For the past two years, the Associated Builders and Contractors (ABC) and Associated General Contractors (AGC) have introduced a bill in the General Assembly to provide a statute of limitations (SOL) clause for the Commonwealth of Virginia. Although the proposals have not passed, the General Assembly directed the Department of General Services (DGS) via the 2019 Appropriation Act, to engage with industry stakeholders on this issue.
In August, a survey was sent out to 1,558 stakeholders in which 507 responses were received. The results of the survey were discussed on October 3 with industry representatives.
The following key points were presented:
- 58% of respondents were not aware that the Commonwealth of Virginia does not have a SOL regarding construction and professional services contracts
- 53% of respondents were from the A/E industry, 27% were from the construction industry, and the remaining responses were from attorneys, surety companies, state government/higher education stakeholders, and local governments
- Most professional services claims come within less than a year after construction completion. By the sixth year, data seems to indicate that claims are non-existent to minimal on professional services
- Most claims on construction services come between the fourth and sixth year, however, the data shows that significant claims can come at the 10-year mark and beyond
AIA Virginia and ACEC Virginia had several practitioners that spoke to this issue in the meeting.
Our thanks to Donald Booth, AIA, Jim Lowe, Esq., Kathy Blanchard, and Dave Albo (our lobbyist) for providing comments on this issue.
The key points from speakers were as follows:
- A/E firms design to the standards of the time. If a firm designed a project in 1979, then it was designed to the standards in place at that time – which would be much different than the standards of today
- If the Commonwealth of Virginia has an unlimited SOL, then practitioners could be at a disadvantage with procuring professional liability insurance for the sole reason of having state agency clients
- Small businesses are directly affected since they are often sub-consultants and would be subject to the same unlimited SOL terms with the Commonwealth of Virginia as the prime contract holder
- Claims are often tied to confidentiality agreements which limits data sharing
- Electronic storage of information changes over time – long term storage will be unreliable as technology changes
- Claims to A/E’s usually cease after 3-4 years
- A/E professional liability insurance is claims-based. This means the practitioner has to use the policy in place at the time of the claim regardless of when the project was completed
- The industry must have certainty in order to manage risk
DGS asked all presenters what the SOL duration should be. The answer was that every firm developed a policy for record retention. The industry standard is usually five to seven years, although firms may decide to maintain records for up to 10 years.
DGS indicated that the final determination was going to be a number that brought a “little pain” to both sides. They will review all of the comments and provide a report to the General Assembly in December.