Court rules plaintiffs’ claims against insulation contractor are barred by statute of repose.
In a significant victory, Zausmer Shareholders Daniel I. Jedell, James Wright, and Theresa Bodwin recently secured the dismissal of a subrogation claim for property damage valued at more than $45,000,000 arising out of a residential fire.
On October 31, 2023, a fire destroyed a 17,000 square foot residence in Bloomfield Hills, Michigan. The home owners and their homeowners’ insurer, Great Northern Insurance Co., sued several contractors that performed work during the home’s construction phase, seeking to subrogate property damage caused by the fire. Plaintiffs’ claims exceeded $45,000,000, with Great Northern exhausting its $30,000,000 policy, and the home owners claiming more than $15,000,000 for the loss of personal items in excess of the policy. As against the contractor Insulation Services of Michigan, Inc. (“ISM”), plaintiffs alleged claims for negligence and breach of implied warranty of workmanship. Specifically, plaintiffs claimed that ISM installed cellulose insulation too close to the flue pipe of the master bedroom fireplace, causing the fire.
ISM performed its insulation installation work at the residence as a subcontractor between May 2015 and August 2016, more than six years before suit was filed in 2024. ISM moved for the dismissal of plaintiffs’ claims under Michigan’s statute of repose, MCL 600.5839(1)(a), which provides a six-year limitations period from occupancy, use, or acceptance of an improvement to real property, and is intended to relieve contractors from the burden of defending delayed claims for property damage and/or personal injuries long after their work is completed. ISM proved, through submission of corporate records and affidavits, that it completed its work at the residence in August 2016 and was paid in full in October 2016, the time of plaintiffs’ “acceptance” of the improvement to real property (the insulation installed as a permanent addition to the residence).
ISM additionally argued that the breach of implied warranty of workmanship claim was barred because it expired in October 2022. ISM proved that it completed its insulation installation work at the residence in August 2016, received payment for its work in October 2016, and filed a Certification of Installation of Insulation with the building department in November 2016.
Plaintiffs conceded the breach of implied warranty of workmanship claim was untimely. However, they argued that the insulation ISM installed was part of the home and construction was ongoing until a certificate of occupancy was issued on January 25, 2018, six years to the date before plaintiffs’ lawsuits were filed. In other words, plaintiffs contended the statute of limitations/repose did not begin to accrue until the homeowner occupied the home, as opposed to when the contractor’s work was accepted and used by the general contractor, on the owners’ behalf. Plaintiffs argued that dismissal would be premature because discovery could reveal that ISM installed insulation at a later date.
The court issued an opinion and order granting ISM’s motion and dismissing plaintiffs’ claims against ISM as untimely and barred by the six-year statute of repose. In so doing, the court relied on the Court of Appeals’ holding of Miller-Davis Co v Ahrens Constr, Inc, 285 Mich App 289 (2009) to reason, by extension, that plaintiffs “accepted” the improvement when it had paid ISM for its completed work. The court explained that the fact that plaintiffs (via their general contractor) accepted and used the insulation in the remaining construction of the residence barred the untimely claim “[e]ven if the plaintiffs could discover information that ISM was somehow responsible for the fire.”
Congratulations to Dan, Jim, and Theresa on their excellent work that resulted in a dismissal and a big win for the firm client.
Zausmer
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