Justices Limit Lawsuits Against Home Builders

Homeowners can no longer sue builders for negligence in California unless construction defects have caused an injury or economic loss, the California Supreme Court decided Monday.

The 5-2 decision was an important victory for the state’s construction industry, which has complained that negligence suits have virtually halted condominium construction in California.

Prior to today’s ruling, if a homeowner found a defect--for example, something that was not built up to code standards--he or she could sue the builder any time within 10 years of purchase of a new home.

Now, however, such a suit can only be filed if the defect already has caused damage.

If a defect exists that has not yet caused damage, homeowners can only recover the cost of repairing the defect during the period of a warranty on a new home, which can range from one to 10 years. (Suits can be filed at any time if a deficiency causes bodily harm, lawyers said.)

Justice Kathryn Mickle Werdegar, writing for the court, raised the specter of higher housing costs if homeowners are allowed to file suit over any code violation.

Just because building codes require walls to be built in a way that reduces damage in an earthquake or a strong wind does not mean that “any given defect is sufficiently grave to pose a realistic risk of structural failure,” Werdegar wrote.

Chief Justice Ronald M. George, who disagreed with part of the court decision, implored the Legislature to change the law so that dangerous construction deficiencies, such as a wall that might collapse in an earthquake, can be repaired at the builders’ expense before residents are harmed.

“California is prone to earthquakes, and, tragically, the negligent construction of residential housing almost surely will result in the deaths and injury of numerous current and future residents of this state,” the chief justice wrote.

Steven M. Strauss, who represented San Diego homeowners in the case, said homeowners who were not the original buyers are penalized by the ruling.

If these residents “encounter some kind of life safety problem . . . they are now disenfranchised,” Strauss said.

Another lawyer for the San Diego residents said the ruling will make homeowners less willing to look for defects in their homes because they can’t get reimbursed and will not want to disclose them to future buyers.

“Under this ruling,” said Duane E. Shinnick, “there also is not as great an incentive for developers or contractors to build the home according to code because they can hope that no damage occurs within the first 10 years, and then they are off the hook.”

Representatives of the building industry countered that most lawsuits are over minor construction defects that will never cause damage.

“Spending millions of dollars to correct technical defects . . . is something of an economic waste,” said Newport Beach lawyer Gregory L. Dillion, who defended the William Lyon Co., a major home builder, in the case.

The case before the court, Aas vs. William Lyon Company, S071258, was brought by homeowners in a San Diego condominium project and a single-family housing development.

They sought compensation to cover the cost of repairs and the loss of future value in their homes. Building code violations included improperly connected walls and inadequate insulation for fire protection.

Both the trial court and a Court of Appeal had decided that the residents were barred from suing for negligence unless the defects caused damage.

The Supreme Court, upholding those decisions, based Monday’s ruling in part on a 1965 ruling that limited a manufacturer’s liability in a negligence lawsuit to physical injuries.

In that case, a plaintiff could not recover for the cost of repairing a defective truck or for lost business income because the truck could not make deliveries.

“To say that one’s house needs repairs costing a certain amount,” Werdegar wrote, “is not necessarily to say that one has suffered the type of harm” covered by personal injury law.

George said the court should have adopted a rule to allow homeowners compensation for repairs of life-threatening construction defects. A court could ensure that the money was spent to repair the property, George argued.

But Werdegar said the court should leave it to the Legislature to decide whether the approach was reasonable. Such a rule would require judges to determine which violations endangered lives and which didn’t, she objected.

Justice Stanley Mosk, in a dissent, said he regretted that the court failed to create even a “minimal safeguard” for homeowners.