Michael L. Meyer | Taft Stettinius & Hollister | March 15, 2019
In a previous article, we discussed the unique nature of professional liability claims in construction matters. That article discussed the proof required in a professional liability claim and insurance considerations exclusive to a professional liability claim. Another important consideration is the period during which a party must file its suit.
Each state has different statutes of limitation—the time periods during which lawsuits must be filed. In nearly every state, different claims are subject to different statutes of limitation. If a suit is not filed within the time allowed by statute, the claim is forever barred. Because state law typically governs construction contracts and the relationship between parties on a project, state laws also govern the limitations period.
In most states, there are separate statutes of limitation for claims based on breach of contract, property damage and general negligence damages. Some states also have specific statutes of limitation that govern claims of professional liability against state-licensed professionals. Examples include doctors, dentists, medical providers and others. Some states also include surveyors, architects and engineers in their professional liability statutes. Unfortunately, some do not, and simply use the generic term “professional.” This can lead to confusion over which claims are subject to the statute. In any event, each statute sets a time during which a plaintiff must file suit. Often the time periods differ from claim to claim.
On a construction project, many “professionals” are engaged to perform various services. Typically there is a contract specifying the scope of those services. Surveyors, architects, engineers and other professionals are usually engaged by contract. Often those contracts require the professional to perform their services in a “workmanlike” manner. Some even require compliance with certain specified professional standards.
When a problem arises with the professional’s performance, the first question a potential plaintiff must ask is “what type of claim do I have?” As a recent federal case in the Southern District of Indiana highlights, this is not always a simple question to answer. In Generali – U.S. Branch v. Lachel & Assoc., Inc., there was a structural collapse on a bridge project. The contractor sued a contracted engineer claiming a flaw in the engineer’s design. The contractor alleged the engineer breached its contract by providing professional services below the applicable standard of care. The engineer moved to dismiss, arguing that the claim was for negligence in the performance of professional services, not a breach of contract. The distinction was important because Indiana has a much shorter statute of limitations for negligence claims than for breach of contract claims. The lawsuit was filed within the longer breach of contract statute but after the expiration of the shorter negligence limitation period. The court looked to the substance of the claim, rather than the title or label the plaintiff used when filing. Finding that the nature and substance of the claim was based on negligence, the court dismissed the complaint.
Generali is just one example of the importance of understanding the nature of a potential claim at an early stage. The case is also a warning against reliance on a mere general understanding of statutes of limitation. A plaintiff relying solely on a basic understanding might mistakenly believe it has much more time than it does to pursue a claim. As a result, the plaintiff may delay consulting outside counsel. This can mean the difference between an opportunity to pursue the case and being shown the courthouse door.
Those engaging “professionals” should understand that it is the nature and substance of the claim that determines the applicable statute of limitations. The mere fact that the work was done under a contract is not determinative. Neither is the fact that the professional’s performance may appear negligent. Recognizing this distinction and involving counsel early may save an otherwise valid claim from the trash heap of legal missteps.