Owners may be compelled to assume design liability.

Once again, legislation has been introduced in the New York State Senate and Assembly for a statute of repose. If passed, the legislation would effectively pass the risk of loss for defects in design and construction to the owner after seven years from the certificate of occupancy issue date.

The bills in question are Senate bill 2445 and Assembly bill 4000. They are identical in content and were both introduced in February 1995.

The crux of the proposed legislation is a seven-year time limit from certificate of occupancy to bring a claim for personal injury, wrongful death or property damage against the architect, the engineers and the construction contractor. This would be a radical change from the current law, which generally allows the plaintiff to sue the designer, the builder or the owner within three years of the incident. Thus, for instance, if a pedestrian trips and breaks his arm on a defectively designed or constructed stair 10 years after completion, the plaintiff can only sue the owner under this legislation.

The legislation is predicated on the belief that any defects in design and construction will occur within the seven year period and that otherwise the defects are due to building maintenance and not errors in design or construction. Specifically it states "the legislature further finds that the best designed and constructed improvement is dependent upon proper maintenance to preserve its integrity and safety, and it is thus of importance to the public safety and welfare to insure that an owner maintains and repairs that which is the property of the owner... The time limitation set forth here-in, commencing on the date that the improvement was completed, will preserve the liability of the professional during a period in which the defects, if any will be revealed, and therefore will establish an appropriate limitation on liability, while affording adequate protection to the public."

The net effect of the legislation is to pass the risk of loss after seven years to the building owner. This may of course put pressure on insurance premiums paid to cover bodily injury and property damage claims asserted against building owners. The legislation will not likely affect the building owners maintenance costs, since building maintenance in commercial and residential structures alike are already heavily regulated.

The proponents of the legislation do not attempt to conceal the fact that insurance premiums are a motivating factor. In fact the legislation states "the cost of maintaining adequate insurance coverage is so expensive that a significant number of design professionals and construction contractors are forced to forego insurance coverage altogether, to the detriment of the public's safety and welfare."

Presently, the bill in the Senate has had two reports out of the Codes Committee and may be introduced on the senate floor for a vote at any time. The bill in the Assembly is still within the Codes Committee.

(Peter Goetz is a senior member of the New York and New Jersey based law firm of Goetz, Fitzpatrick & Flynn, which concentrates its practice in construction and real estate law related fields.)