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Contractor's Contribution and Indemnity Claim Is Barred by Minnesota's 10-Year Statute of Repose
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May 14, 2007
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(A revised version of this article appears in The Construction Lawyer, Volume 27, No. 3, Summer 2007, published by the American Bar Association's Forum on the Construction Industry.)
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Howrey LLP
In July 1993, a contractor substantially completed construction of a home in Minnesota for the owner. In 2002, the owner discovered water intrusion and mold in the walls of the home. The owner's family alleged it was suffering health problems attributable to the presence of mold. In May 2003, the owner commenced an action against the contractor for defective construction of the home.
The 2002 version of Minnesota's statute of repose applicable to such claims provides:
Except where fraud is involved, no action by any person in contract, tort, or otherwise to recover damages for any injury to property, real or personal, or for bodily injury or wrongful death, arising out of the defective and unsafe condition of an improvement to real property, nor any action for contribution or indemnity for damages sustained on account of the injury, shall be brought against any person performing or furnishing the design, planning, supervision, materials, or observation of construction or construction of the improvement to real property or against the owner of the real property more than two years after discovery of the injury or, in the case of an action for contribution or indemnity, accrual of the cause of action, nor, in any event shall such a cause of action accrue more than ten years after substantial completion of the construction. Date of substantial completion shall be determined by the date when construction is sufficiently completed so that the owner or the owner's representative can occupy or use the improvement for the intended purpose.
Minnesota Statutes §541.051 1 (a) (2002).
Thus, the owner commenced its action just two months before the statute of repose took effect. The contractor answered the complaint in January 2004 and filed third-party actions against its subcontractors in March and April 2004 for contribution and indemnity. The subcontractors moved for summary judgment, based on the statute of repose, which the District Court granted.
The Court of Appeals reversed, holding that when a contribution or indemnity claim actually accrues within 2 years after the 10-year statutory repose period, the claim should be deemed as a matter of law to have accrued at the end of the 10 years following completion of construction (i.e., the last day of the repose period).
The Minnesota Supreme Court rejected this construction of the statute, reversed the Court of Appeals and reinstated summary judgment against contractor on its third-party claims. Weston v. McWilliams & Associates, Inc., 716 N.W.2d 634 (Minn. 2006). The Supreme Court held that the statute is plain and unambiguous on its face and did not require the strained construction articulated by the Court of Appeals. The Supreme Court also rejected the contractor's constitutional challenges to the statute of repose.
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For more information about the issues covered in this report, please contact John Ralls in our San Francisco office at 415-848-3362 or at rallsj@howrey.com or contact your Howrey attorney. For more information about Howrey's Construction Practice Group, click here.
©2007 Howrey LLP
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