When facing or asserting claims arising out of a construction project in Illinois, it is vital to understand the nuances of the statutes of limitation and repose that govern the time periods within which claimants must assert claims related to construction projects (i.e., claims against those committing “an act or omission … in the design, planning, supervision, observation or management of construction, or construction of an improvement to real property”). Illinois’s construction statute of limitations and repose (735 ILCS 5/13-214) also applies to injury claims which arise from defined activities.
Illinois’s Construction Statute of Limitations and Repose
The statute has two aspects. First, the claimant has four years to file suit; this is known as the “statute of limitations.” The four-year period begins to run from the time the claimant “knew or should reasonably have known …” of the act or omission giving rise to the claim. Second, the claimant has 10 years from the time the act or omission occurred to discover the act or omission; this 10-year period is known as the “statute of repose.” From the date of that discovery, the claimant has four years to file suit on the claim. In other words, if the claimant does not become aware of a claim within 10 years of the occurrence of the act or omission causing it, the claimant loses the right to assert it. Ultimately, if a claim is discovered at the end of the 10-year period, exposure for the claim will last another four years (for a potential total of 14 years). Additionally, if the contractor is sued for contribution under the Joint Tortfeasor Contribution Act, the contractor could be exposed for another two years. Note that repair or corrective work to a prior improvement does not reset the 10-year repose period. Notwithstanding the statute, parties to a construction project are permitted to revise the statute of limitations and/or repose by contract so long as the reduced period is reasonable.
“Knew or Should Reasonably Have Known”
The issue of when a claimant “knew or should reasonably have known” of a claim has been the subject of much litigation. Because each case is unique and will turn on its own circumstances, there is no bright-line rule as to what constitutes “knowledge.” The Illinois Supreme Court has defined “knowledge” to mean the claimant knew or should have known of the injury and that it was wrongfully caused. The term “wrongfully caused” has been interpreted to mean not that the claimant knows of the exact causes, but that the claimant is sufficiently on notice such that it must begin an investigation to determine the exact causes and determine whether it has a valid cause of action. Knowledge on the part of the claimant was found in the following situations:
when the claimant directed its personnel to begin an internal investigation of water infiltration issues;
when the claimant initially notified the general contractor of water infiltration issues; and
when the claimant-owner received a letter from the project’s architect regarding the architect’s inspection and conclusions.
Although it is the claimant’s duty to investigate once it possesses the requisite knowledge, a party potentially responsible for an error in the construction, design, planning, supervision, observation, or management cannot mislead the claimant or conceal the erroneous cause or condition through remedial repairs or alternative, nonactionable explanations. For a claim based on fraudulent concealment of a cause of action, the four-year period is inapplicable; a claimant has five years from the date of discovery to assert its claim.
Other Limitation Periods and Key Takeaways
With respect to upstream claims for payment (e.g., subcontractor v. contractor; contractor v. owner), there are other limitation periods of which to be aware: mechanics lien claims (two years to file suit to foreclose lien claim); payment bond claims (two years to file suit per the standard AIA A312 language); oral contracts (five years to file suit on an unwritten contract); and written contracts (10 years to file suit on written contracts).
From a contractor’s perspective, well-documented project records and correspondence with a project owner are essential to establishing a strong limitations or repose defense. When a contractor becomes aware of an incident or potential claim, it will want to participate in any investigation conducted by the owner. When a project owner informs a contractor of an alleged defect, concealment and superficial remedies are never advisable, as the law strongly protects claimants and can diminish a contractor’s credibility during litigation. Rather, providing a project owner with detailed, contemporaneous information about the full scope of the alleged problem, the dates on which it was observed, and all remedial measures taken and/or recommended, tends to prevent a claimant from insisting it lacked the requisite knowledge to investigate its potential cause of action.
Jonathan Mraunac represents general contractors, subcontractors, suppliers, and other participants in the construction industry. As a member of Ogletree's construction practice group, Jonathan advises clients relative to all aspects of the construction process including the prosecution and defense of claims in federal and state court, arbitration, and mediation, the perfection and prosecution of mechanics lien claims, and the formation and negotiation of contract documents. Recently, Jonathan...