Statute of Limitations
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A statute of limitations sets the deadline by which a claimant must file suit. If the deadline passes, the claimant will forever be barred from seeking compensation. As explained below, this date can be a moving target for construction defect claims. Accordingly, understanding the statute of limitations for construction defect claims is critically important for both claimants and contractors.
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Two Years from Date of Discovery.
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The statute of limitations for a claim "against any architect, contractor, builder or builder vendor, engineer, or inspector performing or furnishing the design, planning, supervision, inspection, construction, or observation of construction of any improvement to real property" is two years from the date of discovery. We used to have in Colorado a separate three-year statute of limitations for breach of contract claims for construction defects. However, the Colorado legislature amended the CDARA statute for the express purpose of eliminating that distinction by including the following language: "Such actions shall include any and all actions in tort, contract, indemnity, or contribution, or other actions for the recovery of damages..." Accordingly, the statute of limitations for a construction defect claim is two years from the date of discovery.
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When is the Date of Discovery?
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The date of discovery is "the time the claimant ... discovers or in the exercise of reasonable diligence should have discovered the physical manifestations of a defect in the improvement which ultimately causes the injury." Knowledge of the "physical manifestations of a defect" does not require an understanding of the cause of the defect. For example, the first day an owner notices cracks in a material is likely the day the clock starts ticking, even when the owner has no idea what is causing the cracks. The reasoning for this is that the two-year statute of limitations should provide the owner plenty of time to investigate the cause of the defect and bring a claim.
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Contribution and Indemnity Claims.
Contribution and indemnity claims against subcontractors, materials suppliers, design professionals, and any other trade that might be liable to the general contractor or upper tier subcontractor must be brought within ninety days after the owner's claim is settled or reduced to final judgment.
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Can the Statute of Limitations be Extended?
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There are potential arguments available to survive a statute of limitations defense. First, the statute of limitations is tolled during the notice of claim process. Once the formal notice of claim is submitted, the clock stops ticking and does not begin again until sixty days after the completion of the process. This is not a simple analysis. The definition of a notice of claim is broad. Claimants have successfully argued that simple written complaints regarding the work constituted a formal notice of claim sufficient to toll the statute of limitations. Multiple complaints create multiple tolling events. And while there are strict delivery requirements (certified mail or personal service), actual receipt is sufficient. Most communications are by email, and actual receipt is easy to prove. The statute of limitations could possibly be extended by months or years inadvertently.
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This is conceptually similar to what is known as "the repair doctrine." The repair doctrine is a form of equitable tolling of a statute of limitations while a construction professional undertakes repair efforts intended to remedy the defect. Pursuant to this doctrine, the deadline is extended until the date the construction company abandons the repairs. However, Colorado case law holds that the CDARA statute of limitations supersedes the repair doctrine. The two are inconsistent, and the statute wins. The court of appeals has specifically held that the repair doctrine does not extend the statute of limitations for a construction defect claim in Colorado.
In certain occasions, the parties might form an agreement following the discovery of the defect regarding responsibility to remedy the defect. Such an agreement, written or verbal, could constitute a contract amendment or settlement agreement. Any breach of such an agreement would be governed by the three year statute of limitations. However, the agreement would need to be explicit, otherwise the argument could be construed as an attempt to circumvent CDARA's elimination of the repair doctrine.
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The bottom line is that the statute of limitations for a construction defect claim is often a complicated, fact-intensive inquiry that should be explored fully by the claimant, defending party, and counsel.
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Personal Injury Claims.
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CDARA allows recovery for personal injuries caused by construction defects. But the statute of limitations analysis for such claims can be tricky. The clock on the two-year statute of limitations begins ticking when the owner first observes the defect that causes the injury, not the date the injury occurs. In fact, the statute of limitations might expire before the defect causes any injury.
For example, where improper drainage causes ice accumulation, the claim accrues when the ice accumulation is observed, not when someone slips on that ice resulting in injury. While recognizing that this "has the potential for unfair results," the Colorado Supreme Court has held that the language of the CDARA statute is clear and unequivocal. The claim must be brought within two years of the observation of the physical manifestations of the defect, regardless of when the injury occurs.
Notably, this only applies to claims against contractors. A person injured as a result of a dangerous condition on a property might still be able to bring a claim against the landowner pursuant to the Premises Liability Act.
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