Building a Stronger Defense

In Maxwell v. Atl. Richfield Co., 476 P.3d 645 (Wash. Ct. App. 2020), Division 2 of Washington’s Court of Appeals was faced with the question of whether claims for personal injury arising out of construction activities were subject to Washington’s construction six-year statute of repose.

The plaintiffs argued that the defendant trade professionals’ involvement in the “sale” of asbestos-containing products installed at the project were not “construction activities” that would otherwise support imposition of the statute of repose. The court found that the construction statute of repose applied to bar mesothelioma claims brought by the Browns.

Background

Maxwell involved a wrongful-death claim due to alleged exposure to asbestos during the construction of Atlantic Richfield Corporation’s (ARCO) refinery at Cherry Point. Parsons was the design-build general contractor, with Brand as the insulation subcontractor. Parsons purchased materials for the project and ARCO reimbursed Parsons on a cost-plus basis. Brand installed asbestos-containing thermal insulation and gaskets in multiple areas around the refinery.

Brand was responsible for providing materials needed to complete its work, and Parsons paid Brand for the invoiced cost of materials. The project was substantially complete in 1972. Edmond Brown worked as a technician and operator in the coker unit at the refinery between 1971 and 1985. Brown’s work duties included cleaning debris, picking up insulation, and sweeping dust. Brown was exposed to asbestos dust from Brand’s hand-cut insulation.

The Litigation

In 2018, Brown was diagnosed with mesothelioma. His estate and surviving spouse subsequently filed a lawsuit in Pierce County Superior Court against Parsons and Brand. Although the Browns asserted claims against a number of defendants, they did not assert claims against the product manufacturers of the asbestos-containing insulation. The Browns asserted claims against Parsons on the basis that Parsons was liable for: 1) directing and requiring the use of asbestos-containing insulation; 2) supplying asbestos-containing insulation; and 3) directing, supervising, and otherwise participating in the installation of the asbestos-containing insulation.

The Browns alleged that Brand was one of the entities that had supplied the insulation. The trial court granted summary judgment for Parsons and Brand based on RCW 4.16.300 and .310, Washington’s six-year construction statute of repose.

The Holding

Following the Browns’ appeal, the Washington Court of Appeals, Division 2 affirmed the trial court’s decision. The Court of Appeals held that the Browns’ claim arose from Parsons’ and Brand’s construction activities, and that Parsons’ and Brand’s activities involved an improvement upon real property.

First, the Court of Appeals emphasized the idea that the statute of repose applies within the context of construction activities. Thus, the statute of repose applies to only those causes of action “arising from” enumerated construction activities, including construction, alteration, supervision, and administration of construction contracts. Said another way, if the claim does not arise from a construction activity, the statute of repose does not apply.

The Court of Appeals pointed to the expansive nature of the statute of repose and referenced the intent that it be “broad and sweeping.” The court distinguished between the activities of selling and building by describing other circumstances where the statute of repose did not apply, such as a product-liability claim against the manufacturer and seller of a diving board incorporated into a swimming pool, which was undeniably an improvement to real property. 

Second, the court found that the statute of repose applies only to claims arising from the construction of an “improvement upon real property,” distinguishing such activities from the installation of systems that become a “normal part” of a building or manufacturing process taking place within the building. Specifically, the court differentiated between a system that is installed to perform as an integral part of the building (such as HVAC, plumbing, and electrical), as opposed to a process that takes place within the building. As such, a system that satisfies the “improvement upon real property” prong is both part of the structure itself and necessary for the building to function as intended.

The Court of Appeals was unpersuaded by the Browns’ argument that their claims arose from the sales activities of Parsons and Brand. Although the court acknowledged the contractual requirement that Parsons purchase all necessary materials, the court noted no real separation between Parsons’ role as a builder or as a seller of building materials. The court found that Parsons was not a seller because Parsons did not sell purchased materials to ARCO. Instead, ARCO was obligated to reimburse Parsons based upon invoices and purchase orders between Parsons and the insulation manufacturers.

The court found Parsons’ reimbursement to Brand for the actual cost of materials furnished by Brand similarly persuasive. Brand was not required to “sell” anything to Parsons, and the court saw that the Browns’ claims arose out of Brand’s construction activities despite Brand’s invoicing of separate amounts for materials and labor, and progress payments for the same. 

As such, the court found that Brand’s installation of insulation under its subcontract (and Parsons’ construction of the refinery) were activities falling within the original construction or improvement of real property.

There can be no doubt that Maxwell v. Atl. Richfield Co. strengthens the application of the six-year statute of repose to personal injuries on construction projects. This decision may act to shield construction professionals who purchase and are reimbursed for products installed at construction projects. Although this case involved an asbestos injury, we believe the holding may be extended to other injuries and products encountered in the construction industry.

The court’s holding is straightforward in its delineation of what claims are subject to the statute of repose and products liability. The court’s emphasis on the role of reimbursement is favorable to contractors who purchase products for installation and are reimbursed by upstream parties. The court’s reasoning translates easily to other construction scenarios. For instance, contractual provisions relating to the cost and reimbursement of materials will characterize the contractor as a purchaser over that of a product seller.

Parsons and Brand were both undoubtedly involved with the original construction or improvement of real property. However, the court’s focus on the installation of a system within an existing structure or improvement of real property suggests application in situations where an im-provement is made to an existing system or building. Given the court’s delineation between improvements and construction to an original structure versus an internal process within a building, it is likely that the same protections applied in this case also extend to construction activities that pertain to the original structure. For example, a court is likely to find that the improvement of an environmentally beneficial plumbing system within a building is a construction activity in contrast to the maintenance of a warehouse refrigeration unit.