(Posted November 3, 2016) You may count me among the legions of Easterners who are expecting sleep deprivation to catch up with them this afternoon. I stayed up last night until a ridiculous hour watching Game 7 of the World Series, even though my beloved Dodgers fell one series short of playing in it. You see, the man for whom I’m sort-of named, my grandfather Stan Emmert, was a Cubs fan his whole life, which spanned from the Taft Administration deep into the 1980s. For his whole life, Chicago never won the World Series. I thought of his smile last night as I watched a game that put to shame anything the National Football League could ever offer.

Today the Supreme Court gives us one published opinion, exploring the statute of limitations in contract claims. Hensel Phelps Construction v. Thompson Masonry Contractor illustrates one of the risks of doing business as a government contractor: when the owner is the Commonwealth, there is no end date on your potential liability.

Hensel won the right to build a student health and fitness center at Virginia Tech. Acting as general contractor, it hired several subcontractors, some of whose work was covered by corporate sureties.

Hensel finished the building in 1998 and handed Tech the keys; the school made the last payment the next year, and Hensel paid off its subs. Other than one minor repair made in 2000, the building checked out.

Except it didn’t. In 2012, the school demanded $7 million – almost half the entire contract amount – to remedy what it thought was defective workmanship. The general negotiated a settlement of $3 million, paid it, and demanded that the subs reimburse the general. The subs declined, so the general sued for breach of the subcontracts; but a trial court sustained pleas of the statute of limitations.

This appeal is about whether the subcontracts obligated the subs to cover any liability that the general might have to the project owner. Specifically, the school, as an agency of the Commonwealth, isn’t subject to the statute of limitations – time does not run against the state – but it does run against the general in its potential claims against the subs. That was the basis of the trial court’s holding, and today the Supreme Court unanimously affirms.

The general claimed that when the subcontracts incorporated the general contract, it incorporated the essentially endless period for making claims on it. But as Justice Millette points out in the court’s opinion, the endless period isn’t found in the general contract; it’s in a statute (Code §8.01-231). The subs can’t be charged with unlimited (at least in time) liability because “a general incorporation provision is insufficient to expressly waive a limitations period, as it does not expressly acknowledge the right to a limitations period or intent to waive that right.”

The court also rejects the general’s argument that the statute of limitation on its claims didn’t begin to run until it paid the settlement to the Commonwealth. But by another statute, that limitations period begins “when the breach of contract occurs,” not when the damage is discovered. There’s an exception for indemnification; those claims accrue when the indemnitee pays the direct obligation.

At first blush, that looks very promising for the general. But six years ago, long after delivery of the building, the court held that an indemnification is void as against public policy where it indemnifies a party against liability for his own negligence. The indemnification language in the subcontracts violates that rule, so that statutory exception doesn’t help. The court also rejects the argument that several other provisions, “scattered throughout the contract in other specific contexts and under other specific subtitles, were contemplated by the parties as independent indemnification provisions, particularly when there is a freestanding, albeit ineffectual, indemnification provision in the contract.”

So what’s a general to do? Will it be liable for its subcontractors’ mistakes in perpetuity, with no right of recourse after the five-year SoL runs in favor of the subs? Nope, the court says; you can always modify your indemnity provisions to comply with the 2010 decision, and contractually agree on a delayed accrual for indemnity claims. Today’s opinion is a specific invitation for contractors to revise their contracts immediately.