The Ohio Supreme Court’s decision on April 27 in Flagstar Bank, F.S.B. v. Airline Union’s Mortgage Company, et al, 2011-Ohio-1961, raises interesting environmental questions: who qualifies as a professional entitled to the four year limitation protections of R.C. 2305.09(D)? Does it cover, for example, acts of certified environmental managers that result in contamination of real property? Does it cover environmental consultants performing Phase I Environmental Site Assessments? If “yes,” is the discovery rule exception superseded, as held in Flagstar, and does the statute of limitations always commence at the time of the initial offensive act?
The court in Flagstar held that a cause of action for professional negligence against a property appraiser accrues on the date that the negligent act is committed, and the four year statute of limitations commences on that date. The Court’s decision, however, leaves open the door to determine the applicability and commencement date of statutes of limitation in cases not involving appraisers. In short, the court extended the definition of “professional negligence” to include appraisers as professionals, but did not define “professional.”
In Flagstar, the plaintiff bank contended that the appraisals had been performed in a negligent fashion, and although the appraisals had been performed more than four years prior to the filing of the action, the statute of limitations did not begin to run until the bank sustained a compensable injury. The statute at issue provided that the action must be brought within four years “after the cause of action accrued.” The Supreme Court, therefore, undertook an analysis to determine when a cause of action accrues under Ohio law.
The Flagstar court noted that Ohio’s general rule is that the cause of action exists (accrues) from the time the wrongful act is committed. 2011-Ohio-1961 at ¶ 13; R.C. §2305.09. However, the court observed that the discovery rule created an exception to this general rule. The plaintiff bank asserted that both the discovery rule and the delayed-damages rule required a finding that the statute of limitations did not commence until the bank sustained a compensable injury. The Supreme Court noted that under the delayed-damages rule, “where the wrongful conduct complained of is not presently harmful, the cause of action does not accrue until actual damage occurs.” Id. at ¶ 19. With respect to torts, the Supreme Court reaffirmed its prior holding that the statute of limitations does not begin to run until the tort is complete, and that a tort is not complete until there has been an “invasion of a legally protected interest of the plaintiff.” Id. at ¶ 20.
The Flagstar court looked to prior cases involving professional negligence of accountants and determined that the same rule should apply to appraisers because they too were professionals, and the cause of action accrues when the act is committed. Id. at ¶ 27.
Although the court’s opinion in Flagstar was unanimous, there remain unanswered questions about the scope of the limitations defense in environmental cases.
For more information on environmental statutes of limitation, please contact Kim Burke or any member of Taft’s Environmental Practice Group.
1 Whether initial exposure of humans to a hazardous substance constitutes “actual damage” that is “presently harmful”, or an “invasion of a legally protected interest,” has not been resolved by the court.