October 2015 Bar Bulletin
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October 2015 Bar Bulletin

Mixed Messages: Limitations on Latent Construction Defect Liability

By Ian Franzel

 

How long do construction materials last and perform their function? How long should the finished product last and how does the Legislature delineate the appropriate time period for a contractor or designer to be liable for the finished product?

A sizable part of my practice involves questions concerning insurance coverage for property damage to residential homes. This includes faulty roofing craftsmanship and materials, bursting pipes, leaking drain systems/devices, and the insurance claims resulting from them. Strangely, water damage due to construction defects and failure persists despite the recent very dry weather here and across the state.

If and when it rains heavily again, surely the practice area of water damage to residential real estate will take off in high volume. Homes themselves may take off in a high volume of water as well.

Why, in addition to things generally being wet here, is this issue so persistent? On one hand, there is a failure of roofers and contractors to use flashing, composite shingles, proper plumbing and drains, and other construction materials to adequately waterproof their finished products. On the other hand, these materials and installations have a limited lifespan and can only be guaranteed or warranted for a finite period of time.

Clients of course turn to their homeowner's insurance, but most such policies exclude damages caused by construction defects. The way I explain the issue of construction defects - where there has been damage to construction that is six-plus years old - to clients is to outline that there has to have been egregious misconduct by the contractor (or other person) for the statute of limitations and the statute of repose to be overcome. That is, there has to have been a tort.1 This is a key consideration.

The clients must detail exactly what went wrong. With many synthetic materials on the market, merely identifying a construction defect can require knowhow and expertise.

Today, wood and metal have been replaced with laminates, composites, and aggregates. Glue has been replaced with molecularly altered adhesives. Wiring, plumbing, and other mechanical components are increasingly concealed in conduits or buried under the earth. In short, construction has become highly scientific and complex. Landowners increasingly hire contractors for their expertise and a non-expert landowner is often incapable of recognizing substandard performance.2

This article does not discuss product liability, which has its own statute/s of limitations and guidelines. Enforceability of warranties for products used in construction that have failed is also outside of the scope of this article and deserves its own independent analysis. Whatever the case, considerations of product liability claims and the enforceability of warranty limitations can often play a role in analyzing a client's facts for a construction defect claim. I consult with clients on warranty issues, but certainly not on product defect liability.

The Washington construction statute of repose mandates this: "All claims or causes of action as set forth in RCW 4.16.300 shall accrue, and the applicable statute of limitation shall begin to run only during the period within six years after substantial completion" or termination of the construction. Section 4.16.300 consists of "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 repair of any improvement upon real property."3

Despite this legislative bar, it stands to reason that damages due to latent construction defects should be compensable in some way to the client, especially if the construction in question was new construction completed in the last eight to 12 years. To protect such a claimant, the court may impose/enforce the statute or some version of a "discovery rule of accrual," which functions to extend the period of time, beyond the six years, during which a latent construction defect claim may be made.

"When a Court adopts a discovery rule of accrual for a particular kind of action it does so because it is persuaded that a 'literal application of the statute of limitations' could 'result in grave injustice.'"4 The discovery rule of accrual effectively stops the clock on the six-year statute of repose.

1000 Virginia dealt with stucco work, windows, flashing and caulking that leaked, as well as duct work that was claimed to be improperly installed. The certificate of completion of this work was issued in 1992 and the general contractor filed suit against the subcontractor in 2002.5

Its companion case, Lombardi v. JTE Construction, Inc., dealt with a property owner who hired a contractor to construct a home, which was completed in 1995. The owner filed suit in 2003 claiming the contractor did faulty roofing, flashing and siding work.6

Despite these dates, and the six-year statute of repose, the Court allowed the claims to go forward.7 The reasoning supporting application of the discovery rule of accrual is intuitive, as discussed in 1000 Virginia:

There is little to distinguish a case involving latent defects in a building and a case where a surgical instrument is left in the plaintiff's body during surgery. In both cases the plaintiff may have no way of knowing that a cause of action exists, i.e., no way of knowing the facts that show that the construction contract was breached in the first case or that a duty of care was breached in the latter.

The 1000 Virginia Court cited facts and instances from courts around the country, including improper site preparation leading to land settling, roof trusses that were inadequate to support the load, leaking gas lines, and roofers who did not use corrosive-resistant nails.8

Before 2003, the Legislature did not differentiate between contract and tort claims with regard to the statute of repose, but it does now. In Architectonics Construction Management, Inc. v. Khorram,9 the Court allowed a contract-based claim, arising from a defect, long after the work was done.


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