Colorado State Senator Ray Scott recently introduced a bill (SB15-091) to reduce Colorado’s statute of repose for construction claims from 6 years down to 3 years. The bill is set to take effect on August 5, 2015, if the General Assembly adjourns on May 6, 2015, as scheduled, and no referendum petition is filed. If the bill passes, Colorado would have the shortest statute of repose for construction claims in the nation. By comparison, several states maintain statutes of repose of 10 years or longer.
A “statute of repose” is one of two types of timing limitations that cuts off legal rights if they are not acted on by a certain deadline. The more commonly known timing limitation is a “statute of limitations.” A statute of limitations fixes the time limit for bringing a claim once it has accrued. The time for accrual is the time when the claimant could first have maintained the action to a successful result. For breach of contract claims on a construction project, for example, the statute of limitations typically accrues at substantial completion.
The discovery rule provides, however, that the statute of limitations for some types of claims tolls until the claimant knew or should have known of the defendant’s breach. The discovery rule varies by state. Some states apply it only to torts, others apply it to breach of contract and tort claims.
A statute of repose establishes the outermost time in which a claim may be tolled by an applicable discovery rule. Thus, a statute of repose cuts off claims even if a claimant has not yet discovered it has been damaged.
Legislation proposing to shorten the statute of repose serves to reduce the amount of time after completion of a project that contractors and design professionals may be liable for work relating to the project. Property owners and potential buyers should be wary of bills like Colorado’s SB15-091 because construction defects are often latent (hidden) in nature and may not be discovered until well after substantial completion of a project. For example, structural systems may be hidden from view by drywall, stucco, EIFS, or other wall coverings. If structural systems are defectively designed or constructed, an owner may not be aware of the deficiency until a catastrophic failure, which could occur several years after substantial completion.
Commentators suggest that SB15-091 has little chance at survival because it was not introduced with a co-sponsor in Colorado’s House of Representatives. Even if the bill does not move forward, it serves as a good reminder that construction-related firms, and their counsel, should be aware of the applicable statutes of limitations and statutes of repose that affect their practices.