The Subrogation Strategist

Statutes of repose establish a legislature’s determination of when defendants should be free from liability. As set forth in Nevada Revised Statute (NRS) 11.202, the statute of repose for construction improvements in Nevada is six years after “substantial completion.” In Somersett Owners Ass’n v. Somersett Dev. Co., 492 P.3d 534 (Nev. 2021), the Supreme Court of Nevada (Supreme Court) discussed when a construction improvement is substantially complete, as defined by the common law, for purposes of NRS 11.202. Because the plaintiff did not establish that its suit was filed within six years of when the rockery walls at issue were substantially complete, the Supreme Court affirmed the decision of the court below.

In this case, Q & D Construction, Inc. (Q & D) graded the property in 2006 and Parsons Bros Rockeries, Inc. (Parsons) then constructed rockery walls to support terraced lots. This phase of the construction ceased in December of 2006, and Stantec Consulting Services, Inc. (Stantec) issued letters to Somersett Development Company, Ltd. (Somersett) indicating that the work was inspected and approved. Although the expected lifespan of the rockery walls was 50 years, some began failing in 2011. In 2017, the Somerset Owners Association (SOA) brought suit against Somersett, Parsons, Q&D and Stantec (collectively Respondents) to recover for the damage associated with the failing rockery walls. The Respondents, relying on NRS 11.202, filed a motion for summary judgment, which the lower court granted, and this appeal followed.

NRS 11.202 prohibits the commencement of actions more than six years after substantial completion of the improvement to the real property in question. NRS 11.2055 defines the term “substantial completion,” and states that a property shall be deemed substantially complete on the date on which, among other things, a certificate of occupancy is issued for the improvement. Where, however, none of the applicable events (such as issuing a certificate of occupancy) occur, the date of substantial completion is determined by the rules of the common law. NRS 11.2055(2). Addressing a question of first impression, the Supreme Court discussed when an improvement is substantially complete under the common law. Adopting the definition of the term “substantial completion” offered by the American Institute of Architects (AIA), the court held that an improvement is substantially complete pursuant to the common law at “the stage in the progress of the Work when the Work or designated portion thereof is sufficiently complete in accordance with the Contract Documents so that the Owner can occupy or utilize the Work for its intended use.”

As noted by the Supreme Court, the question of when an improvement is substantially complete is a fact-intensive inquiry, based on the circumstances of each case. In this matter, because the letters stating that the rockery walls were substantially complete in 2006 were buttressed by the fact that Parsons ceased construction around the same time, the walls were substantially complete in December of 2006 at the latest. Thus, the court held that the SOA’s suit was barred by the statute of repose. In holding that the SOA’s suit was time-barred, the court rejected the opinions of the SOA’s experts that the walls were not substantially complete until they were fit to be utilized, which had not yet occurred. As noted by the court, accepting this twist on the AIA’s definition would, as a practical matter, defeat the statute of repose. Moreover, the deviations in construction standards noted related to the quality of construction, not whether the construction was substantially complete.

The Supreme Court also rejected the plaintiff’s argument that the statute of repose should be tolled to prevent unfairness because Somerset controlled the board of the homeowner’s association until 2013. As noted by the court, most status of repose cannot be tolled. Although the court did not resolve the issue of whether a tolling exception applied, it held that because there was no evidence of intentional fraud, the repose period was not subject to equitable tolling.

This case serves as a reminder that statutes of repose are more final than statutes of limitations and, generally, cannot be tolled. When faced with a statute of repose, subrogation practitioners should review the applicable jurisdiction’s statutory language and where, as here, the repose period runs from “substantial completion,” determine the meaning of that term.