|Featured Article In the Land of Aas |
|The California Supreme Court has ruled that damages from construction defects must be manifest in order to bring a tort cause of action|
By Cynthia A. R. Woollacott
Cynthia A. R. Woollacott is a partner in Woollacott Jannol Fields LLP. She specializes in business litigation, including construction and design defect litigation for plaintiffs and defendants.
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In 2000, the California Supreme Court in Aas v. Superior Court1 upheld the economic loss rule and maintained the line between tort and contract claims by rejecting a negligence cause of action for construction defects that had not yet caused appreciable physical damage. In the 5-2 decision, Chief Justice Ronald George and Justice Stanley Mosk wrote separate opinions that were labeled as both concurring and dissenting.
The Aas plaintiffs were individual homeowners and their homeowners' association, and the defendants were the developer, general contractor, and various subcontractors. The plaintiffs sought contract and tort remedies for construction defects ranging from inadequate shear and fire walls to discolored drain stoppers. Some defects had resulted in failures, other defects had not. The case came to the supreme court after the trial court granted the defendants' motions in limine to exclude from the tort causes of action the plaintiffs' evidence of defects that had not manifested damage. The court of appeal denied the plaintiffs' petition for writ of mandate.
Aas brought to a head a long-simmering conflict between homeowners who demanded repair of building code violations and admittedly negligent construction, and contractors and their insurers who refused to pay to repair conditions that had not failed. The importance of the issue may be measured by the number of amici curiae on both sides. The supreme court put the conflict to rest by holding that tort remedies may not be sought for defects that do not manifest damage. For example, a balcony that slopes steeply to a sliding glass door with an unraised threshold falls below the standard of care and violates building codes. This construction defect likely will allow water to enter the home and cause damage someday. But until the home sustains actual damage, Aas holds no tort cause of action has accrued despite the known defect.2 While several bills have been introduced in the legislature to overrule Aas, they have not been successful.3
Under the law now, should homeowners with actual damage due to construction defects consider themselves lucky? Following the Aas decision, were predictions of homeowner deaths and the return of "buyer beware" hyperbole?4 Is the reasonable life of a home 10 years?
Aas confirmed the existence of a serious limitation on claims for construction defects. The decision was a defense victory in the continuing battle between plaintiffs (property owners and homeowners' associations (HOAs)) on the one side and defendants (developers, contractors, and subcontractors and their insurers) on the other. But even after Aas, plaintiffs' attorneys still have options, insurance policies still require property damage to trigger coverage, and defense attorneys still have the economic loss rule. Shifts in construction defect litigation since Aas may be less substantive than people hoped or feared.
Aas holds that negligence claims in construction defect litigation require manifest property damage.5 Although the statutory measures of damage in contract and tort use identical language—the amount of compensation "for all the detriment proximately caused"6—the common law economic loss rule provides that "appreciable, non-speculative, present injury is an essential element of a tort cause of action."7 As certain parties argued in Aas, there can be no "nonphysical property damage," and without the economic loss rule there would be no distinction between contract and tort claims.8
Manifest property damage includes injury to a non-defective part of a house caused by a defective other part.9 Without the damage, homeowners and HOAs do not have negligence claims against developers, general contractors, or subcontractors for construction defects.10 If a plaintiff has made repairs and lost the money paid for them, Aas holds this loss only measures damage and does not create the type of damage recoverable in tort.11 Under Aas, even a notice of abatement citing likely structural failure and requiring repair might not involve property damage compensable in tort.12
The plaintiffs in Aas alleged causes of action for negligence, strict liability, breach of implied warranty, breach of express warranty, and breach of contract. Damages included diminution in value of their property and costs of repairing the defects. The defects were defined as deviations from building codes or construction industry standards and ranged from violations of safety-related building codes to aesthetics. Some defects admittedly had not caused damage.13
The court's holding addressed only the negligence claim. The facts were not analyzed under a claim of strict liability because the plaintiffs did not seek a remedy under that claim for defects that had not caused damage.14 Breach of contract and warranty causes of action were not involved in the decision because they are not tort claims.15 Nor did the court analyze liability for defects that had manifested damage; it was not disputed that tort law provides a remedy for construction defects that cause property damage.16 Losses from expectations involving the benefit of the bargain—such as diminution in value, costs of repair, or deviations from statutory or industry standards that have not resulted in physical damage—are economic damages remedied by contract, warranty, and fraud causes of action.17
Aas's requirement of "physical injury" and its distinction between contract and tort claims have two major effects on construction defect litigation. First, warranty and contract claims require privity. Subsequent owners have only tort claims available.18 The rationale stems from Seely v. White Motor Company, in which the supreme court apportioned a builder's responsibilities. A builder must meet the performance levels and economic expectations of the direct buyer, but a third party is entitled only to the avoidance of injury.19 The tort duties of the builder run to whoever owns the property when it suffers physical damage.20 Strict liability may be available only in the context of mass-produced homes, although the Aas court and a recent court of appeal decision noted it might apply to all persons in the residential construction business.21
The second effect is on insurance coverage. Most general liability policies cover "property damage."22 The quoted phrase might or might not have the same meaning for purposes of insurance coverage as it does under the economic loss rule.23 Had the court in Aas allowed tort recovery for building code violations, diminution in value, or repair costs without manifest physical damage, insurance could be claimed for these losses. As it was, the court made no distinction between the use of the term "property damage" in an insurance policy and under the economic loss rule. Indeed, the court belittled a Seventh Circuit case that held that the incorporation of a defective plumbing system into homes inflicted physical injury and hence invoked coverage by the standard comprehensive general liability (CGL) insurance policies issued to the contractor24—a holding that, according to Justice Mosk, was rejected on appeal.25
The dissents in Aas framed their points against the rhetorical question, "Why wait?" Chief Justice George asked why a homeowner should "have to wait for a personal tragedy to occur in order to recover damage to repair known serious building code safety defects caused by negligent construction."26 He would have allowed "a right of action in negligence to recover costs to remedy safety code violations that pose a serious threat of injury" without waiting for the injury to become manifest.27 The majority answered that the economic loss rule under the existing law of tort and contract requires that plaintiffs wait. Changing the rule or expanding protections for plaintiffs, the majority believed, rested with the legislature. The opinion noted then-pending legislation introduced in 1999 to overturn the court of appeal's Aas decision.
After the supreme court's Aas opinion, legislators introduced two bills that would have overturned it, but both bills failed to achieve passage. SB 355 (Escutia) was supported by homeowners and their attorneys, but it was opposed by contractors' and insurance groups and died in committee. Anti-Aas language in AB 267 (Steinberg) was deleted by amendment because it lacked support;28 the bill continued as an amendment to Civil Code Section 1375 to extend deadlines for common interest development prelitigation proceedings.
AB 1010 (Dutra) attempted to make a legislative finding that construction defect litigation is an epidemic that contributes to a scarcity of insurance and a resulting decline in building. The bill also declared that an alternative method of resolving construction defect disputes is needed to reduce litigation while protecting homeowners. The bill languished. Related AB 600 (Dutra) sought unsuccessfully to establish a 10-year home construction warranty—which would have run with the land for the benefit of subsequent owners—and an exclusive dispute resolution program that included a waiver of tort remedies under the jurisdiction of the Contractors State License Board.
Legislative inaction in the face of Aas's holding and its implications for construction defect litigation have kept the rhetorical question "Why wait?" alive in the courts.
The plaintiffs did not have to wait at all in Hicks v. Kaufman & Broad Home Corporation,29 in which the court of appeal seemed to side with both Aas dissents. Hicks involved a development with "inherently defective" slab foundations in the individual homes.30 Some of the slabs had already cracked, but others had not. The plaintiff homeowners sued on causes of action for strict liability, negligence, breach of express warranty, and breach of implied warranty.31 The remedy sought was the cost of repair or replacement, not compensation for property damage.32
Hicks allows the claims of express warranty (from the purchase agreements) and implied warranty (arising from Commercial Code Sections 2314 and 2315) to proceed.33 Phrased as a question of malfunction rather than manifest property damage, the court held that "proof of breach of warranty does not require proof the product has malfunctioned but only that it contains an inherent defect which is substantially certain to result in malfunction during the useful life of the product."34
Hicks cites Aas as supporting (though without directly addressing) the proposition that breach of warranty allows recovery for costs to repair construction defects that have not resulted in property damage.35 The rationale is that the plaintiffs' warranty right was to a defect-free product, the defect itself is the injury, and the remedy is the cost of replacement.36 The Hicks court held that a "substantially certain" likelihood of failure constituted injury in the form of diminished value, rejecting 100 percent certainty as impractical and unnecessary.37 On the issue of waiting, the court stated, "We see no reason why a homeowner should have to wait for the inevitable injuries to occur before recovering damages to repair the defect and prevent the injuries from occurring."38
But limitations, including some discussed in Aas, appear in Hicks. Privity is required for the implied warranty cause of action.39 The Hicks court noted the "well settled" proposition that strict liability and negligence do not provide a remedy for economic damage—defects that have not caused property damage.40 And class action status was denied on the tort causes of action because they require individualized proof of liability and causation.41
Finally, not all defects give rise to warranty claims under Hicks. Only those "inherently defective" homes "substantially certain" to manifest damage qualify.42 The decision in Hicks, rendered in the context of Aas, allows some plaintiffs to proceed but inevitably leaves others waiting.
The CSLB Option
The respondents in Aas argued that homeowners without manifested damage had a viable remedy before the Contractors State License Board.43 State agencies do not enjoy a reputation in the legal community for effective remediation of private party disputes, and the CSLB is no exception. But Aas's holding may make the CSLB an alternative to litigation worth considering, especially for plaintiffs not in privity.44
Violations of law within the CSLB's jurisdiction include several relating to construction defects. Disciplinary action may be warranted for:
• "A willful departure in any material respect from accepted trade standards for good and workmanlike construction.…"45
• "A willful departure from or disregard of plans or specifications in any material respect.…"46
• "Willful or deliberate disregard and violation of the building laws.…"47
• "Failure in a material respect on the part of a licensee to complete any construction project or operation for the price stated in the contract.…"48
"Willfulness" and "material" are not burdensome elements of proof at the CSLB.49
In 2000, the appellate court in Tellis v. Contractors' State License Board held that multiple construction defects and the failure to repair alone constituted violations of two of the statutes under the CSLB's jurisdiction.50 "Material" means "substantial as opposed to trivial."51 The court rejected the argument that willfulness in this context was similar to that required in a criminal case52 and further imputed knowledge of the substandard level of work to the contractor based on his experience alone.53 Noncompliance with building codes itself similarly established a willful departure in Mickelson Concrete Company v. Contractors' State License Board.54
The CSLB may impose a range of sanctions for violations relating to construction defects. These include restitution orders, citations requiring repairs, penalties, and suspension or revocation of a contractor's license.55 If the CSLB issues a citation, the contractor is required to take certain actions such as correcting the violations within a reasonable time or paying a specified sum for their correction.56 The contractor must comply or his or her license will be suspended or even revoked.57 Imposition of these sanctions, or the credible threat of their imposition, may go a long way to fostering the sort of remedial effort needed to make injured homeowners whole.
The limitations in Aas do not appear to apply to CSLB claims. There is no requirement of manifest physical injury. Privity is not mentioned. The emphasis of the CSLB is on correcting substandard work and building code violations, or obtaining restitution for the homeowner. Homeowners should assess, however, whether a contractor's license is sufficiently important to the contractor to force compliance and whether insurance would be available to pay any CSLB disciplinary orders.
The $7,500 contractor's bond required by Business and Professions Code Section 7071.6 is another source of compensation for smaller claims. The grounds for recovering against a bond are the same as those in a CSLB claim.58 Litigation combined with parallel proceedings in the CSLB and against bonds may give the greatest chance of relief to aggrieved homeowners.
Transfer Disclosure Statement Issues
Since Aas effectively precludes owners of used homes from litigating against developers and builders or claiming insurance for unmanifested defects, it is possible there will be an increase in claims against sellers based on failure to disclose under the laws pertaining to the Real Estate Transfer Disclosure Statement. Whether defined as breach of warranty or a type of negligence, such claims increase the risk of homeowners who are faced with the problem of finding out too much in investigating possible construction defects—particularly if they were not the owners when the construction took place—and then facing the disclosure dilemma.
Potential plaintiffs frequently ask, "If the investigation finds defects, do I have to disclose them when I sell the house?" The answer is yes, even if no cause of action exists for the discovered defects. Civil Code Section 1102.1 provides that buyers have a right to be informed of "any fact materially affecting the value and desirability of the property, including, but not limited to, the physical conditions of the property and previously received reports of physical inspections.…" The parties to a purchase-sale transaction may not waive that right, even in an "as is" sale.
The form specified in Civil Code Section 1102.6 requires disclosure of nonoperational components, "significant defects/malfunctions," "alterations or repairs not in compliance with building codes," and lawsuits alleging defects or deficiencies.
A legislator proposed a bill to let homeowners know the consequences of starting down the defect-finding road before they gained unwanted knowledge. AB 752 (Briggs) would have added Section 6157.6 to the Business and Professions Code, requiring that advertisements by construction defect lawyers disclose the "[l]egal obligations imposed on homeowners upon a finding that their home has or may have a construction defect, including the obligation to disclose home construction defects upon sale of the home, and the potential financial impacts that may result if a home construction defect is not rectified." The bill died in the Judiciary Committee.59
A tension exists between Aas and the legislative intent underlying the transfer disclosure laws. Aas chills investigation into construction defects for a would-be seller because discovery of defects not yet manifested by injury must be disclosed and could affect price but does not support a tort claim. The transfer disclosure laws, on the other hand, compel reasonable investigation and disclosure at the risk of liability for nondisclosure. The petitioners in Aas argued the economic loss rule would result in homeowners choosing to "see no evil" so they need not disclose any evil upon sale.60 Any homeowner adopting that strategy risks liability later for failure to disclose. Whether from the risk of investigation and disclosure of noncompensable defects or the risk of not investigating and litigation with a buyer for failure to disclose, the burden of defects not manifested by injury falls on homeowner-sellers, not on contractors.
What about recovery for emotional distress? The same groups of consumer (plaintiffs') and industry (defense and insurance) attorneys that argued Aas had met in 1999 in Erlich v. Menezes, a supreme court case in which privity and manifest property damage were present.61 Erlich holds that negligent construction of a home cannot support a damages claim for emotional distress based on breach of the construction contract. The court declared the "general measure of damages" for repairable construction defects is the reasonable cost of repair and lost use or the alternative of diminution in value.62 Negligent construction—the claimed contractual breach—"did not cause physical injury."63 No duty independent of the construction contract existed, and the breach resulted in property damage alone.64
Emotional distress damages are not contemplated by contracting parties.65 According to Erlich, homeowners can avoid emotional distress by moving out of their homes until repairs are made.66 Homeowners cannot reasonably hope any construction project will be error-free and they will live happily ever after: "[T]here is a reason that tag line belongs only in fairy tales."67
The court noted that allowing emotional distress claims for defective construction could increase the cost of housing, eliminate builders' insurance, and diminish the supply of affordable housing68—and the avoidance of these results may have contributed to the Aas holding as well.
Justice Kathryn Werdegar's dissent in Erlich suggested the case did not concern emotional distress damages in a pure negligence case.69 But as the author of the Aas decision, Justice Werdegar's summary of Erlich in Aas filled that gap: "This court recently rejected the argument that the negligent performance of a construction contract, without more, justifies an award of tort damages.…In so doing, however, we reiterated that conduct amounting to a breach of contract becomes tortious when it also violates a duty independent of the contract arising from principles of tort law."70
There may well be such a duty in construction defect cases involving strict liability and negligence, but the damages from the breach of that duty must comply with the economic loss rule.71
Implied warranty may be the most attractive alternative for plaintiffs lacking manifest damage. The supreme court established that homeowners are protected by an implied warranty of nondefective construction in Pollard v. Saxe & Yolles Development Company.72 The contractual nature of an implied warranty claim should make the economic loss rule inapplicable: Diminution in value and cost of repair appear to be proper measures of damage in implied warranty cases. The Aas court found that these are the "standard alternative measures of damage for injury to property."73
This is not to say that an implied warranty claim will always produce a recovery. In addition to privity and proof of a construction defect, plaintiffs suing for breach of implied warranty must show reasonable notice of breach and other warranty restrictions. Implied warranty claims also are susceptible to contractual disclaimers.74
Plaintiffs in privity have more options in litigation because of the benefits of their contract and warranty rights. These plaintiffs must contend, however, with the restrictions, disclaimers, and other detriments of their bargains.75 Buyers might not have the leverage to insist that a developer or contractor agree to generous warranties or representations as to code compliance, but at least they have the advantage over subsequent purchasers of seeking out solvent contractors and attempting to negotiate a good deal. Recent case law necessarily limits insurance coverage for construction defects—and this makes a contractor's ability to respond in damages more important now than before.
Subsequent buyers, lacking privity, face even more obstacles to recovery for construction defects. Manifest injury must be present. The time passing between completion of the work and manifestation of injury also raises the potential for a defense based on the 10-year statute of limitations for latent construction defects.76 The 10-year statute applies regardless of privity, but a subsequent buyer may have little or no time left on the limitations period when he or she acquires the property. If there is no manifest damage within 10 years of construction, plaintiffs who lack privity cannot recover in tort for diminution in value, the costs of remedying building code violations, or the costs of repair—even if repairs have had to be made.77 It is doubtful that the increasingly popular "home warranties" included in purchase agreements would cover unmanifested defects either.
Potential remedies for subsequent buyers without manifest injury may lie in CSLB enforcement or a claim against the seller under the transfer disclosure laws. These buyers may also seek a notice of abatement and then sue in tort, though recovery on that theory appears problematic. A homeowner may not want to report a defect to regulators in the hope that some resulting order will require remedial action and lead to compensation from third parties.
Issues also may arise under Aas for projects with several construction defects. What result occurs if a new or different injury becomes manifest after one round of construction defect litigation concludes? A waiver under Civil Code Section 1542 would not apply because the "claim" would not exist under tort law until the damage has manifested. But the "primary right" theory might well bar any second action even if the remedy (tort damages for manifest defect) was not available in the first action because of the economic loss rule.78 Since contractors are exonerated for latent defects after 10 years,79 homeowners might consider that to be the life span of any construction.
This leaves the subject of insurance. Justice Mosk feared that the immediate outcome of the Aas majority's holding would be the shoddy construction of homes due to insulation from liability provided by the manifest injury requirement.80 Instead, the immediate consequence has been an increase in insurers' comfort in denying claims for defects that have not manifested damage. If injury has manifested, then property damage seems to have occurred and the loss will be covered, in the absence of particular policy exclusions, regardless of the legal theory. But if the defects exist without manifesting physical damage, it now seems incontrovertible that no coverage should exist for any tort claim.81
The next frontier in this area may be the question of insurance coverage for causes of action based on contract, particularly implied warranty. The supreme court held in Vandenberg v. Superior Court that coverage for what the insured is "legally obligated to pay as damages" makes no distinction between contract and tort causes of action; the nature of the damage rather than the name of the cause of action governs coverage.82 So the question returns as to whether property damage covered by insurance includes costs of repair and diminution in value since these are available damages under contract theories. Plaintiffs appear to be avoiding a judicial determination on the applicability of the economic loss rule to implied warranty cases by dropping that cause of action from appeals.83 The concept that breach of implied warranty might allow subsequent buyers to avoid the economic loss rule seems likely to fail because of the lack of privity and the insistence in Aas on maintaining the line between contract and tort.
Yet despite the seeming clarity of Aas's holding, the potential conflict between the meaning of "property damage" in insurance policies and the economic loss rule might still require carriers to defend and indemnify.84 Carriers do not seem to be turning to independent counsel85 as a way of dealing with this issue by asserting fully the Aas outcome. Whether contract-related construction defect damages constitute property damage under insurance policies might be the next subject of appellate scrutiny.
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1 Aas v. Superior Court, 24 Cal. 4th 627, 101 Cal. Rptr. 2d 718 (2000).
2 Personal injury claims are beyond the scope of this article.
3 See text and notes, infra.
4 See, e.g., License for Unsafe Homes, Sacramento Bee, Dec. 21, 2000; Wait and See, L.A. Daily J., Jan. 8, 2001; Keeping Homeowners Housebroken, S.F. Daily J., Jan. 8, 2001.
5 Aas, 24 Cal. 4th at 636 n.4 (citing Sabella v. Wisler, 59 Cal. 2d 21, 27-30, 27 Cal. Rptr. 689 (1963)).
6 Civ. Code §§3300 and 3333.
7 Aas, 24 Cal. 4th at 646.
8 Aas, No. S071258, Answer Brief on the Merits of the William Lyon Company and Lyon Communities, Inc.
9 Aas, 24 Cal. 4th at 636 n.5 (citing Stearman v. Centex Homes, 78 Cal. App. 4th 611, 613, 92 Cal. Rptr. 2d 761 (2000)). The supreme court limited the relevance of Centex to this proposition. Id. at 648 n.12.
10 Id. at 632.
11 Id. at 646.
12 Huang v. Garner, 157 Cal. App. 3d 404, 203 Cal. Rptr. 899 (1984) (finding a notice of abatement citing likely structural failures and requiring repairs to be compensable damage in negligence but not strict liability). Aas disapproved Huang but accepted "for the sake of argument" that a notice of abatement might allow repair costs as tort damages. Aas, 24 Cal. 4th at 649.
13 Aas, 24 Cal. 4th at 633, 634.
14 Id. at 635. See Nash v. MacDonald, 2001 Daily Journal D.A.R. 10663 (Oct. 2, 2001).
15 Aas, 24 Cal. 4th at 635.
17 Id. at 636, 641 (citing Casey v. Overhead Door Corp., 74 Cal. App. 4th 112, 123-24, 87 Cal. Rptr. 2d 603 (1999)).
18 Id. at 637.
19 Id. at 642 (citing Seely v. White Motor Co., 63 Cal. 2d 9, 18, 45 Cal. Rptr. 17 (1965)); Wait and See, L.A. Daily J., Jan. 8, 2001.
20 Krusi v. S. J. Amoroso Constr. Co., 81 Cal. App. 4th 995, 1005-06, 97 Cal. Rptr. 2d 294 (2000).
21 Aas, 24 Cal. 4th at 639 n. 9 (citing Kriegler v. Eichler Homes, Inc., 269 Cal. App. 2d 224, 227, 74 Cal. Rptr. 749 (1969)); Nash v. MacDonald, 2001 Daily Journal D.A.R. 10663 (Oct. 2, 2001).
22 People Who Live in Glass Houses: The Recurring Issue of Construction Defect Claims and Insurance Coverage, 1997 Defense Research Institute 4-11, Construction-Related Insurance Coverage Issues.
23 See CPS v. TIG Specialty Ins. Co., 90 Cal. App. 4th 149, 108 Cal. Rptr. 2d 282 (2001) (finding coverage for property damage asserted as an offset affirmative defense).
24 See Eljer Mfg., Inc. v. Liberty Mut. Ins. Co., 972 F. 2d 805 (7th Cir. 1992). The Aas court distinguished Eljer and declined to comment on its correctness under California law. Aas, 24 Cal. 4th at 642 n.10.
25 Aas, 24 Cal. 4th at 675 n.2 (Mosk, J., dissenting).
26 Id. at 653 (George, C. J., dissenting).
27 Id. at 669.
28 AB 267, Feb. 16, 2001 version, amended in May 2001; Panel OKs Bill on Construction-Defect Disputes, L.A. Daily J., Aug. 31, 2001.
29 Hicks v. Kaufman & Broad Home Corp., 89 Cal. App. 4th 908, 107 Cal. Rptr. 2d 761, modified and rehearing denied, 2001 Cal. App. LEXIS 520 (2001).
30 Id. at 912.
32 Id. at 912-13.
34 Id. at 917-18.
35 Id. at 918, 919, 920.
36 Id. at 922.
37 Id. at 923 n.52.
38 Id. at 923.
39 Id. at 926 (citing Anthony v. Kelsey-Hayes Co., 25 Cal. App. 3d 442, 102 Cal. Rptr. 113 (1972)).
40 Id. at n.53 (citing Fieldstone Co. v. Briggs Plumbing Prods., Inc., 54 Cal. App. 4th 357, 62 Cal. Rptr. 2d 701 (1997)); Aas v. Superior Court, 24 Cal. 4th 627, 101 Cal. Rptr. 2d 718 (2000).
41 Hicks, 89 Cal. App. 4th at 913.
42 Foundation Fracas, L.A. Daily J., Aug. 2, 2001.
43 Bus. & Prof. Code §§7000 et seq.; Court Hears Arguments as to Whether Builders Can Be Sued, L.A. Daily J., Sept. 8, 2000.
44 See Bruce D. Rudman and Sam K. Abdulaziz, Hammering the Contractor, Los Angeles Lawyer, Jan. 2001, at 28.
45 Bus. & Prof. Code §7109(a).
46 Bus. & Prof. Code §7109(b).
47 Bus. & Prof. Code §7110.
48 Bus. & Prof. Code §7113.
49 See Rudman & Abdulaziz, supra note 44.
50 Tellis v. Contractors' State License Board, 79 Cal. App. 4th 153, 93 Cal. Rptr. 2d 734 (2000) (violations of Bus. & Prof. Code §§ 7109 and 7113).
51 Id. at 163.
52 Penal Code §7.
53 Tellis, 79 Cal. App. 4th at 158-59.
54 Mickelson Concrete Co. v. Contractors' State License Bd., 95 Cal. App. 3d 631, 635, 157 Cal. Rptr. 96 (1979).
55 Bus. & Prof. Code §7090.
56 Bus. & Prof. Code §7099.
57 Bus. & Prof. Code §§7090.1, 7099.6.
58 Bus. & Prof. Code §7071.5.
59 See http://www.leginfo.ca.gov.
60 Aas v. Superior Court, No. S071258, Petitioners' Joint Reply Brief.
61 Erlich v. Menezes, 21 Cal. 4th 543, 87 Cal. Rptr. 2d 886 (1999).
62 Id. at 555, 561.
63 Id. at 557.
64 Id. at 555-56.
65 Id. at 558.
66 Id. at 555.
67 Id. at 557-58.
68 Id. at 560.
69 Id. at 562.
70 Aas v. Superior Court, 24 Cal. 4th 627, 643, 101 Cal. Rptr. 2d 718 (2000).
72 Pollard v. Saxe & Yolles Dev. Co., 12 Cal. 3d 374, 379-80, 115 Cal. Rptr. 648 (1974).
73 Aas, 24 Cal. 4th at 651 n.15.
74 Civ. Code §§1791.1, 1792.3; Comm. Code §§2601 et seq., 2701 et seq.; Pollard, 12 Cal. 3d at 380; Huang v. Garner, 157 Cal. App. 3d 404, 419, 203 Cal. Rptr. 899 (1984); Court Hears Arguments as to Whether Builders Can Be Sued, L.A. Daily J., Sept. 8, 2000.
75 Comm. Code, div. 2, ch. 6, 7, §§2601 et seq., 2701 et seq.; Foundation Fracas, L.A. Daily J., Aug. 2, 2001; Aas, No. S071258, Petitioners' Joint Reply Brief (citing Kriegler v. Eichler Homes, 269 Cal. App. 2d 224, 228, 74 Cal. Rptr. 749 (1969)).
76 Code Civ. Proc. §337.15.
77 The Aas majority decision's reference to "involuntary" out-of-pocket expenses implies that under some circumstances actual repair of defects that had not yet manifested damage at the time of repair might constitute a loss compensable in tort. Aas, 24 Cal. 4th at 646.
78 Hamilton v. Asbestos Corp., Ltd., 22 Cal. 4th 1127, 1145-46, 95 Cal. Rptr. 2d 701 (2000); McCloskey v. Carlton Builders, 165 Cal. App. 3d 689, 21 Cal. Rptr. 659 (1985).
79 Cascade Gardens Homeowners Ass'n v. McKellar & Assoc., 194 Cal. App. 3d 1252, 1256, 240 Cal. Rptr. 113 (1987).
80 Aas, 24 Cal. 4th at 673-74 (Mosk, J., dissenting).
81 The Lyon parties argued in the Aas case that diminution in value is not a covered type of loss. Aas, No. S071258 (citing New Hampshire Ins. Co. v. Vieira, 930 F. 2d 696, 701 (9th Cir. 1991)).
82 Vandenberg v. Superior Court, 21 Cal. 4th 815, 839, 88 Cal. Rptr. 2d 366 (1999) (rejecting any ex contractu/ex delicto distinction).
83 See, e.g., Krusi v. S.J. Amoroso Constr. Co., 81 Cal. App. 4th 995, 998 n.2, 97 Cal. Rptr. 2d 294 (2000); Erlich v. Menezes, 21 Cal. 4th 543, 87 Cal. Rptr. 2d 886 (1999); Aas, 24 Cal. 4th 627, 101 Cal. Rptr. 2d 718.
84 The Aas petitioners argued contract, warranty, and administrative claims are not covered by insurance. Aas, No. S071258, Petitioners' Joint Reply Brief (citing St. Paul Fire & Marine Ins. Co. v. Coss, 80 Cal. App. 3d 888, 895-97, 145 Cal. Rptr. 836 (1978)).
85 Civ. Code §2860.