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Last Reviewed / Modified On 12 Mar 2019.

OKLAHOMA CONSTRUCTION CLAIMS RESOURCES

Construction Claims

Limitations & Repose Periods

Statutes of Limitations

See 12 OK Stat §12-95 (2017). Tort actions have a two-year statute of limitations. Claims sounding in written contract have a five-year statute of limitations. Civil actions involving construction defects must be brought within five years for actions based upon a written contract or within three years for actions based upon an oral contract, whether express or implied. An action for injury to person or property not based on contract must be brought within two years. In civil actions brought by private parties pursuant to Oklahoma’s Consumer Protection Act, the statute of limitations is three years. Brashears v. Sight N Sound Appliance Ctrs., Inc., 981 P.2d 1270, 1273-1274 (Okla. Civ. App. 1999). Under Oklahoma’s discovery rule, a statute of limitations may be tolled until a defect or injury is discovered or should have been discovered. Kirby v. Jean’s Plumbing, Heat and Air, 222 P.3d 21, 27 (Okla. 2009). The discovery rule is not applicable to claims based on breach of a construction contract if its application would result in extending the substantive law’s time bar of the statute of repose. Id at 28. The completion of the construction contract is the accrual date for a claim for breach of contract against a contractor. Samuel Roberts Noble Found., Inc. v. Vick, 840 P.2d 619, 622 (Okla. 1992)

Statute of Repose:

See 12 OK Stat §12-109 (2017) which provides that no action in tort to recover damages for any deficiency in the construction of an improvement to real property, for injury to property, real or personal, arising out of such deficiency, for injury to person or for wrongful death arising out of any such deficiency, shall be brought against any person performing or furnishing the construction of such an improvement more than ten years after substantial completion of such an improvement.

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

With respect to a residential property, a contract for the construction of a new residence or for an alteration of, repair of, or addition to an existing residence may include provisions which: (1) require a homeowner, prior to filing a lawsuit for construction defect(s), to present to the contractor a written notice of construction defect(s); and (2) allow the contractor to inspect any construction defect(s) and present the homeowner with a written response which shall include the contractor’s offer to repair the defect(s) or compensate the homeowner for such defect(s) within thirty (30) days after receipt of the notice. 15 OK Stat §15-765.6 (2017).

If the above mentioned provisions are included in a contract, the homeowner shall not file a lawsuit against the contractor until the conditions precedent have been fulfilled. In the event the homeowner files a lawsuit against the contractor without fulfilling the conditions precedent, the contractor shall be entitled to a stay of proceedings until such conditions have been fulfilled. If the conditions precedent have been fulfilled, the homeowner may seek remedies against the contractor as provided by law. 15 OK Stat §15-765.6 (2017).

Indemnity and Contribution

Indemnity

Express Indemnity – See 15 OK Stat §15-221 (2017) which provides that any provision in a construction agreement that requires an entity or that entity’s insurer to indemnify, insure, defend or hold harmless another entity against liability for damage arising out of death or bodily injury to persons, or damage to property, which arises out of the negligence or fault of the indemnitee, its agents, representatives, subcontractors, or suppliers, is void and unenforceable as against public policy. “Construction agreement” means a contract, subcontract, or agreement for construction, alteration, renovation, repair, or maintenance of any building, building site, structure, highway, street, highway bridge, viaduct, water or sewer system, or other works dealing with construction, or for any moving, demolition, excavation, materials, or labor connected with such construction. The provisions of this section do not affect any provision in a construction agreement that requires an entity or that entity’s insurer to indemnify another entity against liability for damage arising out of death or bodily injury to persons, or damage to property, but such indemnification shall not exceed any amounts that are greater than that represented by the degree or percentage of negligence or fault attributable to the indemnitor, its agents, representatives, subcontractors, or suppliers. This section does not apply to construction bonds or to contract clauses which require an entity to purchase a project-specific insurance policy, including owners’ and contractors’ protective liability insurance, project management protective liability insurance, or builder’s risk insurance.

Implied Indemnity – In the absence of a contract, the right to indemnification may arise if a party is held vicariously liable for the acts of another but only if the party seeking indemnification is without fault. Nat’l Union Fire Ins. Co. v. A.A.R. Western Skyways, Inc., 784 P.2d 52, 54 (Okla. 1989). Implied indemnity may arise out of a special relationship between parties and from equitable considerations. Noble Steel, Inc. v. Williams Bros. Concrete Constr. Co., 49 P.3d 766, 770 (Okla. Civ. App. 2002).

Contribution

The right of contribution arises when two or more persons become jointly or severally liable in tort for the same injury to person or property or for the same wrongful death. The right of contribution exists only in favor of a tort-feasor who has paid more than the pro-rata share of the common liability, and the total recovery is limited to the amount paid by the tort-feasor in excess of their pro-rata share. There is no right of contribution in favor of any tort-feasor who intentionally caused or contributed to the injury or the wrongful death. 12 OK Stat § 12-832 (2017).

Certificate of Merit – Experts

Presently not required after the Oklahoma Supreme Court held that the affidavit of merit requirement set forth in 12 OK Stat § 12-19.1 (2017) was unconstitutional in any professional liability claim. John v. Saint Francis Hosp., Inc., 405 P.3d 681 (Okla. 2017).

Economic Loss Doctrine

The Economic Loss Doctrine provides generally that a plaintiff cannot sue in tort to recover damages for purely monetary loss such as lost wages or profits. The doctrine has been applied to manufacturer’s product liability actions. Waggoner v. Town & Country Mobile Homes, Inc. 808 P.2d 649 (Okla. 1990). However, it is unclear whether it would apply to negligent construction claims.

Loss of anticipated profits, if within the contemplation of the parties at the time the contract was entered into, is recoverable in an action for breach of contract. The damages must proximately flow from the breach and be capable of accurate measurement. Cook v. Okla. Bd. of Pub. Affairs, 736 P.2d 140, 153 (Okla. 1987).

Contractor Licensing Requirement.

Oklahoma does not license general contractors. However, licenses are required for electrical, mechanical, and plumbing trades. In addition, depending on the size of a construction site, general contractors may be required to apply for a permit to discharge storm water.

Common Law & Statutory Claims

Breach of Contract – a material failure of performance of a duty arising under or imposed by an agreement. If one party to a contract fails to perform, which results in damages, the damaged party may sue for breach of contract. Accompanying every contract is a common law duty to perform the contract with care, skill, reasonable experience and faithfulness. A negligent failure to perform these duties is a tort and a breach of contract. Leak-Gilbert v. Fahle, 55 P.3d 1054 (Okla. 2002).

Negligence – the three essential elements are: (1) a duty of care owed by a defendant to protect a plaintiff from injury/damages; (2) a failure to properly perform the duty; and (3) plaintiff’s injury/damages caused by the defendant’s breach of the duty. Brigance v. Velvet Dove Rest. Inc., 725 P. 2d. 300 (Okla. 1986). Oklahoma has adopted a modified version of the Accepted Work Doctrine, which relieves an independent contractor of liability for injuries to third parties after the contractor has completed the work and the owner or employer has accepted the work, regardless of the contractor’s negligence in completing the project. Several exceptions to this doctrine are recognized such as where the defect is latent or hidden, in cases of fraud or deceit, where the contractor deliberately conceals a defect, where a nuisance has been created, or where the product of the contractor’s work is inherently or imminently dangerous. Pickens v. Tulsa Metro. Ministry, 951 P.2d 1079 (Okla. 1997).

Breach of Warranty – A warranty can be based upon either an express provision stated in the contract or implied by law. When a contract contains an express warranty within the terms of the contract, the warranty will determine the extent and duration of the contractor’s responsibility, unless that responsibility is provided for by an implied warranty at law. Woods v. Amulco Prods, 235 P.2d 273 (Okla. 1951). Implied warranties are provided for by 15 OK Stat § 15-171 (2017). Where a general contractor contracts to perform work for another requiring the exercise of care, skill and knowledge, there is an implied warranty that work which he undertakes shall be of proper workmanship and reasonable fitness for its intended use. McCool v. Hoover Equip. Co., 415 P.2d 954 (Okla. 1966).

Construction Damages

Cost of Repair:

When a contractor or builder has breached the contract by defective construction and the defects may be remedied by repair to comply with the contract, the measure of damages is limited to the cost of the repairs. Smith v. Torr, 310 P.2d 378 (Okla. 1957).

Diminution in Value:

In order to prevent unreasonable economic waste, Oklahoma law limits recovery of restoration costs so that recovery cannot exceed the diminished value of the land. Peevyhouse v. Garland Coal & Mining. Co., 382 P.2d 109 (Okla. 1962). Damages are measured by the diminution in value of the property, rather than by the cost of remediation when the cost to restore the land is grossly disproportionate to the loss in value of the property. Schneberger v. Apache Corp., 890 P.2d 847 (Okla. 1994). In construction litigation, if the cost of repairing the defect is grossly disproportionate to the loss in value of the property, the rule would likely be applied and damages would be awarded for the diminution of value.

Punitive Damages

Punitive damages are generally not allowed in a breach of contract action.

Punitive damages may be awarded to punish a defendant based on several factors enumerated in 23 OK Stat § 23-9.1 (2017). If awarded, punitive damages fall into three categories: (1) “reckless disregard” whereby the damages are limited to the greater of $100,000 or the amount of actual damages awarded; (2) “intentional and malicious actions”, whereby the damages cannot exceed the greater of $500,000, twice the amount of actual damages awarded, or the increased financial benefit derived by the defendant as a direct result of the conduct; and (3) “intentional, malicious and life-threatening actions”, whereby there is no limitation on the amount of punitive damages.

Attorney’s Fees

Generally, absent an authorizing statute or valid contract, a prevailing party is not entitled to recover attorney’s fees. Moses v. Hoebel, 646 P.2d 601 (Okla. 1982).

12 OK Stat. §12-936 (2017) is an example of an authorizing statute in which attorney’s fees shall be allowed in a civil action to recover for labor or services rendered if the damage arises directly from the rendition of labor or services rather than from an aspect that relates collaterally to labor and services. Cook v. Okla. Bd. of Pub. Affairs, 736 P.2d 140, 154 (Okla. 1987).

Joint and Several Liability (specific to construction)

23 OK Stat §23-15 (2017) provides that in any civil action based on fault and not arising out of a contract, the liability for damages caused by two or more persons shall be several only and a joint tortfeasor shall be liable only for the amount of damages allocated to that tortfeasor. This section shall not apply to actions brought by or on behalf of the state. The provisions of this section shall apply to all civil actions based on fault and not arising out of contract that accrue on or after November 1, 2011.

Consequential Damages

Consequential damages are those damages naturally flowing from the contract breach or damages that were reasonably contemplated as probable at the time of execution. Recovery for a breach of contract is generally limited to consequential damages. The measure of damages is the amount which will compensate the party for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom. No damages can be recovered for a breach of contract, which are not clearly ascertainable in both their nature and origin. 23 OK Stat § 23-21 (2017)

Trigger of Coverage

Under an “occurrence” liability insurance policy, if an insurable event occurred during the term of coverage, notice to the insurer may be made after the policy term. Under a “claims made” policy, coverage is triggered when, during the policy period, the insured becomes aware of and provides notice to the insurer of the claim or occurrences which might give rise to the claim. State ex rel. Crawford v. Fanie Int’l, 943 P.2d 1009 (Okla.Civ.App. 1997).

Definition of an Occurrence

Defective construction alone is not an “occurrence” but faulty workmanship (by the insured or its subcontractors) that causes damage to property other than the defective work itself and/or other parts of the project is an “occurrence.” Dodson v. St. Paul Ins. Co., 812 P.2d 372 (Okla. 1991)

Duty to Defend

The duty to defend does not arise until the defense of a covered suit is tendered to the insurer. First Bank of Turley v. Fid. & Deposit Ins. Co., 928 P.2d 298 (Okla. 1996). Whether a duty to defend exists or not must be determined from the actual facts, not just the pleadings. Thus, the Supreme Court of Oklahoma declared in Turley that an insurer must look to the pleadings, to facts made known to it by the insured and to those facts that were otherwise known (or readily knowable) to it at the time that the tender of defense is received.

Additional Insureds

Determining Primary and Non-Contributory vs. Excess Position

When more than one policy provides coverage, the specific language of the insurance policy will determine whether coverage is either “primary” or “excess”. A “primary” insurance policy provides immediate coverage whereas an “excess” policy provides secondary coverage which is triggered after the primary limits are exhausted. Two insurers who both owe primary coverage may seek equitable contribution against one another to recover funds paid in excess of the insurer’s proportionate share of common liability. United States Fid. & Guar. Co. v. Federated Rural Elec. Ins. Corp., 37 P.3d 828 (Okla. 2001).

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

Subrogation is available to recover against a co-insurer later discovered to share primary liability with another insurer. Republic Underwriters Ins. Co. v. Fire Ins. Exch., 655 P.2d 544 (Okla. 1982)

Insureds Right to Independent Counsel, Reservation of Rights and Consequences of Rejecting a Defense

  1. An insurer has a duty to defend when it ascertains facts giving rise to the potential for liability under the policy. The insured has a correlative duty to give its insurer timely notice of the claim to enable it to discover facts bearing on coverage. If coverage is questionable, the insurer may defend the insured under a reservation of rights. First Bank of Turley v. Fid. and Deposit Ins., 928 P.2d 298 (Okla. 1996).
  2. If an insurer undertakes to defend an action against the insured, without a reservation of rights, and a judgment is rendered against the insured, the insurer is estopped to deny liability under the policy. Estoppel arises when the insurer commits to an unqualified defense with knowledge that the action may not be within the coverage of its policy. Tri–State Cas. Ins. Co. v. McDuff, 134 P.2d 342 (Okla. 1943).        
  3. The reservation of rights letter should identify those relevant provisions of the policy on which the insurer may rely to disclaim coverage. In addition, the insurer should specify that any further actions taken by it shall not be construed as a waiver of any rights or defenses. Melton Truck Lines, Inc. v. Indem. Ins. Co. of N. Am., 2006 U.S. Dist. LEXIS 43179, *9-10 (N.D. Okl. 2006).
  4. An insurer must disclose the rationale for coverage denial within a reasonable time. The denial must make specific reference to the policy defense being relied upon by the insurer. Cust-O-Fab Serv. Co., LLC v. Admiral Ins. Co., 158 Fed. Appx. 123 (10th Cir. 2005).
  5. No statute or case law in Oklahoma requires an insurer to pay for independent counsel whenever it asserts a reservation of rights. However, in Nisson v. Am. Home Assur. Co., 917 P.2d 488, 490 (OK Civ. App. 1996) when it became apparent that the insurer and insured would pursue conflicting defense strategies, the insurer had a duty to pay reasonable fees for the independent representation of the insured under the duty to defend clause of the insurance contract.

Coverage Defenses

Late Notice

Insurer has burden of showing prejudice from noncompliance with notice provisions in both first and third-party claims. Indep. Sch. Dist. No. 1 v. Jackson, 608 P.2d 1153 (Okla. 1980); Cont’l Cas. Co. v. Beaty, 455 P.2d 684, 685 (Okla. 1969). Prejudice rule does not apply to claims-made policies. State ex rel. Crawford v. Fanie Int’l, 943 P.2d 1099 (Okla. Civ. App. 1997).

Lack of an Occurrence

Defective construction alone is not an “occurrence.” Dodson v. St. Paul Ins. Co., 812 P.2d 372 (Okla. 1991)

Choice of Law (Forum Selection Clauses)

Governed by the law of the state in which policy was issued. Gilbertson v. State Farm Mut. Auto Ins., 845 F.2d 245 (10th Cir. 1988).

Targeted Tenders

Not recognized in Oklahoma

Consent Judgments

15 OK Stat §15-756.1 (2017) provides that in lieu of instigating or continuing an action or proceeding, the Attorney General or a district attorney may accept a consent judgment with respect to any act or practice declared to be a violation of the Consumer Protection Act. Such a consent judgment shall provide for the discontinuance by the person entering the same of any act or practice declared to be a violation of the Consumer Protection Act, and it may include a stipulation for the payment by such person of reasonable expenses and investigation fees incurred by the Attorney General or a district attorney. The consent judgment also may include a stipulation for restitution to be made by such person to consumers of money, property or other things received from such consumers in connection with a violation of this act and also may include a stipulation for specific performance.

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