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Logo Icon Second Appellate District Follows Liberty Mutual Decision

In Burch v. Superior Court, (February 19, 2014) California Court of Appeal, Second Appellate District, No. B248830, the Third Division of the Second Appellate District relied upon the Fourth Appellate District's decision in Liberty Mutual Insurance Company v. Brookfield Crystal Cove LLC (2013) 219 Cal. App. 4th 98 to find that the California Right to Repair Act (S.B. 800 B Civil Code Sections 895 through 945.5) does not preclude homeowners from prosecuting common law claims for damages for construction defects that have caused property damage.

In Burch, the homeowner sued the developer, general contractor, and principals of both entities for, among other things, negligence and breach of implied warranty concerning alleged numerous construction defects in her home. The developer, general contractor, and individual defendants filed a motion for summary adjudication contending that the Right to Repair Act provided an exclusive remedy to homeowners for construction defects in new residential construction. The trial court granted that motion citing Civil Code Sections 896 and 943 in support of its ruling.

Civil Code Section 896 provides in pertinent part:

In any action seeking recovery of damages arising out of, or related to deficiencies in, the residential construction . . ., a builder . . . shall, except as specifically set forth in this title, be liable for, and the claimant's claims or causes of action shall be limited to violation of, the following standards, except as specifically set forth in this title.

Civil Code Section 943 provides in pertinent part:

Except as provided in this title, no other cause of action for a claim covered by this title or for damages recoverable under Section 944 is allowed. In addition to the rights under this title, this title does not apply to any action by a claimant to enforce a contract or express contractual provision, or any action for fraud, personal injury, or violation of a statute.

The homeowner filed a writ of mandate challenging the trial court's decision. On review, the Second Appellate District granted the writ petition, directing the trial court to vacate its order and to enter an order denying the motion.

The court drew specific attention to Civil Code Section 897, stating that it "excepts from the limitation of liability under the act any defect that 'causes damage.'" Civil Code Section 897 provides:

The standards set forth in this chapter are intended to address every function or component of a structure. To the extent that a function or component of a structure is not addressed by these standards, it shall be actionable if it causes damage.

Reading Civil Code Section 897 together with Civil Code Section 944 which permits a homeowner to pursue a claim for the violation of any statute as an exception to the exclusive remedy of the Right to Repair Act, the court stated that the Right to Repair Act does not limit or preclude a common law claim for construction defects that cause property damage.

The court's contention, however, ignores the purpose of Civil Code Section 897. It provides a homeowner with a cause of action under the statute if the defective function or component of his or her house is not addressed by the functionality standards set forth in Civil Code Section 896 and the defective function or component causes damage. It should not be considered a means by which the exclusive remedy of the Right to Repair Act can be avoided.

The Second Appellate District further noted that:

Liberty Mutual examined the act and its legislative history and concluded that the act does not provide an exclusive remedy and does not limit or preclude common law claims for damages for construction defects that have caused property damage. We agree.

With the decision in Burch, two appellate districts have now issued decisions which create significant problems for residential developers and general contractors, among others, in California. Absent the California Supreme Court reviewing and overturning the decision in Burch, the Liberty Mutual decision, and the Burch decision if it is published, result in residential developers and general contractors being faced with both liability in common law for construction defects which cause property damage and liability under the Right to Repair Act for construction defects which do not cause property damage but do violate the functionality standards of the Act. Such a result was likely not envisioned when the Right to Repair Act was passed. Indeed, the Act was passed in part to provide "the prompt and fair resolution of construction defect claims . . .." Stats. 2002, c. 722, Section 1 (S.B. 800). However, after the decisions in Liberty Mutual and Burch, developers and general contractors should anticipate an increase in construction defect litigation and in the time it takes to resolve such litigation as homeowners now will pursue both statutory and common law claims.

Please note that the Burch decision is not yet a final ruling and has not yet been designated for publication. We will continue to monitor this decision and keep readers updated with the status of this case.