The Right to Repair Act Means What it Says and Says What it Means

Garret Murai | California Construction Law Blog

Screenshot 2022-11-21 at 11.48.49 PM

A rather short case for a short week.

In Gerlach v. K. Hovnanian’s Four Seasons at Beaumont, LLC, 82 Cal.App.5th 303 (2022),  the 4th District Court of appeals examined provisions of the Right to Repair Act (Civ. Code §§895 et. seq), also known as “SB 800” after its original bill number, as it applies to roofs.

The Gerlach Case

Lynn Gerlach and Lola Seals are homeowners who purchased their homes in the Four Seasons at Beaumont adult community, for those 55 year old and older, located in Beaumont, California. Gerlach purchased her home when it was built in 2006. Seals purchased her home from the original owners in 2015.

In 2015 and 2016, Gerlach and Seals served the developer, K. Hovnanian’s Four Seasons at Beaumont, LLC, with claim notices under the Right to Repair Act. The Right to Repair Act, as its name implies, provides notice requirements and repair rights by developers of new single-family homes. The Right to Repair Act also includes construction standards, the violation of which, provides homeowners with a statutory basis for bringing construction defect claims.

Both Gerlach and Seals’ notices raised claims regarding their roofs. Specifically, Gerlach and Seals’ notices raised three statutory claims under the Right to Repair Act under Civil Code sections 896(a)(4), (g)(3)(A), and (g)(11) which provide as follows:

896(a): With respect to water issues: . . . (4) Roofs, roofing systems, chimney caps, and ventilation components shall not allow water to enter the structure or to pass beyond, around, or through the designed or actual moisture barriers, including, without limitation, internal barriers located within the systems themselves. For purposes of this paragraph, “systems” include, without limitation, framing, substrate, and sheathing, if any.

896(g)(3)(A): With respect to issues regarding other areas of construction: . . . (3)(A) To the extent not otherwise covered by these standards, manufactured products, including, but not limited to, windows, doors, roofs, plumbing products and fixtures, fireplaces, electrical fixtures, HVAC units, countertops, cabinets, paint, and appliances shall be installed so as not to interfere with the products’ useful life, if any.

896(g)(11): Roofing materials shall be installed so as to avoid materials falling from the roof.

Hovnanian, upon receipt of Gerlach and Seal’s notices, made various repairs to the homes. Apparently, however, not enough, because Gerlach and Seals later filed suit.

Prior to trial, Hovnanian objected to Gerlach and Seal’s proposed jury instructions as to their roof claims. Specifically, Hovnanian argued that while, Civil Code section 896(g)(3)(A) makes specific to “roofs,” the roofs at issue were not “manufactured products” because the Right to Repair Act defines “manufactured products” as “a product that is completely manufactured offsite,” and the roofs at issue (which were tile) were not completely manufactured offsite. The trial court agreed. 

At trial, Gerard Vandewater testified as a roofing expert for Gerlach and Seals. During his testimony, Hovnanian’s counsel objected to Vandewater’s testimony on relevancy grounds and under Evidence Code section 352. At side bar with the trial court, Hovnanian’s counsel argued that Civil Code section 896(a) required a showing that the roofs allowed water to leak into the homes, that Civil Code section 896(g)(11) required a showing that all or a portion of the roof fell to the ground, and that unless Vandewater was prepared to testify that either of these events occurred (i.e., water intrusion or roofing materials falling off), Vandewater’s testimony was irrelevant. When asked by the trial court whether Vandewater would be testifying that either water intrusion occurred or roofing materials fell off, Gerlach and Seals’ counsel stated that Vandewater would not. As such, the trial court terminated Vandewater’s testimony.

Following trial, the jury awarded Seals a grand total of $1,931.08 for defects related to windows and awarded Gerlach nothing on the ground that she failed to timely file her claim under the Right to Repair Act.

Gerlach and Seals appealed.

The Appeal

On Appeal, Gerlach and Seals made two arguments:

  1. A roof is a manufactured product under Civil Code section 896(g)(3)(A); and
  2. Civil Code sections 896(a) and 896(g)(11) do not require actual water intrusion or that roofing materials have actually fallen off, but rather, that the roof be in such a condition that water intrusion or roofing materials falling off will not occur.

In the spirit of the season, and in a bit of an “all turkeys are birds, but not all birds are turkeys” logic analysis, the Court of Appeal explained that while Civil Code section 896(g)(3)(A) includes “roofs” among the list of manufactured products that may be covered by the provision, not all roofs are “manufactured products.” Enough said.

And as to Civil Code section 896(a) and 896(g)(11), the Court of Appeal explained that the plain language of the sections required actual water intrusion and that roofing material have actually fallen off, because “[o]therwise, a plaintiff could recover on the basis of the mere possibility that such violations might occur.”  

Conclusion

So there you have it. A short case for a short week. If there’s any lesson to be learned here, other than read the statute as it usually means what it says, it is that the underlying purpose of the Right to Repair Act is to give builders an opportunity to repair defects, and if claims can proceed to litigation merely because something “might” happen, it kind of defeats the whole purpose of giving someone the right to repair. 


When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Coverage for Collapse Ordered on Summary Judgment

Tred R. Eyerly | Insurance Law Hawaii

    A collapsed floor in a restaurant was found to be covered. J&J Fish on Center Street, Inc. v. Crum & Forster Spec. Ins. Co., 2022 U.S. Dist. LEXIS 163661 (D. Wis. Sept. 12, 2022).

    J&J Fish rented property from Vision. Vision was obligated to keep the premises insured under an all-risk policy. Vision was also responsible for maintaining and repairing the property “including the slab flooring exterior walls of the premises.” Vision never obtained insurance on the building, but J&J Fish secured a commercial property policy from Crum & Forster.

    On May 29, 2020, approximately 25% of the building’s slab floor, the section beneath the walk-in cooler, collapsed into the crawl space below. Dr. Daniel Wojnowski inspected the crawl space and observed overall dampness as well as a pool of water in the space. He concluded that the collapse occurred because the steel support beams and steel elements of the floor corroded after prolonged exposure to moisture. Based on this report, Crum & Forster denied coverage. J&J Fish sued and the parties moved for summary judgment.

    The policy covered collapse, which meant an abrupt falling down or caving in of a building or any part of a building. Further, if the collapse was caused by decay that was hidden from view, it was covered. 

    Here, 25% of the building’s floor fell three-and-a-half feet into the crawl space overnight. On its face, it was a sudden and unexpected fall or drop that rendered part of the building unfit for use as a restaurant.

    Crum & Forester raised several arguments against coverage. First, it claimed the events did not amount to a collapse because the policy did not consider a collapse to include a building or an part of a building to be in damage of falling down or caving in. But here, the slab floor was no longer “in danger of falling down” because that danger was long-passed with the floor already having fallen.

    Crum and Forster next argued that the decay causing the collapse was not hidden from view because it could be observed from within the crawl space. Dr. Wojnowski, equipped with a flashlight, entered the crawl space on all fours and observed the decay. But the problem with this argument was that “hidden” was a matter of degree. Under the plain meaning of the term, decay that was concealed within a cramped, unlit space was “hidden from view.”

    Crum & Forster also relied on exclusions expressed in the policy in sections other than Section D which addressed collapse. The court held that Crum & Forster could not rely on these exclusions to oust coverage under section D, and J&J Fish was entitled to summary judgment on the question of liability.

    Finally, the court held that Crum & Forster was entitled to subrogation against Vision pursuant to the lease between Vision and J&J Fish. Vision breached the lease by (1) failing to acquire property insurance and (2) failing to maintain the slab floor. 


When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Contractor Owed a Defense

Tred R. Eyerly | Insurance Law Hawaii

    The Illinois Appellate Court reversed the lower court and found that the insured contractor was entitled to a defense for alleged construction defects. Acuity v. M/I Homes of Chicago, LLC, 2022 Ill. App. LEXIS 393 (Ill. Ct. App. Sept. 9, 2022).

    The owners association (AOAO) sued M/I Homes for breach of contract and the implied warranty of habitability due to alleged defects. The AOAO alleged that the defects caused physical injury to the townhomes. There was resulting property damage such as damage to other building materials, windows and patio doors, and water damage to the interior of units. M/I Homes requested a defense from Acuity, but the request was denied. 

   Acuity filed a complaint for declaratory judgment against M/I Homes and the AOAO, seeking a declaration that it had no duty to defend. Cross-motion for summary judgment were filed. Acuity argued that the actual property the insured was working on did not constitute covered property damage caused by an occurrence. M/I Homes contended that there was damage to other property that was beyond repair and replacement of the construction work. 

    The trial court granted summary judgment to Acuity and denied M/I Homes’ motion. M/I Homes appealed. M/I Homes argued that the allegations of damage to “other property” in the underlying complaint referred to “property other than the townhomes themselves (i.e. property other than the contractor’s work product)” and was sufficient to qualify as property damage. This was also an occurrence because the underlying complaint alleged that damage was an accident caused by the defective work of the subcontractor and was neither expected nor intended by M/I Homes. 

    Acuity argued that the allegations of damage to “other property” were not enough to trigger its duty to defend. The allegations were unconnected to a theory of recovery and the underlying complaint failed to both identify the owner of the “other property’ and explain how the AOAO had standing to sue for the damage to that property. 

    The court noted that the underlying complaint simply alleged, in the broadest possible terms, that there was damage to “other property.” These allegations were sufficient to trigger Acuity’s duty to defend. The case was remanded to enter summary judgment in favor of M/I Homes on the duty to defend. 


When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

A Trivial Case

Garret Murai | California Construction Law Blog

Construction defect cases leading to physical injury are rarely trivial, at least in the eyes of the injured party, but alas sometimes they are as the next case, Nunez v. City of Redondo Beach, 81 Cal.App.5th 749 (2022), demonstrates.

The Nunez Case

Monica Nunez, Vice President of Finance and Accounting at a restaurant chain and a part-time fitness instructor at a gym, tripped and fell on a public sidewalk in Redondo Beach. Ms. Nunez, who was in her forties, tripped following a group run when her back foot hit a sidewalk slab that was elevated at its highest point approximately 11/16 inches. Ms. Nunez landed on her left knee and right arm and in the process fractured her kneecap and elbow.

Ms. Nunez sued the City of Redondo Beach for her injuries alleging causes of action for dangerous conditions on public property under Government Code section 835, nuisance under Government Code section 815.2, and failure to perform a mandatory duty under Government Code section 815.6.

The City filed a motion for summary judgment arguing that the raised sidewalk slab was a “trivial” defect under the law. The City in its papers, and Nunez in her opposition, each included lay and expert declarations. Among the declarations filed by the City was a declaration by Frank Contreras, the City’s Public Works Manager, who stated that he had visited the site after the accident and measured the displacement of the sidewalk slab which he stated ranged from zero “to 5-8th of an inch, perhaps a millimeter more.”

Among the declarations filed by Nunez were declarations by Benjamin Monar, a forensic engineer, and Mark Burns, a senior forensic engineer at the same firm. In his declaration, Monar stated that the height differential of the sidewalk slab measured from one-half inch to 9/16th of an inch. Burns, in his declaration, stated that the sidewalk slab “presented an abrupt height differential,” that the “minimum toe clearance of a pedestrian . . . during normal walking stride is approximately 0.50 to 0.60 inches,” and that a height differential in excess of this magnitude created a substantial possibility that a pedestrian could trip if not conspicuous.

After taking the matter under submission, the Court granted the City’s motion for summary judgment, finding that the City had established that the raised sidewalk slab was trivial as a matter of law, and that Nunez had failed to present evidence raising a triable issue of material fact.

Nunez appealed.

The Appeal

On appeal, the 2nd District Court of Appeal explained that a public entity may be held liable for injuries caused by a dangerous condition on public property, and that a condition is considered “dangerous” if it “creates a substantial (as distinguished from a minor, trivial or insignificant) risk of injury when such property or adjacent property is used with due care in a manner in which it is reasonably foreseeable that it will be used. ” Known as the “doctrine of trivial defect,” while generally a question of fact, a court may determine that a defect is “trivial” as a matter of law if the court determines, “viewing the evidence most favorable to the plaintiff . . . that the risk created by the condition was of such a minor, trivial or insignificant nature in view of the surrounding circumstances that no reasonable person would conclude that the condition created a substantial risk of injury.”

In the sidewalk-walkway context, explained the Court of Appeal, “[t]he decision whether the defect is dangerous as a matter of law does not rest solely on the size of the crack in the walkway” but rather “[a] court should decide whether a defect may be dangerous only after considering all of the circumstances surrounding the accident that might make the defect more dangerous than its size alone would suggest” including “whether the walkway had any broken pieces or jagged edges and other conditions of the walkway surrounding the defect, such as whether there was debris, grease or water concealing the defect, as well as whether the accident occurred at night in an unlighted area or some other condition obstructed a pedestrian’s view of the defect.”

In short, explained the Court of Appeal, determining whether a defect is trivial as a matter of law involves two steps:

First, we review evidence of the “`type and size of the defect.’” If that analysis reveals a trivial defect, we then consider “`evidence of any additional factors [bearing on whether the defect presented a substantial risk of injury]. If these additional factors do not indicate the defect was sufficiently dangerous to a reasonably careful person,’” then we will “`deem the defect trivial as a matter of law.’”

And, here, held the Court of Appeal, when viewed in the light most favorable to Nunez, the evidence shows that the height differential of the sidewalk slab was at its highest point just under 3/4 of an inch. However, explained the Court, “[c]ourts consistently have held that – in the absence of aggravating factors – a sidewalk offset of this size (and higher) [3/4 of an inch to one and 1/2 inches] is a trivial defect as a matter of law. Moreover, explained the Court, the fact that the City would attempt to repair sidewalk elevation differentials of 1/2 inch or more does not create a triable issue of fact because “the City does not have a duty to protect pedestrians from every sidewalk defect that might pose a tripping hazard – only those defects that create a substantial risk of injury to a pedestrian using reasonable care.”

Conclusion

So there you have it. Not all construction defects on public property give rise to a claim for dangerous conditions on public property. If a defect is minor, trivial or insignificant, the court, viewing the evidence in the light most favorable to the plaintiff, can find that the defect is trivial as a matter of law.


When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Colorado Defective Construction is Not Considered “Property Damage”

SDV Insights

In the July 5, 2022, case of Indian Harbor Ins. Co. v. Houston Casualty Co., the United States District Court for Colorado addressed the issue of whether damage to defectively installed balconies is considered “property damage” under Colorado law, requiring payment by a commercial general liability policy.

Facts of the Case

The case stems from a construction project where a subcontractor improperly installed balconies on an apartment complex. The owner of the project secured commercial general liability (CGL) coverage through an OCIP insured by Houston Casualty Company (HHC). The OCIP insured the general contractor and subcontractors. The general contractor also purchased a subcontractor default insurance policy insured by Indian Harbor.

All parties agreed that the subcontractor improperly installed portions of various balconies, including flashing, water-proof sealing, and water-resistant barriers, among other defects with the installation process. The parties also agreed that other portions of the balconies were properly installed. However, in order to repair the defects in the installations, every bit of each balcony had to be torn off and re-constructed.

The OCIP provides coverage to the subcontractor for “those sums that the insured becomes legally obligated to pay as damages because of `bodily injury’ or `property damage’ to which this insurance applies.” However, the standard “your work” and “business risk” exclusions commonly found in CGL policies (exclusions j, k, and l) were removed from the HCC policy.

The Indian Harbor subcontractor default insurance policy also insured the loss, providing coverage for indemnification of “Loss,” which was defined as “costs and expenses paid by (the general contractor) to the extent caused by a Default of Performance of a Subcontractor/Supplier under the terms of a Covered Subcontract.” After paying the general contractor for the default claim, Indian Harbor brought suit to recover from the subcontractor’s liability insurer, which was HCC.  

Ultimately, HCC denied any coverage under its policy based upon the argument that there was no “property damage” as defined under their policy. HCC’s argument was that the damage that everyone agreed happened was damage to the subcontractor’s defective work itself, and therefore, did not qualify as “property damage” under the terms of the CGL policy. Eventually, both parties filed motions for summary judgment.

If There Is No “Property Damage,” There Is No Coverage

The court begins its analysis by stating that the first issue to determine is “whether the installation of the defective balconies constitutes ‘property damage’ under the HCC CGL policy and Colorado law.” The court indicated that without the existence of “property damage,” one never gets to the issue of whether there was an “occurrence” or an “accident.” HCC’s CGL policy defines “property damage” as “[p]hysical injury to tangible property, including all resulting loss of use of that property.”

The court first addresses Indian Harbor’s argument that Colorado’s Construction Defect Action Reform Act (CDARA) should resolve the issue in its favor. Since its passage in 2010, many parties to these types of cases have made an argument about the CDARA and that it should be conclusive on the issue of defective work being covered. However, this has not been the case.

The court quickly dismissed the CDARA argument as premature. Indian Harbor cites the language of the act which states, “work that results in property damage, including damage to the work itself, is an accident unless the property damage was expected or intended by the insured.” (Colo. Rev. Stat. § 13-20-808(3)). In rejecting this argument, the court reasoned that it was irrelevant as to whether there was an accident or occurrence without first determining whether there is “property damage” as defined in the HCC policy. It would be premature to discuss whether there was an accident or occurrence before first addressing whether there was property damage, because if there is no property damage, there is no coverage.

The court referenced the 2012 Colorado Court of Appeals decision in Colorado Pool Systems, Inc. v. Scottsdale Insurance Co., where an insurer refused to indemnify a general contractor for losses resulting from demolishing and replacing an improperly constructed pool. In Colorado Pool Systems, the court held that a CGL policy did not cover the cost of replacing the defectively built pool but did cover any necessary “rip and tear” damage to non-defective areas necessary for the defective pool replacement. The court did not apply the CDARA because the contract in the case was negotiated and signed prior to the statute’s enactment. However, in dicta, the Colorado Pool court stated that, “[t]he statute’s effect is clear enough. If we were to apply it, we would presume that the CGL policy covered damage that resulted from [the general contractor’s] defective workmanship.” The Indian Harbor court dismissed this as mere dicta and chose not to consider it.

The Indian Harbor court also cited the 2017 case of Peerless Indem. Ins. Co. v. Colclasure, where the Colorado federal district court applied Colorado Pool, holding that damage for repair and replacement of a defective arena roof was not considered “property damage” and thus is not covered under a CGL policy. Although, in Peerless, that court did agree that the CDARA applied, and property damage caused by defective workmanship was covered. But the court went on to conclude that “property damage” does not include costs of repair or replacement of defective workmanship but does include consequential damage to other parts of the property.

Based upon Colorado Pool and Peerless, the court denied Indian Harbor’s summary judgment motion and granted HCC’s cross-motion for summary judgment.

The Bottom Line

The court’s holding in this case, as well as the holding in Peerless, is contrary to the legislative intent of the CDARA. Section 13–20–808 of the CDARA was enacted in response to the General Security Indemnity Co. v. Mountain States Mutual Casualty Co. case. In that case, the Colorado Court of Appeals held that faulty workmanship, standing alone, is not an “accident” and that a construction defect is not an “occurrence.” In enacting Section 13-20-808, the legislature’s intent was clear that it considered a construction defect as an occurrence and that defective work should be covered by a CGL policy, unless and until it was excluded by another provision of the policy.

Specifically, the statute states the following in Section 13-20-808(1)(b)(III): “The decision of the Colorado court of appeals in General Security Indemnity Company of Arizona v. Mountain States Mutual Casualty Company, 205 P.3d 529 (Colo. App. 2009) does not properly consider a construction professional’s reasonable expectation that an insurer would defend the construction professional against an action or notice of claim contemplated by this part 8.”

Then, in Section 13-20-808(3), the statute states:

“(3) In interpreting a liability insurance policy issued to a construction professional, a court shall presume that the work of a construction professional that results in property damage, including damage to the work itself or other work, is an accident unless the property damage is intended and expected by the insured. Nothing in this subsection (3):

(a) Requires coverage for damage to an insured’s own work unless otherwise provided in the insurance policy; or

(b) Creates insurance coverage that is not included in the insurance policy.”

The Indian Harbor decision basically says that defective workmanship is not “property damage” that should be considered under the CDARA. This begs the question, if defective work will not be considered “property damage,” then why enact the CDARA to begin with? The CDARA was specifically enacted to overturn the holding of General Security and declare that faulty workmanship should be covered by a CGL.

SDV will monitor future decisions out of Colorado to see how this statute is used (or not used) in dealing with coverage of construction defects as occurrences and faulty workmanship.

Shortly after this decision was reached, the parties in this case reached a settlement.  


When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.