IDAHO CONSTRUCTION CLAIMS RESOURCES
1 Construction Claims
- 1.1 Limitations & Repose Periods
- 1.2 Right to Repair Laws and/or Pre-Suit Statutory Procedures
- 1.3 Indemnity and Contribution
- 1.4 Certificate of Merit – Experts
- 1.5 Economic Loss Rule
- 1.6 Contractor Licensing Requirements
- 1.7 Common Law & Statutory Claims
- 2 Construction Damages
- 3 Trigger of Coverage
Limitations & Repose Periods
Statute of Limitations
- An action based on a written contract must be brought within five (5) years from the date of completion. Idaho Code § 5-216.
- An action based on an oral contract must be brought within four (4) years following the date of completion. Idaho Code § 5-217.
- An action for personal injuries, negligence, professional malpractice or implied warranties has a two (2) year statute of limitations. Idaho Code § 5-219(4).
- In the event a cause of action does not have a statute of limitation specially prescribed, Idaho has a four (4) year statute of limitations. Idaho Code § 5-224.
Statute of Repose
Idaho’s statute of repose applies to causes of action arising out of design or construction improvements to real property. Idaho Code § 5-241
Actions will be deemed to have accrued and the statute of limitations shall begin to run as to actions against any person by reason of his having performed or furnished the design, planning, supervision or construction of an improvement to real property, as follows:
i Tort actions, if not previously accrued, shall accrue and the applicable limitation statute shall begin to run six (6) years after the final completion of construction of such an improvement. Idaho Code § 5-241(a).
ii Contract actions shall accrue and the applicable limitation statute shall begin to run at the time of final completion of construction of such an improvement. Idaho Code § 5-241(b).
The statute of repose terminates liability within a set time after completion of a construction project; specifically:
i Eight (8) years for a tort claim, which is six (6) years of repose and two (2) years for the applicable statute of limitations as set forth under Idaho Code § 5-219.
ii Five (5) years for a written contract claim, which represents the actual accrual of the statute of limitations pursuant to Idaho Code § 5-216 upon substantial completion of the contract work.
iii Four (4) years for oral contract claim, which represents the actual accrual of the statute of limitations pursuant to Idaho Code § 5-217 upon substantial completion of the contract work.
Right to Repair Laws and/or Pre-Suit Statutory Procedures
Idaho has enacted the Notice and Opportunity to Repair Act (“NORA”) for claims involving construction defects. Idaho Code §§ 6-2501-2504.
a. NORA only applies to lawsuits or actions “for damage or the loss of use of real or personal property caused by a defect in the construction of a residence or in the substantial remodel of a residence.” Idaho Code § 6-2502(1).
b. A residence is defined as a “single-family house, duplex, triplex, quadraplex, condominium or a unit in a multiunit residential structure.” Idaho Code § 6-2502(7).
The purpose of NORA is to give construction professionals the opportunity to fix construction defects before a lawsuit is filed.
a. Prior to commencing an action against a construction professional for a construction defect, the claimant shall serve written notice of claim on the construction professional. Idaho Code § 6-2503(1).
b. The notice of claim shall state that the claimant asserts a construction defect claim against the construction professional and shall describe the claim in reasonable detail sufficient to determine the general nature of the defect. Id.
c. Any action commenced by a claimant prior to compliance with the requirements of this section shall be dismissed by the court without prejudice and may not be recommenced until the claimant has complied with the requirements of this section. Id.
d. If a written notice of claim is served under this section within the time prescribed for the filing of an action under this chapter, the statute of limitations for construction-related claims is tolled until sixty (60) days after the period of time during which the filing of an action is barred. Id.
Notice of a claim alleging construction defect triggers a construction professional’s duty to respond under NORA. Idaho Code § 6-2503(2).
a. Within twenty-one (21) days after service of the notice of claim, the construction professional shall serve a written response on the claimant. Idaho Code § 6-2503(2).
b. Pursuant to Idaho Code § 6-2503(2)(a)-(c), the written response shall:
- Propose to inspect the residence that is the subject of the claim and to complete the inspection within a specified time frame. The proposal shall include the statement that the construction professional shall, based on the inspection, offer to remedy the defect, compromise by payment, or dispute the claim;
- Offer to compromise and settle the claim by monetary payment without inspection; or
- State that the construction professional disputes the claim and will neither remedy the construction defect nor compromise and settle the claim.
c. If the construction professional disputes the claim or does not respond to the claimant’s notice of claim within twenty-one (21) days, the claimant may bring an action against the construction professional for the claim described in the notice of claim without further notice. Idaho Code § 6-2503(3)(a).
Indemnity and Contribution
Idaho abolished the common-law doctrine of joint and several liability for all cases except those involving defendants acting in concert and cases where liability is vicarious. Idaho Code § 6-803; Jones v. HealthSouth Treasure Valley Hosp., 147 Idaho 109 (Idaho 2009).
Tortfeasors have a right to contribution from each other for any payment beyond their proportionate share, provided that joint and several liability applies. Idaho Code § 6-803; Horner v. Sani-Top, Inc., 143 Idaho 230 (Idaho 2006).
Where the plaintiff is 50 percent or more at fault, he/she may not recover. Idaho Code § 6-801; Ross v. Coleman Co., 141 P.3d 1099 (Idaho 1988).
Where the plaintiff is at fault to some degree that is less than 50 percent, he/she may recover his damages less the percentage that is attributable to his own actions. Idaho Code § 6-801; Salinas v. Viestra, 107 Idaho 984 (Idaho 1985).
Partial settlement by a jointly and severally liable tortfeasor reduces the remaining tortfeasors’ liability by the settlement amount. Idaho Code § 6-805; Quick v. Crane, 111 Idaho 759 (Idaho 1986).
Where the defendants are only jointly (and not severally) liable, partial settlement has no effect on the remaining defendants’ liability. Idaho Code § 6-805 (1991); Tuttle v. Wayment Farms, 131 Idaho 105 (Idaho 1998).
Certificate of Merit – Experts
In Idaho, there is no requirement for filing a certificate or affidavit of merit for claims against design or construction professionals.
Economic Loss Rule
“Unless an exception applies, the economic loss rule prohibits recovery of purely economic losses in a negligence action because there is no duty to prevent economic loss to another.” Blahd v. Richard B. Smith, Inc., 141 Idaho 296, 300 (2005) (citing Duffin v. Idaho Crop Improvement Ass’n., 126 Idaho 1002, 1007 (1995); Tusch Enters. v. Coffin, 113 Idaho 37, 41 (1987); Clark v. International Harvester Co., 99 Idaho 326, 336 (1978)).
The rule applies to negligence cases in general and its application is not restricted to products liability cases. Blahd, 141 Idaho at 300 (quoting Ramerth v. Hart, 133 Idaho 194, 197 (1999)).
“[E]conomic loss is recoverable in tort as a loss parasitic to an injury to person or property.” Duffin v. Idaho Crop Improvement Ass’n, 126 Idaho 1002, 1007 (1995).
“Economic loss includes costs of repair and replacement of defective property which is the subject of the transaction, as well as commercial loss for inadequate value and consequent loss of profits or use.” Bladh, 141 Idaho, 296 300. Conversely, “property damage encompasses damage to property other than that which is the subject of the transaction.” Id.
An exception to the economic loss rule is applicable in cases involving a special relationship between the parties, such as professional or quasi-professional relationship. Duffin, 126 Idaho 1002, 1008.
Contractor Licensing Requirements
Contractor - The Idaho Contractor Registration Act (“ICRA”) requires all contractors to register as a contractor with the state. Idaho Code § 54-5204.
- The ICRA exempts certain professionals who are licensed, registered, or otherwise regulated by the state from registering, including but not limited to architects and engineers. Idaho Code § 54-5205 (Exemptions are set forth in this section).
Electrical Contractors – Any person, partnership, company, firm, association or corporation engaging in, conducting, or carrying on the business of installing wires or equipment to carry electric current or installing apparatus to be operated by such current, or entering into agreements to install such wires, equipment or apparatus, shall be known as an electrical contractor and must be licenses. Idaho Code §§ 54-1002, 54-1003A.
Public Works Contractors – Pursuant to Idaho Code § 54-1902, it is illegal for any person to engage in the business or act in the capacity of a public works contractor without first obtaining a license from the Public Works Contractors State License Board, unless exempt under Idaho Code § 54-1903.
- The qualifications required of an applicant to receive a public works contractor license is listed under Idaho Code § 54-1910.
- The license must be renewed annually. Idaho Code § 54-1912.
Plumbers must be certified by the Plumbing Board of the Department of Labor and Industrial Services. Idaho Code § 54-2620.
Common Law & Statutory Claims
Liability for constructional professionals is derived from common law tort and contract principles as well as the Idaho Code.
Cost of Repair
As set forth under Idaho Code § 6-2504(1)(a)-(d), the claimant may recover only the following damages proximately caused by a construction defect:
- The reasonable cost of repairs necessary to cure any construction defect, including any reasonable and necessary engineering or consulting fees required to evaluate and cure the construction defect, that the contractor is responsible for repairing under this chapter;
- The reasonable expenses of temporary housing reasonably necessary during the repair period;
- The reduction in market value, if any, to the extent that the reduction is due to structural failure; and
- Reasonable and necessary attorney’s fees.
If a construction professional fails to make a reasonable offer as required under the Act, or fails to make a reasonable attempt to complete the repairs specified in an accepted offer, or fails to complete, in a good and workmanlike manner, the repairs specified in an accepted offer, the limitations on damages and defenses to liability provided for in this section shall not apply. Idaho Code § 6-2504(2).
Pursuant to Idaho Code § 6-2504(3), if a claimant denies a request to inspect as provided for in the Act, unreasonably rejects an offer to remedy the construction defect or does not permit the construction professional a reasonable opportunity to repair the defect pursuant to an accepted offer of settlement, the claimant may not recover an amount in excess of:
- The reasonable cost of the offered repairs which are necessary to cure the construction defect and which are the responsibility of the construction professional; or
- The amount of a reasonable monetary settlement offer made under the Act; and
- The amount of reasonable and necessary attorney’s fees and costs incurred before the offer was rejected or considered rejected.
The total damages awarded in a suit subject to this chapter may not exceed the greater of the claimant’s purchase price for the residence or the current fair market value of the residence without the construction defect. Idaho Code § 6-2504(4)
Diminution in Value
If a breach results in defective construction, the injured party may recover damages based on either (1) the diminution in the market price of the property caused by the breach, or (2) the reasonable cost of remedying the defects, if that cost is not clearly disproportionate to the probable loss in value to him. Gilbert v. Tony Russell Const., 115 Idaho 1035, 1039 (Ct. App. 1989) (citing Restatement (Second) of Contracts § 348(2).
- The “diminution in the market price” is measured as the difference between the market price that the property would have had without the defects and the market price of the property with the defects. Gilbert v. City of Caldwell, 112 Idaho 386, 394 (Ct. App. 1987) (citing Restatement (Second) of Contracts § 348, comment c).
- The injured party must prove the diminution in value caused by the other’s breach with reasonable certainty, or damages are not recoverable. Restatement (Second) of Contracts § 352.
Punitive damages are awarded to a claimant, over and above what will compensate the claimant for actual personal injury and property damage, to serve the public policies of punishing a defendant for outrageous conduct and of deterring future like conduct. Idaho Code § 6-1601(9).
According to Idaho case law, “while punitive damages may be recovered in a contract action, they are not favored in the law and therefore should be awarded only in the most compelling circumstances; they should be awarded cautiously and within narrow limits.” Cuddy Mountain Concrete, Inc. v. Citadel Constr., Inc., 121 Idaho 220, 227 (Ct. App. 1992).
Punitive damages may be available in construction contract cases as a sanction against oppressive conduct. Cuddy Mountain, 121 Idaho 220.
- The Cuddy Mountain case involved a breach of contract claim arising from a contract between a general contractor (Citadel) and a subcontractor (Cuddy Mountain). Citadel terminated the contract without giving Cuddy Mountain the required seven-day written notice of termination. Id. Citadel claimed that it terminated the contract because of Cuddy Mountain’s poor performance. Cuddy Mountain, 121 Idaho at 223.
- In Cuddy Mountain, the court determined that the following behavior by Citadel constituted oppressive conduct sufficient to support an award of punitive damages: 1) the evidence showed that Citadel’s decision to terminate “was conceived in frustration and consummated in anger” and there was no evidence that Citadel gave any thought to the consequences of its decision; 2) the termination in fact caused financial hardship to Cuddy Mountain; 3) Citadel refused to pay the balance Cuddy Mountain demanded for the work it had performed; and 4) following termination, Citadel altered certain daily reports which had been prepared prior to the termination. Cuddy Mountain, 121 Idaho at 227-28.
“In any action seeking recovery of punitive damages, the claimant must prove, by clear and convincing evidence, oppressive, fraudulent, malicious or outrageous conduct by the party against whom the claim for punitive damages is asserted.” Idaho Code § 6-1604(1).
“In all civil actions in which punitive damages are permitted, no claim for damages shall be filed containing a prayer for relief seeking punitive damages. However, a party may, pursuant to a pretrial motion and after hearing before the court, amend the pleadings to include a prayer for relief seeking punitive damages. The court shall allow the motion to amend the pleadings if, after weighing the evidence presented, the court concludes that, the moving party has established at such hearing a reasonable likelihood of proving facts at trial sufficient to support an award of punitive damages. A prayer for relief added pursuant to this section shall not be barred by lapse of time under any applicable limitation on the time in which an action may be brought or claim asserted, if the time prescribed or limited had not expired when the original pleading was filed.” Idaho Code § 6-1604(2).
A judgment for punitive damages shall not exceed the greater of two hundred fifty thousand dollars ($250,000) or an amount which is three (3) times the compensatory damages contained in such judgment. If a case is tried to a jury, the jury shall not be informed of this limitation. Idaho Code § 6-1604(3).
In any civil action the court may award reasonable attorney fees, including paralegal fees, to the prevailing party or parties when provided for by any statute or contract. Rule 54(e)(1) of the Idaho Rules of Civil Procedure.
As set forth under Idaho Code § 12-121, the court may award may award reasonable attorney’s fees to the prevailing party or parties when it finds that the case was brought, pursued or defended frivolously, unreasonably or without foundation.” Rule 54(e)(2) of the Idaho Rules of Civil Procedure; Idaho Code § 12-121.
Joint and Several Liability (specific to construction)
Idaho abolished the common-law doctrine of joint and several liability for all cases except those involving defendants acting in concert and cases where liability is vicarious. Idaho Code § 6-803.
Cost Incurred to Access Repair Areas
As set forth in relevant part under Idaho Code § 6-2504(1)(a), in a suit alleging damages proximately caused by a construction defect, the claimant may recover “[t]he reasonable cost of repairs necessary to cure any construction defect, including any reasonable and necessary engineering or consulting fees required to evaluate and cure the construction defect …”.
“Consequential damages are not recoverable unless specifically within the contemplation of the parties at time of contracting.” Silver Creek Computers, Inc. v. Petra, Inc., 136 Idaho 879, 884 (2002) (citing Appel v. LePage, 135 Idaho 133 (2000); Brown’s Tie & Lumber Co. v. Chicago Title Co. of Idaho, 115 Idaho 56, 61 (1988)).
“Consequential damages need not be precisely and specifically foreseen; but they must have been reasonably foreseeable, and within the contemplation of the parties, when the contract was made … Whether such damages were reasonably foreseeable and within the contemplation of the parties is a question of fact.” Strate v. Cambridge Telephone Co., Inc., 118 Idaho 157, 160-61 (Ct. App. 1990) (citations omitted).
Trigger of Coverage
Definition of an Occurrence
The insurance policies often define in their terms what constitutes an “occurrence.”
“If the insurance policy is clear and unambiguous, the determination of the insurance policy’s meaning and legal effect are questions of law.” City of Idaho Falls v. Home Indem. Co., 126 Idaho 604, 607 (1995). “The meaning of the insurance policy and the intent of the parties must be determined from the plain meaning of the insurance policy’s own words.” Id.
The mere fact that a term is undefined in a policy does not make that term ambiguous if it has a settled legal meaning. National Union Fire Ins. Co. of Pittsburgh, P.A. v. Dixon, 141 Idaho 537, 540 (2005).
It is well settled in Idaho that “the time of the occurrence of an ‘accident,’ within the meaning of a liability indemnity policy, is not the time the wrongful act was committed but the time the complaining party was actually damaged.” Millers Mut. Fire Ins. Co. of Texas v. Ed Bailey, Inc., 103 Idaho 377, 379 (1982) (quoting National Aviation Underwriters, Inc. v. Idaho Aviation Ctr. Inc., 93 Idaho 668, 670 (1970)).
Even if the term “occurs” is not defined in the policy, Idaho case law makes it clear that an accident occurs during the policy period in which the policy holder was actually damaged, and not the period in which the event giving rise to the loss occurred. Melichar v. State Farm Fire and Cas. Co., 143 Idaho 716, 721 (2007).
Duty to Defend
The duty of an insurance company to defend its insured arises when a complaint is filed against the insured which, reading the allegations in the complaint broadly, reveals a potential for liability that would be covered by the policy. Shunn Const., Inc. v. Royal Ins. Co. of America, 127 Idaho 97, 98 (1995).
Contractual Indemnity – In most circumstances, Idaho law permits a party to contract for indemnification; however, the obligation to indemnify is to be strictly construed and the status of indemnitee is interpreted narrowly. Barnett v. Eagle Helicopters, 122 Idaho 92, 96 (Idaho Ct. App. 1992) (the court set forth that the rule of interpretation of construction contract indemnity is that the indemnitor is entitled to have his undertaking strictly construed, particularly in those cases in which the agreement was prepared by the indemnitee).
Anti-Indemnity Statutes – Idaho law prohibits indemnification in construction contracts that intend to indemnify another party against liability for damages arising out of bodily injury or damage to property resulting from the sole negligence of the indemnitee.
As set forth under Idaho Code § 29-114, “A covenant, promise, agreement or understanding in, or in connection with or collateral to, a contract or agreement relative to the construction, alteration, repair or maintenance of a building, structure, highway, appurtenance and appliance, including moving, demolition and excavating connected therewith, purporting to indemnify the promisee against liability for damages arising out of bodily injury to persons or damage to property caused by or resulting from the sole negligence of the promisee, his agents or employees, or indemnitees, is against public policy and is void and unenforceable.”
Coverage for AI’s own negligence vs. vicarious liability for Named Insured
Determining Primary and Non-Contributory vs. Excess Position
AI carrier’s rights to reimbursement for defense expenses from other, co-primary carriers
Insureds Right to Independent Counsel and Consequences of Rejecting a Defense
The courts in Idaho have not directly considered the question of whether an insured is entitled to independent counsel when a conflict of interest exists; however, the Supreme Court indirectly considered that question in Boise Motor Car Co. v. St. Paul Mercury Indemnity Co., 62 Idaho 438 (1941).
In Boise Motor, the Court briefly discussed the consequences that flow from an insurer reserving rights in connection with a matter, explaining that if the insured did not consent to the reservation of rights, and the insurer continued to assert a right to withdraw, the insurer was in breach of the insurance contract such that it was appropriate for the insured to protect itself by employing its own counsel. Id., 62 Idaho at 449. In other words, if the insurer insists on representing an insured under a reservation of rights without the consent of the insured, the insured is justified in employing independent counsel at the insurer’s expense.
It is generally recognized that coverage defenses may be properly preserved by a reservation of rights agreement; however, such an agreement does not eliminate the insurer’s obligation to pay defense costs, which includes attorney’s fees. Mutual of Enumclaw v. Harvey, 115 Idaho 1009, 1013 (1989).
Choice of Law (Forum Selection Clauses)
For Choice of Law, Idaho has adopted the “most significant relationship” test of the Restatement (Second) of Conflict of Laws; Seubert Excavators, Inc. v. Anderson Logging Co., 126 Idaho 648, 651 (1995).
a. The test has been applied in both tort and contract actions. Seubert, supra,at 651-52 (citing Johnson v. Pischke, 108 Idaho 397 (1985) (adopting § 145 of the Restatement) and Rungee v. Allied Van Lines, Inc., 92 Idaho 718 (1968) (adopting the proposed official draft of what became § 188 of the Restatement)).
b. The first step is to determine whether the dispute is contractual in nature or whether it is based in tort. Seubert, supra,at 652.
- In a tort case the following considerations must be taken into account: (a) the place where the injury occurred, (b) the place where the conduct causing the injury occurred, (c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any, between the parties is centered. Id. at 651, 889 P.2d 82, 85 (1995) (citing Johnson, 108 Idaho 397, 400 (quoting Restatement § 145).
- In case involving a contract issue, a different set of factual contacts are considered in determining which state has the most significant relationship to the dispute: (a) the place of contracting, (b) the place of negotiation of the contract, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the domicile, residence, nationality, place of incorporation and place of business of the parties. Id. at 651-52 (citing Rungee 92 Idaho 718, 722-23 (quoting proposed official draft of Restatement § 188)).
Idaho has articulated such a strong public policy against the enforcement of forum selection clauses by enacting Idaho Code § 29-110. Fisk v. Royal Caribbean Cruises, 141 Idaho 290, 293 (2005).
Choice of forum provisions are limited by Idaho Code § 29-110, which states in pertinent that, “Every stipulation or condition in a contract, by which any party thereto is restricted from enforcing his rights under the contract by the usual proceedings in the ordinary tribunals, or which limits the time within he may thus enforce his rights, is void.” Idaho Code § 29-110 (1).