Do Not Ignore Construction Defect Claims if You Are on Inquiry Notice

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In Ryan Altenbaugh, et al. v. Benchmark Builders Inc., et al., No. 120, 2021, 2022 Del. LEXIS 24, the Supreme Court of Delaware recently affirmed the lower court’s ruling that the statute of limitations barred the homeowners’ negligent construction claims. Although the court applied the discovery rule to toll the running of the three-year statute of limitations, it found that the homeowners were on inquiry notice of the defects within their home eight years before filing suit.

Mr. Altenbaugh and his wife (Plaintiffs) purchased their home in 2008 from Benchmark Builders, Inc. (Benchmark). One year into homeownership, Plaintiffs reported water leaking into the kitchen from windows to Benchmark. Two years later, in January 2011, Plaintiffs wrote a letter to Benchmark notifying it of a water issue in the basement. Specifically, the letter described a 15’ x 4’ section of wall that was “soaked,” including the fiber glass insulation. Benchmark’s representative examined the area and told Plaintiffs the issue was limited to a small area and that it had been repaired.

In 2019, during a separate bathroom repair, a contractor noted rotting wood behind the drywall. Plaintiffs conducted a moisture survey which revealed “systemic and catastrophic water intrusion.” The cause of the water intrusion purportedly related to a failure to install adequate flashing around penetrations through the stucco exterior dating back to the original construction. Plaintiffs filed suit against Benchmark and Delaware Roofing & Siding Company L.L.C. (referred to collectively with Benchmark as Defendants) in November 2019.

Defendants filed a motion for summary judgment and the trial court granted the motion, stating that Plaintiffs had actual knowledge of the construction defects by at least 2011— the time at which Plaintiffs sent their letter to Benchmark. Plaintiffs unsuccessfully argued that summary judgment was not appropriate because questions of fact remained with respect to the discovery rule.

On appeal, Plaintiffs argued that despite reporting issues in 2009 and 2011, they were unaware that water had been systemically penetrating the stucco and infiltrating their home. Thus, the discovery of the systemic water intrusion did not take place until 2019. The court disagreed. As the high court noted, in construction defect actions, the cause of action accrues at the time of construction unless the discovery rule tolls the running of the three-year statute of limitations. While Plaintiffs attempted to argue that they did not possess specialized home construction knowledge, the Supreme Court believed their letter to Benchmark noting “construction defects” and the discovery of soaked walls was enough to show awareness of the issue. Because the court agreed that they were on “inquiry notice” of the claim in 2011, when their injury was no longer inherently unknowable, the Supreme Court of Delaware affirmed the Superior Court’s grant of summary judgment based on the statute of limitations.

When investigating a construction defect loss in Delaware (a jurisdiction that applies the discovery rule to latent construction defect claims), it is important to keep in mind not only the date the defect was discovered, but whether the facts suggest that the plaintiff was on “inquiry notice” of the claim. In cases where the plaintiff was on “inquiry notice” of the claim, a court may find that, because the plaintiff was on inquiry notice, the statute of limitations was not tolled until the time of actual discovery. As the court found in this instance, because the plaintiffs were on inquiry notice of the claim more than eight years prior to the time the suit was filed, their claim was barred by Delaware’s three-year statute of limitations.

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