Several states have recently introduced significant legal changes that impact construction defect liability, insurance coverage, and statutes of limitation for filing claims. These developments – in Montana, Wisconsin, Oregon and Colorado – highlight the need for claims professionals to stay informed about evolving legal frameworks to effectively manage risk and ensure compliance in construction projects.

Montana Shortens Time to Bring Contract and Construction Claims

The following are the key changes to the statute of limitations that have gone into effect in Montana:

Written contracts – The statute of limitations is reduced from eight years to six years.

Construction/land surveying – Statute of repose is reduced from 10 years to six years.

Sixth-year injury grace – If an injury occurs during the sixth year after completion/survey, suit may be filed within one year of the injury.

There are no changes to other limits – The limits of five years for unwritten contracts and three years for other non-written obligations remain the same.

These changes apply to actions “founded on an instrument in writing” filed on or after October 1, 2025. They are not retroactive and do not apply to actions filed before October 1, 2025.

Claims professionals, design professionals, and construction contractors should note the shorter time frame for bringing liability actions.

Wisconsin Appellate Court Finds Duty to Defend in Construction Defects Case

A Wisconsin appeals court has ruled that an insurer must defend a metal fabricator against customer claims related to paint applied to aluminum balconies that later bubbled and peeled.

In Frankenmuth Mutual Insurance Co. v. Midwest Stairs & Iron Inc., a three-judge panel from Wisconsin’s Court of Appeals District I held that the lower court erred in finding no property damage on the basis that the paint and balconies formed an integrated system, Midwest Stairs & Iron sought coverage from Frankenmuth in July 2020 for damage to the balconies. The insurer denied the claim and then sued Midwest, seeking a court order on its coverage obligations. The Supreme Court of Wisconsin has denied further review, making the appellate ruling requiring coverage final.

Oregon Supreme Court Clarifies Coverage for Construction Defect Claims

The Oregon Supreme Court has ruled that coverage for a construction defect claim under a liability policy depends on whether there is a basis for tort liability. In Twigg v. Admiral Ins. Co. the court examined the meaning of "occurrence" in a liability policy, determining that recovery for an “accident” depends on whether there was a basis for imposing tort liability.

The construction defect case involved damage to a newly built luxury single-family home on a hillside lot. The homeowners hired the insured, Rainier Pacific Development LLC, as the general contractor. The court ruled that as long as negligence contributed to the property damage, the claim qualifies as a covered occurrence – even if a breach of contract claim could also be asserted.

Colorado Supreme Court Finds Economic Loss Rule Applies to Allegations of Willful and Wanton Conduct

The Colorado Supreme Court determined that no exception to the economic loss rule existed for allegations of willful and wanton conduct.

In Mid-Century Ins. Co. v. HIVE Construction, Inc., the court ruled that a change order reducing fire-retardant materials did not result in a tort claim. When the fire ultimately took place, the plaintiff was limited to breach of contract remedies.

This case is notable because Colorado generally provides broad coverage for construction defect claims based on prior case law and statute. Here, however, the plaintiff was an insurance company as subrogee, and this may have influenced the ultimate decision.

Colorado Statute: HB 25‑1272 – Construction Defects in Multifamily Buildings

This new law is intended to encourage builders and insurers to remain active in developing new multifamily housing. For construction of multifamily, attached housing with two or more units, the act establishes the Multifamily Construction Incentive Program.

Builders who elect to participate in the program must do the following:

• Provide a warranty that covers any defects and related damage at no cost to the homeowner for specified periods
• Arrange a third-party inspection of the property
• Record a notice of election to participate in the program in the real property records before the property is offered for sale

For construction defect claims brought for the construction of housing for which the builder is a participant in the program, the following apply:

• Claimants must file a certificate of review with the complaint if the claim is against an architect or engineer.
• Actions are limited to claims that have resulted in alleged defects.

To qualify for assistance from the state affordable housing fund, local governments must establish an expedited approval process for applications involving for-sale, multifamily condominium projects.

Staying Informed

Gen Re maintains a comprehensive national heat map tracking construction defects issues by state to help our clients stay up to date on evolving legal changes that impact construction defect liability coverage. For more information, please contact your Gen Re account executive.