The most common question that comes up when evaluating a document retention policy seems to be, "What is the statute of limitations?"
However, the question that should really be asked is, "What is the statute of repose?" While engineers often use the terms “statute of limitations” and “statute of repose” interchangeably, the distinction between the two terms is of pivotal importance when creating a document retention policy.
Statutes of limitations bar a lawsuit that is not brought within a certain time period, which may be subject to change based on the date the claimant discovers an injury that was wrongfully caused.1 In certain scenarios, the statute of limitations will not be deemed as having begun until the claimant discovers or should have discovered that an injury was wrongfully caused, which can occur years after an engineer completes his or her services.2 Due to this rule, which is commonly referred to as the discovery rule, statutes of limitations often do not set an outer limit on when a claim may be asserted or litigation may be filed.
On the other hand, statutes of repose typically set a time limit for filing suit that runs from a set point in time. While statutes of repose vary from state to state, they typically start running from the time of substantial completion of construction or improvement to real property, occupancy, or possession of the improvement, or the date of act, error, or omission.3 Thus, the applicable statute of repose starts running from an identifiable event and sets the outer limit for bringing a lawsuit. As such, engineers should use the statute of repose, not the statute of limitations, to set the time frame for their record retention policy.
Because it can be difficult to determine the outer limit for bringing a lawsuit in an engineer’s jurisdiction from a simple reading of the applicable statute of repose, engineers should always consult their local legal counsel to ensure that their document retention period provides adequate protection. For example, the statute of repose in Illinois is 10 years from the act or omission giving rise to the claim, which would make an engineer logically conclude that he or she can discard records 10 years after services are complete.4 However, the statute of repose then goes on to say that a person who discovers the act or omission prior to the expiration of the aforementioned 10 years shall get four years to bring an action.5 In other words, if the claimant discovers the engineer’s act or omission within the ninth year, he or she will have four years from the discovery of the act or omission to bring the cause of action, potentially extending the outer limit for bringing a lawsuit up to 14 years after the engineer’s services are completed.
Moreover, it is often wise for an engineer to permanently retain the documents that show when his or her work was completed, when the improvement was substantially complete, and/or when the improvement was occupied, such as certificates of substantial completion or occupancy, and as-built drawings. Permanent retention of these types of documents will ensure that the engineer can prove a claimant’s lawsuit is time-barred when such is the case.6
1E.g., King v. Paul Krez Co., 752 N.E.2d 605, 612-613 (Ill. App. Ct. 2001).
3Cal. Civ. Code Proc. § 337.15 (Deering 2018) (“ No action may be brought to recover damages from any person […] who [...] performs or furnishes the design, specifications, surveying, planning, supervision, testing or observation of construction or construction of an improvement to real property more than 10 years after the substantial completion of the development or improvement […].”); Colo. Rev. Stat. § 13-80-104 (2018) (“all actions against any architect, contractor, builder or builder vendor, engineer, or inspector performing or furnishing the design, planning, supervision, inspection, construction or observation of any improvement to real property shall be brought within the time provided in section 13-80-102 after the claim for relief arises, and not thereafter, but in no case shall an action be brought more than six years after the substantial completion of the improvement to real property except as provided in subsection (2) of this section.”); Fla. Stat. § 95.11 (2018) (“the action must be commenced within 10 years after the date of actual possession by the owner, the date of issuance of certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion of the contract or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever is latest.”); N.J. Stat. § 2A:14-1.1 (2018) (“No action […] to recover damages for any deficiency in the design, planning, surveying, supervision or construction of an improvement to real property […] shall be brought against any person performing or furnishing the design, planning, surveying, supervision of construction or construction of such improvement to real property, more than 10 years after the performance or furnishing of such services or construction.”).
4735 Ill. Comp. Stat. 5/13-214 (2018) (“No action based upon tort, contract or otherwise may be brought against any person for an act or omission of such person in the design, planning, supervision, observation or management of construction, or construction of an improvement to real property after 10 years have elapsed from the time of such act or omission.”).
5Id. (“However, any person who discovers such an act or omission prior to the expiration of the 10 years from the time of such act or omission shall in no event have less than 4 years to bring an action as provided in subsection (a) of this Section.”).
6Please note that this article assumes that the engineer’s services are going to involve construction or an improvement to real property. Where such is not the case, this information may not be accurate.