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Litigation Pipeline: Construction Defect - Case Law

Jimenez v. Superior Court

By Dale, Braden & Hinchcliffe

Overview

For more than 30 years, California courts have applied the theory of strict liability in tort to developers of mass-produced housing in construction defect cases. Mass-produced houses have been viewed as a product; the developer who supplied the product has been treated, under the law, similarly to any other manufacturer. The California Supreme Court has now extended the theory of strict liability to manufacturers of defective windows installed in mass-produced homes. In its ruling, which was handed down in mid-December 2002, the Court held that a manufacturer of windows installed in a mass- produced home can be held strictly liable for resulting physical damage to other parts of the house.

Owners of tract homes in a San Diego area development brought suit against various defendants, including two window manufacturers (Viking and T.M. Cobb) and two companies that supplied and installed the windows. Plaintiffs alleged causes of action for strict liability and negligence, asserting that the windows were defective and the defects caused damage to the homes. T.M. Cobb moved for summary adjudication on the strict liability cause of action based on the existing law that strict liability did not apply to it since it was not a developer and had no ownership or control over the development. The Trial Court granted the motion for summary adjudication but the Court of Appeal reversed, holding that "...the doctrine of strict products liability applied to manufacturers of defective component parts installed in mass- produced homes, and that this strict liability extended to injuries to other parts of the house in which the defective component was installed."

The Supreme Court affirmed the appellate court's ruling. It found that the policies underlying the application of strict liability to manufacturers and suppliers of complete products (i.e., the house) should apply equally to manufacturers and suppliers of components installed in mass-produced homes. The Court rejected T.M. Cobb's argument that strict liability should not apply to a component manufacturer. However, the Supreme Court would not extend strict liability to those who provide only services.

The Supreme Court also addressed the extent to which recovery under a strict liability theory could be barred by the economic loss rule. The latter precludes tort recovery when the damage is limited to the defective product itself. In such cases, recovery would be limited to the law of contractual warranty. T.M. Cobb argued that the "product" at issue was the entire home, and, therefore, the damage to components was damage to the product itself. The Court rejected this argument, indicating that a manufacturer's duty does not end when the product is incorporated into a larger product. Thus, if damage to other parts of the home can be shown, the economic loss rule will not bar recovery.

More Questions Than Answers

The Court put to rest the split of authority that has developed over the years in the Appellate Courts in determining that strict products liability applies to defective windows in mass-produced housing. However, the decision raises additional, un-answered questions which it does not answer, leaving open the likelihood of further litigation. The Court gave no clear definition of what products or materials will qualify as "component parts." The Court's ruling suggests that strict liability may be extended to suppliers, but it does not say so specifically. The ruling does not extend to those who supply a "service" although it is unclear what will be considered a "service" in the future.

Justice Kennard, who wrote the majority opinion, attempts to further explain her reasoning in a separate concurring opinion. Kennard reasoned that even when one component damages another larger product, tort recovery should be denied when the defective component has become so "integrated" into the larger component that it has lost its "separate identity." Kennard further reasoned that "windows may be regarded as a distinct product for purposes of the economic loss rule" because they can be removed from one home and installed in another.

This decision resolves two issues: (1) strict liability applies to defective manufactured windows that are installed in mass-produced housing; and (2) the economic loss rule still applies as a limitation on liability. However, as pointed out in Justice Brown's dissent, the ruling presents potential strict liability to manufacturers or suppliers of all component parts. It raises the question as to how lower courts will draw a distinction when the majority opinion does not provide any criteria. We can certainly expect further litigation in this area. We can also expect that plaintiffs' attorneys will begin the process of amending existing complaints to include strict liability causes of action against component part manufacturers and suppliers.