United States District Court in Virginia Holds That Prime Contract Provision Concerning Accrual of Statute of Limitations “Flowed Down” to Afford Subcontractor Defense to Defective Work Claim

Steadfast Insurance Co v. Brodie Contractors, Inc.
2008 U.S. Dist. LEXIS 88448 (October 31, 2008 W.D. Va.)

Steadfast Insurance Co., as subrogee of Skanska USA Building Co., the general contractor, alleged claims for breach of contract and breach of warranty against Brodie Contractors, Inc., a masonry subcontractor, concerning replacement of brick veneer on the Danville Regional Medical Center. Brodie moved for summary judgment alleging that the lawsuit was barred by Virginia’s statute of limitations.

Virginia’s contract statue of limitations states that a suit for breach of a written contract claim must be brought within five years after the cause of action accrues. Brodie argued that by virtue of the prime contract’s “flow-down” provision, the prime contract’s “Commencement of Statutory Limitation Period” provision, tying accrual (at the latest) to substantial completion, governed claims for breach of the subcontract, as well,. If so, the contractor’s claim would have accrued more than five years before the filing of the lawsuit and would be time barred. The Plaintiff, on the other hand, asserted that the claim did not accrue until a later date when the owner sent a letter formally rejecting the work so that the lawsuit was timely.

The Court agreed with the Brodie and dismissed the claim as time barred under the statute of limitations. The Court held that Virginia courts recognize the flow-down relationships between prime contracts to subcontracts in the construction industry, and held that the prime contract and subcontract terms clearly effectuated a flow-down of the prime contract provision regarding accrual of the statute of limitations.

The prime contract’s “flow-down” provision stated, in pertinent part:

… Each subcontract agreement … shall allow to the Subcontractor, unless specifically provided otherwise in the subcontract agreement, the benefit of all rights, remedies and redress against the Contractor that the Contractor, by the Contract Documents, has against the Owner.

The Subcontract explicitly incorporated the Prime Contract, stating:

The Contract Documents for this Subcontract consist of this Agreement and any exhibits or attachments hereto, the Agreement between the Owner and Contractor for the above-referenced Project, all Conditions to the Agreement between the Owner and Contractor (General, Supplementary and any other Conditions)….

The Court held that the all contracting parties intended the general conditions of the prime contract to be integrated with the subcontract. The prime contract contained the following provision pertaining to accrual of the statute of limitations:

Before Substantial Completion. As to acts or failures to act occurring prior to the relevant date of substantial completion, any applicable statute of limitations shall commence to run any alleged cause of action shall be deemed to have accrued in any and all events not later than such date of substantial completion.

Because the subcontract in the did not have a conflicting provision, the accrual of statute of limitations clause from the prime contract governed the subcontract, as well, so that the claim against Brodie was time-barred.

Click here for full text opinion provided courtesy of LexisNEXIS.

This entry was posted in Breach of Contract, Statute of Limitations, Subcontract and tagged , , , , . Bookmark the permalink.