California Supreme Court Confirms California’s Right to Repair Act (SB800) is the Exclusive Remedy for Claims Alleging Property Damage from Construction Defects, Reversing Prior Case Law

The California Supreme Court’s decision in Aas v. Superior Court 24 Cal.4th 627 (2000) held that the economic loss rule barred homeowner construction defect claims that were limited to solely economic losses. In response, in 2002 the California legislature passed SB800, commonly known as the Right to Repair Act (the “Act”), which comprehensively reformed California construction defect litigation. The Act requires homeowners to participate in a comprehensive pre-litigation dispute resolution process which affords builders an opportunity to cure alleged defects prior to a lawsuit being filed.

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Recent Rulings Create Greater Inconsistency Among California Appellate Districts Regarding Application of “Faulty Workmanship” Exclusions to Construction Defect Cases

Two recent California appellate court opinions have interpreted “faulty workmanship” exclusions as they apply to construction defect lawsuits. These exclusions are standard ISO exclusions in commercial general liability policies that exclude coverage for property damage to: (1) “that particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations” (exclusion j(5)); (2) “that particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed

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