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Time Limitations In Professional Liability Claims

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In just about every professional liability claim there are statute of limitations issues implicated that may  completely time bar all of the claims against the professional. For instance, if a client is represented by both an attorney and an accounting professional on a 1031 exchange or other complex tax issue, the client may consider suing either the accountant or the lawyer.

For various reasons, the client may find it advantageous to sue one of the professionals but not both. However, when a limitations provision begins to run is often triggered as of the time the client knew or should have known that the elements of a claim were present.

If either one of the professionals have information in their file that indicates the client knew or should have known of the elements of the claim, the claims may have expired depending on the applicable limitations period for the claim. Time limitations are an important consideration then for both the client in bringing the claims and the professional in defending the claims.

Claims against professionals generally take the form of contract claims and professional negligence type claims. It is important to know the difference because contract claims in Montana have longer statutes of limitations than typical negligence based claims.

Broadly speaking, a breach of contract claim that is based upon a written instrument has an eight-year statute of limitations. § 27-2-202(1). Actions based in tort must be commenced within three years of the claim's accrual. Mont. Code Ann. § 27-2-204. However, in a case that includes a breach of a professional service contract, it can be difficult to determine whether the claims are strictly tortious (negligence based) or strictly contractual.

Montana has adopted the Gravamen Test to determine the character of a claim. If the main focus of the claim relates to the performance or non-performance of a specific contractual provision, the claim is likely to be a contractual claim subject to the longer contractual limitations period. However, if the gravamen of the claim is the alleged breach of the legal duty to provide competent professional services rather than a breach of a specific contractual provision, the three year statute of limitations is likely to apply.

Under certain circumstances, liability may exist in both tort and contract, giving the injured party the right to elect which form of action to pursue. However, that choice must be more than a mere re-labeling of a claim to avoid the consequences of a statute of limitations.

In other words, a party can't just change the name of their claim in order to benefit from the longer contractual limitations period. The gravamen of the claim rather than the label controls the limitations period utilized.

Whether you are the professional or the injured party in these situations it pays to know and understand the applicable limitations periods.

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