NEW HAMPSHIRE, JOINING OTHER STATES IN PROTECTING THE BUILDING INDUSTRY
FROM LIABILITY CLAIMS MORE THAN EIGHT YEARS AFTER COMPLETION OF WORK -

THE STATUTE OF REPOSE - ARE YOU PROTECTED IN YOUR STATE?

By R. James Steiner

On August 18, 2005, the New Hampshire Supreme Court issued its decision in the case of
Winnisquam Regional School District v. Daniel J. Levine & a., concluding that members of the building industry are entitled to protection from suits brought more than after eight years after substantial completion of a construction project. With this decision, New Hampshire joins a number of states across the country recognizing the need to protect the building industry from a potentially infinite period of liability far beyond the date of completion of a project.

Without a statute of repose, those in the construction industry face potential claims brought decades later, through claims based on an alleged inability to "discover" the alleged defect within the normal three-year period applicable to most actions brought in civil courts. A statute of repose, which can vary from 6 years to 12 years, state to state, is a legislative response intended to provide a reasonable balance between the normally applicable three-year limitation period for claims and an unlimited time within which a problem could be "discovered."

This particular case in New Hampshire is indicative of the pitfalls of working on projects in states lacking a statute of repose. The general contractor, Dutton & Garfield, Inc. installed a new roof over a middle school in 1991, substantially completing it by the spring of 1992. The building structure was a pre-engineered metal building, manufactured in 1973. The school district, through its own project engineer, indicated in response to queries from the general contractor that no additional bracing would be necessary to the frame prior to installing the new roof. In March, 2001, a civil engineer attending her daughter's concert in the gym noticed what she believed to be "buckled bridging" in the building frame purlins (the beams) across the top of the school gymnasium. The resulting inspection led to conflicting conclusions about the cause as either attributable to heavy wet snow load that year (many roofs failed in New Hampshire during this extraordinary time) or some failure in the roof design or installation.

Some 9 ½ years after "substantial completion" of the project, the school district sued the engineers who had done an assessment of the roof in 1991, the general contractor, the installation subcontractor, the school's own project engineer and the roof manufacturer. The school's project engineer had passed away in the interim decade and none of his office records could be located; the general contractor had a policy to destroy old records after seven years. The loss of the project engineer as a witness, his records for purposes of documentation, as well as the general contractor's file, left a gaping hole as to certain of the information deemed important towards the best defense of the claim.

The statute of repose in New Hampshire provides as follows:

Except as otherwise provided in this section, all actions to recover damages for injury to property, injury to the person, wrongful death or economic loss arising out of any deficiency in the creation of an improvement to real property, including without limitation the design, labor, materials, engineering, planning, surveying, construction, observation, supervision or inspection of that improvement, shall be brought within 8 years from the date of substantial completion of the improvement, and not thereafter.

New Hampshire Revised Statutes, Annotated ("RSA") 508:4-b, I. It goes on to provide, further, as follows:

Nothing in this section shall affect the liabilities of a person having actual possession or control of an improvement to real property as owner or lawful possessor thereof, and nothing contained in this section shall alter or amend the time within which an action in tort may be brought for damages arising out of negligence in the repair, maintenance or upkeep of an improvement to real property.

RSA 508, 4-b, VI (exclusion as to owners/occupiers). The statute creates classifications, protecting all of those involved in the construction industry, and leaving out owners and occupiers. The New Hampshire Supreme Court had to address whether these classifications were reasonable, not arbitrary, and that they bore a fair and substantial relationship to the purpose of the statute. Concluding the benefits to the general public outweighed the protection being provided, the Court concluded unanimously that the statute met constitutional muster.

Specifically, the New Hampshire Supreme Court found that the State Legislature, in enacting the statute, had noted as follows:

The general court finds that, under current law, builders, designers, architects and others in the building trade are subject to an almost infinite period of liability. This period of liability, based on the discovery rule, particularly affects the building industry and will eventually have very serious adverse effects on the construction of improvements to real estate in New Hampshire. Therefore, it is in the public interest to set a point in time after which no action may be brought for errors and omissions in the planning, design and construction of improvement to real estate. This act is determined to be in the public interest and to promote and balance the interests of prospective litigants in cases involving planning design and construction of improvements to real property.

Though not referred to directly in the decision of the Court, a statistical study done years earlier, the New Hampshire Special Claim Study, undertaken by Schinnerer & Company, Inc., and submitted to the State Senate Judiciary Committee, showed that 96% of the claims filed in New Hampshire against New Hampshire design professionals were brought within seven years of substantial completion of the construction project. Therefore, the Legislature concluded the statute was unlikely to eliminate many truly legitimate claims. Further information in the study indicated that injury and damages suffered long after completion of construction are usually caused by improper maintenance, inspection, repair and other similar factors over which those involved in the construction have no control, and requiring design professionals, material men, laborers, etc. to defend against stale claims forces them to rely on faded memories, lost evidence and unavailability of witnesses. The Legislature noted from the study, further, that defending against stale claims imposes a heavy financial burden on those in the construction industry, who must often take substantial time from ongoing projects to retrieve files and records from archives, locate former employees, and attend depositions and trials. Further, the indefinite exposure to liability places a substantial burden on those in the construction industry, particularly design professionals, to maintain liability coverage for unreasonable periods of time after they retire. The study concluded that a statute of repose providing for a reasonable period of time within which to file a claim does not unfairly burden the injured plaintiff, since he or she is usually able to seek redress against the owner or occupier of the building, who is the party most likely to be responsible for the injury and the one in the best position to have prevented it.

Given the existence of BOCA and other applicable building codes and standards, and the authority of local building inspectors over projects, the building industry is in a unique situation relative to other professions. Indeed, the court rejected specifically the analogy of comparing those in the building trade to doctors or those involved in the manufacturing field. Buildings are subject to inspection during construction and are certified for occupancy only upon satisfactory compliance with the applicable standards. Moreover, once those in the building industry leave a project, an owner or occupier has the ability to inspect or repair, an ability to insure, and certainly a duty to maintain a structure. Moreover, the owner/occupier generally is expected to have on hand records related to the building. Finally, those in the building industry are precluded from re-entry without the authority of the owner or occupier. As such, the New Hampshire Supreme Court agreed the New Hampshire Legislature had sound reasons upon which it enacted the statute of repose, at eight years, and found it constitutional. This decision reversed what had been a $136,500 jury verdict against Dutton & Garfield, Inc. (out of a damage claim exceeding $700,000).

If your state lacks a statute of repose, introducing your state legislator to the language above, as to purpose, the material contained in the study provided to the New Hampshire Legislature, as well as the language of the statute, above, will be the first steps in protecting your entire industry from the potential for an "almost infinite period of liability." As of August 18, 2005, all of those involved in the building industry in New Hampshire now enjoy the protection of a more limited period of liability, limited to eight years, after a project is substantially completed. It is a reasonable and fair balancing of the equities between the building industry and the consumer public.