Construction Claims

Limitations & Repose Periods

Statutes of Limitations

a. The statute of limitations for a tort action against a contractor for personal injury, injury to personal property or wrongful death arising out of the defective and unsafe condition of an improvement to real property is six years after occupancy of the completed improvement, use or acceptance of the improvement, or one year after the defect is discovered if the defect is based on the gross negligence of the contractor where the gross negligence is the proximate cause of the injury or death. No such action may be commenced more than ten years after the time of occupancy of the completed improvement, use, or acceptance of the improvement. M.C.L. §600.5839.

b. Causes of action for breach of contract have a six-year statute of limitations. M.C.L. §600.5807.

c. Claims brought pursuant to the Michigan Consumer Protection Act have a statute of limitations of six years from the date of the transaction or one year from the date the last payment was made, whichever date is later. M.C.L. §§445.903, 455.911.

d. Causes of action based on fraud have a six-year statute of limitations. M.C.L. §600.5813. Causes of action for fraudulent concealment have a two-year statute of limitations. M.C.L. §600.5855.

e. Discovery rule: A cause of action accrues when the plaintiff knows, or should have known, of the injury. Connelly v. Paul Ruddy's Equipment Repair & Service Co., 388 Mich. 146 (1972).

Statute of Repose:

Michigan’s statute of repose states that no action in tort against a contractor for personal injury, injury to personal property or wrongful death arising out of the defective and unsafe condition of an improvement to real property may be commenced more than ten years after the time of occupancy, use or acceptance of the improvement. M.C.L. §600.5839.

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

Michigan has no statutory or common law requiring pre-suit notice of claim or an opportunity to cure a defect.

Indemnity and Contribution

Indemnity

Michigan recognizes three theories of indemnity: (1) implied contractual indemnity; (2) common law indemnity; and (3) express contractual indemnity. Oberle v. Hawthorne Metal Products, 192 Mich. App. 265, 269-70, 480 NW2d 330 (1991). Implied contractual indemnity is based on notions of restitution, and requires a special relationship between the indemnitor and indemnitee, or a course of conduct whereby one party undertakes to perform a certain services and impliedly assures indemnification. Feaster v. Hous, 137 Mich App 783, 791; 359 NW2d 219 (1984). Common law indemnity is based on principles of vicarious liability and shifts liability from a passive wrongdoer to an active wrongdoer. Hardy v. Monsanto Envirochen Systems, 414 Mich. 29, 86-87; 323 NW2d 270 (1982).

With regard to express contractual indemnity, general contract documents and subcontracts typically contain indemnification clauses flowing up the contractual chain. M.C.L. 691.991 voids an indemnity agreement in a construction contract which purports to indemnify the indemnitee for the consequence of the indemnitee’s “sole negligence." It has been held that “sole negligence” means 100% fault for the totality of the personal injury or property damage claim. Michigan does not require an indemnity provision to expressly state that the indemnitor must indemnify the indemnitee for the consequences of the indemnitee’s own (as opposed to “sole”) negligence so long as the language of the indemnitee provision, the situation of the parties, and the surrounding circumstances established that was the parties’ intent. The Michigan Supreme Court has held that failure to indemnify pursuant to a clear and unambiguous indemnity provision is a distinct breach of contract action from a claim based on the failure to install the structure according to specifications, and that any indemnity action necessarily accrued at a later point.

Contribution

Contribution may be enforced by motion or separate action. A contribution plaintiff who satisfies all or part of a judgment for which he is jointly liable is entitled to contribution only if the contribution defendant was made party to the original action and a reasonable effort was made to notify him of the commencement of the action. Gerling Konzern Allgemeine Verischerungs AG v. Lawson, 684 NW 2d 358 (Mich. 2004).

Certificate of Merit – Experts

There is no requirement for filing a certificate or affidavit of merit for claims against design or construction professionals.

Economic Loss Doctrine

In order to state a tort claim, a plaintiff must allege the breach of a “separate and distinct” tort duty (i.e. something more than a mere breach of contract). Economic losses (commercially anticipated damages) or those arising from no more than a breach of contract, must be recovered in contract. Detroit Bd. Of Educ. V. Celotex Corp., 196 Mich. App. 694; 493 NW2d 513 (1992).

Contractor Licensing Requirement.

Contractor licensing requirements can vary greatly among jurisdictions within Michigan. As a whole, however, the law in Michigan is that unlicensed residential contractors cannot institute or maintain actions for compensation. M.C.L. §339.2412; Epps v. 4 Quarters Restoration LLC, 498 Mich. 518, 872 NW2d 412 (2015). This limitation on actions extends to lien rights and prevents an unlicensed residential contractor from filing a lien in response to non-payment for its work. Stokes v. Millen Roofing, Co., 466 Mich. 660, 662, 649 NW2d 371 (2002).

Unlicensed contractors are not prohibited from defending the merits of a claim against it.

A contract for the services of an unlicensed contractor is voidable at the option of the homeowner, but is not void ab initio. Epps v. 4 Quarters Restoration LLC, 498 Mich. 518, 872 NW2d 412 (2015).

Common Law & Statutory Claims

Michigan recognizes a claim for common-law fraud with the following elements, (1) the defendant made a representation of a material fact; (2) the representation was false when made; (3) when the defendant made the representation, the defendant knew it was false, or made it recklessly, without the knowledge of its truth as a positive assertion; (4) the defendant made the representation with the intention that the plaintiff would act upon it; (5) the plaintiff acted in reliance on it; and (6) the plaintiff suffered damage. Novi v. Robert Adell Children’s Fund Trust, 473 Mich. 242; 701 NW2d 144 (2005).

Construction Damages

Cost of Repair

The general rule is that the non-breaching party should be placed in as good a position as if the contract had been fully performed. Tel-Ex Plaza, Inc. v. Hardees Restaurants, Inc. 76 Mich. App. 131, 255 NW2d 794 (1977). Therefore, the cost of repairing the defective work is recoverable.

Diminution in Value

The general rule is that the non-breaching party should be placed in as good a position as if the contract had been fully performed. Tel-Ex Plaza, Inc. v. Hardees Restaurants, Inc. 76 Mich. App. 131, 255 NW2d 794 (1977). Therefore, damages for diminution in property value attributable to defective work are recoverable.

Punitive Damages

Punitive damages are not permitted except as provided by statute.

Attorney’s Fees

The general rule is that attorney fees are not recoverable unless recovery is expressly authorized by contract, statute, court rule or a recognized exception to the general rule.

Joint and Several Liability (specific to construction)

Generally, any Michigan tort defendant is severally liable for damages attributed to its percentage of fault. Mich. Comp. L. §600.6304 (1995); Romain v. Frankenmuth Mutual Ins., 762 NW2d 911 (Mich. 2009)

Cost Incurred to Access Repair Areas

None.

Consequential Damages

Generally, parties may only recover actual damages. To recover consequential damages, they must be reasonably within the contemplation of the parties at the time they enter into the contract. Such recoverable consequential damages could include increased construction costs, lost profits and loss of rents.

Trigger of Coverage

Definition of an Occurrence

The definition of “occurrence” requires an “accident." Under Michigan law, defective workmanship, standing alone, does not constitute an “occurrence” and thus does not trigger coverage, under a CGL policy. See generally Hawkeye-Security Ins. Co. v. Vector Constr. Co., 460 N.W.2d 329 (1990). However, an insurer must defend and may become obligated to indemnify an insured under a general liability policy of insurance that covers the losses caused by “accident” where an insured’s faulty work product damages the property of others. Id. at 333. An accident has been defined as a “undesigned contingency, a casualty, a happening by chance, something out of the usual course of things, unusual, fortuitious, not anticipated, and not naturally to be expected.” No accident occurs when a builder supplies a defective product or performs in an unacceptable manner. Conversely, when an insured's defective workmanship results in damage to the property of others, an “accident” exists within the meaning of the standard comprehensive liability policy. This interpretation is consistent with the overall scheme of liability insurance which is to provide coverage for unforeseen events, and not to serve as a substitute for a bond.

Duty to Defend

Additional Insureds

1. Coverage for AI’s own negligence vs. vicarious liability for Named Insured.

   This is generally determined on a policy-by-policy basis.

2. Determining Primary and Non-Contributory vs. Excess Position

   This is dependent on policy.

3. AI carrier’s rights to reimbursement for defense expenses from other, co-primary carriers.

   This is dependent on policy.

Insureds Right to Independent Counsel and Consequences of Rejecting a Defense

The insurer may select in good faith a “truly independent” counsel.

Coverage Defenses

Late Notice

An insurer must show actual prejudice to deny coverage based on late notice. Koski v. Allstate Ins. Co., 572 NW 2d 636 (Mich. 1998)

Lack of an Occurrence

See above under Coverage Trigger.

Choice of Law (Forum Selection Clauses)

Under Michigan law, “the validity and construction of a contract are controlled and to be determined by the laws of the situs, or place where the contract was entered into. Fireman’s Fund Ins. Co. v. Ex-Cell-O Corp., 702 F.Supp. 1317, 1328 (E.D. Mich. 1988). In Michigan, a contract is deemed to have been made in the state where the last act necessary to make it a binding agreement took place.” Millgard Corp. v. Fireman’s Fund Ins. Co., 755 F.Supp. 181 (E.D. Mich. 1991). The general rule is that a Michigan court will apply Michigan law unless a rational reason to do so otherwise exists.” Sutherland v. Kennington Truck, 454 Mich. 274, 286, 562 NW2d 466 (1997).

MCL 600.745(3) states that an action can be dismissed pursuant to a forum selection clause if the clause states that the parties agree that the action shall be brought only in another state. If the contract fails to use exclusionary language, the statute does not require dismissal.

Targeted Tenders

No cases found.

Consent Judgments

No cases found.