Montana Supreme Court Rules Statute Of Repose Cannot Be Tolled For Late Discovery Of Defects

Statutes of limitation provide deadlines for parties to bring legal actions. Once a statutory limitation period expires, an injured party is typically left without recourse to recover damages. Many states have adopted a doctrine known as the “discovery rule” which ensures that limitation periods do not begin to run until the injured party is aware, or reasonably should be aware, of the occurrence of the injury. In contrast, a statute of repose limits the time in which a construction claim can be brought and the limitation period begins to run at a specific point in a project, typically at completion or substantial completion of the project or contract work. Statutes of repose are meant to give certainty to contractors, owners, and designers so that they do not have to worry about exposure to liability once a specified amount of time passes. In February 2017, the Montana Supreme Court interpreted Montana’s statute of repose and made it clear that the statute of repose would not be tolled due to a defendant’s fraudulent concealment of defects or the late discovery of facts related to a construction defect claim.

Hill County High School District No. A. (the “School District”) v. Dick Anderson Construction, Inc. & Springer Group Architects, P.C. (“Springer”) involved a case where a high school sued a contractor after the roof installed by Dick Anderson Construction (“Anderson”) partially collapsed. The School District entered into a contract with Springer to design a new roof for Havre High School. The School District subsequently entered a contract with Anderson to construct the roof. Anderson began construction in June 1997 with an expected completion date of October 1997 but Anderson failed to complete its work by the October deadline and the parties disputed whether the project ever was “completed.” A final project walkthrough occurred in January 1998. At that time, the parties discussed various punch list items that needed to be addressed. The School District had full use of the building by April 1998 and it issued final payment around that same time.

Soon after the School District began to use the building, it experienced several problems with the new roof. Both Springer and Anderson worked with the School District to address the various problems in 1998. In October 2003, Springer informed the School District that repairs were finished and that no further work was necessary. A large portion of the new roof collapsed after a heavy snowstorm in December 2010 and the School District filed suit in December 2011.

The School District alleged negligence, breach of express and implied warranty, breach of contract, and it alleged that Springer and Anderson fraudulently concealed problems with the roof. Both Springer and Anderson filed motions to dismiss the lawsuit asserting that the passage of time barred the action. The court granted the motions concluding that Montana’s statute of repose barred the School District’s claims because the roof was “completed,” within the meaning of the statute, in 1998. The court also concluded that fraudulent concealment of facts would not toll the statute of repose and it awarded Springer attorney fees pursuant to the contract between Springer and the School District. The School District appealed.

On appeal, the Montana Supreme Court considered the language in the statute and upheld the lower court despite the School District’s argument that the statute of repose should be tolled based on alleged fraudulent concealment by Springer and Anderson. The School District further argued that the statute of repose limitation period did not begin to run in 1998 because there was evidence that Springer and Anderson were still performing repair work under the contract in 2003. The Montana Supreme Court explained that the statute of repose explicitly provides that the limitation period begins to run once the owner can utilize the improvement for its intended purpose. The court made it clear that the statute of repose is “an absolute bar to bringing a claim for construction-related damages more than ten years after construction is completed” regardless of whether repair work is ongoing and regardless of whether the contractor conceals facts relevant to the claim.

Other states have different limitations periods and different statutes of repose. For example, Washington’s statute of repose provides that construction defect claims must be brought within six years of substantial completion of the project, or with six years of termination of the construction services, whichever is later. Tort claims in Washington are subject to a three-year statute of limitations and breach of contract claims are subject to a six-year statute of limitations. In contrast, Montana’s statute of repose provides that construction defect claims must be brought within ten years of when the improvement is provided while tort claims must be brought within three years of when the claim is discovered. As a result, contractors performing work in Montana are exposed to construction defect claims four years longer than contractors who perform work in Washington. In Idaho, property owners have six years to file suit after substantial completion of the construction project, regardless of when the defect was discovered. As a result, a contractor’s ability to avoid liability or an owner’s ability to recover damages can hinge on what state the work occurred in and how much time has passed. Given the nuances from state to state, it is best to contact an experienced construction attorney early in the process to determine what statutory and contractual rights may protect you. The construction lawyers at Campbell & Bissell, PLLC are licensed in Washington, Idaho, Montana, Alaska, and North Dakota. We look forward to helping you.

Tyler S. Waite

twaite@@campbell-bissell.com

(509) 455-7100