Court Holds Right to Repair Act Did Not Bar Homeowners Insurer’s Subrogation Claim

Publish Date:Sep 03, 2013
Summary:
In Liberty Mutual Ins. Co. v. Brookfield Crystal Cove, LLC., the California Court of Appeal (Fourth Appellate District, Division Three) concluded that the Right to Repair Act does not provide the exclusive remedy in cases where actual damage has occurred because of construction defects.

In Liberty Mutual Ins. Co. v. Brookfield Crystal Cove, LLC., the California Court of Appeal (Fourth Appellate District, Division Three) concluded that the Right to Repair Act does not provide the exclusive remedy in cases where actual damage has occurred because of construction defects.

Eric Hart purchased a home from the Brookfield.  The home was flooded when a fire sprinkler burst.  Brookfield acknowledged its liability and repaired the damage to the home. Hart had to move to a hotel for several months during the repair process.  Hart’s homeowners insurer, Liberty Mutual, paid for his hotel and relocation expenses.

Liberty Mutual filed a subrogation claim to recover the expenses it incurred on Hart’s behalf.  In a subrogation action, the insurer steps into the shoes of its insured.  Thus, Liberty Mutual’s right to recover from Brookfield was dependent on whether Hart would have been able to recover relocation expenses from Brookfield.

In response to Liberty Mutual’s claim, Brookfield contended that the claim fell within the scope of the Right to Repair Act and was therefore time-barred by the Act’s statute of limitations.  The trial court agreed with Brookfield and dismissed the case.  Liberty Mutual appealed. The Court of Appeal reversed the trial court’s decision.

The Court of Appeal examined the legislative history of California’s 2002 Right to Repair Act.  The history showed that the Act was aimed at addressing construction defect litigation.  The court concluded that the focus of the Act’s provisions is instances where construction defects are discovered before any actual damage has occurred and that “[n]othing in the Act supports a conclusion it rewrote the law on common law claims arising from actual damages sustained as a result of construction defects.”

The Court of Appeal acknowledged that the Right to Repair Act created a statute of limitations in construction defect cases where construction defects do not result in actual damage.  However, in enacting the Act, the Legislature did not repeal Code of Civil Procedure sections 337.1 and 337.15 which establish statutes of limitations for construction defect cases.  These statutory sections applied to Liberty Mutual’s claim, and Liberty Mutual was not restricted by the statute of limitations in the Right to Repair Act.

The court summarized its ruling by stating that “we hold the Act does not provide the exclusive remedy in cases where actual damage has occurred because of construction defects.  Therefore, Liberty Mutual’s subrogation claims were not time-barred for failing to comply with the Act.”

The court’s August 28, 2013 opinion is available at www.courts.ca.gov  

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