How long can I be held liable for a bad work claim?

So just how long does a contractor face liability for a bad work claim?

Here is a typical lawyer response: It depends.  It depends on the nature of the claim, the date the bad work was discovered and the laws of the state in which the project is located.  In some states, the period can be as long as 16 years.  In Indiana, the outside limit is 10 years from the date of substantial completion, although the period may be longer or shorter if the claim relates to deficient design.

Indiana’s “statute of repose” mandates by law the outside time limit for the liability of a contractor or design professional for bad work or deficient design, including claims for personal injury and property damage.  Most states have a statute of repose, although the time limits differ between the various states; each set a cap on the maximum time allowed for the filing of a lawsuit.  If defects are discovered after the mandated period expires, the claim is barred by operation of law.  Unlike a “statute of limitations,” which requires a lawsuit to be filed within a specified period of time after a legal right has been violated, a statute of repose is designed to bar lawsuits filed more than the time allowed by the statute no matter when the legal right was violated.

Indiana’s statute of repose was first passed by the Indiana General Assembly in 1967.  Although it has been amended since it was enacted, the statute still requires lawsuits to be filed within 10 years from the date of substantial completion or 12 years after the completion and submission of the plans and specifications if the claim is for deficiency in design.  The statute has been characterized as being “broad in its application,” and acts to bar claims no matter what legal theory is advanced by the claimant’s lawyer.  The statute applies to nearly every type of claim and entity involved in the improvement of real estate.  Indiana courts have declared that the statute cannot be stopped (extended), or “tolled,” by any action or inaction on the part of the contractor of design professional.

In one Indiana case, a homeowner discovered serious defects in a new home, including the movement of brick and associated cracks and gaps caused by the virtual lack of any footings in the foundation.  The court concluded that the structural problems had been intentionally concealed by the builder by the use of double moldings in the window and door frames, shrubs around the base of the home and fascia along the top of the brick work.  The homeowner sued the builder 14 years after the home was built.

The builder argued that the claim was barred by Indiana’s statute of repose.  The homeowner claimed that the statute should be extended because of the builder’s obvious fraud.  The court sided with the builder and strictly enforced the statute of repose, stating that the statute was “an absolute time limit beyond which liability no longer exists” and, as a result, “is not tolled for any reason ….”

By:  Greg Easter