Boston Partner, Jay S. Gregory, and Associate, Shaun D. Loughlin, recently obtained a favorable decision from the Massachusetts Appeals Court in a case that will further define the application of the Commonwealth’s statute of repose to claims for contractual indemnification.
In University of Massachusetts Building Association, et al. v. Adams Plumbing & Heating, Inc., et al., 102 Mass. App. Ct. 1107 (2023) (Mass. App. Ct. R. 23.0 Decision), the plaintiffs sued a Gordon & Rees client and seven other defendants, alleging negligence, breach of contract, and contractual indemnification stemming from alleged defects in the design and installation of a kitchen exhaust system. The firm's client served as the plaintiffs’ project manager, and pursuant to its contract with the plaintiffs, was required to indemnify the plaintiffs from and against any claims, losses, damages, etc., to the extent caused by the client’s breach of contract or negligence.
The project achieved substantial completion and opened to the public for use in September 2014. The alleged exhaust system defects arose in 2018. The plaintiffs did not file their lawsuit until December 2020, or, more than six years after the project achieved substantial completion and opened to the public for use.
Pursuant to Massachusetts General Law c. 260, § 2B, no tort action for damages arising out of the deficiency or neglect in designing or constructing an improvement to real property for a public agency may be brought more than six years after the earlier of: (1) official acceptance of the project by the public agency; (2) the opening of the real property to public use; (3) the acceptance by the contractor of a final estimate prepared by the public agency pursuant to the relevant public contracting statutes; and/or (4) substantial completion of the work and taking possession for occupancy.
Gordon & Rees moved for summary judgment in the trial court, arguing that all three of the plaintiffs’ claims were barred by this statute of repose—the negligence claim was brought more than six years after substantial completion, the breach of contract claim sounds in negligence by merely alleging a breach of the applicable standard of care, and the contractual indemnification claim only seeks damages arising out of the client’s breach of the standard of care, thus rendering that claim also an action sounding in tort. In the alternative, the client’s indemnification obligations only exist “to the extent” the client was found negligent or in breach of contract. If both of those claims fail as a result of the statute of repose, then the client could not be found negligent or on breach of contract.
The trial court allowed summary judgment. With respect to the contractual indemnification claim, the trial court held that contractual indemnification claims could only bypass the statute of repose in the third-party claim context (i.e., someone suing the plaintiffs for damages, and the plaintiff then filing a third-party claim against the client for indemnification), and not first-party claims.
The plaintiffs appealed the breach of contract and contractual indemnification claims. Following briefing and oral argument, the Appeals Court affirmed the trial court’s decision on summary judgment, but did so on slightly different grounds on the indemnification claim.
Specifically, the Appeals Court held that the indemnification claim still sounded in tort, rather than contract, thus subjecting it to the statute of repose, because “there was no injury separate and distinct from the shoddy work, and the issue was whether the defendants were negligent. This is precisely the sort of claim that the statute of repose bars, whether asserted as a claim for negligence, indemnification, or something else.”
The Appeals Court further illustrated a scenario in which the plaintiffs’ indemnification could have bypassed the statute of repose—“For example, had the ventilation system caused damage to other property owned by [the plaintiffs] for which [the plaintiffs] brought a first-party contractual indemnification claim, that claim would be [allowed to bypass the statute].”
This opinion serves to further clarify the application of the statute of repose to contractual indemnification claims in Massachusetts. It appears, based on this opinion, that a plaintiff may not rely on an indemnity provision in a construction contract to bypass the six-year statute of repose unless such a claim seeks indemnification for damages to something other than the work itself (i.e., personal injury or property damage). If, as here, a plaintiff relies on an indemnity provision to obtain damages solely for defective work, design services, etc., then that claim will still sound in tort, such that the statute of repose will apply.
This opinion will certainly guide plaintiffs in their pleading strategies moving forward, and contractors and/or design professionals should be wary of these strategies. Based on this opinion, plaintiffs may very well allege claims of damage other than to the negligent work itself, in order to circumvent the statute’s six-year repose period. Contractors and/or design professionals should be prepared to rebut these allegations through discovery, and demonstrate that a plaintiff did not actually incur damages via personal injury or property damage, so as to bring the indemnification claim back into the scope of the statute of repose.
Despite the potential for these strategic pleading efforts, Massachusetts contractors and design professionals should still take solace in this recent opinion—property owners will not be able to frame a simple negligence claim as one for “contractual indemnification,” solely for the purpose of asserting the claim more than six years after substantial completion. Such a claim will still sound in tort, and should be dismissed as untimely.