Design-Build Operation and Maintenance Concession Agreements through public-private partnerships are becoming more common for major infrastructure improvement projects. Florida courts have recently ruled that design professionals and contractors participating in the design-build portion of those types of projects may be exposed to several decades of exposure to liability after their respective services and work have been completed. Contractors and design professionals must be aware of this exposure and manage the risk effectively.
Florida’s statute of repose is codified at Fla. Stat. § 95.11(3)(c) (2011), which provides that:
An action founded on the design, planning, or construction of an improvement to real property . . . must be commenced within 10 years after the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.
Design professionals and contractors typically rely on the ten-year statute of repose to determine the outer limit of exposure to claims. It is therefore crucial that they review the recent decision of the United States District Court for the Southern District of Florida in Downs v. United States, 2011 WL 688739 (S.D. Fla. 2011).
In April 2003, Downs broke his neck when he dove into the ocean along Miami Beach and struck his head on a rock. He was rendered a quadriplegic. In 2006, Downs sued the United States and claimed that the rock should have been cleared as part of a long term beach erosion control project in Miami Beach.
This project began in the 1960s when Miami-Dade County sought congressional assistance to address flooding and coastal erosion problems. The United States Army Corps of Engineers was authorized by Congress to examine and suggest solutions. In 1972, the United States entered into a Local Cooperation Agreement (“LCA”) with Miami-Dade County for studies and renourishment of eroded beachland, referred to as the Dade County Beach Erosion Control and Hurricane Protection Project (“Project”).
The LCA set forth the respective responsibilities of the United States and Miami-Dade County. The initial construction portion of the Project was divided into five phases. The dredge and fill work in the area where the accident occurred ended in 1980 under Phase 2/Contract 2. However, the LCA also contemplated continued maintenance over 50 years with periodic renourishment and restoration to maintain the design template for the shoreline.
The United States moved for summary judgment claiming that it should be considered the designer and/or contractor for the Project and, therefore the repose period in Section 95.11(3)(c) had expired. Taking into account the on-going maintenance obligations in the LCA, the Court determined that the project had a 50-year life span, had not yet been “completed” and thus the statute of repose period had not yet commenced, rendering the lawsuit timely under Fla. Stat. § 95.11(3)(c). The Court noted that this was consistent with the case of Allan and Conrad, Inc. v. University of Central Florida, 961 So. 2d 1083 (Fla. 5th DCA 2007).
In Allan and Conrad, the Fifth District held that the statute of repose on which period is to be measured from the date of completion of the entire project by all parties involved, rather than the date on which a particular party’s participation on the project ended. Read together, the Downs and Allan and Conrad opinions provide that a long term contract may extend the overall time during which a design professional or contractor is exposed to claims to multiple decades. Utilizing the time-frames in Downsas an example, a design professional or contractor may be exposed to claims for up to 60 years, or 2072 if measured from today.
Downs is non-binding because it is a trial level decision. However, the reasoning is consistent with the public policy that limitations defenses are strictly construed and, “where there is reasonable doubt as to legislative intent, the preference is to allow the longer period of time.” Baskerville Donovan Eng’rs, Inc. v. Pensacola Executive Condo. Assn, Inc., 581 So.2d 1301, 1303 (Fla. 1991). Allan and Conrad is binding in the Central Florida area encompassed by the Fifth District and potentially statewide if no other appellate districts have ruled on the same issue.
Design Build Operation and Maintenance Concession Agreements through public private partnerships are becoming more common for major infrastructure improvement projects. The I-595 expansion in Broward County, Florida is one example.
The arrangements typically contemplate operation and maintenance by the concessionaire for multiple decades following completion of construction. Design professionals and contractors participating in the design build portion of those projects may find themselves with several decades of exposure to claims after their respective services and work have been completed.
Managing that risk is challenging. For design professionals, maintaining “nose” coverage for errors or omissions committed decades earlier can be cost-prohibitive for even the largest firms.