New Hampshire’s statute of repose for construction claims, RSA 508:4-b, puts a time limit of eight years from the date of substantial completion on the filing of most lawsuits challenging construction and design deficiencies in the creation of an improvement to real property, after which time no suit can be brought regardless of whether the claim was latent and not discoverable for most or all of that period. In this respect it is unlike the statute of limitations, RSA 508:4, whose three-year clock does not start ticking until the claim “accrues” -- which may be more than three years after the breach of duty occurs if the breach and resulting injury were neither discovered nor reasonably discoverable until later.
The statute of limitations operates differently with respect to indemnity claims, which “do not accrue for the purposes of the statute of limitations until a judgment has been paid by the third-party plaintiff” because the “statute of limitations cannot possibly start to run on an indemnity claim until the party seeking indemnification suffers a loss.” Jaswell Drilling Corp. v. General Motors Corp., 129 N.H. 341, 347 (1987). Often a suit brought within that three year limitations period will result in a judgment beyond it, yet still allow the loser’s indemnification suit against the indemnitor to proceed even though filed well more than three years after the underlying claim accrued. But what if the party seeking indemnification suffers that judgment, that “loss,” more than eight years after substantial completion of the improvement giving rise to the underlying claim? Does the statute of repose shut out his right to indemnity?
A recent decision from New Hampshire’s federal district court says it does. In Continental Western Insurance Co. v. Superior Fire Protection, Inc., Civil No. 18-cv-117-JL, 2019 WL 1318274 (D.N.H. March 22, 2019), the inspector/tester of a sprinkler system was sued by the subrogee of the hotel where the system had failed, and in turn sought indemnity or contribution from the installer of the system. The installer, having substantially completed its work more than eight years prior to the lawsuit, sought refuge under the statute of repose. The inspector/tester countered that its claim for indemnity did not accrue until it was sued by the subrogee. But “accrual” is not the trigger under the statute of repose, said Judge LaPlante. Rather, substantial completion is the trigger, barring indemnity and contribution claims “even if those claims would — as they would here — accrue after the repose period has run.” The Court granted the installer’s motion for summary judgment.
What is somewhat unusual about this case is the fact that the underlying action by the subrogee against the inspector/tester was not itself barred by the statute of repose (because the allegedly deficient inspection/testing of the sprinkler system was not a “deficiency in the creation of an improvement to real property,” and in any event occurred years after that improvement was substantially complete). In most construction settings the would-be indemnitee, if sued within eight years of substantial completion of the improvement at issue, will still be timely in seeking indemnity from an indemnitor -- as long as he doesn’t wait to suffer a judgment first. And he doesn’t need to wait. As Judge McNamara noted in Penta Corporation v. Town of Newport, No. 212-2015-CV-00011, 2015 WL 11182532 (Merrimack Super. Ct., Nov. 20, 2015), “While technically the right to indemnity arises when a judgment is rendered in favor of another, it has long been the practice to try indemnity claims, when properly pled, along with an underlying action.” Indemnity claimants would be well served to file their cross-claims against potential indemnitors in the underlying action, before the eight-year repose clock winds down.
Quaere: Continental Western concerned a claim of derivative or equitable indemnity, not one of express contractual indemnity. If there had been such a contractual right to indemnity, would a claim for breach of that contract still have been barred by the statute?
The statute of limitations operates differently with respect to indemnity claims, which “do not accrue for the purposes of the statute of limitations until a judgment has been paid by the third-party plaintiff” because the “statute of limitations cannot possibly start to run on an indemnity claim until the party seeking indemnification suffers a loss.” Jaswell Drilling Corp. v. General Motors Corp., 129 N.H. 341, 347 (1987). Often a suit brought within that three year limitations period will result in a judgment beyond it, yet still allow the loser’s indemnification suit against the indemnitor to proceed even though filed well more than three years after the underlying claim accrued. But what if the party seeking indemnification suffers that judgment, that “loss,” more than eight years after substantial completion of the improvement giving rise to the underlying claim? Does the statute of repose shut out his right to indemnity?
A recent decision from New Hampshire’s federal district court says it does. In Continental Western Insurance Co. v. Superior Fire Protection, Inc., Civil No. 18-cv-117-JL, 2019 WL 1318274 (D.N.H. March 22, 2019), the inspector/tester of a sprinkler system was sued by the subrogee of the hotel where the system had failed, and in turn sought indemnity or contribution from the installer of the system. The installer, having substantially completed its work more than eight years prior to the lawsuit, sought refuge under the statute of repose. The inspector/tester countered that its claim for indemnity did not accrue until it was sued by the subrogee. But “accrual” is not the trigger under the statute of repose, said Judge LaPlante. Rather, substantial completion is the trigger, barring indemnity and contribution claims “even if those claims would — as they would here — accrue after the repose period has run.” The Court granted the installer’s motion for summary judgment.
What is somewhat unusual about this case is the fact that the underlying action by the subrogee against the inspector/tester was not itself barred by the statute of repose (because the allegedly deficient inspection/testing of the sprinkler system was not a “deficiency in the creation of an improvement to real property,” and in any event occurred years after that improvement was substantially complete). In most construction settings the would-be indemnitee, if sued within eight years of substantial completion of the improvement at issue, will still be timely in seeking indemnity from an indemnitor -- as long as he doesn’t wait to suffer a judgment first. And he doesn’t need to wait. As Judge McNamara noted in Penta Corporation v. Town of Newport, No. 212-2015-CV-00011, 2015 WL 11182532 (Merrimack Super. Ct., Nov. 20, 2015), “While technically the right to indemnity arises when a judgment is rendered in favor of another, it has long been the practice to try indemnity claims, when properly pled, along with an underlying action.” Indemnity claimants would be well served to file their cross-claims against potential indemnitors in the underlying action, before the eight-year repose clock winds down.
Quaere: Continental Western concerned a claim of derivative or equitable indemnity, not one of express contractual indemnity. If there had been such a contractual right to indemnity, would a claim for breach of that contract still have been barred by the statute?
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