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Right to Repair Act Requires Notice to Builder Prior to Repair of Damage

Right to Repair Act Requires Notice to Builder Prior to Repair of Damage – P. Kurt Peterson

Dipak Roy purchased a home in 2004 constructed by KB Home Coastal, Inc. KB’s corporate address for notice of defect claims was listed in the purchase materials. In March, 2010, Roy discovered a water leak in the home and reported it to his home insurer, Allstate, but not to KB. Allstate repaired the water damage in June, 2010, and then sent a letter in July advising KB that Allstate would pursue its subrogation rights against KB to recover the $80,985 in repair costs. The letter was not sent to KB’s listed address and KB did not respond. Later, Allstate sent a settlement demand letter to KB in November, 2010, demanding payment of the full cost of repair. This letter was mailed to KB’s listed address. KB did not respond. In March, 2011, Allstate filed a complaint against KB. After some procedural maneuvering by the parties, demurrers, opposing motions for summary judgment, appellate court intervention, and the filing of two amended complaints, the case again went up on appeal before the Second Appellate District.

On appeal, Allstate relied on the holding in the recent Liberty Mutual case (Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98) that the Right to Repair Act (Civ. Code, §895 et seq.) (the “Act”) does not provide the exclusive remedy in cases of actual property damage, and therefore Allstate had valid common law tort and subrogation claims. For procedural reasons, however, the Court of Appeals determined it did not need to address Liberty Mutual because the issue on KB’s appeal pertained only to Allstate’s cause of action pled under the Act. The issue the Court did address was whether the Act required notice to be given to a builder before repairs were made, and whether Allstate’s letters sent in July and November, 2010 constituted proper notice. The Court held that under the Act notice is required before repairs are made, and that proper notice was not given by Allstate to KB to afford an opportunity to inspect and repair the defect before the damage was repaired by the homeowner.

On the issue of notice, the Court looked to the plain language of the statute. Allstate argued that the statutory language of Section 910 of the Act does not expressly require notice to the builder before repairs are made. The Court reasoned, however, that the code section could not be read in isolation, and in harmonizing it with the other prelitigation procedures of the Act, determined that the sequential nature of the procedures mandates notice of defect be given before repairs are made in order to give the builder the Act’s intended opportunity to inspect and repair. The Court further found Allstate’s July and November, 2010 letters to be wanting because they did not comply with Section 912 of the Act requiring the notice to “provide the claimant’s name, address, and preferred method of contact”, to “state that the claimant alleges a violation pursuant to this part against the builder”, and to “describe the claim in reasonable detail sufficient to determine the nature and location, to the extent known, of the claimed violation”. Allstate’s letters also failed to refer to the Act, and the construction defect described was no longer in existence due to the repair. The Court also held that the insured homeowner, not Allstate, was required to provide KB with proper notice under the Act, and no such notice was given.             Allstate’s subrogation claim failed because it could not have greater rights under subrogation than the homeowner would have had in his own right.

The Court did not reach the issue of notice in an emergency repair circumstance in its holding, but did discuss the matter briefly in dicta, observing that the provisions of the Act, particularly the liability a builder has for consequential damages under the Act, gives the builder the incentive to complete the repairs as quickly as possible in a catastrophic damage scenario, so long as the builder receives the statutorily required notice.

Because KB did not receive notice and had no opportunity to repair under the Act, the Court saw “no injustice in interpreting the statute as altogether barring the claim for damages” and excusing KB’s liability for damages under the Act. As such the Court of Appeal directed the trial court to grant KB’s motion for summary judgment against Allstate.

KB Home Greater Los Angeles v. Superior Court (Allstate Insurance Company) 223 Cal.App.4th 1471