On August 28, 2013, the California Appellate Court (Fourth District) issued its ruling in the case of Liberty Mutual Insurance Company v. Brookfield Crystal Cove LLC (Case No. GO46731). Liberty Mutual filed suit against Brookfield to recover relocation expenses that it paid on behalf of its insured homeowner after a pipe in the home’s sprinkler system burst, causing significant damage. Brookfield, the developer and builder of the home, acknowledged its liability and repaired the damage.
The trial court found that Liberty Mutual’s complaint was time barred under the four-year statute of limitations of the Right to Repair Act (the Act), Civil Code section 895 et seq. The Appellate Court reversed, holding that the Act does not eliminate a property owner’s common law rights and remedies where actual damages have occurred. The Act was created 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 pointed out that the legislative history of the Act, which was enacted in 2002, contains nothing to support a contention that the Act bars common law claims for actual property damage. The legislative history shows that the Act was intended to grant statutory rights in cases where construction defects caused economic damages, but the Act did nothing to limit claims for actual property damage. “Simply put, a homeowner who suffers actual damages as a result of a construction defect in his or her house has a choice of remedies; nothing in the Act takes away those rights.” Based on this analysis, the court held that the Act does not provide the exclusive remedy in cases where actual damage has occurred because of construction defects, thus Liberty Mutual’s subrogation claims were not time barred for failing to comply with the Act.
The impact of this decision will be felt in construction defect cases in California where the homeowner has alleged actual damage as opposed to only diminution of the value of the property. In those cases, the homeowner will be able to choose whether to pursue a remedy under the Right to Repair Act or to pursue common law rights and remedies otherwise recognized by law, such as claims for negligence, strict liability, breach of contract, breach of warranty or equitable claims including declaratory relief.