Court Of Appeals Expands Application Of Construction Statute Of Repose

Jonathan Schirmer | Ahlers Cressman & Sleight

A recent decision by Division I of the Washington Court of Appeals in Puget Sound Energy, Inc v. Pilchuck Contractors, Inc.[1] demonstrates the broad application of the construction statute of repose to work performed by contractors.

The construction statute of repose[2] bars certain legal claims based on construction activity if the alleged harm caused by the activity does not occur within a specific timeframe. The claims covered by the construction statute of repose include:

all claims or causes of action of any kind against any person, arising from such person having constructed, altered, or repaired any improvement upon real property, or having performed or furnished any design, planning, surveying, architectural or construction or engineering services, or supervision or observation of construction, or administration of construction contracts for any construction, alteration or repair of any improvement upon real property.[3]

The statute of repose bars any cause of action based on the above which has not accrued within six years after substantial completion of construction.[4]

Puget Sound Energy, Inc. (PSE) is a public utility that provides electricity and natural gas service to the Puget Sound region. In 2001, PSE and Pilchuck Contractors (Pilchuck) entered into a services agreement under which Pilchuck agreed to perform construction, operations, and maintenance projects for PSE. The contract contained an indemnity clause requiring Pilchuck to indemnify and hold harmless PSE from any and all claims or losses arising from Pilchuck’s conduct as PSE’s contractor.

In 2004, PSE contracted with Pilchuck to perform work to install new gas lines in Greenwood, Seattle and to cut and cap the existing lines Pilchuck submitted a work notification card to PSE which indicated the existing gas lines had been retired. This notification was then entered into PSE’s master map of gas service lines to indicate the service line no longer existed. Pilchuck then finished its work and was paid in full.

Fast forward to March 2016, when gas leaked from the line and ignited, causing an explosion that destroyed several businesses. The Washington Utilities and Transportation Commission (WUTC) performed an investigation and determined the gas leak was caused by physical damage to the gas service line. The WUTC determined that the service line had not been cut and capped as documented by PSE’s contractor, and that the explosion would not have occurred but for PSE’s improper abandonment of the service line in 2004.

In 2018, PSE filed suit against Pilchuck alleging Pilchuck was required to indemnify PSE for its costs stemming from the explosion. Pilchuck moved for summary judgment arguing that PSE’s claims were barred by Washington’s construction statute of repose which bars claims arising from construction of any improvement on real property that have not accrued within six years after substantial completion of construction.[5] The trial court agreed and granted summary judgement for Pilchuck.

PSE appealed on several grounds. The Court of Appeals rejected every argument set forth by PSE and upheld the application of the statute of repose to bar PSE’s indemnity claim against Pilchuck.

First, PSE argued that because Pilchuck had not actually completed its work of deactivating the gas line, it had not performed an “improvement on real property” and thus could not avail itself of the statute of repose to bar PSE’s claim against Pilchuck.

The Court of Appeals disagreed, stating “The fact that Pilchuck did not complete that work does not change the status of gas service lines as an ‘improvement upon real property’ for purposes of the statute of repose.” The Court of Appeals relied on the intent of the legislature to broadly apply the statute of repose to protect contractors such as Pilchuck. The Court held that because PSE contracted with Pilchuck to perform work which constituted an improvement on real property, the statute of repose applied, despite the fact that the work was not performed.

Second, PSE argued that Pilchuck’s act of submitting a work report which indicated the work had been performed did not fall within the construction statute of repose since this constituted reporting activity and not ‘improvements to real property’. The Court of Appeals again disagreed, finding that because the reporting activities arose from the construction activities Pilchuck was hired to perform and were required by the services agreement between PSE and Pilchuck, the reporting activity was covered by the statute of repose.

Third, PSE argued that the statute of repose did not apply because Pilchuck did not deactivate the gas lines and thus never substantially completed its work on the gas service line necessary to trigger the running of the six-year period in the statute of repose. The Court again disagreed, relying on the statue’s definition of substantial completion as “the state of completion reached when an improvement upon real property may be used or occupied for its intended use.”[6] Based on this definition, the Court found that Pilchuck had substantially completed its work on the gas lines since the gas lines were no longer being used to provide gas and PSE treated the gas lines as retired, even though Pilchuck had not actually completed the work to retire the lines.

Finally, PSE sought to have the Court create a fraud exception to the statute of repose that would bar application of the statute where evidence of fraud existed. Citing the legislature’s intent to broadly apply the statute of repose, the Court of Appeals declined to create a fraud exception to the statute of repose and deferred to the legislature for the possible creation of such an exception.  

Comment: With this decision, the Court of Appeals further expanded the application of the construction statute of repose by finding that even where work is not performed as claimed by the contractor, the statute of repose will bar claims against the contractor as long as the work at issue was at least contracted for. The Court of Appeals also signaled that it will strictly adhere to the language of the Statute of Repose and refuse to create any exceptions to the application of the doctrine absent action from the state legislature.


[1] 2020 WL 6395578.

[2] The statute of repose differs from a statute of limitations. A statute of limitations sets a deadline to file suit based on when a party suffered an alleged injury or harm. A statute of repose creates an absolute bar on claims after the passage of a set amount of time.

[3] RCW 4.16.300.

[4] RCW 4.16.310.

[5] RCW 4.16.300.; RCW 4.16.310.

[6] RCW 4.16.310.

Massachusetts Clarifies When the Statute of Repose is Triggered For a Multi-Phase or Multi-Building Project

Jeffrey J. Vita and Anna M. Perry | SDV Insights

Lennar Hingham Holdings, LLC (“Lennar”) built a twenty-eight-building, 150-unit condominium project containing twenty-four discrete phases over a seven-year span. The condominium association subsequently brought an action against Lennar and others alleging design and construction defects to four main components of the common elements: “decks and columns,” “roofing/flashing,” “exterior walls/flashing/building envelope,” and “irrigation system.” In response, the defendants argued that the plaintiff’s claims with respect to six of the twenty- eight buildings were barred by Massachusetts’s six-year statute of repose, G. L. c. 206 § 2B.

The United States District Court for the District of Massachusetts previously held that all twenty-eight of the condominium’s buildings should be treated as a single improvement for purposes of application of the statute of repose. Subsequently, the court certified the following question to the Massachusetts Supreme Judicial Court: Where the factual record supports the conclusion that a builder or developer was engaged in the continuous construction of a single condominium development comprising multiple buildings or phases, when does the six-year period for an action of tort relating to the construction of the condominium’s common or limited common elements start running?

The plaintiff association argued that the meaning of the term “improvement,” as used in the statute, was crucial to determining when the six-year statute of repose is triggered. Plaintiff claimed the entire condominium project was a single “improvement” based on factors such as the terms of the master deed, which created a single legal entity, the pace and continuity of the construction, and the fact that the defendants were involved in the project from beginning to end. Thus, adopting the plaintiff’s view, the entire project would be considered a single “improvement” as opposed to 28 separate improvements. Opposing this argument, the defendants argued that the statute of repose was triggered as each building in the project was opened for use based on the various certificates of occupancy issued by the town.

The Massachusetts Supreme Court disagreed with the plaintiff’s arguments and found each building constituted a separate improvement for purposes of the statute of repose. As each building was issued its certificate of occupancy, the Court found “improvement” to mean each individual building. Additionally, the Court found that “where a particular improvement is integral to and intended to serve multiple buildings within a single phase, or buildings across multiple phases, or even the condominium development as a whole, the statute of repose begins to run when that discrete improvement is substantially complete and open to its intended use.” The Court reasoned that the legislature’s intent, when enacting the statute, was to strike a reasonable balance between the right to a remedy for owners such as the plaintiff and the need to have an outer limit on the tort liability of those involved in the construction process.

This case is a win for contractors, owners, developers, and architects as their potential liability is further limited under Massachusetts’s statute of repose for multi-phase or multi-building projects. Despite this ruling, contractors of all tiers will still want to ensure they have adequate insurance coverage during the entirety of the applicable statute of repose period for any and all work they complete. As a result, it is critical to review your products-completed operations coverage within your commercial general liability policy to ensure it will cover you for the entirety of the statute of repose applicable in the jurisdiction in which you perform the construction activities.

Colorado Legislature Kills SB 20-138 – A Bill to Extend Colorado’s Statute of Repose

Dave McLain | Colorado Construction Litigation

As previously reported, SB 20-138, “Concerning Increased Consumer Protection for Homeowners Seeking Relief for Construction Defects,” would have extended the Colorado statute of repose applicable to construction defect claims.  Senate Bill 20-138, if enacted, would have:

  1. Extended Colorado’s statute of repose for construction defects from 6+2 years to 10+2 years;
  2. Required tolling of the statute of repose until the claimant discovers not only the physical manifestation of a construction defect, but also its cause; and
  3. Permitted statutory and equitable tolling of the statute of repose.

Now that the legislature is back in session, it will be a shortened session because of Covid-19 and, other than dealing with budget shortfalls, it seems like any bills that are not free, fast, and easy to pass will likely die in this year’s session.  Perhaps in line with this thinking, Senator Robert Rodriguez, opted to kill Senate Bill 20-138.  On second reading in the Senate on May 28th, the bill was laid over until December 31st, effectively killing the bill.  While the battle may be over for this year, rest assured it will be back in the future as plaintiffs’ attorneys seek to attach recent construction defect reforms. 

The Moving Finish Line: Statutes of Limitation and Repose Are Not Always What They Seem

Kenneth E. Rubinstein and Nathan Fennessy | Construction Executive

Having an end date for risk is important to construction professionals who need to know when they can close their books and destroy files relating to old projects. While professionals typically look to the statute of limitations and repose, these deadlines can sometimes be harder to determine than one might think. 

STATE LAWS PROHIBITING ALTERATION OF STATUTES OF LIMITATION

Many contractors seek to control the extent of their risk by negotiating the length of their liability period. In some instances, contractors may seek to shorten the statute of limitations to protect against stale claims. While in other instances, owners periodically negotiate for longer periods to ensure that they will not be time barred from pursuing valid claims. While the majority of states enforce such contractual provision, a number of states hold such clauses unenforceable. In these instances, the state’s original statute of limitations will apply regardless of what the contract says. 

QUESTIONS OF WHETHER STATUTES OF REPOSE APPLY TO ARBITRATION

As the construction industry has moved to binding arbitration to resolve disputes, many contractors may have assumed they would continue to enjoy the benefits of state statutes of repose that fix the end date for a contractor’s liabilities in those proceedings. Unfortunately, some contractors have learned the hard lesson that state statutes of repose (and statutes of limitation) do not always apply in arbitration. Indeed, only a few states – e.g. New York, Georgia and Washington – have statutes that specifically subject arbitration claims to the same time limitations for the commencement of actions as if the claim had been brought in court, and the majority of states have not yet addressed this question. 

The overwhelming majority of courts considering the issue (including courts in California, Connecticut, Idaho, Indiana, Maine, Massachusetts, Minnesota, North Carolina, Ohio and Washington) have determined that the time limitations set forth in a statute of repose or statute of limitations do not apply to arbitration. The only exception that the authors are aware is Florida where the Florida Supreme Court determined in Raymond James Financial Services, Inc. v. Phillips, 126 So. 3d 186 (Fla. 2013) that arbitration constituted a “civil action or proceeding” and therefore met the definition of “action” set forth in Florida’s statute of limitation. 

INCONSISTENT LAWS REGARDING APPLICATION OF TIME LIMITS UPON PUBLIC OWNERS

Public owners (including the federal government, as well as some cities, states and state agencies) often have an infinite time within which to bring a civil action. The basis for this immunity from statutes of limitations is the old English common law doctrine, “nullum tempus occurrit regi”– literally, no time runs against the King–which purports to exempt some public owners from statutes of limitations of general applicability unless statutes expressly provide otherwise. The federal government always has this protection. Accordingly, the statute of limitations won’t prevent the federal government from filing suit even decades after construction is complete. The picture is far less clear, however, with states and municipalities, as different states take different approaches to the issue. Some states reject the doctrine, other states allow the state alone to exercise the doctrine, while others allow the state, state agencies and even municipalities to benefit. 

Unfortunately, determining the end date for liability can be more difficult than simply reviewing the applicable statutes of limitation and repose. Contractors who perform work in more than one state, or who do both private and public work, should review the rules carefully before closing their books.

Parties’ Agreement Doesn’t Pull the Trigger on California’s Statute of Repose

William Boerler | The Subrogation Strategist

In Hensel Phelps Constr. Co. v. Superior Court, 257 Cal. Rptr. 3d 746 (Cal. Ct. App. 2020), the Court of Appeals of California, Fourth Appellate District, addressed whether a party’s contractual definition of the phrase “substantial completion” controlled the trigger date for California’s construction-related statute of repose, Cal. Civ. Code § 941(a). The Fourth District held that the agreement between the condominium owner and developer for Smart Corner Condominiums and the general contractor, Hensel Phelps Construction Co. (Hensel Phelps) – which determined the date of “substantial completion” for the construction project – did not control when the statute of repose started to run.

As set forth by the court, Hensel Phelps signed a prime contract with the owner and developer of a project that included a residential condominium tower. The prime contract required several items before the parties could consider the project substantially complete. Among the requirements was that the project be at the stage where the work was sufficiently complete to allow lawful occupancy and the architect on the project issued a certificate of substantial completion. The architect signed the certificate of substantial completion on May 24, 2007. The City of San Diego, however, continued to issue certificates of occupancy after that date.

On July 6, 2017, Smart Corner Condominium Association (Smart Corner), who was not in privity with Hensel Phelps, gave notice to Hensel Phelps of its construction defect claim, alleging numerous defects. After Hensel Phelps declined to participate in the pre-litigation dispute resolution process set forth in California’s Right to Repair Act, Cal. Civ. Code § 895 et. seq., Smart Corner filed suit against Hensel Phelps. During the litigation, Hensel Phelps filed a motion for summary judgment arguing that, as set forth in the prime contract, the statute of repose began to run on May 24, 2007, when the architect issued its certificate of substantial completion. The trial court denied Hensel Phelps’ motion. Subsequently, Hensel Phelps filed a writ of mandate, asking the appellate court to order the trial court to vacate its order.

On appeal, the court rejected Hensel Phelps’ request that the court interpret the phrase “substantial completion” using a bright line rule, as determined by the parties in their private contract. As noted by the court, the date of substantial completion is an objective fact about the state of construction of an improvement and is a statutory standard, not a contractual one. Finding that private parties cannot confer on themselves the ability to determine when the limitations period begins to run, particularly with respect to another party’s claim, the appellate court denied Hensel Phelps writ.

The Hensel Phelps decision serves as a reminder that subrogation practitioners considering filing suit in an older construction litigation case need to carefully analyze when a construction statute of repose referencing “substantial completion” starts to run. As noted in Hensel Phelps, the answer does not necessarily depend with how the building contract determines the date of “substantial completion.”