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.
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.