Inside this Issue

A1 - Contractor’s Allegedly negligent construction was not “unlawful” under the Pennsylvania Unfair Trade Practices and Consumer Protection Law. An Extension of the Statute of Re-pose Only Applies to “New” Defect
A2 - Homeowner action against Window Manufacturer Dismissed Pursuant to Economic Loss Doctrine
A3 - Safety Manager Granted Summary Judgment against Personal Injury Claim for Steel Tubing Falling Through Sidewalk Bridge Not Built in Conformance with Plans

Article 1

Contractor’s Allegedly negligent construction was not “unlawful” under the Pennsylvania Unfair Trade Practices and Consumer Protection Law. An Extension of the Statute of Re-pose Only Applies to “New” Defect

See similar articles: Statute of Repose

By: Joanne Dekker, J.D., ConstructionRisk, LLC

Homeowners sued a construction contractor alleging that the Contractor had negligently constructed the house in such a manner that allowed significant water intrusion into the house causing continuous damage for a period of at least five years up until the time they filed suit. The trial court held that the Homeowners’ action was barred by the Statute of Repose which required that a claim be made within 12 years of the completion of construction. The court dismissed the case on the Contractor’s motion for summary judgment and Homeowners appealed. On appeal, Homeowners argued that the Contractor’s actions were “unlawful” and therefore not covered by the Statute of Repose. In the alternative, the Homeowners claimed that they were entitled to a two-year extension of the Statute of Repose because the “injury” began within 12 years and was ongoing. The appellate court dismissed the Homeowners’ appeal on all issues. Johnson et al. v. Toll Brothers, et al., 302 A.3d 1231 (2023).

The Pennsylvania Statute of Repose at issue (42 Pa.C.S. § 5536(a)) provides:

A civil action or proceeding brought against any person lawfully performing or furnishing the design, planning, supervision or observation of construction, or construction of any improvement to real property must be commenced within 12 years after completion of construction of such improvement to recover damages.

In this case, the Contractor completed the construction of the house on October 18, 2004. The certificate of occupancy was issued on the same day and the house was also conveyed to the original homeowners on that date. This established the end of the twelve-year period as October 18, 2016. Homeowners bought the house from the original owners on September 13, 2016 and filed suit against the Contractor on August 21, 2018, well outside the twelve-year Statue of Repose.

The court stated:

A party asserting a Statute of Repose defense must, therefore, show that (1) the project involved a lawful improvement to real property; (2) over 12 years have elapsed from the completion of the improvement to commencement of the action; and (3) the party is in the statute's protected class.

On appeal, Homeowners argued that the Contractor’s negligent construction was “unlawful” and therefore the statute of repose did not apply. However, the court held that the Contractor acted lawfully because at the time it constructed the house it was properly authorized to do business, it was a licensed homebuilder and the Commonwealth issued a certificate of occupancy. In other words, Contractor “lawfully” constructed the house.

The Statute of Repose also provides that a claim based on a construction defect may be filed within 14 years of completion of construction “if an injury or wrongful death shall occur more than ten and within 12 years after completion of the improvement.” Homeowners argued that even if the Statute of Repose applied, that they were still entitled to this two-year extension which would extend their filing time from October 18, 2016 to October 18, 2018, thereby making their August 21, 2018 initiation of their lawsuit timely. Homeowners presented expert evidence that the damage to the house began no later than 2012 (within the 12 years) and argued that the defects and damage to the house constituted a “continuing injury” that extended the Statute of Repose.

The court disagreed.

. . . it is clear that the injury contemplated in the exception of part (b) was meant to be one that “shall occur” or arise for the first time no earlier than the tenth year of the filing period. It was not meant to refer to a recurring or continuous injury that began years prior to that three-year range.

Thus, if the roof began leaking or there was a problem with the foundation that occurred after Homeowners bought the house, then they would be entitled to the two-year extension for the Statute of Repose.

About the author: Article written by Joanne Dekker, J.D., ConstructionRisk, LLC. This article is published in ConstructionRisk Report, Vol. 26, No. 2 (February 2024).

Article 2

Homeowner action against Window Manufacturer Dismissed Pursuant to Economic Loss Doctrine

See similar articles: Economic Loss | Economic Loss Doctrine | gist of action | Implied Warranty | Statute of Limitations

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."

***

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).

Article 3

Safety Manager Granted Summary Judgment against Personal Injury Claim for Steel Tubing Falling Through Sidewalk Bridge Not Built in Conformance with Plans

See similar articles: Indemnification clause | Site Safety

An individual walking on a sidewalk next to a building being constructed in New York City suffered injuries when a section of steel tubing that was being hoisted fell onto him from 11 stories up. It fell through a three-foot gap between the building and a sidewalk bridge intended to protect people walking beneath it. The gap resulted from a failure to meet the plans and specifications. The plaintiff sued many entities, including the project safety manager. In upholding summary judgment for the safety manager summary judgment, the court explained that there was no evidence that the safety manager committed negligence. Its failure to identify and correct the unsafe work did not give rise to a negligence claim “since [its] contract explicitly provided that its role on the project was solely in an ‘advisory capacity’ and that that it had no authority to supervise the contractors or to control or stop the work.” Dejesus v. Downtown Re Holdings, LLC, 217 A.D. 3d 524 (NY 2003).

Summary judgment was also granted and affirmed for the safety manager on the contractors’ contractual indemnity claims against it. This is because there was no evidence that the safety manager’s actions or omissions resulted in plaintiff’s injuries. The contention that the failure to identify and warn of the unsafe conditions constituted “omissions” was unavailing. The court stated:

“As noted, under its contract with Noble, City Safety was to serve only in an advisory capacity and had no obligation or authority to correct work hazards. Given the limited scope of City Safety's responsibilities, the purported “omissions” were insufficient to trigger the indemnification clause (citation omitted).”

Risk Management Comment:

The indemnity provisions of the contract in question were not provided in the court decision. When our firm reviews indemnity clauses we like to revise them to state the Indemnitor will only indemnify for damages to the extent caused by the negligent acts, errors or omissions of the Indemnitor. In the court decision, the court essentially interpreted the indemnity clause in a manner consistent with the wording we like to use regarding causation. Because there was no evidence that the unsafe condition was caused by the safety manager who “had no obligation or authority to correct the work hazards” it had no indemnity obligation.

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