BILD Chalks Up a Win Defending the “Right to Repair” Alleged Construction Defects

The Building Industry Legal Defense Foundation (BILD), along with its coalition partners, the California Building Industry Association and Leading Builders of America, garnered a win in the case of Gillotti v. Stewart (No. C075611, Cal. Ct. of App. 3d Dist. Filed 4/26/17, publication order 5/18/17).  The case arose from a dispute over alleged damage from removal of trees and their connections to soil placement and driveway leveling. 

First, as amicus curie before the Third District Court of Appeal, BILD supported the builder/seller, general contractor, and grading subcontractor of the property in their arguments that SB 800 and its “right to repair” was the exclusive avenue for resolution of an alleged defects at the property—not an action for common law negligence.  BILD continues to argue that the Liberty Mutual decision (Liberty Mutual Insurance Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98) was wrongly decided as it allowed for common law claims in construction defect actions despite SB 800’s “right to repair.”  The Court of Appeal agreed with BILD and the building industry, rejected Liberty Mutual, and upheld the “right to repair” finding that SB 800 “clearly and unequivocally expresses the legislative intent that the [SB 800] apply to all actions seeking relief of recovery of damages arising out of, or related to deficiencies in, residential construction, except as specifically set forth in [SB 800],” and that SB 800 “does not specifically except actions arising from actual damages.”  (Gillotti at *10).  After achieving a victory in the opinion in Gillotti¸ BILD had to step in again and fight to have the Court’s opinion published, as it was initially unpublished, which would have made it uncitable as precedent.  Upon hearing BILD’s arguments in favor of publication, the Court released its opinion in Gillotti for publication on May 18, 2017.    

The Third District Court of Appeal’s opinion in Gillotti is the second time that it has disagreed with Liberty Mutual having also upheld the “right to repair” in the case of Elliott Homes v. Superior Court (Hicks) (2016) 6 Cal.App.5th 333, a case which is currently pending review before the California Supreme Court along with the Fifth Appellate District’s rejection of Liberty Mutual in McMillin Albany LLC v. Superior Court (2015) 192 Cal. Rptr. 3d 53.  (BILD is also an amicus curiae in the McMillin case, and our brief can be found here.)  Thus, the split between California courts continues to grow regarding how to manage construction defect claims and whether or not to abide by the “right to repair” as the sole remedy. 

BILD will continue to defend SB 800 and the “right to repair” and thanks its outside counsel in the Gillotti case, Kathleen Carpenter at Donahue Fitzgerald and Alan Packer at Newmeyer & Dillion for their outstanding work in this matter.  A copy of BILD’s amicus brief in the Gillotti case can be found here, and a copy of the request for publication can be found here.

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BILD Continues The Fight To Preserve Insurance Availability For Construction Defect Claims

The BILD Foundation is continuing its push to ensure that insurance coverage is readily available to cover potential construction defect claims.  Since 2015, BILD has worked on the case of Navigators Specialty Insurance Company v. Moorefield Construction, Inc., first filing a brief as a friend of the court in 2015, and then appearing on behalf of the building industry in oral arguments before the California Court of Appeal in 2016. 

BILD’s arguments focused on the fact that the lower court’s ruling in the matter could be used by the insurance industry to deny all construction defect coverage under a theory that every act done by a contractor at a construction site is an intentional act and, thus, is not an “accident” eligible for insurance coverage.  Through its outside counsel, Gerard Mooney with the law firm of Rutan & Tucker, LLP, BILD has argued that contractors do not intend to do their work defectively, and that any reasonable interpretation of the term “accident” should cover a contractor’s allegedly defective work, particularly given nearly all construction work is done with knowledge of a potential risk of product failure. 

The ruling issued by the Court of Appeal in December 2016 held that no insurance coverage would be available for the contractor in the matter as the contractor’s actions were deliberate acts, not accidents, and that the insured was liable to reimburse the insurer for settlement payments attributed to the required repairs.  The Court of Appeal, however, was very careful to limit its ruling to the facts of the case, stating that it was only deciding the particular matter before it and not ruling on all construction defect matters generally.  The Court found that in this particular matter, the contractor knew it was performing defective work with either the hope or mistaken belief that the defective work would not cause damage at a later time. 

BILD, has now filed a request with the California Supreme Court to depublish the case.  Depublishing the case would lessen its potential impact on the building industry as no future court would be able to cite to the case as precedent in future construction defect/insurance lawsuits.  BILD seeks to have the case depublished based on our belief that: 1) the Court of Appeals’ opinion goes against well-settled California law that would hold contractor’s actions are “accidents” deserving of coverage; and 2) that the Court’s opinion goes against public policy encouraging building professionals not to consider the consequences of their actions and not to attempt to eliminate or minimize risk of damage; and 3) that the opinion would effectively nullify construction defect policies across the state.  BILD has been joined in its Depublication request by the California Building Industry Association and the California Business Properties Association. 

On its own motion, the California Supreme Court has extended its time for review in the matter, perhaps signaling its desire to overturn the Court of Appeals’ ruling or, at the least, grant BILD’s Depublication request.  As stated by BILD’s outside counsel, Gerard Mooney: “The Court of Appeal's opinion has the potential to jeopardize the insurance coverage upon which many in the building industry rely.  It is our hope the California Supreme Court will grant review to consider this important public issue.”

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BILD Prepares for Court Proceedings to Preserve Insurance for Construction Defect Claims

For more than a year, BILD has been involved in a case currently before the California Court of Appeal that promises to determine whether or not insurance coverage for construction defect claims continues to exist.  The case is Navigators Specialty Insurance Company v. Moorefield Construction, Inc.  BILD has appeared in the case as a friend of the court, filing its brief in September 2015.  BILD’s outside counsel, Gerard Mooney with Rutan & Tucker, LLP, obtained an Order from the Court of Appeal to participate in oral argument and will be making BILD’s case before the Court on October 19, 2016.

The case revolves around a commercial construction defect action wherein the floor tiles of a retail store were installed by Moorefield and are now claimed to be defective as a result of an adhesive failure.  Moorefield tendered the matter to its insurer, Navigators, under its comprehensive general liability policy, seeking coverage for the retailer’s defect claims.  Navigators argued before the trial court that Moorefield’s installation of the flooring titles over a concrete slab with elevated moisture vapor levels was an intentional act, rather than an “accident” as a required by the policy, such that the policy did not cover the matter. The trial court agreed with Navigators – leaving Moorefield with no insurance coverage. 

BILD believes that the trial court erred in siding with Navigators and that to rule in any way other than to affirm Moorefield’s coverage under its policy would potentially negate coverage for construction defects under CGL policies.  Specifically, BILD’s brief contends that contractors do not intend to do their work defectively, and that any reasonable interpretation of the term “accident” should cover a contractor’s allegedly defective work, particularly given nearly all construction work is done with knowledge of a potential risk of product failure. 

Said Mr. Mooney, “Rutan & Tucker is proud to assist BILD with its efforts to avoid the significant possible harm to the building industry that could result if the trial court’s order denying insurance coverage is not reversed.”

In order to preserve the availability of construction defect insurance coverage for all types of projects, builders, and contractors, BILD has stepped in to persuade the Court of Appeal to reverse the lower court. 

In addition to this insurance case, BILD continues to monitor and participate in other construction defect cases throughout the state, always fighting to protect the building industry, preserve pre-litigation rights to cure alleged defects, and halt the proliferation of construction defect lawsuits. 

A copy of BILD’s amicus curiae brief can be found here.  

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BILD Leads Coalition Challenging Expansive New Permitting Program from State Water Board

BILD Foundation is leading a broad-based coalition challenging the proposed “Procedures for Discharges of Dredged or Fill Materials to Waters of the State.”  Through a comment package submitted August 18, 2016 as well as testimony provided at State Water Resources Control Board (State Water Board) meetings on the matter, BILD is continuing in its many years of involvement in the State Water Board’s efforts to regulate wetlands and other waters throughout California. 

Working through its outside counsel, Keith Garner with Sheppard Mullin, LLP, BILD along with a coalition of 30 additional statewide and regional business, planning, agricultural, and water-related organizations provided extensive comments to the State Water Board.  As Mr. Garner explains, “The current proposal is based on questionable legal authority, conflicts with an existing federal regulatory program, and will likely result in significant delay and additional costs for public and private project sponsors.” A full copy of the comments can be found here.

BILD’s comments focused upon several glaring and significant problems with the proposed permitting program.  Highlights of the comments follow:

·         Rather than focusing solely on the narrow band of allegedly unprotected “isolated wetlands” the State Water Board is proposing a broad-based permit program that will conflict with, duplicate, or complicate federal programs as well as other state programs managed by the U.S. Army Corps of Engineers and the California Department of Fish and Wildlife.

·         The program would require a case-by-case analysis to determine when any area is potentially a “water of the State” and fails to contain any definitions as to what the agency considers “water of the State” to be. 

·         The new program lacks clear definitions on what activities would be considered exempt from the new program, when alternatives analyses would be required, and what rules or definitions would apply leading to likely application of the new rules in non-uniform and unclear fashion across the state. 

·         Would impose a new, onerous permit program on all “waters” throughout the state despite statements from the State Water Board staff that only 1% of these “waters” fall outside of federal control presently. 

·         The State Water Board appears to lack authority to implement its new proposals, either under federal or state laws. 

Since BILD and its coalition submitted their comments, numerous other entities have come forward with concerns about the proposed regulations, including the U.S. Army Corps of Engineers, the U.S. Environmental Protection Agency, CalTrans, the California High Speed Rail Authority, and the Department of Water Resources.

BILD awaits a revised draft of the proposed regulations from the State Water Board.

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