Statute of Limitations Could Run Before Accident Occurs.
It doesn’t seem possible that a statute of limitations could expire even before a loss is suffered and damages are incurred. However, that is the case in Georgia due to some questionable case law being used by defendants to escape liability. Subrogation professionals everywhere should make a note of it.
A homeowner builds a new home which is completed on January 1, 2010. On January 1, 2015, a fire caused by defective wiring destroys the home. The homeowner’s insurance carrier pays the homeowner for the damages and on February 1, 2015 files a subrogation suit against the negligent electrician and the general contractor responsible for the defective wiring. The statute of limitations for damage to real property in Georgia is four (4) years. O.C.G.A. § 9-3-30. The statute of limitations for damage to personal property is also four (4) years. O.C.G.A. § 9-3-31. The statute of repose for improvement to real property is eight (8) years from substantial completion. O.C.G.A. § 9-3-51. By all accounts it would appear that the subrogated carrier timely filed its subrogation suit – within four (4) years of the incident. However, a motion to dismiss that lawsuit based on the four (4) year statute of limitations was granted and the suit was dismissed. Amazing, but true.
In Stamschror v. Allstate, 600 S.E.2d 751 (Ga. App. 2004), a homeowner sustained fire damage to his new home. The home passed final inspection on August 22, 1994 and they closed on the house the next day. On December 25, 1998, the home was nearly destroyed by a fire. Allstate paid the owner $125,000 for the damage and on April 26, 2001, within four (4) years of the fire but more than four (4) years after substantial completion of the house, Allstate filed a subrogation suit against an electrical subcontractor for negligence which caused the fire. The defendant filed for summary judgment, which was granted and upheld on appeal. The Court held that although the cause of action was controlled by the four (4) year statute of limitations, the four (4) year statute began to run on the date of substantial completion – well before the fire even occurred. The Court’s reasoning defies logic, but stated that “a cause of action in negligence accrues and the statute of limitation begins to run when there is a negligent act coupled with a proximately resulting injury. The true test to determine when a cause of action accrues is to ascertain the time when the plaintiff could first have maintained his action to a successful result.” Because the homeowner was the owner at the time of substantial completion (as opposed to buying the house from the original owner), the Court held that her claim for damage to real property (the house) was four (4) years, and accrued when the home was completed. The limitation period begins to run from the date of the damage, which the Court said was the negligent installation of wiring, not the fire.
O.C.G.A. § 9-3-30 reads as follows:
§ 9–3–30. Trespass upon or damage to realty; damage to dwelling due to synthetic exterior siding.
(a) All actions for trespass upon or damage to realty shall be brought within four years after the right of action accrues.
(b)(1) The causes of action specified in Code Section 51-1-11 and subsection (a) of Code Section 9-3-51 for recovery of damages to a dwelling due to the manufacture of or the negligent design or installation of synthetic exterior siding shall accrue when the damage to the dwelling is discovered or, in the exercise of reasonable diligence, should have been discovered, whichever first occurs. In any event, such cause of action shall be brought within the time limits provided in Code Sections 51-1-11 and 9-3-51, respectively.
(2) This subsection shall apply to causes of action which had not expired under the former law before March 28, 2000. This subsection shall not revive any cause of action which was barred by former law before March 28, 2000.
On its face, the statute reads like any other statute of limitations statute. The limitations period expires four (4) years from the date the “cause of action accrues.” This crazy notion, which turns a statute of limitations into a pseudo-statute of repose, stems from the obscure Georgia Court of Appeals decision in Howard v. McFarland, 515 S.E.2d 629 (Ga. App. 1999). The Howard decision admits that O.C.G.A. § 9-3-30 is not a statute of repose, confirming that it remains a statute of limitations. Yet, the poorly-written decision goes on to say that:
A cause of action by a property owner for damage to a building resulting from negligent construction or design accrues at the time of the completion of the building; mere ignorance of the facts constituting a cause of action does not prevent the running of the statute of limitation.
In Corp. of Mercer Univ. v. Nat. Gypsum Co., 368 S.E.2d 732 (Ga. 1988), the Supreme Court concluded that “the ‘discovery rule’ is confined to cases of bodily injury and does not apply to actions seeking recovery for property damage only.” In Howard, the plaintiff argued that the existence of O.C.G.A. § 9-3-51, the eight (8) year statute of repose for such actions, extended the four (4) year statute of limitation to eight (8) years for subsequent purchasers of the realty who discover the problem within four (4) years of bringing suit. Howard v. McFarland, supra. The Howard decision makes no sense and creates the real possibility that a subrogation cause of action which accrues tomorrow might have been time-barred yesterday. Three times Georgia courts have rejected the argument that the statute of repose somehow extends the statute of limitations in such cases, so the above decisions remain good – albeit nonsensical – law.
The moral of the story is to be extremely careful in Georgia property loss cases involving real property. Your rights could be extinguished before they even accrue.
If you have any questions regarding this article or subrogation in general, please contact Gary Wickert at email@example.com.