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September 2013

Right to Repair Act Does Not Provide Exclusive Remedy for Homeowners When Construction Defects Result in Actual Damage

On August 28, 2013, the California Court of Appeal, Fourth Appellate District, held that California’s Right to Repair Act, Civil Code section 895, et seq. (the “Act”), does not provide the exclusive remedy for homeowners when alleged construction defects have resulted in actual damage.

The decision in Liberty Mutual Insurance Company v. Brookfield Crystal Cove, LLC, involved a 2008 pipe failure in a sprinkler system at a newly constructed home.  While the builder (Brookfield) performed repairs and remediation at the property, the homeowner’s insurance company (Liberty Mutual) paid for the homeowner’s relocation expenses.  In 2011, Liberty Mutual filed a subrogation lawsuit against Brookfield to recover those expenses.

Brookfield moved to dismiss Liberty Mutual’s complaint arguing that it was time-barred under the Act, which established specific statutes of limitations and set forth pre-litigation procedures a homeowner must follow prior to bringing a civil action against a builder.  Because Liberty Mutual’s suit against Brookfield was brought under a subrogation theory, it “stood in the shoes” of the insured homeowner and was subject to the limitations and requirements of the Act (assuming they applied).  The trial court dismissed Liberty Mutual’s complaint finding that it was time barred under the Act.  Liberty Mutual appealed.

The court of appeal reversed, holding that Liberty Mutual’s claim was not time-barred for failing to comply with the Act.  The appellate court examined the purpose and legislative history of the Act and determined that it “was enacted to provide remedies where construction defects have negatively affected the economic value of a home, although no actual property damage or personal injuries have occurred as a result of the defects.”  The court held that the Act does not eliminate a property owner’s common law rights and remedies where, as in the case before it, actual damage has occurred.  Finding nothing in the legislative history of the Act indicating an intent to bar a homeowner’s common law claims for actual damages, the Court held that when construction defects cause actual damage, a homeowner has the option to pursue its rights under the Act or under common law tort theories.

Click here for a copy of the opinion.

This opinion is not final.  It may be withdrawn from publication, modified on rehearing, or review may be granted by the California Supreme Court.  These events would render the opinion unavailable for use as legal authority.

This and other case bulletins, as well as other publications of Gordon & Rees LLP, may be found at www.gordonrees.com.

Insurance

Matthew S. Foy
Timothy P. Lindell



Insurance

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