Raymond P. D'Amante
R James Steiner
Due Diligence in the Face of Statute of Repose
September 2005
By: Raymond P. D'Amante and R. James Steiner
You are interested in buying a building in New Hampshire constructed more than eight years ago. As part of your due diligence, you have a comprehensive inspection done regarding the building's condition. After closing, you discover what you believe is a hidden defect. Although you may have a claim against the inspection company, can you sue those involved in the original construction of the building, such as the architects, engineers, general contractor or subcontractors, based on the discovery today of an allegedly hidden defect dating back to the original construction?
As of August 18, 2005, in Winnisquam Regional School District v. Daniel J. Levine & a., ("Winnisquam") the New Hampshire Supreme Court said, "No!" In a well-reasoned decision, the Court upheld the "statute of repose" as barring such a law suit. This statute provides protection to those in the construction industry from a potentially infinite period of liability after construction for hidden defects, limiting such claims (in New Hampshire) to eight years after substantial completion of a project. Statistically, most claims for building defects are brought within seven years. The New Hampshire Legislature added an additional year to the limitation period. The Legislature concluded during debate on the law that the potential for liability, beyond eight years, "particularly affects the building industry and will eventually have very serious adverse effects on the construction of improvements to real estate in New Hampshire." The Legislature concluded the general public benefits more from an industry-protecting statute of repose than it did from leaving those in the building industry exposed to potential claims for decades.
The Winnisquam case offers a textbook example for the rationale in support of providing such protection. In 1991, Winnisquam put out to bid a new roof over the school based on specifications drawn up by its own project engineer. The roof was substantially completed by the spring of 1992. In March, 2001, a civil engineer watching her daughter's concert in the gymnasium believed she observed "buckled bridging" of the purling support beams. Engineers hired to investigate offered differing conclusions, including as a possible cause the extraordinary heavy wet snow during this time frame, but included as one consideration the prospect of negligence in the design and/or installation of the roof in 1991. Winnisquam sued the original engineering firms it had hired to study the building roof leaks, the school's own project engineer, who developed the specifications for the re-roof project, the general contractor, the installation subcontractor, and the roofing manufacturer. In the intervening decade, the school's project engineer had passed away, his records could not be found and the general contractor had followed through on its seven-year discard rule and disposed of the files for this project.
From a request for some $760,000 in damages, a jury found shared responsibility and imposed a verdict of $136,500 against the general contractor. As a preliminary step, the superior court had found the New Hampshire statute of repose, RSA 508:4-b, unconstitutional. The general contractor appealed to the N.H. Supreme Court to address a number of issues, including the statute of repose.
On appeal, Winnisquam argued that construction cases should follow the "discovery rule," and the statute of limitations should not begin to run on a potential claim until a defect is reasonably discoverable. Winnisquam argued the statute of repose is "inherently unreasonable." The Supreme Court concluded otherwise. It is the owner or occupier of the building, once constructed, that has the duty to maintain the building, insure the building, and repair the building. The owner/occupier is not shielded from a claim under the statute of repose. Attorney R. James Steiner, of D'Amante Couser Steiner Pellerin, P.A. in Concord New Hampshire, who conducted the trial of the case before the superior court, and argued the appeal before the New Hampshire Supreme Court, said, "In upholding the constitutionality of the statute of repose, the New Hampshire Supreme Court performed a critical balancing to conclude the legislature correctly analyzed the issue in enacting the statute originally."
When purchasers become involved in acquiring property, they should use due care to investigate the building lest the purchaser later finds potential problems for which at least certain of the potential defendants are insulated from liability based on a statute of repose. In New Hampshire that limitation period is eight years; in other states, the period may vary. Lastly, it is wise for those involved in the building industry to know the applicable period of any statute of repose and to retain their records for a period greater than the statute provides as protection against claims.
