Does Four Year Statute of Repose in T.C.A. § 28-3-202 Bar Tennessee Construction Defect Claims When Project is Not Complete?

The recent Tennessee Court of Appeals decision of Keith Gillis v. Covenant Health, 2015 WL 3563034 (Tenn. Ct. App. 2015) discussed the four year statute of repose found in T.C.A. § 28-3-202 for construction defect claims.  This statute of repose is a very good way to defeat many construction defect claims in Tennessee.  This particular case dealt with a situation where a radiology facility at Methodist Hospital was allegedly defectively constructed.  Specifically, the walls around the radiology facilities required a certain amount of lead shielding but there was a portion of the walls that did not contain the necessary lead shield to protect individuals from exposure to excessive radiation.  As a result, plaintiffs claimed they were exposed to excessive radiation and therefore they sued the construction company that failed to put in the necessary lead shielding.

Tennessee law is clear that we have a four year statute of repose that bars claims for construction defect cases filed greater than four years from the date of substantial completion (with certain exceptions).  The entire statute found in T.C.A. § 28-3-202 is as follows:

All actions to recover damages for any deficiency in the design, planning, supervision, observation of construction, or construction of an improvement to real property, for injury to property, real or personal, arising out of any such deficiency, or for injury to the person or for wrongful death arising out of any such deficiency, shall be brought against any person performing or furnishing the design, planning, supervision, observation of construction, construction of, or land surveying in connection with, such an improvement within four (4) years after substantial completion of such an improvement.

The question therefore, in many cases, centers around how to determine the date of “substantial completion.”  T.C.A. § 28-3-201(2) defines substantial completion as follows:

(2) “Substantial completion” means that degree of completion of a project, improvement, or a specified area or portion thereof (in accordance with the contract documents, as modified by any change orders agreed to by the parties) upon attainment of which the owner can use the same for the purpose for which it was intended; the date of substantial completion may be established by written agreement between the contractor and the owner.

In the Gillis case, the plaintiffs argued, quite creatively, that the radiology facility was not substantially complete because a necessary element of that facility (the shielding in the wall) was missing.  Their argument was basically that the project could not be substantially complete when there was such an important necessary element missing from the project.  They claimed that as a result, the fact this case was filed approximately 8 years following the opening of the facility did not bar the claim because the project was never “substantially complete”.  The trial court granted summary judgment in favor of the defendants and that ruling was appealed. 

On appeal, the Tennessee Court of Appeals first considered the definition of substantial completion.  The Court noted “substantial completion does not mean perfect completion according to the exact specifications.  Otherwise, the qualifying word ‘substantial’ before ‘completion’ would have no meaning.”  Gillis at 5.  In this particular case the undisputed evidence was that the emergency room department including the CT scan room at issue was used from March 2006 until the suit was filed approximately eight years later.  The Tennessee Court of Appeals found that plaintiffs’ argument would destroy the very purpose of the statute of repose in Tennessee for construction defect cases.  Under the plaintiffs’ theory, almost every construction defect case could be brought without concern for the statute of repose because the plaintiffs’ argument would basically require absolute perfect completion before the four year statute of repose would begin to run.  However, the Court noted the statute only requires “substantial completion” where the resulting work is then used for its intended purpose. 

As a result, although plaintiffs made a creative argument in this case to try to get around the statute of repose, the Tennessee Court of Appeals found the trial court did not err when it found that the date of substantial completion was in 2006.  Therefore the statute of limitations applied to bar this claim.  The simple fact there is outstanding work to be completed or that certain work was not performed as required under the plans, does not extend the four years statute of repose.  This case correctly decided this issue because if the court went the other way in this case, the construction defect statute of repose would no longer have any teeth.