Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC

In Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98, Hart purchased a new home built by Brookfield. (Id. at p. 101.) A few years later, a pipe in the sprinkler system burst, flooding the home and causing damage. Brookfield acknowledged its liability and repaired the damage. (Ibid.) Hart lived in a hotel during the repairs; his homeowners insurer, Liberty Mutual, paid for Hart's hotel and relocation expenses. Liberty Mutual then filed a subrogation action against Brookfield to recover the expenses it paid; the first amended complaint alleged causes of action for strict liability, negligence, breach of contract, breach of warranty, equitable estoppel, and declaratory relief. (Id. at pp. 101, 102.) Brookfield's demurrer to the first amended complaint was sustained on the ground Liberty Mutual's complaint was time-barred under the Act. The appellate court reversed. The court defined the issue before it as: "whether Liberty Mutual's complaint in subrogation falls exclusively within the Right to Repair Act, and therefore is time-barred." (Liberty Mutual, supra, 219 Cal.App.4th at p. 102.) The court stated a key goal of the Act was to abrogate the holding in Aas v. Superior Court (2000) 24 Cal.4th 627, 632. In Aas, "the California Supreme Court held that construction defects in residential properties, in the absence of actual property damage, were not actionable in tort." (Liberty Mutual, supra, 219 Cal.App.4th at p. 103.) Thus, homeowners could not recover in tort for costs of repair or the diminution in value of the homes arising from construction defects that had not caused property damage. (Ibid.) The Liberty Mutual court cited the legislative history of the Act, which stated: "'Except where explicitly specified otherwise, liability would accrue under the standards regardless of whether the violation of the standard had resulted in actual damage or injury. As a result, the standards would essentially overrule the Aas decision and, for most defects, eliminate that decision's holding that construction defects must cause actual damage or injury prior to being actionable.'" (Liberty Mutual, at p. 103.) After considering a number of the provisions of the Act, the Liberty Mutual court concluded "the Act covers instances where construction defects were discovered before any actual damage had occurred," but does not provide the exclusive remedy when the defects have caused damage. (Liberty Mutual, supra, 219 Cal.App.4th at pp. 105, 108-109.) Therefore, the time limitations of the Act did not bar Liberty Mutual's subrogation claims. (219 Cal.App.4th at p. 109.)