In a decision with significant consequences concerning the amount of time after construction during which design professionals and contractors may be liable for defective services or work, the Massachusetts Supreme Judicial Court recently ruled the Commonwealth's six-year statute of repose does not bar a claim for contractual indemnification for defective design services. The decision adds clarity about how the statute of repose applies to negligence actions and how it does not apply to negotiated contractual obligations. Design professionals and contractors must be careful to negotiate contract terms that do not extend their liability for negligent services or work beyond the six-year statute of repose.
In Trustees of Boston University v. Clough, Harbour & Associates LLP, Boston University (“BU”) entered into a contract with the engineering firm Clough, Harbour & Associates (“CHA”) in 2012 for the design of a playing field and a parking facility underneath the field. The nearly $1 million design contract included an indemnification provision stipulating that CHA would compensate BU for "any and all" expenses incurred due to negligent design.
BU claimed the project encountered problems shortly after its 2013 completion because the design did not account for seasonal expansion in the joists supporting the parking structure, resulting in depressions that rendered the field unsafe. BU paid $25,000 for repairs and sought compensation from CHA, which refused to pay.
Ultimately, BU filed a lawsuit in 2020, and CHA sought dismissal based on the statute of repose, M.G.L. ch. 260, Sec. 2B. That statute first sets a three-year limit on “[a]ctions of tort for damages arising out of any deficiency or neglect in the design, planning, construction or general administration of an improvement to real property….” The statute further provides that, "in no event shall such actions be commenced more than six years after the earlier of the dates of: (1) the opening of the improvement to use; or (2) substantial completion of the improvement and the taking of possession for occupancy by the owner."
The Superior Court granted CHA’s motion for summary judgment on the ground that BU’s claims were barred by the statute of repose because the suit commenced more than six years from the date the field was opened for use. BU appealed and the SJC unanimously reversed the Superior Court’s decision, holding that BU’s indemnity claim was contractual in nature and not based in tort and, therefore, BU’s claim was not subject to the time limit in the statute of repose.
In distinguishing BU’s indemnification claim from a negligence claim, the SJC wrote, "[t]o prevail on its claim, the university must show the existence of a valid and enforceable indemnification clause, the occurrence of an event triggering the duty to indemnify, the provision of adequate notice to the indemnitor, and the failure of the indemnitor to fulfill its obligation as specified in the indemnification clause." The Court then added, "[b]y contrast, a negligence claim requires a plaintiff to show duty, breach, causation, and damages....Accordingly, the university's claim is contractual in nature, and the tort statute of repose does not bar it."
Decision Mirrors 1990 Ruling on Indemnification Provisions in Contracts
The Court’s decision relied heavily on Gomes v. Pan American Associates, a 1990 case in which the SJC held that enforcing an express indemnification clause was contractual in nature and not barred by the tort statute of repose. That case was similar to the BU case in that it involved an architect whose contract included an indemnity provision tied to a negligence standard. A patron of a mall designed by the architect sued the mall owner after suffering injuries in a fall caused by a design flaw. Long after the statute of repose's six-year limitation period had expired, the mall owner sued the architect to enforce the indemnification clause in their agreement with respect to the patron's negligence claim. The Court found in the mall owner’s favor, ruling that “[t]he language of the indemnification provision is overwhelmingly contractual” and, therefore, does not fall within the bar of tort actions in the statute of repose.
This decision in favor of BU is seen by some as contrary to the legislative intent behind the statute of repose, as it could be interpreted to mean liability exposure applies for the life of a project, removing any boundaries in time for those involved in designing and constructing of a project. It is possible that the Massachusetts Legislature may consider amending M.G.L. ch. 260, Sec. 2B to include repose protections for claims under contractual indemnity provisions that derive from tort-based or negligent conduct.
Takeaways
One thing clear from the BU decision is that design professionals and contractors must exercise great care when drafting and negotiating indemnity and other contractual terms that could extend their liability for design or construction defects beyond the six-year statute of repose.
