Statute Of Repose: Time Crucial For Design Contractors To Avoid Liability

One of the most common, yet complicated, areas of litigation involves the liability for deficient design or construction of an improvement to property. Fortunately, however, a legal defense known as the “statute of repose” shields most industrial design professionals–and their insurance carriers–from liability for improvements to real estate after a certain period of time.

In these instances, a court determines the merit of a lawsuit based upon the timeline of the construction project, and the degree to which the work is an improvement to existing real estate.

Consider the situation where a coke oven door in a steel mill malfunctions and injures a mill employee, rendering the worker unable to work again in the same job. That worker may sue the building contractor, subcontractor, engineering company, manufacturer as well as the company that installed the coke oven door.

The outcome of the case, for purposes of the statue of repose, would be determined by the age of the coke oven door or how long ago it was installed. During this inquiry, the court would also seek to determine if the coke oven door is an improvement to real estate, or merely a manufactured product–albeit, a large one.

Determining time requirements for any state's statute of repose is essential for the lawsuit to proceed. In Pennsylvania, the statute of repose is 12 years, which can differ or be entirely absent in other states. For construction liability claims, the court examines the improvements to real estate, looking at historical records to determine which contractor or engineer contributed what services and when.

In this example, if the worker sustained his injury in 2000 as a result of the malfunctioning coke oven door and the door was installed in 1980, this lawsuit would be time-barred under the 12-year statute of repose–that is, if the said coke oven door is determined to be an improvement to real estate.

Insurance risk managers, plant owners and industrial design professionals can better prepare and protect themselves against extensive legal actions if they consider the following:

o Builders, contractors, design engineers and architects are part of a protected class in many states for claims made against them involving property damage or personal injury arising from improvements to real estate.

Their roles and the relationships among them in improving real estate are crucial in determining liability.

o When an injury claim is made, the principals of the lawsuit should immediately determine how long the improvement to realty has existed.

o If an improvement seems to be more like a piece of equipment rather than a permanent fixture attached to the real estate property, careful review of the history of construction and subsequent usage of the article must be made to determine if the protection of the statute of repose applies to bar the claim. If, in fact, the improvement is determined to be removable equipment, then the protection afforded under a statute of repose is not available.

To understand which professionals the statute of repose protects, it is best to first understand who is not protected and why.

A supplier whose defective product is incorporated into an improvement to realty is not protected, for example. This is because suppliers distribute items by the thousands and can maintain high quality standards in the controlled environment of a factory.

Conversely, a builder can only pre-test a design and construction in limited ways, with actual use following construction being the only real test of structural integrity.

Because Pennsylvania's 12-year statute of repose begins to run at the time the improvement to realty is completed, after the passage of 12 years, no lawsuit may be filed against the architect, engineer or contractor who designed and built the improvement.

This protection must be contrasted with the application of the normal two-year statute of limitations, which takes effect on the day a product causes injury. That product could have been manufactured and sold more than 12 years before the date of injury, but because it is not an improvement to realty, the manufacturer of the product does not enjoy the automatic elimination of liability after 12 years, which applies to the designer and builder of an improvement to realty.

What then constitutes an improvement to realty?

Basically, such improvements include anything that permanently enhances the value of the real estate or is an indispensable article in business operations.

Most people agree that the following items fall within the statute of repose: buildings, substantial repairs to preserve a building, substantial additions to or changes to buildings, construction of sidewalks, erection of fences, and the preparation of land for building sites.

Applying a case-by-case approach, the courts have held that the following items were also improvements to realty:

o A welding machine attached to a factory floor for 30 years

o An amusement park ride anchored to a playground for 17 years

o A sky dome attached to a school for 19 years

On the other hand, the courts have found that a diving block installed at a school's swimming pool and a chin-up bar added to a school's gymnasium were not improvements to realty. In those instances, the court focused on the fact that the items were easily removable and not permanent enhancements–concluding that they were not improvements to the real property and, therefore, not within the protection of the statute of repose.