The California Court of Appeal determined that California’s “Right
to Repair Act” (Civil Code Sections 895 – 945.5), did not
constitute the sole remedy for construction defect claims within the scope
of the Act. In particular, the Court held that the Act’s limitations
periods do not bar common law construction defect claims involving actual
Liberty Mutual Insurance Company v. Brookfield Crystal Cove, LLC, the plaintiff sought recovery outside the Act’s four-year statute
of limitations for plumbing defects. While the Court conceded that the
complaint arguably fell within the scope of the Act, it determined that
the Right to Repair Act was not the exclusive remedy for construction
defect claims. While the claim may have been time-barred under the Act,
the Court determined that the plaintiff could still pursue its common
law rights as a result of the actual physical damage alleged.
In 2004, Eric Hart purchased a home from Brookfield Crystal Cove LLC (“Brookfield”),
a residential developer. Four years later, a sprinkler pipe burst, and
Hart’s home flooded. Hart’s homeowner’s insurer, Liberty
Mutual, reimbursed Hart for interim housing and relocation costs, while
Brookfield paid for remediation and repairs. Three more years passed,
and in 2011, Liberty Mutual filed an action against Brookfield, seeking
to pursue Hart’s rights by way of subrogation.
According to its terms, the Right to Repair Act applies to any action arising
from or related to construction defects or deficiencies in homes sold
after 2012. The Act sets standards for dozens of construction categories,
and provides for statutes of limitations in each category. In the case
of plumbing claims, the statute runs four years after the property’s
close of escrow.
Escrow on Hart’s home closed in 2004, while Liberty Mutual’s
action was not filed until 2011. In determining whether or not the Act’s
four-year limitation period applied to bar the claim, the Court of Appeal
considered the legislative intent behind the Act, which was to overrule
the California Supreme Court’s 2000 decision in
Aas v. Superior Court. In
Aas, the State’s highest court disallowed common law tort claims for
defects without actual property damage.
The defendants attempted to persuade the Court of Appeal that the Right
to Repair Act governed all claims arising out of a construction defect,
and that the Act therefore provided the sole available remedy for homeowners
like Hart. The Court of Appeal disagreed, reasoning that, in attempting
Aas, the legislature never intended the Act to bar common law claims that would
have met the
Aas standard – actual physical injury.
While the Act still protects residential developers and tradesmen from
stale defect claims that have not manifested in actual physical injury,
that protection does not extend to traditional defect claims that meet the
Aas standard. Businesses engaged in residential construction will likely experience
an increase in legal costs, or insurance premiums, as more tardy homeowners
seek to crawl through the narrow window created by the
Liberty Mutual decision.
Contact Geraci Law Firm at (949) 298-8050 today, or contact
Paul Sievers directly
for more information.