A new decision by the Kansas Supreme Court drastically alters the legal landscape for claims against residential home builders. David v. Hett, No. 98,416, Kan., (Kan. Dec. 30, 2011). Click here to read the full decision. The Court has summarily abolished the economic loss doctrine ("ELD") as a defense long-used by contractors against tort-based claims like negligence, breach of implied warranty, and misrepresentation. Kansas homeowners may now proceed to trial using theories based in both contract and tort law, if they plead and establish a tort-based duty arising independently from their contract with the builder.
The implications are potentially significant. Seemingly, a homeowner party can now seek all damages proximately caused by an alleged negligent act by the builder, possibly including punitive damages if the facts warrant such a claim. Also, the statute of limitations that would time-bar such claims does not begin to run until the date the damage is first reasonably ascertainable; previously the statute would run from the date of the alleged breach of contract, regardless whether there was knowledge of the breach.
For years before Hett, unless the defective construction caused bodily injury or injury to property beyond damage to the house itself, homeowners were limited to pursuing just contract-based claims. But Hett expressly overturns prior Kansas case law. In Hett, the Court examined the tortured history of the ELD around the country, as well as in Kansas, noting that it was originally applied only in product liability cases and was later expanded to other areas of law. In refusing to allow such an expansion of the defense in Kansas, the Court refers to the common situation that a homeowner is not an expert in construction and, by implication, should be given more protections under the law.
The Court's reasoning could potentially be applied and expanded by other Kansas courts to cases involving parties without a direct contract with the builder, to commercial builders, or to others in the construction industry as well.
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We will continue to monitor the fallout from the Hett decision. If you have any questions about it in the meantime, please contact a member of our Construction Law practice group.