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New Decision Rejects Liberty Mutual V. Brookfield and Upholds the Right to Repair Act’s Prelitigation Inspection and Repair Procedures

NEW DECISION REJECTS LIBERTY MUTUAL V. BROOKFIELD AND UPHOLDS THE RIGHT TO REPAIR ACT’S PRELITIGATION INSPECTION AND REPAIR PROCEDURES

On August 26, 2015 the California Court of Appeal, Fifth District, published its decision in McMillin Albany LLC v. Superior Court, F069370, which discusses specifically how Liberty Mutual and Burch misinterpreted the Right to Repair Act (the “Act” or “SB800”), and held that the Act is the exclusive remedy for residential construction defect claims so plaintiffs must comply with the Act’s prelitigation notice, inspection, and repair procedures.

Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98, initiated a firestorm when the Fourth District held that a plaintiff may maintain common law causes of action for construction defects to residential property where actual damage has occurred. Since then, plaintiffs alleging construction defects have been able to avoid the Right to Repair Act’s prelitigation procedures of giving the builder notice of the alleged defects and an opportunity to inspect and repair by simply not including a cause of action under the Act.

Burch v. Superior Court (2014) 223 Cal.App.4th 1411, based its decision on the holding in Liberty Mutual, with only a brief discussion of the Act, and without much reasoning. The Burch court cited to Liberty Mutual, and held the act does not provide an exclusive remedy and does not limit or preclude common law claims for damages for construction defects that have caused property damage.

In McMillin, Plaintiffs filed a complaint for construction defects with common law causes of action, as well as a cause of action for violation of building standards under the Right to Repair Act. Plaintiffs later dismissed their cause of action under the Act. McMillin filed a motion to stay the litigation under Civil Code section 930 arguing that Plaintiffs failed to comply with the Act’s prelitigation procedures by not giving the builder notice of the alleged defects and an opportunity to inspect and repair those defects. Plaintiffs’ opposition argued that under Liberty Mutual and Burch, the Act did not provide the exclusive remedy for a construction defect action so Plaintiffs were not required to follow the Act’s prelitigation requirements where their complaint did not contain a cause of action for violation of the Act. The trial court denied McMillin’s motion to stay. The Firth District court held that the Act applies to all claims arising out of defects in residential construction involving new residences sold after January 1, 2003. The Fifth District court issued a peremptory writ of mandate directing the trial court to enter a new order granting the motion to stay the litigation until the parties have satisfied the Act’s prelitigation requirements.

The McMillin decision thoroughly analyzes the plain language, statutory scheme, and legislative history of the Act to reach its conclusion that Liberty Mutual misinterpreted the Act, and hold that where the complaint alleges deficiencies in construction that constitute violations of the standards set forth in Civil Code sections 896-897, the claims are subject to the Act.

The McMillin ruling sets the stage for the California Supreme Court to determine whether the Act provides the builder an absolute right to repair because there may be some variance in trial courts between those that choose to follow McMillin from the Fifth District, and those that will stick with Liberty Mutual from the Fourth District and Burch from the Second District. Trial courts will ordinarily follow an appellate opinion from its own district even though it is not bound to do so. (McCallum v. McCallum (1987) 190 Cal.App.3d 308, 315, n. 4.)

Blog by: Max G. Carpinelli, Esq. – San Diego, California

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