Statute of Limitations and Bad Faith Claims: Factors to Consider

Anastasiya Collins | Saxe Doernberger & Vita

How much time do our clients have to bring a bad faith action against an insurer? Although we are not frequently asked this question, it is one that we constantly analyze before asserting a bad faith claim.

To answer this question, we look to the statute of limitations, which is a law passed by a state legislative body that sets the maximum amount of time for a party to bring a claim based upon a particular cause of action. For policyholders, knowing which statute of limitations applies to their bad faith claim is critical because it indicates whether it is possible to initiate legal proceedings. In addition, it determines the amount in damages available in case of a successful resolution.

Statute of Limitations in Breach of Contract vs. Tort Claims
One key determinant of a statute of limitations for bad faith is whether the claim is brought as a tort or a breach of contract action. The consequence of framing bad faith as a tort is that a policyholder is not just limited to contract damages. The policyholder can also receive recourse for emotional distress, pain, suffering, punitive damages, attorney’s fees, and other damages that the court may consider appropriate. Unfortunately, however, not every jurisdiction allows plaintiffs to bring bad faith actions as tort claims. While, for example, courts in California, Colorado, and Connecticut allow bad faith claims sounding in tort, courts in jurisdictions such as Tennessee do not.

This background information is very important to keep in mind as different statutes of limitations may apply to common law bad faith claims sounding in tort as opposed to those sounding in contract. For example, if bad faith is brought as a breach of contract claim in California, plaintiffs have four years from the date they were denied in bad faith to bring action against the insurer. If, however, bad faith is brought as a tort claim, that opening narrows to two years. The length of these time periods and the moment when the statute of limitation in a bad faith claim starts to accrue, significantly vary across jurisdictions. However, the window on a contract claim tends to be longer than that of a tort claim.

Common Law vs. Statutory Bad Faith Claims
When pursuing a bad faith claim, it is also important to keep in mind any state laws that may be relevant. Bad faith claims can broadly be categorized as either: (1) common law bad faith claims; or (2) statutory bad faith claims. The first category stems from case law, while the second is based on laws enacted by state legislatures that deal with insurer bad faith. For example, many states have passed laws based on the National Association of Insurance Commissioners’ “Unfair Claims Practices Settlement Act.” While most states in the country have adopted versions of this act, including California, Connecticut, and Florida, some, like Mississippi, have not.

In states that allow for a private right of action based on a statute, the laws may specify a limitations period. For example, in Connecticut, while a common law breach of contract bad faith claim must be brought within six years, and claims based on the state’s Unfair Trade Practices Act must be brought within three.

Contractual Modification of a Limitations Period
Statutes of limitations for bad faith claims can also be context-dependent. Many courts across the country will allow for contract modification of a limitations period, but typically for purposes of shortening the permitted time period for bringing a claim. Some courts have allowed for a contractual lengthening of a statute of limitations. For example, a court in California has held that the three-year statute of limitations for tortious bad faith specified in a health insurance policy trumped the state’s two-year period prescribed by the California statute.1

Due Diligence for Statutes of Limitations
Bad faith litigation and applicable statutes of limitations are more complex and require more attention than other claims since they are dependent on the nature of the cause of action asserted. Because a bad faith claim may be brought either as a tort or as a breach of contract claim, and because state statutes may apply to give a right of action, policyholders must be mindful of the different deadlines and requirements that may be relevant to each type of claim. Any contractual modification of a statute of limitations may also be relevant. Thus, it is imperative, that policyholders work with an experienced attorney who can advise them on their jurisdiction’s unique rules if they have faced a bad faith handling of their claim.

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1Blue Shield of California Life & Health Ins. Co. v. Superior Court, 120 Cal. Rptr. 3d 727, 729 (Cal. Ct. App. 2011).

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Tick Tock: Don’t Let the Statute of Repose or Limitations Time Periods Run on Your Construction Claims

Gus Sara | The Subrogation Strategist

In Wascher v. ABC Ins. Co., No. 2020AP1961, 2022 Wisc. App. LEXIS 110 (Feb. 9, 2022), the Court of Appeals of Wisconsin considered whether the plaintiffs were barred — by Wisconsin’s 10-year statute of repose for improvements to real property claims and the six-year statute of limitations for breach of contract claims — from bringing a lawsuit against the original builders of their home. The plaintiffs alleged negligence and breach of contract against the masonry subcontractors, asserting that they improperly installed the exterior stone cladding. The court found that the plaintiffs’ claims against the original builders were time-barred.

In 2005, the plaintiffs, Thomas and Pamela Wascher (the Waschers) retained Mathwig Builders (Mathwig) as the general contractor for the construction of their home in Greenville, Wisconsin. Mathwig subcontracted defendants Natural Surfaces, LLC (Natural Surfaces) and Carved Stone Creations (CSC) to install the stone cladding on the exterior walls and patio for the home. On November 3, 2008, the Township of Greenville inspected the home and granted the Waschers permission to occupy the residence. The Waschers moved into the home within the next few weeks. In early 2009, the Waschers discovered efflorescence on the stone cladding for the patio. In 2010, the Waschers hired CSC to repair the stone cladding. CSC removed some stone, which revealed that flashing had not been installed behind the stone, which caused water to infiltrate the stone and patio.

In 2012, the Waschers discovered stone falling off the exterior walls. That same year they hired CSC to perform repairs. While CSC claims that it completed the repairs in 2012, the Waschers alleged that CSC continued its repair work on the stone through 2017.

In August 2018, the Waschers sent Mathwig, CSC and Natural Surfaces notices of their claims related to the defective stonework on the home. The Waschers then initiated the subject lawsuit on November 20, 2018. The Waschers’ claims alleged negligence and breach of contract against each defendant and sought damages as well as an injunction ordering defendants to perform remedial work on the home.

The defendants moved to dismiss the complaint arguing, among other things, that the negligence claims were barred by the economic loss doctrine, and that all claims were barred by the statute of repose for improvements to real property and the six-year statute of limitations for breach of contract. The trial court dismissed the negligence claims based on the economic loss doctrine. However, the court denied the motion with respect to the statute of limitations and repose, finding that the Waschers adequately alleged equitable estoppel as a defense.

After discovery, the defendants filed a motion for summary judgment, at which time the court granted summary judgment on all claims related to the original construction.* The court did not find evidence supporting equitable estoppel and, thus, dismissed the claims on grounds that the statute of limitations and repose had expired. The Waschers filed an appeal of the court’s decision.

The Waschers made several arguments in support of their position that the statute of limitations and repose did not bar their claims. With regard to the statute of repose, Wisconsin Stat. § 893.89 states that no action can be commenced against any person involved in the improvement to real property after the end of the “exposure period.” The statute defines the term “exposure period” as “the 10 years immediately following the date of substantial completion of the improvement to real property.” The term “substantial completion” is not defined by the statute.

The court held that the convenient and fair measure of substantial completion is the date that the municipality authorized occupancy. Since the occupancy permit was issued on November 3, 2008, and the complaint was filed on November 20, 2018, the court concluded that the statute of repose expired 17 days before the lawsuit was commenced. The court rejected the Waschers’ argument that substantial completion could not be reached because the defendants omitted the flashing when installing the stone cladding. The court explained that accepting this argument would require it to focus on the quality of the work rather than whether the property was sufficiently completed for occupancy.

The court relied on long-standing precedent for its conclusion that the Waschers’ breach of contract claims were barred by the six-year statute of limitations. Contrary to the Waschers’ position that the statute of limitations did not begin running until the defect was discovered, the court concluded that a “90-year line of precedent” established that a contract cause of action accrues at the moment the contract is breached, regardless of whether the injured party knew or should have known that the breach occurred. In other words, the court held that the discovery rule does not apply to breach of contract claims.

Wascher establishes that, in Wisconsin, the statute of repose for improvements to real property begins to run on the date the municipality issues the permit of occupancy. The Court of Appeals also reiterated the longstanding precedent that the statute of limitations for contract claims begins to run at the time of the breach, not when the plaintiff discovered the breach. Subrogation professionals handling construction defect claims in Wisconsin should be mindful of the Wascher decision and immediately request the permit history for the property to determine when the certificate of occupancy was issued, and the period of time that remains before the statute of repose runs.


[*] The Waschers’ claims also related to subsequent construction, but those claims are not addressed herein.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Do Not Ignore Construction Defect Claims if You Are on Inquiry Notice

Ryan A. Bennett | White and Williams

In Ryan Altenbaugh, et al. v. Benchmark Builders Inc., et al., No. 120, 2021, 2022 Del. LEXIS 24, the Supreme Court of Delaware recently affirmed the lower court’s ruling that the statute of limitations barred the homeowners’ negligent construction claims. Although the court applied the discovery rule to toll the running of the three-year statute of limitations, it found that the homeowners were on inquiry notice of the defects within their home eight years before filing suit.

Mr. Altenbaugh and his wife (Plaintiffs) purchased their home in 2008 from Benchmark Builders, Inc. (Benchmark). One year into homeownership, Plaintiffs reported water leaking into the kitchen from windows to Benchmark. Two years later, in January 2011, Plaintiffs wrote a letter to Benchmark notifying it of a water issue in the basement. Specifically, the letter described a 15’ x 4’ section of wall that was “soaked,” including the fiber glass insulation. Benchmark’s representative examined the area and told Plaintiffs the issue was limited to a small area and that it had been repaired.

In 2019, during a separate bathroom repair, a contractor noted rotting wood behind the drywall. Plaintiffs conducted a moisture survey which revealed “systemic and catastrophic water intrusion.” The cause of the water intrusion purportedly related to a failure to install adequate flashing around penetrations through the stucco exterior dating back to the original construction. Plaintiffs filed suit against Benchmark and Delaware Roofing & Siding Company L.L.C. (referred to collectively with Benchmark as Defendants) in November 2019.

Defendants filed a motion for summary judgment and the trial court granted the motion, stating that Plaintiffs had actual knowledge of the construction defects by at least 2011— the time at which Plaintiffs sent their letter to Benchmark. Plaintiffs unsuccessfully argued that summary judgment was not appropriate because questions of fact remained with respect to the discovery rule.

On appeal, Plaintiffs argued that despite reporting issues in 2009 and 2011, they were unaware that water had been systemically penetrating the stucco and infiltrating their home. Thus, the discovery of the systemic water intrusion did not take place until 2019. The court disagreed. As the high court noted, in construction defect actions, the cause of action accrues at the time of construction unless the discovery rule tolls the running of the three-year statute of limitations. While Plaintiffs attempted to argue that they did not possess specialized home construction knowledge, the Supreme Court believed their letter to Benchmark noting “construction defects” and the discovery of soaked walls was enough to show awareness of the issue. Because the court agreed that they were on “inquiry notice” of the claim in 2011, when their injury was no longer inherently unknowable, the Supreme Court of Delaware affirmed the Superior Court’s grant of summary judgment based on the statute of limitations.

When investigating a construction defect loss in Delaware (a jurisdiction that applies the discovery rule to latent construction defect claims), it is important to keep in mind not only the date the defect was discovered, but whether the facts suggest that the plaintiff was on “inquiry notice” of the claim. In cases where the plaintiff was on “inquiry notice” of the claim, a court may find that, because the plaintiff was on inquiry notice, the statute of limitations was not tolled until the time of actual discovery. As the court found in this instance, because the plaintiffs were on inquiry notice of the claim more than eight years prior to the time the suit was filed, their claim was barred by Delaware’s three-year statute of limitations.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Proposed Changes To Florida’s Statutes Of Limitations And Repose Would Greatly Impact Construction Defect Litigation

Elizabeth Ferguson and Taylor A. Naughton | Marshall, Dennehey, Warner, Coleman & Goggin

A new bill has been proposed in the Florida Legislature that would amend the statutes of limitations and repose greatly impacting construction defect litigation.

The original bill proposed to rewrite Fla. Stat. 95.11(3)(c) by completely eliminating the ten-year statute of repose for latent defects, instead requiring all actions founded on the design, planning, or construction of an improvement to real property to be filed within four years. The proposed four-year time period would begin from the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion of the contract or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.

After introduction of the bill, the Committee on Community Affairs proposed a complete overhaul of 95.11, as it relates to construction defect litigation. The Committee proposes a new subsection be added to Fla. Stat. 95.11, subsection 12, titled “ACTIONS RELATING TO AN IMPROVEMENT TO REAL PROPERTY.” This new section lays out 4 categories of improvements:

Category 1 improvements cover detached single-family home, including pre-manufactured homes, or standalone building structures intended for use by a single business, occupant or owner, not exceeding three stories in height and related improvements to such homes, buildings or structures.

Category 2 improvements include single-family dwelling units not exceeding three stories in height which are constructed in a series or group of attached units or a commercial or nonresidential building not exceeding three stories in height and related improvements to such dwellings, buildings or structures.

Category 3 improvements include commercial or residential buildings or structures of four or more stories in height and related improvements to such buildings or structures.

Category 4 improvements is a catchall for any improvement that does not fall under Categories 1-3.

Further, the proposal amends the statute of limitations to read: “An action founded on the design, planning, or construction of an improvement to real property may be commenced within 4 years after the time to commence an action begins to run.” The repose period would be shortened to five years after the time for commencing an action begins to run for category 1 improvements; seven years for category 2 improvements; 12 years for category 3 improvements, and 10 years for category 4 improvements. The time to commence such an action would begin to run from the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion of the contract or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is earliest.

The proposed amendment contains a limited one-year extension of time for counterclaims, 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 that the current statute contains. It also maintains that warranty work or correction or repair of defects to completed does not extend the period of time within which an action must be commenced.

If signed into law, these amendments would apply to any action commenced on or after July 1, 2022, regardless of when the cause of action accrued. However, any action that would not have been time barred before the amendments may be commenced before July 1, 2023. Any action not commenced by July 1, 2023, that is barred by the amendments is barred.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Change to the Statute of Limitations for Construction Defect Cases – How It Affects You

Samantha Carmickle and John Holper | Winthrop & Weinstine

Under Minnesota Statutes § 541.051, an action arising out of the construction or improvement of real property must be commenced within two years after the cause of action accrues.[1] But when does the cause of action accrue? The Minnesota Supreme Court answered this question on February 3, 2021, when it decided Moore v. Robinson Environmental[2]

In Moore, a homeowner, Moore, sued Robinson Environmental for damages caused by Robinson’s improper removal of asbestos in his home.[3] Moore brought his cause of action four years after the asbestos removal.[4] Robinson moved to dismiss the claim and argued that the 2-year statute of limitations in Minnesota Statutes § 541.051, subdivision 1(a) had expired.[5] Moore, on the other hand, argued that the 2-year statute of limitations did not apply because the removal was not an improvement to real property.[6] Moore argued that the statute of limitations did not begin to run upon the commencement of demolition work, but rather on the commencement of work which added to real property.[7]  The Court, assisted by amicus curiae Construction Law Section of the Minnesota State Bar Association, rejected this argument on the basis that “virtually every construction project involves both types of work[,]” and construction projects should be viewed as a whole.[8] Therefore, the Court held that if demolition is necessary prior to making additions to real property, then a cause of action under § 541.051 accrues when demolition begins.[9]

Following Moore, both contractors and owners need to be aware that a construction project is viewed as a whole even if multiple contractors are working on the project. Therefore, if a project is completed by two contractors and the first contractor does defective work, regardless of whether such work is demolition or addition, the cause of action accrues and the statute of limitations begins to run. As a practical matter, this means that owners must be vigilant in their detection of construction defects throughout the course of the project and must ensure to bring a cause of action within two years of the defective work, not two years of the project completion. Contractors, on the other hand, should recognize that the Moore decision affords them greater protection from construction defect claims through the use of a statute of limitations defense.


[1] Minn. Stat. 541.051, subd.1(a).

[2] 954 N.W.2d 277 (Minn. 2021).

[3] Id. at 279.

[4] Id.

[5] Id.

[6] Id. at 281.

[7] Id. at 284.

[8] Id.

[9] Id.