Contested Nebraska Court of Appeals Ruling Finds Statute of Limitations for Construction Defect Claims Does Not Begin Running Until Expiration of Express WarrantyPublications - Client Alert | January 9, 2015
The Nebraska Court of Appeals recently found that when a contractor provides an owner with an express warranty to repair defects in a project, the four-year statute of limitations for breach of either that express warranty, or for the implied warranty of workmanlike performance, does not commence running until the end of the warranty period. See James Adams v. Manchester Park, L.L.C. and Southfork Homes, Inc., 22 Neb. App. 525, 885 N.W.2d 819 (Neb. Ct. App. 2014). The contractor involved in the decision has petitioned the Nebraska Supreme Court for further review of the case. However, if not altered by the Nebraska Supreme Court, Adams would mean that the statute of limitations for construction breach-of-warranty claims does not begin to run at substantial completion, but instead at the end of any contractually agreed warranty period. Contractors therefore will want to watch closely the Nebraska Supreme Court’s decision with regard to the Adams case.
Adams involved the construction and sale of a home. A “final walk-through” of the project occurred on September 19, 2007. At the walk-through, the contractor provided the homeowner with a one-year “New Home Limited Warranty” which covered “material defects in workmanship and materials.” Settlement issues appeared in the home within six months, which were addressed by the contractor. However, the settlement issues continued to appear after the expiration of the one-year warranty period. At that point, the contractor refused to participate further in remedying the issues.
On September 22, 2011 the homeowner filed a lawsuit against the contractor which included claims for breach of the express warranty and breach of the implied warranty of workmanlike performance. The trial court dismissed the lawsuit, finding the homeowner’s claims had not been timely brought within the four-year statute of limitations for construction defects set out in Neb. Rev. Stat. § 25-223 because they were filed more than four years after the home was completed.
On appeal, the Nebraska Court of Appeals reversed the trial court, finding that the statute of limitations for the homeowner’s breach of warranty claims commenced under Section 25-223 “at the expiration of the 1-year limited warranty,” and that therefore the lawsuit had been timely. The case involved residential rather than commercial construction, but the Court of Appeals did not make that distinction part of its decision. The Court of Appeals also did not distinguish in its ruling between the express breach of warranty claim and the claim for breach of the implied warranty of workmanlike performance. Without that distinction (and unless altered by the Nebraska Supreme Court), Adams stands for the proposition that when a contractor provides an owner with an express warranty to repair material defects in a project, the four-year statute of limitations for breach of either that express warranty, or for the implied warranty of workmanlike performance, does not commence running until the end of the express warranty period.
The Court of Appeals did not include in its analysis in Adams a discussion of prior Nebraska Supreme Court cases which find the statute of limitations for construction defect claims commences at substantial completion of a project. The contractor in Adams has filed a petition for further review of the decision with the Nebraska Supreme Court, asking the Court to reverse the decision in light of those prior cases. If the Nebraska Supreme Court does not agree to further review the case and alter the findings in Adams, the case will be authority that the inclusion of an express warranty in construction contracts can serve to expand the statute of limitations period for construction claims beyond the period that would apply in the absence of an express warranty.
For more information on our construction litigation practice, recent construction litigation news and alerts, please contact the author of this client alert.