Tuesday, June 22, 2010

Stigma Damages in Construction Defect Litigation

A recent Division III Court of Appeals upheld "stigma damages" in a lawsuit by a homeowner against the contractor that built his home. Although not reported (and therefore cannot be used as binding authority in legal briefs), it reinforces my observation over the last fifteen years that (a) homeowners will get what they ask for from judge or jury, and (b) contractors face an uphill battle in construction defect litigation.

Mr. Khalighi purchased a home built by Mr. Harvey, and problems arise with several aspects of the construction. Trial was a bench trial, meaning no jury. The Court of Appeals affirmed a rather substantial judgment including:

-$106,000 cost to repair improper drainage, adding slope to a garage, and improperly poured footings;
-a 25% contingency ($26K) for unforeseen problems that might be uncovered (rejecting the defense argument that this was speculative);
-stigma damages of $148,000; and
-attorneys’ fees of $135,000.

The trial court judge apparently disregarded entirely the defense expert’s opinion that repair costs were $13,000 and stigma damages no more than $38,000. There was no middle ground; the homeowner got everything he wanted.

I was also surprised to see the Court disregarded the homeowners’ obligation to provide notice of defect under RCW 64.50. It was undisputed that the homeowner failed to give any notice of defect or opportunity to cure. But because the contractor did not point out the homeowners’ obligation, the Court determined he had waived that defense.


Wednesday, June 2, 2010

Limiting liability through contract negotiation

A recent, but unpublished, Washington appellate case upheld a contractual provision limiting the time in which suit must be filed. The case is titled Pedowitz v. Above all Roofing. Normally, the statute of limitations for bringing a claim for breach of a written contract is six years. In a roof repair contract, however, the contractor inserted a provision requiring suit to be filed within 18 months of substantial completion. Although having notice of defects in the work performed, the owner did not file suit until after 18 months of substantial completion. The appellate court held that the trial court correctly dismissed the action as untimely.

In support of its holding, the Court of Appeals relied on Southcenter View Condominium Owners Association v. Condominium Builders, 47 Wash. App. 767 (1986). Whether or not the shortened statute of limitations period would be upheld in the case of latent defects not discovered within 18 months is an open question, but there are two lessons to be learned.

First, if you are a contractor, you should consider language limiting the time in which suit must be filed.

Second, if you are a homeowner, you should read the contract carefully to ensure you are not limiting your recourse.

If you would like a copy of the case, you can email me at jim@jwtalbotlaw.com. Full text of the case can be found at: