On May 23, 2018, the Ohio Supreme Court accepted the appeal of New Riegel Local School Dist. Bd. of Edn. v. Buehrer Group Architecture & Eng. Inc., 2017-Ohio-8521 (Nov. 13, 2017). The decision under review held that breach of contract claims are not subject to Ohio’s 10-year construction statute of repose. The Court’s decision is critically important and will have far-reaching ramifications.
Some have argued that Ohio’s 8-year breach of contract statute of limitations is shorter than the 10-year statute of repose, so it doesn’t matter if the statute of repose applies to breach of contract claims. They argue that the 8-year statute of limitations is sufficient to prevent stale claims, so there is no need to apply the statute of repose to breach of contract claims. This argument oversimplifies the issue.
One key difference between a statute of limitations and a statute of repose is that general statutes of limitations do not run against the State of Ohio. State v. Karl R. Rohrer Assocs., Inc., 2018-Ohio-65 (“time does not run against the king”); State, Dept. of Transp. v. Sullivan, 38 Ohio St.3d 137 (1988) (same). The State of Ohio is not barred, by general statutes of limitations, from bringing claims against design professionals and contractors; not 8 years after the project is completed, not 10 years or even 15 years.
This is no small matter as state agencies are major builders in Ohio. The Ohio Department of Transportation invested approximately $2 Billion Dollars on 1,016 projects in 2017. The Ohio Facilities Construction Commission awarded approximately $317 Million Dollars in new contracts and managed appropriations on over 230 projects totaling almost $87 Million Dollars. Both are state agencies and, accordingly, neither is constrained by Ohio’s general statutes of limitations.
Ohio’s statute of repose was enacted in 2005 to strike a rational balance between the rights of prospective claimants and the rights of design professionals and construction contractors. In order to effectuate this stated purpose, the State of Ohio should be subject to some limitations period. A decision holding that the statute of repose applies to breach of contract claims will do just that. As the statute of repose is not a statute of limitations (see Rohrer, supra.), it will apply to regulate breach of construction contract claims brought by the State. It will provide a final and predictable end to all potential construction claims on a project. Clarity, here, is important as it will provide guidance on how long design professionals need to maintain their “claims made” professional liability policies and how long construction professionals should maintain project records, among other things.
The ruling in New Riegel will also affect sureties issuing bonds to Ohio contractors to guarantee the performance of their contracts. These sureties are frequently called upon to remediate damage caused by latent construction defects. No fixed end date terminating their potential liability reduces certainty and predictability. The result is increased premiums and overall construction costs. This only compounds the problem of having to defend stale claims, where witnesses are unavailable and critical documents have been lost or destroyed. Further, sureties cannot limit their exposure by placing a limitation period in the bond itself, as the bond form they must use on state projects is dictated by statute and contains none. Ohio’s statute of repose should apply to breach of contract claims. Finality and certainty will reduce bond premiums, insurance premiums and overall construction costs. It will also effectuate the legislature’s stated intent in striking a proper balance between the rights of prospective claimants and the rights of construction professionals.