Litigation Pipeline

Construction Defect - Case Law

The following are several significant case decisions that have been handed down recently.

Lantzy v. Centex –The California Supreme Court held that the 10-year statute of repose for latent defects is not tolled for the period of time that the builder performs repairs. This put to rest the split of authority among appellate courts. The Court noted the high cost and unavailability of insurance coverage for builders and contractors that has resulted from construction defect losses. The Court also noted unfairness to subcontractors who may be subjected to indemnity liability for defects but are not notified or involved in the repair process. The Court also extended the holding to claims made under SB 800 (the Right-to-Repair law). There are limited exceptions to this holding, including the situation where the repair is being conducted at the time the 10-year statute expires. Also, the Court held open the possibility that the statute could be extended under an equitable estoppel theory (i.e., if a homeowner lets the time expire due to express representations by the builder that a lawsuit is not necessary).

Vitton Construction v. Pacific Insurance – The Court of Appeals has broadened the interpretation of the additional insured endorsement clause “...arising out of your work for that insured by or for you” that was originally addressed in the case of Acceptance v. Syufy in 1999. In Vitton, the named insured created holes in the roof of a warehouse for later installation of skylights and HVAC equipment. Employees of the general contractor, who acknowledged responsibility for site safety, placed barriers around the holes but did not cover them. Later, an employee of the roofer fell through an opening. Even though the Court found that neither the named insured who created the holes nor the general contractor was negligent, they found that the accident still arose out of the non-negligent work of the company creating the holes in the roof, thereby triggering the additional insured endorsement.

Kinsman v. Unocal – The Court of Appeal further evaluated the issue of what constitutes "retained control" by a landowner after Privette. The general rule at common law was that the person who hired an independent contractor was not liable to third parties for injuries caused by the contractor's negligence in performing the work. The "Peculiar Risk" doctrine held the land owner liable as one exception to the common law when third parties were injured by the negligence of an independent contractor hired by a landowner to do inherently dangerous work on the land. For injured employees of subcontractors, this rule of liability was limited by Privette, which concluded: "When . . . the injuries resulting from an independent contractor's performance of inherently dangerous work are to an employee of the contractor, and thus subject to workers' compensation coverage, the doctrine of peculiar risk affords no basis for the employee to seek recovery of tort damages from the person who hired the contractor but did not cause the injuries." Privette left open the issue of whether liability could be imposed when the land owner retained control of the workplace. The court in Kinsman held the land owner could not be liable to the employee, unless the dangerous condition was within the owner’s control and the owner exercised this control in a manner that affirmatively contributed to the employee’s injury.