Construction Law

Comprehensive General Liability Insurance Policy Covers Only Tort-Based Claims. A comprehensive general liability policy was held not applicable to a general contractor’s negligent failure to meet a contractual deadline for completing a construction contract. In so holding, the court explained that the duty to indemnify is measured by the nature and kind of risks covered by the policy. Where, as here, a comprehensive general liability policy uses standard language intended and understood to cover only tort liability, and not contractual liability, and the claim at issue is based upon a contract, there is no coverage for that claim. (Truck Ins. Exchange v. Superior Court (1998) 62 Cal.App.4th 789.)

Emotional Distress Damages May be Recoverable in a Construction Defect Case. For the first time in a reported decision, a Court of Appeal affirmed an award of emotional distress damages in a construction defect case, holding that because a general contractor’s breach of contract also constituted a breach of his legal duty of due care and because that negligence caused a threat of physical injury to the plaintiffs, such damages were recoverable. In this case, the defendant general contractor was hired by the plaintiffs after promising to fulfill very specific requirements regarding the construction of the plaintiffs’ "dream home." Three months after the plaintiffs moved into the newly constructed home, it rained, and the entire house flooded (3 inches of standing water in the living room, streams of water pouring from the ceiling and walls which liquified the plaster, etc.). Despite efforts to correct the problems, which included cutting holes in the interior and exterior walls and ceilings, the defendant could not correct the problems. Ultimately it was discovered that there were serious structural defects in the home, which was starting to collapse in several areas. The stress of the problems with the house and the inability to correct those problems caused the plaintiff-husband to incur a permanent heart condition. In a dissenting opinion, one member of the Court of Appeal advocated reversing the emotional distress damages because the defendant’s negligence, while gross, resulted only in economic injury and property damages, not physical injury (the heart condition was caused by the plaintiff-husband’s emotional distress and not by the negligent construction itself). According to the dissent, emotional distress damages should not be recoverable in a construction defect case as a matter of law. This case was granted review by the California Supreme Court, but no decision has been forthcoming yet. (Erlich v. Menezes (1998) 60 Cal.App.4th 1357.)

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