Life After McMillin: Do Negligence and Strict Liability Causes of Action for Construction Defects Still Exist?
January 24, 2018 —
Thomas Balestreri and Amanda Crawley - Balestreri, Potocki, & HolmesThe ruling is in but the battle will likely continue over the practical application of SB 800. On January 18, 2018 the California Supreme Court issued its decision in
McMillin Albany, LLC v. Superior Court (Van Tassel) (January 18, 2018, S229762) __ Cal.4th __, holding that the statutory prelitigation scheme in The Right to Repair Act (“the Act”) that provides for notice and an opportunity for the Builder to repair defects applies to all claims for construction defects in residential construction sold on or after January 1, 2003, regardless whether the claim is founded on a violation of the Act’s performance standards or a common law claim for negligence or strict liability. (
McMillin Albany, LLC v. Superior Court (Van Tassel) (January 18, 2018, S229762) __ Cal.4th __.) With this holding, has the Court ruled that common law causes of action for construction defect still survive? If so, what will they look like and what standards will be applied?
The short answer is that it appears that common law causes of action still survive, at least for now, but it is not clear from this decision what they will look like and what standards will apply.
Portions of the decision seem to suggest that the Act is the sole and exclusive remedy for construction defect claims: “…even in some areas where the common law had supplied a remedy for construction defects resulting in property damage but not personal injury, the text and legislative history [of the statute] reflect a
clear and unequivocal intent to supplant common law negligence and strict product liability actions under the Act.” (
McMillin (January 18, 2018, S229762) __Cal.4th.__ [p. 6].) (Italics added for emphasis) However, at the end of the decision, the Court seems to be saying that there may still be a place for common law claims for negligence and strict liability alongside the Act but that these causes of action may be subject to the performance standards in the Act.
The
McMillin case went up to the Supreme Court on a procedural issue: whether a common law action alleging construction defects resulting in both economic loss and property damage is subject to the Act’s prelitigation notice and cure procedures. The Van Tassels had dismissed their claims under the Act opting to proceed solely on their common law claims including negligence and strict liability. McMillin sought a stay to force the Van Tassels to comply with the Act’s prelitigation procedures. The Supreme Court held that the Van Tassels must comply with the statutory procedures and affirmed the stay issued by the trial court. But the question remained: now that the Van Tassels were left only with common law claims, how would they proceed under the Act?
To understand how the Court dealt with this question, one must first understand how the Court dealt with the narrow procedural question presented by the case. The Court provides a very detailed, clear explanation of the reasons why it felt the Legislature intended for all construction defect claims involving residential construction must comply with the prelitigation requirements of the Act. In summing up its conclusions the Court makes three definitive holdings.
First, for claims involving economic loss only—the kind of claims involved in
Aas—the Court holds that the Legislature intended to supersede
Aas and provide a statutory basis for recovery. (
McMillin (January 18, 2018, S229762) __Cal.4th.__ [p. 10].) In other words, the Court clearly agrees that the Act was meant to allow recovery of damages based solely on economic damages. No surprise there. Second, the Court held for personal injuries, the Legislature made no changes to existing law that provides common law remedies for the injured party. (Id.) Nobody has ever contested that. Finally, the Court held that for construction defect claims involving property damage and not just economic loss “the Legislature replaced the common law
methods of recovery with the new statutory scheme.” (
Id.,) (Italics added for emphasis.)
In other words, the Court is not saying that negligence and strict liability are not permitted causes of action. The Court is merely stating that these causes of action must comply with the Act’s statutory scheme just as the same as a claim for economic loss. Here the Court is focusing on the procedure that must be followed. “The Act, in effect, provides that construction defect claims not involving personal injury will be treated the same procedurally going forward whether or not the underlying claims gave rise to any property damage.” (
Id.)
Having laid out its fundamental premise, the Court then deals with Plaintiff’s arguments regarding the intent of the Legislature and makes light work of them all. In the process, the Court disapproves
Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal. App. 4th 98, and
Burch v. Superior Court (2014) 223 Cal. App. 4th 1411, to the extent they are inconsistent with the views expressed in the
McMillin opinion.
This is where the decision gets interesting. The Court reminds us that the Van Tassels had dismissed their statutory causes of action for violation of the performance standards under Section 896. One would think at that point that Plaintiffs had to be wondering if they had any claims left given that the Court had ruled that the Act was the sole means of recovery for construction defects. Not so fast. The Court points out that the complaint still rests on allegations of defective construction and that the suit remains an “ ‘action seeking recovery of damages arising out of, or related to deficiencies in, the residential construction’ of the plaintiffs’ homes (§896)
and McMillin’s liability under the Van Tassels’ negligence and strict liability claims depends on the extent to which it [McMillin] violated the standards of sections 896 and 897.” (
McMillin (January 18, 2018, S229762) __Cal.4th.__ [p. 19].) (Emphasis added.) WHAT DID THE COURT JUST SAY? Did the Court just say that a plaintiff could bring a common law cause of action for negligence or strict liability based on a violation of the performance standards under Section 896? What exactly would that claim look like? What would be the elements of such a cause of action?
To answer these questions, the Court states in the very next paragraph, which also happens to be the last paragraph in the decision: “In holding that claims seeking recovery for construction defect damages are subject to the Act’s prelitigation procedures regardless of how they are pleaded,
we have no occasion to address the extent to which a party might rely upon common law principles in pursuing liability under the Act.” (
McMillin (January 18, 2018, S229762) __Cal.4th.__ [p. 19].) (Italics added for emphasis) Is the Court answering “No” to the questions posed above? Probably not. It is simply following the age old rule that an appellate court will
not rule on an issue that is not specifically presented by an appeal, leaving that question for another day.
All we know for sure from
McMillin is that every claim for construction defects falling within the scope of the Act must follow the prelitigation procedure. There are no hall passes for negligence and strict liability. The larger question posed by the last two paragraphs in the decision, is whether the law recognizes a cause of action for negligence and strict liability for construction defects based on the standards in Section 896. The answer will have to be worked out by judges and trial attorneys in courtrooms across the State! The parameters of this hybrid cause of action that the Court seems to have posited will need more careful consideration than can be offered on first reading of
McMillin v. Superior Court.
Read the court decisionRead the full story...Reprinted courtesy of
Balestreri, Potocki, & Holmes
Illinois Supreme Court Rules Labor Costs Not Depreciated to Determine Actual Cash Value
November 19, 2021 —
Tred R. Eyerly - Insurance Law HawaiiThe Illinois Supreme Court determined that a homeowner insurer may not depreciate labor costs in calculating actual cash value (ACV) after a loss under the policy. Sproull v. State Farm Fire and Casualty Co., 2021 Ill. LEXIS 619 (Ill. Sept. 23, 2021).
Plaintiff was insured under a homeowner's policy that provided replacement cost coverage for structural damage. Under the policy, the insured would initially receive an ACV payment but then could receive replacement cost value (RCV) if repairs or replacement were completed within two years and the insurer was timely notified. The policy did not define "actual cash value."
Plaintiff suffered wind damage to his residence and timely submitted a property damage claim to State Farm. The adjuster determined that the building sustained a loss with RCV of $1711.54. In calculating ACV, State Farm began with the RCV and then subtracted plaintiff's $1000 deductible and an additional $394.36, including taxes, for depreciation. Plaintiff thus received an ACV payment of $317.18. Plaintiff claimed that he was underpaid on his ACV claim because State Farm depreciated labor, which is intangible and thus not subject to wear, tear, and obsolescence. Further, labor should not have been depreciated because it was not susceptible to aging or wearing and its value did not diminish over time.
Read the court decisionRead the full story...Reprinted courtesy of
Tred R. Eyerly, Damon Key Leong Kupchak HastertMr. Eyerly may be contacted at
te@hawaiilawyer.com
Michigan Court Waives Goodbye to Subrogation Claims, Except as to Gross Negligence
March 13, 2023 —
Lian Skaf - The Subrogation StrategistIn Ace American Insurance Company, et. al. v. Toledo Engineering Co., Inc., et. al., No. 18-11503, 2023 U.S. Dist. LEXIS 15222 (Ace American), the United States District Court for the Eastern District of Michigan determined whether insurers could pursue their subrogation claims against the defendants despite a waiver of subrogation in each of the contracts the insured had with the respective defendants. Based on the language of the contracts and the circumstances leading up to the loss, the court held that the insurers could not pursue their subrogation claims – other than their claims for gross negligence – due to waivers of subrogation in the applicable contracts.
In Ace American, the insured, Guardian Industries, LLC (Guardian), retained Toledo Engineer Co., Inc. (TECO) and Dreicor, Inc. (Dreicor) to renovate a glass furnace in the insured’s glass manufacturing plant. Guardian and TECO entered into a contract on December 6, 2016. Guardian and Dreicor entered into a contract on September 29, 2013, that the parties later updated on June 3, 2016. Both defendants began work on the project in the spring of 2017 and were finished with the portion of the work known as the “Cold Tank Repair” prior to the loss.
On June 3, 2017, there was an explosion and fire at the plant that caused significant property damage. The plaintiff insurers (Plaintiffs) made payments in the amount of $80 million and became subrogated to its insured’s rights. Plaintiffs then initiated this action.
Read the court decisionRead the full story...Reprinted courtesy of
Lian Skaf, White and Williams LLPMr. Skaf may be contacted at
skafl@whiteandwilliams.com
An Additional Insured’s Reasonable Expectations may be Different from the Named Insured’s and Must be Considered to Determine whether the Additional Insured is Entitled to Defense from the Insurer of a Commercial Excess & Umbrella Liability Policy
June 12, 2014 —
Richard H. Glucksman, Esq., Jon A. Turigliatto, Esq. and Kacey R. Riccomini, Esq. – Chapman Glucksman Dean Roeb & BargerThe Second District Court of Appeal’s recent decision, Transport Insurance Company v. Superior Court (2014) 222 Cal.App.4th 1216, immediately affects builders and contractors (collectively “builders”) who are often named as additional insureds (AIs) to contractors’ general liability policies. The decision is an important tool for builders’ counsel because the builder’s reasonable expectations can alter the interpretation of ambiguous terms in policies issued to subcontractors. Essentially, the builder’s intent is relevant to the interpretation of policy terms because the subcontractor’s intent in requesting additional coverage depends on the agreement it made with the builder. The salient aspects of the facts, the Appellate Court’s reasoning, and practical considerations are discussed below.
Transport Insurance Company (Transport) issued a commercial excess and umbrella liability policy (Policy) to Vulcan Materials Company (Vulcan), naming R.R. Street & Co., Inc. (Street) as an AI for its distribution of a solvent. The Policy provided that Transport would indemnify and defend the insured for loss caused by property damage if (1) it was not covered by “underlying insurance” but was within the terms of coverage of the Policy, or (2) if the limits of liability of the “underlying insurance” were exhausted during the Policy period due to property damage. The Policy included a Schedule of Underlying Insurance (Schedule) that listed policies issued to Vulcan. Thereafter, Vulcan and Street were named as defendants in several environmental contamination actions (Underlying Actions).
Transport brought a declaratory relief action against Vulcan regarding Transport’s duty to defend. (Legacy Vulcan Corp. v. Superior Court (Legacy Vulcan) (2010) 185 Cal.App.4th 677). The trial court found the term “underlying insurance” ambiguous as it was not expressly defined to include only the policies on the Schedule and could be interpreted to include all primary policies in effect. Vulcan challenged the trial court’s decision by petition for writ of mandate, contending “underlying insurance” only included policies listed on the Schedule. The Court of Appeal found “underlying insurance” ambiguous because it was an expressly qualified term under other Policy provisions but not in the umbrella coverage provision and, thus, it was a generic term that was not limited to policies listed in the Schedule or inclusive of all primary insurance.
Reprinted courtesy of Chapman Glucksman Dean Roeb & Barger attorneys
Richard H. Glucksman,
Jon A. Turigliatto and
Kacey R. Riccomini
Mr. Glucksman may be contacted at rglucksman@cgdrblaw.com; Mr. Turigliatto may be contacted at jturigliatto@cgdrblaw.com, and Ms. Riccomini may be contacted at kriccomini@cgdrblaw.com
Read the court decisionRead the full story...Reprinted courtesy of
Nevada Senate Minority Leader Confident about Construction Defect Bill
February 21, 2013 —
CDJ STAFFNevada Senate Minority Leader Michael Roberson told the Las Vegas Review Journal that he was confident that his bill to reform construction defect legislation in Nevada would not meet the same fate as the bill he introduced in 2009, which made it through the Senate only to die in the Assembly. Senate Bill 161 would end the guarantee on legal fees for lawyers bringing construction defect suits. Further, the bill limits construction defects to those that include “an unreasonable risk of injury to a person or property.”
According to the article, construction defect claims in Nevada are 38 times above the national average.
Read the court decisionRead the full story...Reprinted courtesy of
Want to Make Your Jobsite Safer? Look to the Skies.
October 10, 2022 —
Rory San Miguel - Construction ExecutiveNew York Gov. Kathy Hochul is set to sign Carlos’ Law for worker protection. The law would set a national precedent for construction site safety, substantially raising the minimum fines for construction companies found liable for onsite injuries.
Worksites are very complex, and many factors go into creating a safe space. Following suit, innovative operators are looking at advanced technologies to boost onsite safety, including drone data visualization, which involves flying a drone over a site to capture a highly accurate 3D model of current conditions in close to real time. Using drones can't solve every problem, but it can help not only protect workers but also encourage new ones to join your team.
How drone surveying improves jobsite safety
3D mapping a worksite with a drone keeps workers out of harm’s way, helping surveyors avoid potentially dangerous areas filled with constantly moving heavy equipment and machinery. Drone mapping also means surveyors can stay out of the heat, avoiding the risk of excess sun exposure by sending the drone out in their stead to traverse the terrains and slopes of the site.
Reprinted courtesy of
Rory San Miguel, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
Read the court decisionRead the full story...Reprinted courtesy of
No Additional Insured Coverage Under Umbrella Policy
March 12, 2014 —
Tred R. Eyerly – Insurance Law HawaiiThe additional insured was not covered under a property policy for an injury occurring after work was completed. Lewark v. Davis Door Servs., 2014 Wash. App. LEXIS 341 (Wash. Ct. App. Feb. 10, 2014).
Public Storage, Inc. hired Davis Door Service Inc. to perform work at its facilities. The master agreement required Davis Door to maintain a CGL policy that insured Public Storage "during the entire progress of the work." Davis Door secured a CGL policy with American Economy. It also took out an umbrella liability policy with American States.
After Davis Door completed work on a door, Terrie Lewark injury her back opening the door. She sued Public Storage and Davis Door. Lewar and Public Storage settled. Public Storage assigned to Lewark its rights under the umbrella policy with American States. Lewark then sued Davis Door and American States. The trial court found that Public Storage was not an additional insured under the American States umbrella policy.
Read the court decisionRead the full story...Reprinted courtesy of
Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Vancouver’s George Massey Tunnel Replacement May Now be a Tunnel Instead of a Bridge
January 06, 2020 —
Tim Newcomb - Engineering News-RecordThe constant political back-and-forth in British Columbia, Canada, over how to deal with an aging George Massey Tunnel, opened in 1959, has ping-ponged from uncertainty to a $3.5 billion, 10-lane bridge, back to uncertainty, to no bridge and now to an eight-lane submerged tunnel.
Tim Newcomb, Engineering News-Record
ENR may be contacted at ENR.com@bnpmedia.com
Read the full story... Read the court decisionRead the full story...Reprinted courtesy of
