Having an end date for risk is important to construction professionals who need to know when they can close their books and destroy files relating to old projects. While professionals typically look to the statute of limitations and repose, these deadlines can sometimes be harder to determine than one might think.

State Laws Prohibiting Alteration of Statutes of Limitation

Many contractors seek to control the extent of their risk by negotiating the length of their liability period. In some instances, contractors may seek to shorten the statute of limitations to protect against stale claims. While in other instances, owners periodically negotiate for longer periods to ensure that they will not be time barred from pursuing valid claims. While the majority of states enforce such contractual provision, a number of states hold such clauses unenforceable. In these instances, the state’s original statute of limitations will apply regardless of what the contract says.

Questions of Whether Statutes of Repose Apply to Arbitration

As the construction industry has moved to binding arbitration to resolve disputes, many contractors may have assumed they would continue to enjoy the benefits of state statutes of repose that fix the end date for a contractor’s liabilities in those proceedings. Unfortunately, some contractors have learned the hard lesson that state statutes of repose (and statutes of limitation) do not always apply in arbitration. Indeed, only a few states – e.g. New York, Georgia and Washington – have statutes that specifically subject arbitration claims to the same time limitations for the commencement of actions as if the claim had been brought in court, and the majority of states have not yet addressed this question.

The overwhelming majority of courts considering the issue (including courts in California, Connecticut, Idaho, Indiana, Maine, Massachusetts, Minnesota, North Carolina, Ohio and Washington) have determined that the time limitations set forth in a statute of repose or statute of limitations do not apply to arbitration. The only exception that the authors are aware is Florida where the Florida Supreme Court determined in Raymond James Financial Services, Inc. v. Phillips, 126 So. 3d 186 (Fla. 2013) that arbitration constituted a “civil action or proceeding” and therefore met the definition of “action” set forth in Florida’s statute of limitation.

Inconsistent Laws Regarding Application of Time Limits Upon Public Owners

Public owners (including the federal government, as well as some cities, states and state agencies) often have an infinite time within which to bring a civil action. The basis for this immunity from statutes of limitations is the old English common law doctrine, “nullum tempus occurrit regi”-- literally, no time runs against the King--which purports to exempt some public owners from statutes of limitations of general applicability unless statutes expressly provide otherwise. The federal government always has this protection. Accordingly, the statute of limitations won’t prevent the federal government from filing suit even decades after construction is complete. The picture is far less clear, however, with states and municipalities, as different states take different approaches to the issue. Some states reject the doctrine, other states allow the state alone to exercise the doctrine, while others allow the state, state agencies and even municipalities to benefit.

Unfortunately, determining the end date for liability can be more difficult than simply reviewing the applicable statutes of limitation and repose. Contractors who perform work in more than one state, or who do both private and public work, should review the rules carefully before closing their books.