Supreme Court of Minnesota

Case no.: A24-0377
Date filed: July 22, 2026

The Minnesota Supreme Court has ruled that “termination” of construction work refers to the contractual relationship, not the physical completion of the work. It is a technical term within the construction industry and within construction contracts.

Nicholas Oelke entered into a contract with Morningstar Remodeling LLC to renovate a house in the city of Little Canada. Morningstar subcontracted the electrical work to NB Electric Inc.

Near the conclusion of construction, a fire broke out in the house, allegedly because NB Electric had not used the cabling and circuit interrupters specified in the contract. Oelke’s insurer, American Family Insurance Co., took responsibility for the damage and for project completion.

In April 2021, American Family discontinued the services of Morningstar and hired Rock Solid Construction as the new general contractor. The insurance company inspected and approved the work as substantially complete in July 2021.

American Family, subrogated to the rights of its insured party, sued Morningstar and NB Electric in July 2023. The contractors argued the suit was time barred under Minnesota Statute section 541-051. That statute requires a suit for defective construction to be filed within two years of “substantial completion, termination, or abandonment of the construction or the improvement to real property,” whichever occurs first.

The contractors argued Morningstar had been terminated by American Family in April 2021, so the July 2023 suit was not timely. American Family responded that termination refers to the conclusion of all work on the project. The work had not been substantially completed until July 2021, so the suit was timely.

A trial court agreed with the contractors and dismissed American Family’s suit as time barred. The Minnesota Court of Appeals, in a split decision, ruled that termination means the conclusion of construction activities for the project as a whole. Therefore, the suit had been timely. American Family appealed to the state’s highest court.

The Supreme Court of Minnesota said the statute of limitations does not define the term termination. Usually, the court looks to the ordinary, common-use dictionary definition of terms. But that is not the case when a term is a specialized, technical term of art. The court concluded this was such a term. Termination referred to the contractual relationship, not the physical construction work.

“Substantial completion of the project, abandonment, or termination.… Those are all terms of art within the construction industry and within the contract.… In construction law, ‘termination’ is a contractor-specific term of art that refers to the termination of a construction contract, typically pursuant to a termination provision in a contract.”

The court said American Family’s interpretation of the statute would allow substantial completion of the construction work to void a prior contractual termination.

“[T]he prescribed limitations period under section 541.051 virtually disappears in situations where a contractor is terminated and the property owner never hires another contractor to complete the project, delays hiring another contractor to complete the project, or subsequently hires another contractor who drags out substantial completion of the project.”

“For the terminated contractor, such as the contractors here, the accrual of the prescribed limitations period would be at the whim of the property owner, who may or may not continue the project with a different contractor, at a pace unknown to and out of the control of the terminated contractor.”

The Minnesota Supreme Court reversed the appellate ruling and reinstated the trial court’s order dismissing American Family Insurance’s suit as time barred.

In reciting the facts, the court said American Family “discontinued” the services of Morningstar and NB Electric. This does not sound like a formal termination for default under the terms of a contract provision. But it would be considered a constructive termination.

Project owners should avoid simply kicking a contractor off the job or ceasing to use the contractor’s services. It would be more prudent for project owners to formally declare a default and termination in accordance with the terms of the contract.

Participants:
For American Family Insurance: Jessica C. Richardson; Minneapolis, Minnesota
For NB Electric, Inc.: Colby B. Lund; Minneapolis, Minnesota
Before: Judges Hudson, Gaitas, McKeig, Thissen, Moore, Procaccini, and Hennessey
Opinion by: Chief Justice Hudson
Outcome: Dismissal of suit reinstated

Source: Attach the complete opinion or decision PDF here.