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February 4, 2015

Dania, Inc. et al. v. Skanska USA Building, Inc, et al., 2014 Wn. App. LEXIS 3042 (Div. 2)

Division Two of the Washington Court of Appeals offers vague direction regarding the requirement that a nexus exist between construction services provided after substantial completion and a construction defect claim, when determining whether the claim is stale.

WHY THIS CASE IS IMPORTANT

The case highlights the need for contractors to keep detailed project records and to document dates of work and completion of services. Until Washington courts provide further clarity on how close the nexus between the work and the construction defect claim must be, it is apparently enough that the owner shows that the later-performed construction services could have caused the defect at issue. Evidence of a causal connection is not required.

FACTS OF THE CASE

The suit involved Skanska’s construction of a warehouse for Dania in 2005-06. The roofing subcontractor certified that the roof was watertight in December 2005. By January 2006, the building was substantially complete. However, further roofing work was performed as late as June 2006. Roof leaks were discovered in November 2006. Diana sued Skanska and the roofing subcontractor on April 4, 2012, alleging breach of contract and negligence. This was more than six years from substantial completion of the building but less than six years after the last of the roofing work. Division 2 was presented with the issue of whether the suit was timely under Washington’s construction services statute.

Washington courts apply the discovery rule to breach of construction contract claims, thereby potentially extending liability of one who constructs, alters or repairs any improvement upon real property for up to 12 years after substantial completion or termination of services—6 years for the claim to accrue under the statute of repose and 6 years after accrual before the statute of limitations terminates the right of action. The legislature enacted RCW 4.16.326(1)(g), which operates as an affirmative defense to the discovery rule in construction contract actions, to reduce the potential exposure of builders from 12 years to 6.

For contractors who perform final services on a project, the limitations period begins to run from the date their last service was provided, so long as that service gave rise to the cause of action. Courts have explained that there must be some nexus between the services performed after the date of substantial completion and the cause of action in order for the termination of services date to extend the limitations period. This is based on the language of RCW 4.16.300 providing that an action must “aris[e] from” a service and thereby requires a connection between the action and the service.

The majority confirmed the general rule from Parkridge Assocs. Ltd. v. Ledcor Indus., Inc., 113 Wn. App 592 (2002) that a nexus must exist between the work performed after substantial completion and the claims being made, in order for the limitations period to run from the later-completed work, as opposed to substantial completion. If no such nexus exists, the limitations periods begin to run at the earlier substantial completion date, thereby increasing the likelihood that the claims will be time-barred. The Court disagreed with Skansa’s argument that Dania must provide evidence that the work caused the leak, but it gave no description of how close of a nexus must exist. It determined that, because some roofing work was performed after substantial completion, and roof leaks were alleged, the nexus requirement was met.

 

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