The Subrogation Strategist

When the validity of a construction defect claim depends on whether the claim is barred by the applicable state’s statute of repose, it is important to review the statute to identify when claims subject to the statute of repose accrue. In Busch v. Lennar Homes, LLC, 219 So.3d 93 (Fla. Ct. App. (5^th Dist.) 2017), the Court of Appeals of Florida clarified the accrual date for the statute of repose in cases where the accrual date depends on a construction contract’s completion date. Pursuant to Busch, the date of full performance under the contract, not the building’s purchase closing date, is the date on which claims accrue.

In Busch, Timothy Busch (Busch), pursuant to a Purchase and Sale Agreement, contracted to have Lennar Homes build him a house. Nearly ten years after closing on the home, Busch served Lennar Homes with a notice of construction defects, as required by Florida’s right-to-repair act. Shortly thereafter, but more than 10 years after the home’s closing date, Busch filed suit against Lennar Homes, alleging that there were multiple construction defects associated with the home. Lennar Homes, relying on Florida’s statute of repose, Fla. Stat. § 95.11(3)(c), filed a motion to dismiss Busch’s complaint.

Pursuant to Florida’s statute of repose, an action founded on the construction of an improvement to real property “must be commenced within 10 years after the date of actual possession by the owner . . . or the date of completion . . . of the contract between the . . . contractor and his or her employer, whichever date is latest.” Fla. Stat. § 95.11(3)(c). The contract at issue included a clause allowing Busch to inspect the property, identify defects that needed to be corrected and move into the property even if all the required repairs were not completed. The allegations in the complaint did not state when required repairs were completed.

Lennar Homes argued that the parties completed their contract at closing. In response, Busch argued that the contract expressly contemplated that closing could occur even if work required by the contract remained incomplete and, because the complaint did not allege that all work under the contract was completed before closing, the court should not dismiss his complaint. The court agreed with Busch and held that a construction contract is not complete until both sides of the contract have been performed. Thus, the court denied Lennar Home’s motion to dismiss.

Based on the analysis in Busch, when a subrogating insurer is relying on the contract completion date as the accrual date for cases subject to Florida’s statute of repose, subrogation professionals need to investigate whether, at the time of closing, all of the contract’s terms were fully performed by both parties. Absent the completion of all contract terms – including post-closing repair obligations – the contract is not “complete” within the meaning of the statute of repose.