McMillin Albany, LLC v. Superior Court Rejects Reasoning and Outcome of Liberty Mutual on SB800
Litigation
8.28.15
In McMillin Albany, LLC v. Superior Court, the Fifth Appellate District of the California Court of Appeal held that SB800 (Civil Code sections 895 through 945.5, the “Right to Repair Act”) is the only remedy available to a plaintiff in a residential construction defect case, supplanting common law remedies in new for-sale residential construction defect cases, whether or not resulting damage is alleged. The decision rejects the reasoning and outcome from Liberty Mutual Insurance Co. v. Brookfield Crystal Cove, LLC (see prior alert). The decision is so well crafted that Liberty Mutual appears to be dead, except perhaps in the Fourth Appellate District from which it originated. Even there its days may be numbered. With two competing interpretations of the statute from different appellate districts, the stage is set for possible review by the California Supreme Court.
Implications for the Homebuilders
What does the McMillin Albany decision mean for the homebuilding industry? There are two major implications and many minor ones. The most significant aspects of the Right to Repair Act that were impaired by the Liberty Mutual decision were the prelitigation process (allowing inspection, repair, and potentially mediation before a suit is filed) and the shortened statutes of limitations for specific types of defect claims. On the first issue, it has been reported that Liberty Mutual encouraged certain plaintiffs' construction defect lawyers to ignore the pre-litigation notice and dispute resolution process requirements, thereby depriving homebuilders of those benefits. The strategy was employed in the McMillin Albany case, but the court’s ruling should discourage that conduct in the future and provide a remedy for those few instances where it may persist. Second, the Liberty Mutual decision permitted plaintiffs’ attorneys to argue that claims remained viable under common law theories even though claims for the same defects would have been time-barred under SB800. By reinstituting the Right to Repair Act as the exclusive remedy for construction defects, the shorter timelines should give greater certainty to builders.
Allen Matkins will continue to track the progress of this case and others. Please contact us if you have any questions about the potential impacts on your projects.
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