A homeowner who purchased a home 10 years after it was built for the original owner, filed suit alleging negligence, products liability and breach of warranty against the home builder and the window manufacturer, alleging that defective windows caused water damage to the house. In dismissing the suit, the court held the negligence count was barred by economic loss doctrine, the products liability count was barred by the “gist of the action” doctrine, and the warranty claim was barred by the statute of limitations. The decision does a nice job of explaining the basis for applying each of the doctrines to dismiss the suit. Johnson v. Toll Brother, Inc., 303 A.3d 471 (Pa. 2023).
The builder installed Andersen Windows throughout the house. Construction was completed in 2004. The original owner sold the house to a new owner who subsequently sold it to the Plaintiff homeowner in 2016. In 2018 this owner filed the law suit in question. The cite a home inspector report with findings that water was leaking into the wall beneath the windows, the windows were not installed with correct spacing around them for the brick, and they were installed without a drip cap or head flashing in the brick walls – thereby allowing water to penetrate into the wall cavity and drywall beneath the windows.
Economic Loss Doctrine
The homeowner claimed the windows damages the homes “internal structure” causing damage near the windows. Absent “physical damage” economic losses cannot be recovered. Here the court stated that “[W]here various components of a product are provided by the same supplier as part of a complete and integrated package, even if a defect in one component damages another, there is no damage to ‘other property’ of the plaintiff.” … “A residence, such as the home at issue, is akin to a single product that is the sum of its component parts. When a home is sold, the purchaser receives ownership of the entire structure. Here, the windows manufactured by Andersen were but one of the many components integrated into the overall construction of the home to the extent that the windows were, for present purposes, a part of the home itself.”
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It is therefore of no avail for the Johnsons to argue that the windows were somehow “separate” from the home to the degree necessary to establish damage to “other property” and avoid the economic loss doctrine. Rather, any damage that the alleged defects in the windows could have caused to other parts of the home was purely economic damage to the home itself, which is not recoverable in tort. Thus, the trial court did not err in barring the Johnsons’ claims on this ground because the economic loss doctrine applies as a matter of law.
Gist of the Action Doctrine
The court explained this doctrine quite well and rather than paraphrasing the court’s explanation, we are quoting it at length herein.
“In general, courts are cautious about permitting tort recovery based on contractual breaches.” Hart v. Arnold, 884 A.2d 316, 339 (Pa. Super. 2005) (citation omitted). When a plaintiff alleges that the defendant committed a tort in the course of carrying out a contractual agreement, Pennsylvania courts examine the claim and determine whether the “gist of the action” sounds in contract or tort. See *476 Egan v. USI Mid-Atlantic, Inc., 92 A.3d 1, 18 (Pa. Super. 2014) (stating that the “gist of the action” doctrine is designed to maintain the conceptual distinction between breach of contract and tort claims). A tort claim will be barred by the gist of the action doctrine if the claim:
(1) aris[es] solely from the contractual relationship between the parties; 2) when the alleged duties breached were grounded in the contract itself; 3) where any liability stems from the contract; and 4) when the tort claim essentially duplicates the breach of contract claim or where the success of the tort claim is dependent on the success of the breach of contract claim.
Implied warranties are implied by law, explained the court, “to protect buyers from loss where goods purchased are below commercial standards.” Under Pennsylvania law, “a warranty the goods shall be merchantable is implied in a contract for their sale if a seller is a merchant with respect to goods of that kind.”
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with ConstructionRisk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk Report, Vol. 26, No. 2 (February 2024).
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