, adding WSP to the action the following day. Thereafter, S&W and WSP filed a joint motion for summary judgment, claiming that STP’s action was barred by the three-year statute of limitations for negligence. S&W and WSP claimed that even with application of the discovery rule, which delays the running of the statute until the plaintiff knows or in the exercise of due diligence should have discovered the factual bases of its cause of action, STP had sufficient knowledge of the facts at issue prior to January 26, 2014, and thus STP’s complaint was untimely. After the lower court found in favor of the STP, S&W and WSP appealed.

In support of its position on appeal, STP argued that there was an insufficient basis to start the running of the statute of limitations by January 26, 2014. STP highlighted internal correspondence between S&W, WSP and WSDOT, questioning the role of TW-2 in the incident. STP also argued that the statute of limitations should not begin to run until it determined that TW-2 was the “true cause” of the incident.

The court found both of STP’s arguments unpersuasive. The court reasoned that it was not when STP knew the bases of the cause of action that triggered the statute, but when STP discovered them. It also held that neither the possibility of other contributing factors existing nor the fact that an investigation is ongoing alters the point in time when the plaintiff has sufficient notice of an accrued claim to trigger the statute of limitations. Based on these principles, the court determined that January 15, 2014, was the latest day it could be argued that STP had sufficient notice, actual or inquiry, for the statute of limitations to begin. Thus, because STP filed its complaint after the three-year statute of limitations had expired, the court reversed the ruling of the lower court.

While the discovery rule has an equitable purpose and can often be helpful in prosecuting claims thought to be untimely, it is not a magic wand. The case described herein is a good example of the rule’s limits. Since the determination of when a plaintiff has sufficient notice under the discovery rule for a statute to begin to run is a factual one that is subject to interpretation, counsel should be aware of the potential for differing interpretations. Thus, whenever possible, practitioners should err on the side of caution when deciding when to file a complaint if a statute of limitation is about to run.

Contractor Liable Thirteen Years After the Fact??

Earl K. Messer | Taft Stettinius & Hollister | June 28, 2019

Imagine you built a school back in 2005. Years go by. Many employees who worked on the project are gone. Their emails are no longer available to review. Most other records are buried somewhere, maybe. The owner has handled maintenance year after year without your input. The building has aged and felt the effects of changing weather. And then, you are sued, thirteen years after the job is complete—for moisture intrusion. What a nightmare.

The Ohio Court of Appeals for Stark County has just considered such a case and affirmed the trial court’s application of the ten-year statute of repose to bar the claim. Unfortunately, it’s not over yet. The appellate court ruled on May 6, 2019, and the local school district has filed motions to have that ruling reversed. There is probably plenty more litigation to come in this case. Stay tuned.

In the meantime, though, it is constructive to consider what issues are at stake, for both contractors and owners. Ohio has a statute of repose. This is different from a statute of limitations. Most people understand that a statute of limitations sets a time within which a lawsuit must be filed or the claim is lost. The thing that fewer fully understand is that the clock for the statute of limitations may not start to tick until the injured party has reason to believe it has been damaged. In other words, defective construction that a reasonable person would not detect for a while does not start the statute of limitations clock ticking until something occurs to give the owner reason to believe there may be defective work. Think a slow leak inside a building wall that causes wood to rot and mold to grow, but otherwise does not become evident to the owner for five years. Typically, the statute of limitations clock would not begin to tick during those five years. Since the current statute of limitations for breach of contract in Ohio is eight years, the contractor would be exposed to suit for defective work for at least thirteen years.

That would only be the case, though, if the statute of limitations was the only time cut off for construction claims. It is not. Ohio, as well as many other states, also has a statute of repose. The statute of repose in Ohio basically cuts off any ability to sue after ten years following substantial completion. There is an exception if the owner discovers the defects in the final two years of the ten-year period. If the owner does discover defects in those last two years, it gets two more years before it no longer has a claim against the contractor.

So, what does the Stark County case have to do with this? In that case, the contractor, the architect and the contractor’s bonding company were sued for moisture intrusion related issues over thirteen years after the project had been completed. The owner alleged that the Ohio School Design Manual required the defendants to warranty their work for forty years for minor repairs and, astoundingly, one hundred years for major structural or exterior enclosure repairs. The defendants filed motions to dismiss arguing that the statute of repose barred the school district’s claims because it was filed thirteen years after substantial completion, three years beyond the expiration of the statute of repose. On appeal, the appellate court, so far, has affirmed the trial court’s dismissal.

The school district made several arguments as to why the appellate court should have reversed the trial court. The most troublesome for contractors was that when the contractor and the architect agreed in their contracts to be bound by the Ohio School Design Manual, they were more or less agreeing that the school district could make claims against them for up to one hundred years despite the statute of repose. The appellate court did not reject that argument. Instead, it avoided it on a technicality. The school district had not raised that argument with the trial court, and an appellate court will not consider any argument on appeal that a party failed to make first to the trial court. So, contractors can expect owners in the future to test that argument in another case.

Having said that, it seems fairly clear that if the argument had been made to the trial court, the appellate court would have rejected it. The school district’s warranty claim is nothing more than another kind of breach of contract claim. The appellate court affirmed all the good reasons why a breach of contract claim cannot be brought after ten years. All those reasons would apply just as well to a breach of warranty claim, since the warranty was part of the written contract between the parties. Those reasons were that the architect and contractor had no control over the building or its maintenance for all those intervening years. They had no control over extreme weather events that may well have affected the building over thirteen years. Much of the relevant evidence would simply be gone after thirteen years.

So, what is the practical import of all of this?

  1. Both the contractor and the owner should hang on to their written records, including electronic records, for at least ten years, and possibly up to twelve, following project completion.
  2. Owners need to keep their eye on the clock up to ten years after the project is complete in case they may have any viable claims.
  3. Remember that the longer it takes to litigate a matter, the more unclear many things become. For example: what really caused the moisture problems—was it defective work, poor maintenance, natural wear and tear? The owner has the burden of proof to show that it was defective work that caused the problem.
  4. And the longer it takes to litigate, the fewer witnesses that will remain available and the more distant and foggy the memories will be.

When Does the Time Limitation Period Begin To Run For A Lawsuit Against My Homeowners Insurance Company?

Paul LaSalle | Property Insurance Coverage Law Blog | July 2, 2019

In a recent decision,1 a federal court interpreting Pennsylvania law held that the discovery rule does not apply in insurance actions and the statute of limitations for an insured to bring suit against their insurance company begins to run on the date of loss and not the date the insured becomes aware of the loss.

In that case, after a pipe burst at a vacant property at an unknown time, the insured submitted a claim to their insurer. The insurance policy contained a contractual provision that shortened the statutory four-year limitations period for contract actions in Pennsylvania to “one year after the date of loss or damage.”2 Dissatisfied with the insurance company’s handling of her claim, the insured filed suit against her insurance company exactly one year from the date she discovered the burst pipe and extensive damage to her property. Thus, according to the insured, the date of loss (and the start of the one-year limitation period) was the day she discovered the water damage at her property.

The court disagreed, ruling that the “date of loss” is an objective fact and does not refer to the insured or whether they had knowledge of the damage. Ultimately, the court found that the insured’s lawsuit was not timely filed because the evidence of record, including a water bill for 134,000 gallons of water used at the property in the cycle the month prior, confirmed that the “date of loss” was before the date the insured became aware of the water damage at her property. Consequently, the insured’s action was dismissed for failure to file suit within the limitation period in the insurance policy.

If you are unsure as to the limitation period to bring suit for your property damage claim, contact an experienced insurance professional to answer questions regarding your claim.
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1 Pratts v. State Farm Fire & Cas. Co., No. 3:16-CV-2385, 2019 WL 1952875 (M.D. Pa. May 2, 2019).
2 Such contractual provisions shortening the period for an insured to file an action are permissible and enforceable under Pennsylvania law.

Know When Your Claim “Accrues” or Risk Losing It

Christopher G. Hill | Construction Law Musings | June 3, 2019

I have discussed statutes of limitation on construction claims in various contexts from issues with a disconnect on state projects to questions of continuous breach here at Construction Law Musings.  For those that are first time readers, the statute of limitations is the time during which a plaintiff can bring its claim, whether under the Virginia Consumer Protection Act (VCPA), for breach of contract, or for any other legal wrong that was done to him, her or it by another.  The range of limitations runs the gamut of times, for instance it is 5 years for breach of a written contract and 6 months for enforcement of a mechanic’s lien.  This time period is calculated from the “accrual” of the right of action.  “Accrual” is, in general terms, when the plaintiff was originally harmed or should have known it was harmed (depending on the particular cause of action).

A recent case out of the Circuit Court of Norfolk, Virginia examined when a cause of action for a construction related claim under the VCPA accrued and thus whether the plaintiff’s claim was timely.  In Hyde Park Free Will Baptist Church v. Skye-Brynn Enterprises Inc., the Court looked at the following basic facts (pay attention to the dates):

The Plaintiff, Hyde Park Baptist Church, hired the Defendant, Skye-Brynn Enterprises, Inc., to perform certain roof repairs that were “completed” in 2015.  Shortly after the work was done, in 2015, the Plaintiff informed Defendant that the roof still leaked and that some leaks were worse than before.  The Defendant unsuccessfully attempted repair at the time. 14 months later in 2017, the church had other contractors examine the roof and opine as to its faulty installation.  Also in 2017, the church submitted roof samples to GAF, the roof membrane manufacturer and in February 2018 GAF responded stating that the leaks were not due to manufacturing defects.  The church filed its complaint on October 1, 2018 breach of contract, breach of warranty of workmanship and fraud in violation of the VCPA. Defendant responded with a plea in bar, arguing that the statute of limitations barred the claim.

The Norfolk Circuit Court sustained the plea in bar based upon the pleadings and dismissed the complaint with leave to amend.  In doing so it reasoned that because the VCPA cause of action accrues when a plaintiff discovers, or should have discovered by the exercising due diligence, fraud or a mistake. This standard therefore put the burden on the church to show when it discovered, or should have discovered the misrepresentation(s) that form the basis for the VCPA claim and that that time was within the 2 year statute of limitations for such claims.  Stating that the church knew of the issues, whatever they may be, with the roof immediately after the installation, and that whether the church knew the specifics of the actual misrepresentation(s) or injury was immaterial, the Court’s initial ground for dismissal was that the cause of action accrued in 2015 and not in 2018 when the church knew of the exact nature of the injury.  Therefore, the October 2018 complaint was untimely.

The Court even went so far as to state that even if the cause of action did not accrue shortly after the work was complete, the church hadn’t met its burden to show that it exercized due diligence in seeking to discover the alleged misrepresentation and therefore the statute of limitations had not been met.  The Court found nothing in the complaint to show any actions by the church in this vein and that, further,:

Hyde Park also fails to explain in its pleadings why, assuming it had not yet discovered that the contracted roof work was not completed in a workmanlike manner, it took over fourteen months after the repair work was complete to contact certain unnamed independent roofing contractors-and ultimately GAF-to further investigate the source of the ongoing roof leaks.

The takeaway?  In a situation like this always investigate immediately to determine what, if any, misrepresentations may have occurred.  Sitting on your hands and waiting to see what specifics are out there can cost you your claim.

As always, I recommend that you read the opinion linked above for yourself and discuss your specific facts with an experienced Virginia construction lawyer when you may have a situation like that of Hyde Park Baptist Church.

Don’t Run Out of Time to Run to the Courthouse: Understand the Statutes of Limitation Applicable to Construction Litigation

Michael L. Meyer | Taft Stettinius & Hollister | March 15, 2019

In a previous article, we discussed the unique nature of professional liability claims in construction matters. That article discussed the proof required in a professional liability claim and insurance considerations exclusive to a professional liability claim. Another important consideration is the period during which a party must file its suit.

Each state has different statutes of limitation—the time periods during which lawsuits must be filed. In nearly every state, different claims are subject to different statutes of limitation. If a suit is not filed within the time allowed by statute, the claim is forever barred. Because state law typically governs construction contracts and the relationship between parties on a project, state laws also govern the limitations period.

In most states, there are separate statutes of limitation for claims based on breach of contract, property damage and general negligence damages. Some states also have specific statutes of limitation that govern claims of professional liability against state-licensed professionals. Examples include doctors, dentists, medical providers and others. Some states also include surveyors, architects and engineers in their professional liability statutes. Unfortunately, some do not, and simply use the generic term “professional.” This can lead to confusion over which claims are subject to the statute. In any event, each statute sets a time during which a plaintiff must file suit. Often the time periods differ from claim to claim.

On a construction project, many “professionals” are engaged to perform various services. Typically there is a contract specifying the scope of those services. Surveyors, architects, engineers and other professionals are usually engaged by contract. Often those contracts require the professional to perform their services in a “workmanlike” manner. Some even require compliance with certain specified professional standards.

When a problem arises with the professional’s performance, the first question a potential plaintiff must ask is “what type of claim do I have?” As a recent federal case in the Southern District of Indiana highlights, this is not always a simple question to answer. In Generali – U.S. Branch v. Lachel & Assoc., Inc., there was a structural collapse on a bridge project. The contractor sued a contracted engineer claiming a flaw in the engineer’s design. The contractor alleged the engineer breached its contract by providing professional services below the applicable standard of care. The engineer moved to dismiss, arguing that the claim was for negligence in the performance of professional services, not a breach of contract. The distinction was important because Indiana has a much shorter statute of limitations for negligence claims than for breach of contract claims. The lawsuit was filed within the longer breach of contract statute but after the expiration of the shorter negligence limitation period. The court looked to the substance of the claim, rather than the title or label the plaintiff used when filing. Finding that the nature and substance of the claim was based on negligence, the court dismissed the complaint.

Generali is just one example of the importance of understanding the nature of a potential claim at an early stage. The case is also a warning against reliance on a mere general understanding of statutes of limitation. A plaintiff relying solely on a basic understanding might mistakenly believe it has much more time than it does to pursue a claim. As a result, the plaintiff may delay consulting outside counsel. This can mean the difference between an opportunity to pursue the case and being shown the courthouse door.

Those engaging “professionals” should understand that it is the nature and substance of the claim that determines the applicable statute of limitations. The mere fact that the work was done under a contract is not determinative. Neither is the fact that the professional’s performance may appear negligent. Recognizing this distinction and involving counsel early may save an otherwise valid claim from the trash heap of legal missteps.