Construction Claims

Limitations & Repose Periods

Statute of Limitations

1. IC 34-11-2-11: “An action upon contracts in writing other than those for the payment of money, and including all mortgages other than chattel mortgages, deeds of trust, judgments of courts of record, and for the recovery of the possession of real estate, must be commenced within ten (10) years after the cause of action accrues.”
2. IC 34-11-2-7: “The following actions must be commenced within six (6) years after the cause of action accrues: . . . . (1) Actions on accounts and contracts not in writing.”
3. IC 34-11-2-9: “An action upon promissory notes, bills of exchange, or other written contracts for the payment of money executed after August 31, 1982, must be commenced within six (6) years after the cause of action accrues.”
4. IC 34-11-2-3: “An action of any kind for damages, whether brought in contract or tort, based upon professional services rendered or which should have been rendered, may not be brought, commenced, or maintained, in any of the courts of Indiana against physicians, dentists, surgeons, hospitals, sanitariums, or others, unless the action is filed within two (2) years from the date of the act, omission, or neglect complained of.”

Statute of Repose

IC 32-30-1-5(d): “An action to recover damages, whether based upon contract, tort, nuisance, or another legal remedy, for: (1) a deficiency or an alleged deficiency in the design, planning, supervision, construction, or observation of construction of an improvement to real property; (2) an injury to real or personal property arising out of a deficiency; or (3) an injury or wrongful death of a person arising out of a deficiency; may not be brought against a designer or possessor unless the action is commenced within the earlier of ten (10) years after the date of substantial completion of the improvement or twelve (12) years after the completion and submission of plans and specifications to the owner if the action is for a deficiency in the design of the improvement.”

Right to Repair Laws and/or Pre-Suit Statutory Procedures

1. For residential projects, claimant must notify contractor at least sixty (60) days prior to filing any legal action. IC 32-27-3-2. The statute specifically states: “At least sixty (60) days before filing a construction defect action against a construction professional, the claimant must serve written notice of claim on the construction professional. The notice of claim must state that the claimant asserts a construction defect claim against the construction professional and must describe the claim in reasonable detail sufficient to determine the general nature of the defect.”
2. IC 32-27-3-6 states: “Any action commenced by a claimant before compliance with the requirements of this chapter is subject to dismissal without prejudice, and may not be recommenced until the claimant complies with the requirements of this section.”
3. IC 32-27-3-2(b) states that the subject property may be inspected by the contractor.
4. IC 32-27-3-9-(a) provides for attorney’s fees to contractor in subsequent litigation if the claimant unreasonably refusing to accept the construction professional’s proposal for repairs or inspection
5. IC 32-27-3-11 requires the claimant to provide a detailed list of all known defects in any subsequent litigation.

Indemnity and Contribution

IC 26-2-5-1 provides that an indemnity agreement for construction projects is void where it requires a party to indemnify another where the claim arises from the sole negligence or willful misconduct of the party to be indemnified. IC 26-2-5-1 provides that any provision in a construction or design contract which seeks to indemnify a party against liability for death or bodily injury to persons, injury to property, or design defects from the sole negligence or willful misconduct of the party to be indemnified is void against public policy.

Certificate of Merit – Experts

Indiana does not have any requirement for filing a certificate of merit for claims against design or construction professionals.

Economic Loss Doctrine

Under Indiana law, a defendant “is not liable under a tort theory for any purely economic loss caused by its negligence (including, in the case of a defective product or service, damage to the product or service itself).” The economic loss rule “is only implicated where a plaintiff has suffered ‘pure economic loss,” which means “pecuniary harm not resulting from an injury to the plaintiff’s person or property.” There “is no liability in tort to the owner of a major construction project for pure economic loss caused unintentionally by contractors, subcontractors, engineers, design professionals, or others engaged in the project with whom the project owner, whether or not technically in privity of contract, is connected through a network or chain of contracts.” Indianapolis-Marion County Public Library v. Charlier Clark & Linard, P.C., 929 N.E.2d 722 (Ind. 2010).

Contractor Licensing Requirements

Indiana contractors and subcontractors must be licensed by the city or county in which the contractor or subcontractor will be working. General requirements will include submitting an application and fee, proof of liability and workers’ compensation insurance, and proof of identity. Localities may impose other requirements as they see fit.

Common Law & Statutory Claims

Construction Damages

Cost of Repair

In breach of construction contract cases, proper measure of damages is either difference between value of building as constructed and what its value would have been, had it been constructed in accordance with contract, or reasonable cost of curing defects to make building conform to contract. Willie’s Const. Co., Inc. v. Baker, 596 N.E.2d 958 (Ind. App. 1992).

Economic Waste Doctrine: The builder may “demonstrate that the measure of damages proposed by the owner would result in economic waste.” Gough Const. Co., Inc. v. Tri-State Supply Co., Inc., 493 N.E.2d 1283, 1285 (Ind. App. 1986).

Diminution in Value

Punitive Damages

Punitive damages are recoverable where there is “clear and convincing evidence that the defendant acted with malice, fraud, gross negligence, or oppressiveness which was not the result of a mistake of fact or law, honest error or judgment, overzealousness, mere negligence, or other human failing.” Wohlwend v. Edwards, 796 N.E.2d 781, 784 (Ind. App. 2003). Punitive damages are also recoverable “upon a showing of willful and wanton misconduct.” Davidson v. Bailey, 826 N.E.2d 80, 85 (Ind. App. 2005).

In the breach-of-contract context, a plaintiff may recover punitive damages only if the plaintiff proves “the existence of an independent tort of the kind for which Indiana law recognizes that punitive damages may be awarded.” Firstmark Standard Life Ins. Co. v. Goss, 699 N.E.2d 689, 696 (Ind. App. 1998).

Attorney’s Fees

Indiana follows the American rule, which requires each party to pay their own attorney’s fees. “Generally, attorney’s fees are not recoverable from the opposing party as costs, damages, or otherwise, in the absence of an agreement between the parties, statutory authority, or rule to the contrary.” Swartz v. Swartz, 720 N.E.2d 1219, 1223 (Ind. App. 1999).

Joint and Several Liability (specific to construction):

IC 34-51-2-8 provides:

The court, unless all the parties agree otherwise, shall instruct the jury to determine its verdict in the following manner: (1) The jury shall determine the percentage of fault of the claimant, of the defendants, and of any person who is a nonparty. The jury may not be informed of any immunity defense that might be available to a nonparty. In assessing percentage of fault, the jury shall consider the fault of all persons who caused or contributed to cause the alleged injury, death, or damage to property, tangible or intangible, regardless of whether the person was or could have been named as a party. The percentage of fault of parties to the action may total less than one hundred percent (100%) if the jury finds that fault contributing to cause the claimant’s loss has also come from a nonparty or nonparties. (2) If the percentage of fault of the claimant is greater than fifty percent (50%) of the total fault involved in the incident which caused the claimant’s death, injury, or property damage, the jury shall return a verdict for the defendants and no further deliberation of the jury is required. (3) If the percentage of fault of the claimant is not greater than fifty percent (50%) of the total fault, the jury shall then determine the total amount of damages the claimant would be entitled to recover if contributory fault were disregarded. (4) The jury next shall multiply the percentage of fault of each defendant by the amount of damages determined under subdivision (3) and shall enter a verdict against each defendant (and such other defendants as are liable with the defendant by reason of their relationship to a defendant) in the amount of the product of the multiplication of each defendant’s percentage of fault times the amount of damages as determined under subdivision (3).”

Cost Incurred to Access Repair Areas

Consequential Damages

Delay Damages: Delay damages are recoverable under Indiana law. The proper measure of damages for failure to timely complete a project is the rental value or value of the use of the property for the duration of the delay. Jay Clutter Custom Digging v. English, 393 N.E.2d 230, 233 (Ind. App. 1979).

Loss of Use: Loss-of-use damages are recoverable. The proper measure of damages is the rental value of the property. Wallace v. Rogier, 395 N.E.2d 297, 300 (Ind. App. 1979).

Coverage Trigger of Coverage

Definition of an Occurrence

Faulty Workmanship: In Sheehan Const. Co. v. Continental Casualty Co., 935 N.E.2d 160 (Ind. 2010), the Indiana Supreme Court held that a commercial general liability could provide coverage for a contractor’s faulty workmanship. The court explained that to the extent that a contractor’s faulty workmanship was the result of unintentional conduct, the resulting damage would be “unforeseeable” and therefore constitute an “accident” that is an “occurrence” for purposes of triggering insurance coverage. Id. at 170–72”

In Indiana, it is the general rule that a commercial general liability policy does not provide coverage for breach of contract, breach of fiduciary duty, or breach of warranty.

Duty to Defend

Contractual Indemnity: In Indiana, like most other jurisdictions, an insurer’s duty to defend is broader than its duty to indemnify. Walton v. First American Title Ins. Co., 844 N.E.2d 143, 146 (Ind. App. 2006). If an insurer’s independent investigation of the facts underlying a complaint reveals a claim that clearly falls outside the scope of the subject policy, the insurer may properly refuse to defend. Id. at 146.

Anti-Indemnity Statutes

Additional Insureds

1. Coverage for AI’s own negligence vs. vicarious liability for Named Insured
2. Determining Primary and Non-Contributory vs. Excess Position
3. 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

Coverage Defenses

Choice of Law (Forum Selection Clauses)

Choice of law provisions in insurance contracts are generally enforceable in Indiana. See, e.g., National Union Fire Ins. Co. of Pittsburgh v. Standard Fusee Corp., 940 N.E.2d 810 (Ind. 2010).

Targeted Tenders

Consent Judgments