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Potential Statute of Repose Defense to Product Liability Suits

KWhite Bio Webpage HS 10-7-13

If you ask contractors, engineers, and others in the construction business in South Carolina, they will likely tell you that they retain construction project records for eight years. The reason for this practice is that South Carolina has a statute of repose for improvements to real property which bars suits for construction defects, unless they are brought within 8 years of when the certificate of occupancy is issued. Construction lawyers are well aware of this statute of repose, but lawyers in other areas of practice should be aware of it as well, as it applies with equal force outside of the construction context. For example, the statute of repose is broad enough to protect manufactures or sellers of a products which later become permanent additions to real property. (2)

For readers who have not dealt with a statute of repose since law school, a statute of repose “creates a substantive right in those protected to be free from liability after a legislatively determined period of time.” (3)  In establishing South Carolina’s statute of repose for improvements to real property, the legislature sought to “address those instances where ‘persons involved in improvements to real property are subject to the economic and emotional burdens of litigation and liability for an indefinite period of time upon allegations of defective or unsafe conditions.’” (4)  The length of the applicable statutory period has varied over the years. For example a previous version provided a thirteen year period of repose, and the thirteen year period of repose may still apply if substantial completion of the improvement occurred prior to July 1, 2005. (5)  South Carolina’s statute of repose for improvements to real property currently provides that “[n]o actions to recover damages based upon or arising out of the defective or unsafe condition of an improvement to real property may be brought more than eight years after substantial completion of the improvement.” (6)

The statute also specifies the types of actions and defendants to which it applies. Section 15-3-640 provides that actions which trigger the statute of repose include “an action to recover damages for personal injury, death, or damage to property.” (7)  The South Carolina Supreme Court has made it clear that the protection of the statute extends beyond those who construct the improvement. In fact, a previous version of the statute of repose was declared unconstitutional because no rational basis for limiting the statute of repose to engineers, contractors, etc. existed. (8)  As the statute is currently worded and interpreted, any defendant against whom an action is brought based on a defective or unsafe condition of an improvement to real property is afforded protection from the statute of repose.

The South Carolina Supreme Court has set forth a test for determining whether something qualifies as an “improvement,” as the term is used in the statute of repose. (9)  In S. Carolina Pipeline, a product liability action in which the explosion of a buried natural gas pipeline caused injury and property damage, the Supreme Court was asked to determine whether the gas pipeline qualified as an “improvement” for purposes of the statute of repose. (10)  In holding that it did qualify, the Court first disagreed with the “rigid interpretation” advanced by the plaintiff that to qualify as an improvement something must be a “permanent addition to realty.” (11)  The Court found the preamble to the statute of repose made clear “the legislature’s intent to extend the protection contained in the statute of repose to additions which have ‘lengthy useful lives.’” (12)  Hence, given that the gas pipeline (1) made the real property more valuable to the owner; (2) involved the investment of labor and money, and (3) “was permanent as that phrase is commonly understood – it had been in place for 38 years when the explosion occurred,” the Court determined that the gas pipeline had a “lengthy useful life” and was, therefore, an improvement to real property for purposes of § 15-3-640. (13)  The Court’s opinion on the issue is probably best expressed by its statement that “[p]ermanence is necessarily a relative term when applied to improvements, since no improvement, whether the Tower of Pisa or the Pyramids at Giza, is truly permanent. They do, however, have ‘lengthy useful lives’—as set forth in the preamble to § 15-3-640.” (14)

This issue often arises in the manufacturing setting. For example, if it is alleged that a defective overhead crane affixed to the ceiling of a manufacturing facility caused personal injury or property damage, there may be a statute of repose argument. In such a case, it will be important to establish the date that the overhead crane was affixed to the facility. If installation occurred more than eight years before suit was filed (or thirteen depending on the date of installation), it will then be necessary to determine whether the machinery satisfies the lengthy useful life factors. The analysis is factually intensive, so it will need to be developed through discovery along with any other defenses. The statute of repose argument should then be included in any motion for summary judgment at the appropriate time.

FOOTNOTES

1 Kyle J. White is an associate with Gallivan, White, & Boyd, PA in Greenville, South Carolina. He practices primarily in the fields of product liability and complex civil litigation, along with toxic tort, mass tort, and insurance subrogation.

2 This article focuses on the protections afforded to manufacturers and sellers in product liability lawsuits, but the statute is broad enough to include numerous other groups which are not specifically addressed herein.

3 Capco of Summerville, Inc. v. J.H. Gayle Const. Co., Inc., 368 S.C. 137, 142, 628 S.E.2d 38, 41 (2006) (“Section 15-3-640(6) is a statute of repose setting forth the outside time period in which an action arising out of the defective condition of an improvement to real property must be brought, which date begins to run from completion of the project.”).

4 Ocean Winds Corp. of Johns Island v. Lane, 347 S.C. 416, 420, 556 S.E.2d 377, 379-80 (2001).

5 The statute of repose has been amended several times, with the most recent amendment in 2005 serving to reduce the time period from thirteen years to eight years.  The 2005 amendment to the statute of repose, however, only applies to improvements which were completed after 2005. See 2005 South Carolina Laws Act 27 (H.B. 3008) (“(2) Section 2 [which includes amendments to the statute of repose of repose] takes effect on July 1, 2005, and applies to improvements to real property for which certificates of occupancy are issued by a county or municipality or completion of a final inspection by the responsible local building official after the effective date.”); see also Snavely v. Perpetual Fed. Sav. Bank, 306 S.C. 348, 350, 412 S.E.2d 382, 384 (1991) (finding that the legislature intended that “§ 15-3-640 be applied to buildings constructed prior to May 12, 1986.”).

6 S.C. Code Ann. § 15-3-640.

7 S.C. Code Ann. § 15-3-640(3), (9)

8 See Broome v. Truluck, 270 S.C. 227, 231, 241 S.E.2d 739, 740 (1978) (“While it is broadly stated that a vital distinction exists between architects, engineers, and contractors on the one hand, and owners and manufacturers, on the other, such vital distinction is nowhere pointed out such as to justify granting immunity to one group and not to the other.”); see also Snavely, 306 S.C. at 351, 412 S.E.2d at 384 (holding that a revised version of the statute which “increases the period of liability from ten years to thirteen years and extends immunity to current or prior owners and manufacturers” was constitutional).

9 See S. Carolina Pipeline Corp. v. Lone Star Steel Co., 345 S.C. 151, 155, 546 S.E.2d 654, 656-57 (2001) (finding that a gas pipeline was an improvement to real property).

10 See id. at 655.

11 Id. at 656.

12 Id. at 656-57.

13 Id. at 657; cf. Ervin v. Cont’l Conveyor & Equip. Co., Inc., 674 F. Supp. 2d 709, 720 (D.S.C. 2009) (following the S. Carolina Pipeline factors for determining whether something is an improvement, and finding that an incline conveyor system that had been “actually disassembled and moved to a new location” was a piece of “moveable equipment” which did not qualify as an improvement.).

14 Id. at 657 n.3

South Carolina Defense Trial Attorneys AssociationThe Defense Line
Winter 2014, Volume 42, Issue 2