The five-year time limit for suits under the New Home Warranty Act (“NHWA”) and La. R.S. 9:2772 benefit contractors, but can also set a trap that may cost general contractors their ability to pursue indemnity. As a result of the peremption period in 9:2772, a general contractor may be called upon to pay for the faulty workmanship of its “subs” with no recourse against those same contractors.

In Kelleher v. Custom Homes, 15-1798 (La.App. 1 Cir. 6/3/16), the First Circuit clarified the law by affirming dismissal of the builder’s third-party indemnity demand against a subcontractor. The homeowner timely sued the builder for construction defects just before expiration of the NHWA’s five year peremption period, and the builder filed its indemnity demand within 90 days. The indemnity demand was properly dismissed under 9:2772 because more than five years had passed since the home was occupied.

The Kelleher Court relied on its ruling in Peck v. Richmar Construction, Inc, 13-1170 (La.App. 1 Cir. 2/26/14), 144 So.3d 1042, which held that the 90 day grace period in Code of Civil Procedure art. 1067 did not apply to the more specific peremption rule of La. R.S. 9:2772. Further, the legislature’s amendment to La. R.S. 9:2772 to add a 90 day grace period did not become effective until after suit was filed.

Relying on the Louisiana Supreme Court ruling in Ebinger v. Venus Const. Corp., 10-2516 (La. 7/1/11), 65 So.3d 1279,  the Kelleher Court concluded that the filing of the main action did not toll the peremption period, which by definition cannot be interrupted. (Civil Code art. 3461). In this situation, the indemnity claim perempted just as the cause of action arose, leaving the general contractor solely liable.