The Subrogation Strategist

The Florida legislature recently enacted a law clarifying when the ten-year statute of repose begins to run for cases involving “improvements to real property,” as that phrase is used in Florida Statute Section 95.11. House Bill 377 was signed into law on June 14, 2017 and took effect in all cases accruing on or after July 1, 2017. This amendment is significant to subrogation professionals evaluating when cases involving contractors and design professionals are time barred.

Unlike a statute of limitations, which generally begins to run at the time of discovery of a cause of action, a statute of repose begins and ends at specified times regardless of discovery.  Florida Statute Section 95.11 sets forth a four-year statute of repose for actions based on the design, planning or construction of an improvement to real property, except when the action involves a latent defect. The time begins to run from “the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.” With respect to latent defects, the time period runs from the date the defect was or should have been discovered. It also sets the outer limit of any claim, regardless of discovery, at ten years.

The ten-year limitation has caused some confusion for practitioners in Florida. The statute states that an action “must be commenced within 10 years after the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.” A recent court decision added to the confusion by ruling that final payment by the owner was the date when there was a “completion of the contract” and, thus, was when the time period began to run. This created uncertainty for contractors looking to quantify their liability periods since payment times fluctuate and are often supplemented, thereby making it difficult to determine when a payment is “final.” It also opened the door for owners to extend the statute by delaying payment.

Overruling the courts, the recent amendment to the statute states that “[c]ompletion of the contract means the later of the date of final performance of all the contracted services or the date that final payment for such services becomes due without regard to the date final payment is made.” Now, if completion of the contract is the last event and, thus, the starting point for the running of the statute of repose, it is clear that the trigger is the latter of the last performance by the contractor or when the owner must pay for that performance.

While the amendment to Florida’s statute of repose provides some clarity for subrogation professionals in that the new standard is more definite than the older one, it also shortens the statutory time period since final payment – which would generally take place last – is no longer relevant to the analysis. Regardless, to properly evaluate a subrogation claim and if necessary, file suit in a timely manner, it is crucial for subrogation professionals to know when statutes of repose begin to run.