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The Right to Repair Act, part 1: What types of defects does it cover?

| Apr 13, 2016 | Real Estate Litigation

Residential construction defect disputes in California can be costly, complicated and confusing.

Many of the complications involve the Right to Repair Act, also known as SB 800, which the Legislature passed in 2002. It took effect in 2003.

In this two-part post, we will discuss two court decisions that have interpreted key aspects of SB 800. One case involves the subrogation rights of insurance companies on homeowners’ insurance claims. The other case involves the question of whether SB 800 is the exclusive remedy for homeowners for construction defects.

Let’s start with the question of which defects SB 800 covers and whether it is the exclusive remedy. The case we’d like to inform you about is Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC, decided by the California Court of Appeals in 2013. (219 Cal. App. 4th 98)

The Liberty Mutual case concerned a dispute about water damage that resulted when a pipe in a sprinkling system burst. The homeowner had to move out for several months (staying in a hotel) while the builder fixed the damage.

The insurance company for the homeowner paid for the hotel. The insurer also covered other expenses related to the homeowner’s relocation.

Then the insurer sought to get those expenses back by making a subrogation claim against the home builder. The home builder contended that the claim was too late because SB 800 sets forth a four-year limit on construction defect claims for plumbing system defects.

The insurer contended, however, that SB 800 is not the exclusive remedy for construction defects. Through a subrogation action on behalf of the homeowner, the insurer sought to bring common law claims to which the four-year statute of limitations for plumbing defects under SB 800 would not apply.

The California Court of Appeals agreed with the insurer. The court said SB 800 did not impose limits on claims when there is actual property damage.

In part two of this post, we will discuss the practical implications of this decision. We will also take note of another important appellate case, KB Home Greater Los Angeles, Inc, v. Superior Court. That case concerns that status of subrogation claims when an insurer takes action to repair without informing the builder first.