Significant Victory for the Building Industry: Liberty Mutual is Rejected Once Again, This Time by the Third Appellate District in Holding SB800 is the Exclusive Remedy
December 15, 2016 —
Richard H. Glucksman & Ravi R. Mehta – Chapman Glucksman Dean Roeb & Barger Bulletin I. Elliott Homes, Inc. v. Superior Court (Certified for Publication, Cal. Ct. App. Dec. 2, 2016
The California Court of Appeal for the Third Appellate District recently elaborated on the scope of the Right to Repair Act, commonly known as SB-800 (“Act”). In
Elliott Homes, Inc. v. Superior Court of Sacramento County (Kevin Hicks, et al.) (certified for publication, Cal. Ct. App. Dec. 2, 2016), the Court considered whether the Act (and specifically the Act’s pre-litigation procedure) applies, when homeowners plead construction defect claims based only on common law causes of action, as opposed to violations of the building standards set forth in the Act (
Civil Code §896). The Court answered this question affirmatively.
The homeowners of seventeen (17) single-family homes filed a Complaint against the builder of their homes, Elliott Homes, Inc. (“Elliott”), alleging common law causes of action for construction defects. Elliott filed a motion to stay the litigation on the ground that the homeowners failed to comply with the pre-litigation procedure set forth in the Act. The trial court denied the motion, agreeing with the homeowners that this pre-litigation procedure did not apply because the homeowners had not alleged a statutory violation of the Act. Elliott appealed. The Court of Appeal purely considered the question of whether the Act, including its pre-litigation procedure, applies when a homeowner pleads construction defect claims based on common law causes of action, and not on statutory violations of the Act’s building standards.
To answer this question, the Court analyzed a recent case decided by the Court of Appeal for the Fourth Appellate District:
Liberty Mutual Ins. Co. v. Brookfield Crystal Cove, LLC (2013) 219 Cal.App.4th 98. In this subrogation case, a builder’s insurer asserted common law causes of action (but not statutory building standard violations) alleging construction defects against the builder to recover amounts paid to the homeowner after a sprinkler system failure caused extensive damage to the subject property. The trial court sustained the builder’s demurrer to the Complaint on the ground that it was time-barred under the Act. The Court of Appeal reversed the trial court’s order, holding that common law construction defect claims arising from actual damages are not covered by the Act because “the Act does not provide the exclusive remedy in cases where actual damage has occurred.” (
Liberty Mutual, 219 Cal.App.4th 98, 109).
The
Elliott Court declined to follow
Liberty Mutual, finding that that Court failed to properly analyze the language of the Act. The
Elliott Court analyzed both the statutory scheme and the legislative history of the Act to arrive at the conclusion that common law causes of action for construction defects do indeed fall within the purview of the Act.
According to the
Elliott Court, the Act “broadly applies to
any action seeking recovery of damages arising out of, or related to deficiencies in…residential construction and in such an action, a homeowner’s claims or causes of action shall be limited to violation of the standards set forth in the Act, except as specified.” Further, the Act expressly provides that “no other cause of action for a claim covered by this title or for damages recoverable under Section 944 is allowed.”
Civil Code §943(a). In turn,
Civil Code §944 allows for a recovery for the cost of repairing a building standard violation, or for the cost of repairing any damage caused by such a violation, among other things.
The limited exceptions to the Act’s applicability concern the enforcement of a contract, or any action for fraud, personal injury, or violation of a statute. Civil Code §943(a). Additionally, the Act does not apply to condominium conversions. Civil Code §896.
The Elliott Court explains that apart from these exceptions, the Legislature intended the Act to apply to all construction defect claims (regardless of damage) relating to the construction of residential properties whose sales contracts are signed after January 1, 2003. There is no exception in the Act, express or implied, for common law causes of action.
Next, the Court turns to the Act’s legislative history to buttress this conclusion. This history makes clear that the Act is a legislative response to the California Supreme Court’s holding in
Aas v. Superior Court (2000) 24 Cal.4th 627, that construction defects in residential properties are only actionable in tort when actual property damage manifests. Senate Judiciary Committee hearings indicate that the Act was the product of protracted negotiations between varying interested parties, including construction industry trade groups and consumer protection groups. The Legislature intended (1) to promulgate building standards, violations of which would be actionable, even without damage, and (2) to allow homeowners to recover for actual damage caused by construction defects not covered by the building standards. In other words, the Act was intended to provide homeowners redress regardless of whether damage had manifested.
Therefore, the Court concluded that common law causes of action for construction defects, regardless of damage, are subject to the pre-litigation procedure set forth in the Act. The Court issued a writ of mandate directing the trial court to vacate its earlier order, and to enter a new order granting Elliott’s motion to stay the litigation until the homeowners (and Elliott) have satisfied the pre-litigation procedure of the Act.
II. McMillin Albany, LLC v. Superior Court (2015) 239 Cal.App.4th 1132
Similar to the Third Appellate District Court’s ruling in
Elliott, the Fifth Appellate District Court also rejected the holding of
Liberty Mutual in a matter now pending before the California Supreme Court:
McMillin Albany, LLC v. Superior Court (2015) 239 Cal.App.4th 1132 (review granted and opinion superseded sub nom.
Albany v. Superior Court 360 P.3d 1022). Also similar to
Elliott, in
McMillin a group of homeowners filed common law construction defect claims against the builder of their homes. The builder,
McMillin, moved to stay the litigation pending compliance with the Act’s pre-litigation procedure. The trial court denied the motion, holding that the Act does not apply because the homeowners have not asserted statutory building standard violations contained within the Act.
In reasoning substantially similar to that of
Elliott, the
McMillin Court rejected Liberty Mutual’s holding that the Act is not the exclusive remedy for pursuing construction defect claims, with or without damage. Thus, the
McMillin Court issued a writ of mandate to vacate the trial court’s earlier order and to enter a new order granting McMillin’s motion to stay.
On November 24, 2015, the California Supreme Court granted the homeowners’ petition for review. In August of 2016, briefing was completed and the matter is now awaiting the scheduling of arguments. CGDRB will continue to closely monitor the pending appeal of this matter to the California Supreme Court, as well as all related developments.
Reprinted courtesy of
Richard H. Glucksman, Chapman Glucksman Dean Roeb & Barger and
Ravi R. Mehta, Chapman Glucksman Dean Roeb & Barger
Mr. Glucksman may be contacted at rglucksman@cgdrblaw.com
Mr. Mehta may be contacted at rmehta@cgdrblaw.com
Read the court decisionRead the full story...Reprinted courtesy of
Buyer's Demolishing of Insured's Home Not Barred by Faulty Construction Exclusion
June 21, 2017 —
Tred R. Eyerly - Insurance Law HawaiiLoss of the insured's home caused by a renter who demolished the home was covered under the homeowner's policy. Fisher v. Garrison Prop. & Cas. Ins. Co., 2017 Idaho LEXIS 143 (Idaho May 26, 2017).
The insured, Shammie L. Fisher, entered a Purchase Agreement to sell her home to Ron Reynoso. The purchase of the property was contingent upon Reynoso obtaining financing. Before completing the purchase, he would lease the property. The Agreement stated, "Buyer intends to make certain improvements to the property upon possession, with the intent to sell the property for a profit."
Within two months of renting the property to Reynoso, Fisher learned that he had demolished the entire house down to the foundation. He then ceased work and left. Fisher made a claim under her policy, but Garrison Property and Casualty Insurance Company denied coverage based upon the exclusion for faulty, inadequate or defective work. When Fisher sued, the trial court granted summary judgment to Garrison.
Read the court decisionRead the full story...Reprinted courtesy of
Tred R. Eyerly - Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Significant Issues Test Applies to Fraudulent Claims to Determine Attorney’s Fees
January 13, 2017 —
David Adelstein - Florida Construction Legal UpdatesConstruction lienors need to appreciate on the frontend that recovering statutory attorney’s fees in a construction lien action is NOT automatic—far from it. This is because the prevailing party for purposes of attorney’s fees in a construction lien action is determined by the “significant issues test,” a subjective test with no bright line standards based on who the trial court finds prevailed on the significant issues in the case. If you want to talk about the subjective and convoluted nature of recovering attorney’s fees in a construction lien action under the significant issues test, a recent opinion by the Fourth District Court of Appeal is unfortunately another nail in the coffin.
In Newman v. Guerra, 2017 WL 33702 (Fla. 4th DCA 2017), a contractor recorded a construction lien on a residential renovation project and filed a lien foreclosure lawsuit. The homeowner countersued the contractor and asserted a fraudulent lien claim pursuant to Florida Statute s. 713.31. An evidentiary hearing was held on whether the lien was a fraudulent lien and the trial court held that the lien was fraudulent (therefore unenforceable) because it included amounts that were not lienable under the law. The remaining claims including both parties’ breach of contract claims proceeded to trial. There was no attorney’s fees provision in the contract. At the conclusion of the trial, the court found that the contractor was entitled a monetary judgment on its breach of contract claim.
Read the court decisionRead the full story...Reprinted courtesy of
David Adelstein, Florida Construction Legal UpdatesMr. Adelstein may be contacted at
dadelstein@gmail.com
Challenging Enforceability of Liquidated Damages (In Federal Construction Context)
March 11, 2024 —
David Adelstein - Florida Construction Legal UpdatesA recent summary judgment opinion from the Armed Services Board of Contract Appeals (ASBCA), Appeals Of – BCI Construction USA, Inc.,ASBCA No. 6257, 2024 WL 773324 (2024), contains a worthy discussion regarding a contractor’s challenge to the government’s assessment of liquidated damages, specifically the enforceability of the liquidated damages rate. Although this challenge is in the federal context, this discussion would be more expansive and apply outside of the federal context.
When dealing with the enforceability of a liquidated damages, the ASBCA “examines whether the liquidated damages amount ‘is extravagant, or disproportionate to the amount of property loss, as to show that compensation was not the object aimed at or as to imply fraud, mistake, circumvention or oppression.” Appeals of – BCI Construction USA, Inc. (citation omitted).
Read the court decisionRead the full story...Reprinted courtesy of
David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
Whose Lease Is It Anyway: Physical Occupancy Not Required in Landlord-Tenant Dispute
February 07, 2018 —
Afua Akoto – SDV Case Alert In September 2017, a Texas Federal district judge ruled that that Personal and Advertising Injury coverage in a CGL policy did not require physical occupancy in a landlord-tenant dispute.
In the underlying lawsuit, restaurant owner Ziggy Gruber alleged that John Dunn, the landlord of a Houston shopping center, wrongfully interfered with his right of occupancy at the shopping center by failing to complete the negotiation of a lease and preventing his occupancy of the space. Gruber further alleged that he had acquired a direct interest in the premises and became a rightful tenant but as a result of Dunn’s interference, he was never able to open his restaurant.
Read the court decisionRead the full story...Reprinted courtesy of
Afua Akoto, Saxe Doernberger & Vita, P.C. Ms. Akoto may be contacted at
asa@sdvlaw.com
No Coverage for Construction Defects Under Arkansas Law
January 13, 2017 —
Tred R. Eyerly - Insurance Law Hawaii The federal district court found there was no coverage for the insured contractor under Arkansas law when sued for construction defects by two homeowners. Auto-Owners Ins. Co. v. Hambuchen Constr., 2016 U.S. Dist. LEXIS 160364 (W.D. Ark. Nov. 18, 2016).
In one case, the Pierces hired Hambuchen, the insured contractor for the construction of a new home, which was completed in 2006. Two years after moving in, the Pierces experienced water leaks at various locations inside the home and the basement flooded. Water damage rendered the back deck unstable. In 2010 and 2011, Hambuchen made repairs to stop leaks on the decks, but in 2012 the back deck again showed signs of water damage. The Pierces sued, and Auto-Owners provided a defense under a reservation of rights.
In the second case, the Lessmanns hired Hambuchen in 2005 as general contractor to construct their new home. Following completion of the home, the Lessmanns complained about scratched windows. The Lessmanns filed suit against Hambuchen for breach of the construction contract by failing to build their home in a workmanlike manner. The Lessmanns filed suit in May 2009. Auto-Owners was not aware of the suit until 2015 when it received notice that the Lessmanns had filed an amended complaint. The Lessmans' suit went to trial and Hambuchen prevailed.
Read the court decisionRead the full story...Reprinted courtesy of
Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Additional Insured Not Entitled to Indemnity Coverage For Damage Caused by Named Insured
February 23, 2017 —
Tred R. Eyerly – Insurance Law HawaiiThe additional insured unsuccessfully sought to recover damages to its building caused by the named insured. Brit UW, Ltd. v. Tripar, Inc., 2017 U.S. Dist. LEXIS 2462 (N.D. Ill. Jan. 6, 2017).
Davis Russell Real Estate and Management LLC hired Tripar, Inc., a general contractor, to renovate a 12-unit apartment building. The entire roof was to be replaced by a roofing subcontractor. Davis Russell drafted a Professional Services Agreement (PSA) that governed the project. Tripar was to obtain a CGL policy and provide a certificate of insurance evidencing the coverage. Davis Russell was to be named as an additional insured.
Tripar's insurance broker prepared a certificate of insurance reflecting that a CGL policy was issued to Tripar by Brit UW, Ltd. But the certificate clearly stated that it was not issued by the insurer and that it did not alter coverage. The certificate of insurance further stated that it conferred no rights upon the holder.
Read the court decisionRead the full story...Reprinted courtesy of
Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Newmeyer Dillion Attorneys Selected To The Best Lawyers In America© And Orange County "Lawyer Of The Year" 2020
September 03, 2019 —
Newmeyer DillionProminent business and real estate law firm Newmeyer Dillion is pleased to announce that ten of the firm's attorneys were recently recognized in their respective practice areas in The Best Lawyers in America© 2020. In addition, two attorneys have been named Best Lawyers ® 2020 "Lawyer of the Year." Greg Dillion was recognized by Best Lawyers as the 2020 Construction Law "Lawyer of the Year" award winner, while Thomas Newmeyer was recognized by Best Lawyers as the 2020 Litigation - Real Estate "Lawyer of the Year" award winner.
Attorneys named to The Best Lawyers in America, include:
Jason Moberly Caruso
Personal Injury Litigation – Plaintiffs, Product Liability Litigation – Plaintiffs
Michael S. Cucchissi
Real Estate Law
Jeffrey M. Dennis
Insurance Law
Gregory L. Dillion
Commercial Litigation, Construction Law, Insurance Law, Litigation – Construction, Litigation - Real Estate
Joseph A. Ferrentino
Litigation – Construction, Litigation - Real Estate
Jon Janecek
Real Estate Law
Thomas F. Newmeyer
Commercial Litigation, Litigation - Real Estate
John O'Hara
Litigation – Construction
Bonnie T. Roadarmel
Insurance Law
Jane Samson
Real Estate Law
Newmeyer Dillion is immensely proud of our lawyers, whose consistent recognition demonstrates their contributions to the firm, our clients and the legal profession.
With a history of over 35 years, Best Lawyers is the oldest peer review publication within the legal profession. Universally regarded as the definitive guide to legal excellence, Best Lawyers lists are compiled based on an exhaustive peer-review evaluation in which leading lawyers confidentially evaluate their professional peers. Their listings are published in 77 countries worldwide and are recognized for their reliable and unbiased selections. Only one lawyer for each specialty and location is recognized as the "Lawyer of the Year," an award given to the individual with the highest overall peer-feedback for a specific practice area and geographic region.
About Newmeyer Dillion
For 35 years, Newmeyer Dillion has delivered creative and outstanding legal solutions and trial results that align with the business objectives of clients in diverse industries. With over 70 attorneys working as an integrated team to represent clients in all aspects of business, employment, real estate, privacy & data security and insurance law, Newmeyer Dillion delivers tailored legal services to propel clients' business growth. Headquartered in Newport Beach, California, with offices in Walnut Creek, California and Las Vegas, Nevada, Newmeyer Dillion attorneys are recognized by The Best Lawyers in America©, and Super Lawyers as top tier and some of the best lawyers in California and Nevada, and have been given Martindale-Hubbell Peer Review's AV Preeminent® highest rating. For additional information, call 949.854.7000 or visit www.newmeyerdillion.com.
Read the court decisionRead the full story...Reprinted courtesy of
