Discussion of History of Construction Defect Litigation in California

broken-houses

California literally wrote the book on construction defect litigation.  Construction defects began to surface after World War II due to cheap track homes being constructed haphazardly on a large scale.  Throughout the 1960s, developers began utilizing the services of subcontractors to build massive developments.  Rather than having their own employees perform the work, developers began relying more heavily on the specialty subcontractors to perform quality control functions. In 1969, the California Supreme Court expanded liability for developers with respect to residential housing through the concept of strict liability for mass produced homes. Strict liability defendants in construction defect cases may include builders of mass-produced homes, building site developers, component part manufacturers, and material suppliers. Courts have noted that there is little distinction between the “mass production and sale of homes and the mass production and sale of automobiles, and the pertinent overriding policy considerations are the same.” Kriegler v. Eichler Homes, Inc. (1969) 269 Cal. App. 2d 224, 227 (1969). Accordingly, developers of mass-produced tract homes may be held strictly liable whether or not there is privity of contract. Ibid. Courts have held, however, that there is no strict liability against contractors or sub-contractors. See Ranchwood Communities v. Jim Beat Construction (1996) 57 Cal.Rptr.2d 386; La Jolla Village Homeowners’ Assn., Inc. v. Superior Court (1989) 261 Cal.Rptr. 146. Within ten years, attorneys in California were using strict liability theories to seek compensation for homeowners. The initial strict liability lawsuits in California in the 70s and 80s generally applied to condominium projects. The Construction defect “industry” began to take off in the 1980s due to the housing boom and the enforcement of strict liability claims by the courts.  Today, construction defect law has grown into a cottage industry for California lawyers at a huge expense to contractors and their insurance carriers that underwrite commercial general liability policies in the state.  Construction defect law in Florida today is akin to where California was approximately 20 years ago.  Several other states have taken California’s lead in making construction defect litigation a growing industry, especially in the Western United States. There has been an surge of construction defect litigation in Arizona, Nevada, Oregon, Utah, Colorado, New Mexico, Minnesota, Florida, the Carolinas and Texas.  In Colorado, a bill to substantially limit construction defect litigation was recently defeated in 2013.  However, metro-area mayors hoping to increase the stock of condominiums in their cities for young professionals and empty-nest Baby Boomers are fighting to promote similar bills in the future. Factors that kept construction development down during the dismal economic climate of the Great Recession have largely dissipated, with the exception of the real or perceived costs associated with construction defects litigation.   Contractors operating in states that experience heavy construction defect litigation undoubtedly feel these trends are a factor in determining whether condominium construction is a profitable endeavor.   For better or worse, California is once again a trendsetter.