What’s the time limit on construction negligence suits?

One question architects, engineers, contractors and others in the construction trade often ask is how long they are exposed to liability for negligence claims arising out of their work on a construction project.

New Hampshire has a three-year statute of limitations, but like most states, the statute of limitations is subject to what is commonly referred to as the “discovery rule.” This means that the three-year limitation period does not start running until the time a party discovers its injury or damages due to the alleged negligence of the design professional or contractor. The premise is based on the obvious unfairness of precluding an injured person from bringing a lawsuit before he or she even discovers the injury. Thus, in the construction context, the three-year period does not begin running until the injured party discovers, or reasonably should have discovered, its injury or damages due to the allegedly defective design or construction.

The problem with the discovery rule in the construction context is that it can allow for potentially long exposure periods long after completion of a particular project. In medical negligence cases, for instance, a patient often discovers his or her injury soon after the doctor’s negligent act, and the three-year limitation period immediately begins running. But in the construction context, that is not always the case, and the discovery rule potentially allows for an unlimited period of liability well beyond the completion of a project.

Take for example the construction of a large office building. It may be that an architect’s negligence resulted in a design that allowed for structural instability of the building. But problems due to the defective design may not manifest themselves until 15 years after construction, meaning a lawsuit could still be brought up to 18 years after the building was completed.

Legal exposure

Potentially unlimited exposure brings a host of problems for engineers, architects and contractors alike. For one, defending against claims of negligence forces those in the construction trade to try to refresh faded memories, retrieve or recover lost evidence and locate perhaps long since gone employees to present witness testimony.

Furthermore, it may be unfair to allow claims against design professionals and contractors after many years when it is more likely that the real cause of any problems is due to lack of proper maintenance and repair rather than any design professional or contractor negligence during the design or construction phase of the project.

The potential for an indefinite period of exposure adds further financial burden on those in the construction industry. It forces businesses to retain project contract documents, including drawings, specifications, correspondence and other documents indefinitely, or otherwise run the risk of being sued and not having the evidence necessary to defend claims.

It also requires those in the industry, particularly design professionals, to maintain liability coverage for years after the project, including years after their retirement.

The New Hampshire Legislature enacted a statute, RSA 508:4-b, designed to prevent such unlimited exposure for those in the construction industry.

RSA 508:4-b provides that all actions to recover damages arising out of any deficiency in the creation of an improvement to real property, including the design, labor, materials, engineering, planning, surveying, construction, observation, supervision or inspection of that improvement, shall be brought within eight years from the date of substantial completion of the improvement, and not thereafter.

When the Legislature enacted the statute back in 1990, it concluded that it was in the public interest to prevent unlimited exposure of those in the building industry. This eight-year period is a statute of repose rather than a statute of limitations. The distinction is that, whereas a statute of limitations begins to run when the plaintiff is injured or discovers his injury, a statute of repose begins to run upon the defined act of the defendant, regardless of when the plaintiff discovers his injury.

New Hampshire’s statute of repose in the construction industry begins to run upon substantial completion of a project, and once eight years elapses after that date, a plaintiff is barred from bringing a lawsuit against the design professional or contractor, even if the plaintiff does not discover his injury until after eight years have elapsed.

Using the example regarding the negligent design of a large office building, suppose the owner discovers the defective design only after panels on the side of the building start separating 10 years after construction of the building. Although the owner had no reason to question the structural integrity of the building prior to the panels separating, the owner would be barred from bringing an action against the architect because the statute of repose had run.

Does the eight-year statute of repose mean that a plaintiff has eight years to bring a lawsuit from the time she discovers her injury? No. Even though a statute of repose acts to bar a lawsuit unless brought within eight years after the date of substantial completion, a plaintiff still has to contend with the three-year statute of limitations. In other words, once a plaintiff discovers her injury due to an error or omission on a construction project, she must bring an action within three years, even if the eight-year statute of repose will not run until many years later.

The Legislature has included an exception to the eight-year statute of repose for cases involving fraudulent misrepresentations or cases involving fraudulent concealment of material facts.

Those in the construction industry should consult with their attorney if they have questions regarding the application of the statute of repose or the statute of limitations to their particular circumstances.

Jeremy Walker, a director of the Manchester-based law firm of McLane, Graf, Raulerson & Middleton, focuses his practice on commercial litigation, with an emphasis on intellectual property and construction litigation.

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