Puget Sound Energy, Inc. v. Pilchuck Contractors, Inc.

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June 1, 2020

The Washington Court of Appeals Upholds Washington’s Statute of Repose.

Congratulations to HWS Partner Brandon Smith and Senior Associate Jimmy Meeks, who recently
scored a big win in Division I of the Washington Court of Appeals! This decision is not only a win
for our client, but a success for construction companies and insurance carriers statewide. In this
matter, the Court of Appeals properly refused to disrupt the decades of stability that the
construction statute of repose has supplied to Washington’s construction industry in favor of
contractors—providing simplicity, predictability, and certainty for contractors and insurers
calculating the windows of exposure associated with construction projects.

The matter of Puget Sound Energy, Inc. v. Pilchuck Contractors, Inc. concerned PSE’s $17 million
contractual indemnity claim arising out of the 2016 Greenwood gas explosion. In 2004, PSE hired
Pilchuk to redesign the gas distribution system on the 8400 block of Greenwood Ave in Seattle,
WA. One of the gas lines to be decommissioned as a part of the project remained active, leading to
the explosion twelve years later that destroyed a few commercial properties and significantly
damaged many others. PSE claimed that Pilchuk had a contractual duty to indemnify PSE for its
losses arising from the explosion, including immediate remediation costs, penalties incurred in the
UTC’s regulatory action, costs to perform the UTC’s mandated remediation program, settlement
payments for dozens of third-party property damage claims and attorneys’ fees.

We successfully moved for summary judgment on all claims under Washington’s construction
statute of repose (RCW 4.26.300 et seq.), which bars all claims arising from construction of an
improvement upon real property which do not accrue within six years of substantial completion of
the construction. On appeal, PSE argued that the statute of repose did not apply because: (1)
deactivation of the gas line in question was a separate “improvement” from the overall project for
purposes of the statute; (2) a contractor who fails to perform work cannot be said to have
substantially completed the improvement; (3) submission of records documenting construction fall
outside of the construction activities within the scope of the statute; and (4) Washington courts
should recognize an exception to the statute for claims of fraudulent conduct.

The Court of Appeals affirmed the dismissal of PSE’s claims and confirmed our arguments in
opposition to the appeal, holding that: (1) deactivation of the gas line in question was substantially
complete regardless of whether it was separate improvement, because it was put to its intended
“disuse;” (2) submission of records documenting construction is indeed a construction activity
within the scope of the statute; and (3) the plain language of the statute barring “all claims…of any
kind” includes claims of fraud. The decision preserves the statute’s longstanding role protecting
contractors from indefinitely long windows of liability.

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