Striking a blow to developers and their insurance carriers, a state appellate court has ruled that California’s Right to Repair Act is not the exclusive remedy for homeowners for actual damages resulting from construction defects. Although the issues were raised in the context of a subrogation action in which an insurance carrier sought to recoup from a developer relocation expenses it paid a homeowner, the decision has wide-ranging implications.

In its ruling on August 28, 2013, the California Court of Appeal, Fourth Appellate District put to rest the construction industry’s claim that the Right to Repair Act (Civil Code section 895 et seq.) eliminated many common law-based construction defect theories favorable to homeowners, including strict liability, and that it substituted new and much shorter statutes of limitations. An increase in residential construction defect litigation is expected in response to the ruling.

Enacted in 2002, the Act, which is sometimes referred to as SB 800, only recently became the subject of appellate review, due in part to the fact that its application was limited to homes sold after January 1, 2003.

Viewed with relief by attorneys representing homeowners in construction defect actions, the court concluded that the Act was never intended to, and does not, establish exclusive remedies for claims for actual damages for construction defects. In effect, the court held that homeowners who suffer actual damages as a result of a construction defects have a choice of remedies. Further, the ruling makes clear that common law claims are still governed by the longer statutes of limitations, up to 10 years for latent construction defects.

The case is Liberty Mutual Insurance Company v. Brookfield Crystal Cove LLC, No. G046731, 2013 Cal. App. LEXIS 687.

If you have any questions about what to do in response to this decision in terms of policies and procedures, or due to a claim, contact David Frenznick.