Posted on May 27, 2015
The construction industry is unique in that its members provide products and/or services which are, by their very nature, intended to last a long time – years, decades or more. Because of this, contractors and design professionals inherently have greater exposure to claims of defective work. To address this issue, nearly every state in the U.S., including Ohio, has enacted laws, known as statutes of repose, that are designed to limit liability for latent defects in construction projects that may manifest long after the work was originally performed.
Ohio’s statute of repose, codified at 2305.131(A)(1) states in relevant part:
Notwithstanding an otherwise applicable period of limitations…no cause of action to recover damages for bodily injury, an injury to real or personal property, or wrongful death that arises out of a defective and unsafe condition of an improvement to real property and no cause of action for contribution or indemnity for damages sustained as a result of bodily injury, an injury to real or personal property, or wrongful death that arises out of a defective and unsafe condition of an improvement to real property shall accrue against a person who performed services for the improvement to real property or a person who furnished the design, planning, supervision of construction, or construction of the improvement to real property later than ten years from the date of substantial completion of such improvement.
Essentially, the statute precludes an owner from asserting a claim against a contractor or design professional for alleged defects in the construction more than ten (10) years after the project was substantially completed.
Sometimes, statutes of repose are confused with the similar legal concept of statutes of limitations. Statutes of limitations define the time frame in which a lawsuit, which begins to run at the time of injury. For example, a negligence action in Ohio must be brought within two years of the alleged injury having occurred. The difference between a statute of limitations and statute of repose is that the former begins to run at the time the injury occurs (or in some cases is discovered), while the latter begins to run, in the construction context, upon substantial completion of the project. This means that, generally speaking, a statute of limitations will run long before the statue of repose. The interplay between statutes of limitation and repose is well-demonstrated by a recent case decided by the Ohio Supreme Court.
In Oaktree Condominium Assn., Inc. v. Hallmark Bldg. Co., 139 Ohio St.3d 264, the Oaktree Condominium Association (“Oaktree”) discovered a defect in the construction of the foundation of their condominiums in 2003, nearly 15 years after construction of the building had been completed. At the time of the discovery Ohio had no construction statute of repose. In 2007, when Oaktree filed suit against the builder of the condominiums, Hallmark Building Company (“Hallmark”), Ohio had enacted 2305.131, imposing the ten-year statute of repose.
Hallmark argued that the statute of repose barred Oaktree’s claim, but the trial court held that the statute of repose did not apply. Following a jury trial, Oaktree was awarded a $210,000 verdict. On appeal, the Eleventh District Court of Appeals held that the statute of repose applied and reversed for the trial court to consider it. The trial court then granted summary judgment to Hallmark based on the statute of repose. On a second appeal, the 11th District affirmed, but held that R.C. 2305.131 could not be applied retroactively to Oaktree’s claim, because the cause of action had accrued before the statute became effective. The Court then held that Oaktree did not file its claim within a reasonable time, which the court determined was two years after being placed on notice of the damage.
Upon review, the Supreme Court held that Oaktree’s cause of action had accrued before the effective date of R.C.2305.131, therefore it could not be retroactively applied. The Court opined that, when a claim has accrued when there is no statute of repose in effect, the claimant must be provided a reasonable period of time after a statute of repose is enacted to bring the claim. A majority of the court ultimately decided that the statute of limitations defines what a reasonable time to file suit would be. In the case of Oaktree’s claim, the applicable statute of limitations was four years, meaning Oaktree had until October 31, 2007, to file its claims. Because Oaktree had filed on August 30, 2007, its claim was timely and the judgment in its favor was reinstated.
Given the exposure which construction and design professionals can potentially have for latent defects in construction, it is imperative that the few constraints the law places on such liability, such as statutes of limitations and statutes of repose, be recognized and followed. Decisions such as the one rendered in Oakwood demonstrate the complicated analysis required to determine the applicability of such limitations.
Evaluating the factual and legal circumstances under which a statute of limitations or statute of repose defense can be asserted is an undertaking that should be discussed with experienced legal counsel. For questions regarding Ohio’s statutes of limitations, statute of repose, or any other aspect of Ohio construction or business law, please contact Todd Harpst or Nick Horrigan, at Harpst Ross, Ltd. – Business Lawyers for the Construction Industry®, at (330) 983-9971 or firstname.lastname@example.org or email@example.com.
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