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Some states have enacted statutes eliminating much of the uncertainty surrounding construction claims. Owners, designers, contractors and suppliers in these states convene to draft compromise legislation they all can accept. While it isn’t ideal for any one party, the legislation shortcuts many of the disputed motions and recoverability concerns that add cost and time to litigation and often prevent settlement. Here are the key battlegrounds that statutory reform could tackle:

Statute of limitations

Oregon needs one statute of limitations and one statute of repose applicable to all claims (regardless of legal theory) on construction projects. Currently, architects and contractors are subject to different limitation periods and sometimes different rules for when the limitation periods begin to run. This results in liability that varies based on the timing of the claim rather than the merits.

Some people believe that litigants and their experts skew the allegations to target one defendant more than another, simply because the targeted defendant does not have a statute of limitations defense while others do. There is no reason one industry group deserves a shorter limitations period than another. The explanation for the current difference is that some have better lobbyists than others.

Negligence claims

Another battleground is whether a plaintiff can assert a negligence claim for economic damages (as opposed to a breach of contract claim) against defendants. Negligence claims are governed by a two-year limitations period that begins to run upon discovery. Contract claims against contractors are subject to a six-year limitations period running from the date of breach, regardless of discovery.

Because a negligence claim can be discovered and therefore asserted long after a breach claim has expired, the ability to file a negligence claim is a critical aspect of Oregon construction law. However, it is uncertain because of the lack of statutory guidance and changing case law from the Oregon appellate courts about the type of relationship between the parties required to allow a negligence claim to proceed. As with the statute of limitations, lawyers expend many hours briefing and arguing over the ability to sue for negligence.

Recoverable damages

Much time is spent arguing over limitations of liability and waivers of consequential damages. Limitations and waivers are found in contract clauses of varying length and clarity. Some clauses are inconspicuous and not negotiated; other clauses are negotiated for days.

Several states ban attempts to limit liability. Oregon’s anti-indemnity statute is a step in that direction, but more clarity is needed on when – if ever – a party can contractually absolve its liability for construction or design work.

Insurance problems

Unlike Washington and many other states, Oregon has no “bad faith” laws that allow an insured party to show that its insurer acted in bad faith by failing to respond or provide coverage. Bad faith laws add an element of risk to insurance providers that can lead to better claims handling, including earlier settlements.

In addition, Oregon should consider banning certain coverage exclusions on construction projects. To the unwitting owner or contractor, some exclusions appended to the back of their insurance policies can severely limit or void all coverage for common claim scenarios. As one example, no residential contractor should carry insurance with a “residential exclusion” buried in the policy.

Mandatory envelope training

The Construction Claims Task Force, appointed by the Legislature in 2005, was charged with finding solutions to the construction defect crisis and related insurance crisis in Oregon. The task force was specifically directed not to engage in finding “procedural” solutions, which were defined to include issues like those addressed above.

The task force did, however, conclude unanimously that the best way to address construction defects was to require training (and badging) of all workers who engage in the building envelope trades such as siding, windows and roofing. The recommendation from the task force was not adopted by the Legislature because of industry pressure and lobbying to avoid it.

In the wake of two decades of heavy defect litigation, Oregon certainly has improved the quality of construction through better (voluntary) training in the private sector. But as long as defect claims and other construction claims persist, we should look for ways to cut litigation expense, streamline cases and add a degree of certainty to the aforementioned issues. Only a concerted legislative effort by all industry groups can accomplish this goal.

Eric Grasberger is an attorney in the construction and design practice group of Stoel Rives LLP. Contact him at 503-294-9439 or [email protected].