In 2700 Bohn Motor, LLC v. F.H. Myers Constr. Corp., No. 2021-CA-0671, 2022 La. App. LEXIS 651 (Bohn Motor), the Court of Appeals of Louisiana for the Fourth Circuit (Court of Appeals) considered whether a subrogation waiver in an AIA construction contract was enforceable and, if so, whether the waiver also protected subcontractors that were not signatories to the contract. The lower court granted the defendants’ motion for summary judgment based on the subrogation waiver in the construction contract. The plaintiffs appealed the decision, arguing that the subrogation waiver violated Louisiana’s anti-indemnification statute. The plaintiffs also argued that even if enforceable, the subrogation waiver did not apply to the defendant subcontractors since they were not parties to the contract. The Court of Appeals ultimately held that the subrogation waiver did not violate the anti-indemnification statute because the waiver did not shift liability, which the statute was intended to prevent. In addition, the Court of Appeals found that the contract sufficiently satisfied the required elements for the defendant subcontractors to qualify as third-party beneficiaries of the contract.
Courts across the country have historically taken positions encouraging settlements between civil litigants. Thus, as long as there is good faith involved in the negotiation process, settlements and their effects on other parties are generally upheld. Recently, the United States District Court for the Eastern District of California (District Court) considered whether a settlement between the plaintiff and one of several defendants met the good faith standard, thereby barring claims for contribution and indemnity from the co-defendants. Continue reading
In Lennar Northeast Props. v. Barton Partners Architects Planners, Inc, C.A. No. 16-cv-12330-ADB, 2021 U.S. Dist. LEXIS 11800, the United States District Court for the District of Massachusetts considered whether a property owner’s construction defect claims against a contractor were barred by the six-year statute of repose for improvements to real property. Massachusetts’ statute of repose, Mass. Gen. Laws ch. 260, § 2B, bars tort actions against those involved in the design, planning, construction or general administration of an improvement to real property more than six years after the earlier of the dates of (1) the opening of the improvement to use; or (2) substantial completion of the improvement and the taking of possession or occupancy by the owner. Finding that, despite the fact that the plaintiff’s actions were labeled as contract, breach of warranty and consumer protection act claims, the complaint alleged actions sounding in tort. Thus, the court applied the statute of repose to these claims. Continue reading
In Rankin v. South Street Downtown Holdings, Inc., 2019 N.H. LEXIS 165, the Supreme Court of New Hampshire considered, pursuant to a question transferred by the trial court, whether RSA 508:4-b, the statute of repose for improvements to real property, applies to indemnity and contribution claims. The court concluded that based upon the plain reading of the statute, it applies to indemnity and contribution claims. As noted by the court, a holding to the contrary would violate the intent of a statute of repose, which is to establish a time limit for when a party is exposed to liability. Continue reading
In Blok Builders, LLC v. Katryniok, 2018 Fla. App. LEXIS 1312, the Court of Appeals of Florida for the Fourth District considered whether Florida Statute § 725.06 applied to a contract for the excavation of various neighborhood easements containing telecommunication lines. The court held that the statute did not apply because the contract for the excavation work was unrelated to a “building, structure, appurtenance, or appliance,” as explicitly required by the statute. The court’s analysis highlights the importance of thoroughly analyzing statutes and considering (and anticipating) their most narrow interpretations. Continue reading
The California legislature recently enacted legislation – SB 496 – limiting a design professional’s indemnification obligations in private contracts related to design services. The term “design professional” refers to licensed architects, landscape architects and professional land surveyors, and registered professional engineers. As revised, Cal. Civ. Code § 2782.8 states that, for all contracts entered into on or after January 1, 2018 for design professional services, all provisions that purport to have the design professional indemnify the indemnitee for claims against the indemnitee – or require the design professional to provide a defense to the indemnitee – are unenforceable except to the extent that the claims against the indemnitee arise out of, or relate to, the negligence, recklessness or willful misconduct of the design professional. In addition, as revised, § 2782.8 limits a design professional’s liability for the cost of defense to the design professional’s percentage of fault.
The revised statute provides two exceptions. Pursuant to these exceptions, the limitations related to the duty and cost to defend do not apply to: 1) design service contracts where a project-specific general liability policy insures all project participants, including the design professional, and 2) a design professional who is a party to a written design-build, joint venture agreement.
Although this change in the law does not go into effect until January 1, 2018, the change serves as a reminder to subrogation professionals that, when faced with indemnification provisions in design or construction-related contracts, they should check local laws to determine the extent to which subrogating insurers can enforce such provisions.
In Goodman v. Heritage Builders, Inc., 390 P.3d 398 (Colo. 2017) (en banc), the Supreme Court of Colorado clarified the parameters for timely-filing third-party claims for indemnification or contribution in construction defects cases. The court held that C.R.S. § 13-80-104(1)(b)(II) – addressing when a party can file third-party indemnification and contribution claims – controls over the two-year statute of limitations period set forth in C.R.S. § 13-80-102 and the six-year statute of repose period in C.R.S. § 13-80-104(1)(a). Thus, in Colorado, so long as third-party claims are brought during the litigation or within ninety days after the date of judgment or settlement, such claims should be timely.
In Goodman, Heritage Builders, Inc. (Heritage) acted as the general contractor for a home sold to Karen and Courtney Lord (collectively, the “Lords”). The county issued a certificate of occupancy for the home in September 2006. In November 2011, the Lords sold the home to Richard Goodman (Goodman), who discovered alleged construction defects in the home between March and June 2012. In July of 2013, Goodman sent Heritage informal notice of his claims. He sent them a formal notice of claim – as required by Colorado’s Construction Defect Action Reform Act, C.R.S. §§ 13-20-801 to 31-20-808 – in October of 2013. Thereafter, Heritage sent a notice of claim letter to Studio B Architects (Studio B) and Bluegreen, Inc. (Bluegreen), alleging design deficiencies in the home. Subsequently, on December 20, 2013, Goodman filed suit against Heritage and some of its contractors and, in response, Heritage asserted cross-claims and filed a third-party complaint against Studio B and Bluegreen, among others. Arguing that Heritage’s third-party claim against it was barred by the six-year statute of repose contained in C.R.S. § 13-8-104(1)(a), Studio B moved for summary judgment. Bluegreen joined the motion. Finding that Heritage’s claims against Studio B and Bluegreen arose, at the earliest, when Heritage received informal notice of the alleged defects in July of 2013 – more than six years after the home’s date of substantial completion – the trial court held that the statute of repose barred Heritage’s third-party claims against Studio B and Bluegreen. The Supreme Court of Colorado disagreed.
As noted by the court on appeal, in general, construction defect claims are subject to the two-year statute of limitations in C.R.S. § 13-80-102 and the six-year statute of repose in C.R.S. § 13-80-104(1)(a). However, construction defect claims against other parties – “who may be liable to the claimant for all or part of the claimant’s liability to a third person” – are governed by C.R.S. § 13-80-104(1)(b)(II). Pursuant to this subparagraph, notwithstanding the provisions of § 13-80-104(1)(a), contribution and indemnification claims against third-parties may be brought in either: “(1) the construction defect litigation before a settlement or entry of judgment or (2) a separate lawsuit after a settlement or entry of judgment.” Giving the “notwithstanding” language its controlling effect, the court held that, although § 13-80-104(1)(a) incorporates the two-year statute of limitations in § 13-80-102 and contains a six-year statute of limitations for construction defect claims, § 13-80-104(1)(b)(II) is the statute section under which courts determine the timeliness of third-party contribution and indemnification claims. Pursuant to § 13-80-104(1)(b)(II), so long as third-party indemnification and contribution claims are brought during the construction defect litigation or within ninety days following the date of judgment, the claims are timely. Thus, because Heritage brought its third-party claims against Studio B and Bluegreen before any judgment or settlement, the court held that its claims were timely.
The analysis in Goodman serves as a reminder to subrogation professionals that, when deciding whether construction defect-related claims are timely, it is important to review the language of the applicable statute of repose. Where, as in Colorado, there is language in a subsection of the statute of repose indicating that the statute applies “notwithstanding” other statutory sections, subrogation professionals reviewing the statute should accord the subsection containing the “notwithstanding” language appropriate weight.