IQ Spring 2012: The Conference Issue - (Page 7)

LegaL update// No Limits? The Challenges of Statutes of Limitations and Repose the LegaL terM “statute of limitations” refers to the time period in which a lawsuit must be commenced after the claim accrues. State laws vary considerably as to the length of the period and the definition of accrual. For some latent defects, the accrual might be delayed many years until the claim could have been discovered. Most states also have a “statute of repose,” which is a separate defense to certain design- or construction-defect claims. Often this repose period is measured from the substantial completion of a project, regardless of when the claim could have been discovered. In theory the statute of repose should allow designers, contractors and their insurers to know confidently when the liability exposure has ended. Recent developments in Michigan have highlighted just how tricky application of these rules can be—and the application to design-build may be even more troublesome. Until 2011 many Michigan lawyers thought that both the limitations and repose periods for construction- or designdefect claims would be governed by Mich. Comp. Laws §600.5839, which allows six years from use, occupancy or acceptance or 10 years in the case of gross negligence. Two events then changed the landscape. Last year’s Michigan Supreme Court decision in Miller-Davis Co. v. Ahrens Constr., Inc., 802 N.W.2d 33 (Mich. 2011), in a reversal of prior law, held that the Michigan statute of repose no longer applies to contract claims (as opposed to tort claims). Then, following several years of lobbying by the design industry, Michigan amended the statute of limitations for architects, engineers and contractors in Mich. Pub. Act 162 (2011). The combined effect of these changes leaves a problematic Michigan landscape for a number of reasons: • Claims against A/Es involve different time periods than claims against contractors. Where design-builders fit in the scheme is not clear. • Contract claims involve different rules than tort claims. The distinction may be subtle, as in contracts using a common law standard of care. • Contract claims no longer have any statute of repose. • Accrual is no longer tied to completion of the physical project. For A/Es the limitation period seems shorter (two years), but it may not accrue until the conclusion of the professional relationship between the A/E and its client on the matter in question. In any event, the A/E arguably can be sued six months after the claim should have been discovered. • While the court decision immediately governs all cases pending, the statute applies only to claims that accrue after Jan. 1, 2012. The key takeaway points for the designbuilder are: 1. The law in this area can be complicated. K nowing the time period helps only if you also know what is covered and how to measure. 2. When these laws change, uncertainty is compounded and unexpected outcomes develop. 3. The potential for changes in the law makes it hard to formulate dependable risk-management strategies. By tom porter, J.D., DBIa toM portEr, J.D., DBIa, provIDES ManaGEMEntaDvISorY SErvIcES to thE conStrUctIon InDUStrY throUGh hIS GroSSE poIntE, MIch.–BaSED fIrM. dbia.org spring//2012 7 http://www.dbia.org

Table of Contents for the Digital Edition of IQ Spring 2012: The Conference Issue

IQ Spring 2012: The Conference Issue