In the new case of KB Home Greater Los Angeles, Inc. v. Superior Court, the Court of Appeal held that summary judgment was appropriate in a subrogation case where the builder was not given notice of a defect under SB 800’s pre-litigation procedures, thereby depriving the builder of its right to repair the problem.
In the case, a homeowner’s pipe burst, causing damage. The homeowner called his insurance company, Allstate, which hired a mitigation company to remove excess water, damaged drywall, and carpet. After inspecting the property, Allstate hired a contractor to repair the home, and gave KB Home written notice of Allstate’s intent to pursue subrogation.
Allstate filed suit against KB Home, alleging common law causes of action and violations of Civil Code § 895, et seq. (aka SB 800). After several rounds of demurrers, the trial court dismissed the various common law causes of action, and KB Home then moved for summary judgment on the remaining SB 800 claim, which was denied.
KB filed a writ petition, which the Court of Appeal granted, finding that Allstate and the homeowner failed to comply with the pre-litigation procedures of SB 800 (i.e. notice and opportunity to repair), which in turn deprived KB Home of its right to repair the condition. As a result, Allstate was not permitted to assert a cause of action under Civil Code § 895, et seq.
Allstate argued the requirements of SB 800 did not apply to subrogation claims under the decision in Liberty Mutual Insurance Co. v. Brookfield Crystal Cove LLC, which held that SB 800 is not the exclusive remedy for defects that cause damage. The Court found that Liberty Mutual was distinguishable because (1) the plaintiff in Liberty Mutual had complied with the pre-litigation notice requirements, and (2) Allstate’s sole cause of action was under Civil Code § 895, et seq. (all common law causes of action had been dismissed as a result of prior law and motion).
While one might optimistically wish view this case as a limitation of the Liberty Mutual case, it likely is not. The Court’s ruling was largely constrained by the procedural posture of the case, namely that Allstate’s only existing cause of action was under Civil Code § 895, et seq. If Allstate’s Complaint had still contained common law causes of action (as permitted by Liberty Mutual), the result may have been different, because those common law causes of action do not have accompanying pre-litigation procedures. Indeed, the Court specifically noted that Allstate would be permitted to raise the issue of whether it could allege common law causes of action later on an appeal from the final judgment.
As a result, it would not be surprising to see a subsequent appellate decision arise from this case.