Minnesota Supreme Court Clarifies Accrual Date of Construction Defect Limitations Period
Category | Announcements
By Hugh D. Brown and Zachary E. Coppola
Hugh and Zach are members of the firm’s Construction Law Department. Hugh can be reached at 612.359.7663 or hbrown@fwhtlaw.com. Zach can be reached at 612.359.7667 or zcoppola@fwhtlaw.com
The Minnesota Supreme Court recently resolved a question of first impression under Minnesota’s construction statute of limitations: when does “termination … of the construction or the improvement to real property” occur under Minn. Stat. § 541.051, subd. 1(c) when the owner later hires a replacement contractor to finish the job? Does the limitations period commence when the contractor is terminated, or when the project as a whole is complete? The Court held that termination of the contract in question is sufficient to trigger the two-year limitations period, regardless of whether construction ultimately continues under a new contractor.
American Family Insurance Co. v. NB Electric, Inc. stemmed from a 2020 home remodeling project in Little Canada, Minnesota. Morningstar Remodeling, LLC (“Morningstar”) served as the general contractor and subcontracted the electrical work to NB Electric, Inc. (“NB Electric”). In July 2020, a fire broke out during construction, allegedly because NB Electric and Morningstar used nonmetallic cabling and omitted required arc fault circuit interrupters. The homeowner terminated NB Electric about a month after the fire and terminated Morningstar by April 2021. He then hired a new general contractor, Solid Rock Construction, which completed the repairs; the city issued final approval in July 2021.
American Family, the homeowner’s insurer, brought a subrogation action against NB Electric and Morningstar in July 2023: more than two years after Morningstar’s termination but less than two years after Solid Rock’s substantial completion. The district court granted summary judgment for the contractors, holding that the claims accrued no later than April 2021, when the homeowner terminated Morningstar. A divided court of appeals reversed, reasoning that “termination … of the construction or the improvement to real property” refers to termination of the project as a whole, not termination of an individual contractor’s engagement, and that, because a new contractor continued the project, no termination (as distinct from eventual substantial completion) had occurred.
Before the Minnesota Supreme Court, NB Electric argued that “termination” means termination of the contract obligating the contractor to perform the work; here, the homeowner’s contract with Morningstar, so the claim accrued in April 2021. American Family pressed several counterarguments. First, it argued the statute is unambiguous because it says nothing about a “contract” or “contractor,” and that the Court’s decision in Moore v. Robinson Environmental already established that similar language in the statute refers to the entire project rather than any one contractor’s role. Second, it argued that NB Electric’s reading was unworkable because it would require an owner to track every subcontractor’s individual scope and completion date. Third, it argued that its own project-wide reading better served “uniformity, predictability, and timely resolution of disputes” in the construction industry.
The Court rejected each of American Family’s arguments. On the textual point, it held the statute’s silence cuts both ways because it also never uses the phrase “entire construction project,” so the absence of the word “contract” does not resolve anything. It distinguished Moore on the ground that no contractor had been terminated in that case, so the Court’s “judicial mind” there was never trained on the specific question of what termination does to accrual. On the subcontractor tracking argument, the Court found it beside the point because an owner need only know the status of its own general contractor, not the status of every subcontractor working beneath it. And on uniformity and predictability, the Court observed that “the entire construction project” is an inherently fluid concept, especially where work is phased, so anchoring accrual to that concept would create more unpredictability, not less.
Having found the statute ambiguous, the Court turned to legislative history behind the 2018 amendment that added the “substantial completion, termination, or abandonment” trigger to subdivision 1(c). That amendment responded to the Court’s 2015 decision in 328 Barry Avenue, LLC v. Nolan Properties Group, LLC, which held that a defect claim could accrue, and the limitations clock could start running, before a project was ever substantially complete, even where everyone expected the problem to be fixed before completion. The Minnesota State Bar Association pushed the fix, framing it as protection against forcing parties into premature litigation over defects both sides expected to be repaired.
The Court also found the legislative record tied “termination” specifically to the contractual relationship – not the project. In doing so, it highlighted MSBA Construction Law Section member (and Fabyanske shareholder) Dean Thomson’s testimony before the Senate Judiciary and Public Safety Finance and Policy Committee in which he explained that the amendment was “proposing that we run the statute of limitations no earlier than the date of substantial completion, or abandonment of the project, or termination of the contract in question.” The Court treated that testimony as strong evidence that the Legislature meant termination of the contract, not termination of the undertaking as a whole.
Finally, the Court weighed the consequences of each reading. Under American Family’s approach, a construction project might never be “terminated” at all, as an owner who fires a general contractor and simply delays replacing it – indefinitely if the owner chooses – could keep the limitations period from ever starting, leaving the terminated contractor’s exposure hostage to decisions made entirely by someone else on a timeline outside the contractor’s control. The Court held that result irreconcilable with the basic purpose of a statute of limitations: giving defendants reasonable certainty about when their exposure to old claims closes.
Takeaways: The Court’s holding provides owners, general contractors, and subcontractors with a bright-line rule that should be straightforward to apply going forward: once a general contractor’s contract is terminated, the two-year clock starts, unless discovery of the injury occurs later, in which case discovery controls, whether or not the owner brings in someone else to finish the job. The decision is particularly welcome for general contractors, since their own termination date now fixes a clear outer bound to their exposure, regardless of how long the owner takes to hire a replacement or how long the replacement takes to finish the job.
The benefit to subcontractors is less certain, particularly where a subcontractor is terminated or replaced, but the general contractor and the project continue. The Court did not decide whether a subcontractor’s own termination, distinct from the general contractor’s, could independently start the clock. Subcontractors terminated well before the general contractor should not assume the point is settled in their favor; until a court squarely addresses it, the safer assumption is that accrual runs from the general contractor’s termination date. Owners and their counsel should also take care to document the date a general contractor’s engagement actually ends, since that date, not the completion date of any replacement contractor, now controls when the limitations period begins to run.
Announcements
Congratulations to the ten attorneys from Fabyanske, Westra, Hart & Thomson, P.A. who have been named 2026 “Minnesota Super Lawyers”. The polling, researching, and selecting of “Super Lawyers” is designed to identify Minnesota lawyers who have attained a high degree of peer recognition and professional achievement. Only five percent of Minnesota attorneys receive this honor. FWHT’s 2026 “Minnesota Super Lawyers” include Mark Becker, Hugh Brown, Matt Collins, Julia Douglass, Rory Duggan, Kyle Hart, Jesse Orman, Elise Radaj, Nathan Sellers and Dean Thomson. Dean Thomson was also selected as a Top 100 “Super Lawyer”.
Congratulations to the Fabyanske, Westra, Hart & Thomson, P.A. attorneys who have been named Super Lawyer’s 2026 Minnesota “Rising Stars”. They are Colin Bruns and Erinn Valine. “Rising Stars” are nominated by their peers and must be 40 years old or under, or have been practicing for 10 years or less. No more than 2.5 percent of the lawyers in the state are named to the list.
Six attorneys from Fabyanske, Westra, Hart & Thomson, P.A. have been named to the 2026 Legal 500 City Elite listing.
The selected attorneys and practice areas in which they were recognized are:
- Julia J. Douglass – Commercial Disputes
- Rory O. Duggan – Banking & Finance
- Fred H. Ladner – Banking & Finance
- Katie A. Welsch – Banking & Finance
- Paul W. Muilenberg – Corporate and M&A
- Thomas J. Tucci – Corporate and M&A
Also, Fabyanske, Westra, Hart & Thomson’s Construction Group were ranked nationally for the first time this year.