McMILLIN ALBANY v. S.C.

Amicus Curiae Brief of National Association of Subrogation Professionals

Cal.July 29, 2016

SUPRE iL neAT COPY SUPREME©CO URT wee Vi Les F lte IhaED JUL “2 9 2016 CASE NO. 8229762 Frank A. McGuire Clerk Deputy IN THE SUPREME COURT OF THESTATE OF CALIFORNIA McMILLIN ALBANY,LLC,et al. Petitioners, V. SUPERIOR COURT OF KERN COUNTY, Respondent CARL & SANDRA VANTASSEL,et al. Real Parties in Interest. Kern County Superior Court Case No. S-1500-CV-279141 From the Published Opinion of the Court of Appeal, Fifth Appellate District, Civil Case No. F069370 APPLICATION TO FILE AMICUS CURIAE BRIEF and AMICUS CURIAE BRIEF OF THE NATIONAL ASSOCIATION OF SUBROGATION PROFESSIONALS (In support of Real Parties in Interest Carl & Sandra Van Tassel,et al) Susan M. Benson, SBN 146837 Jason P. Williams, SBN 232371 Benson Legal, APC Williams| Palecek Law Group, LLP 6345 Balboa Boulevard, Suite 365 3170 4" Ave,Suite 400 Encino, Ca 91316 San Diego, CA 92103-5850 (818) 708-1250 (tel) (619) 346-4263(tel) (818) 708-1444 (fax) (619) 346-4291 sbenson@bensonlegal.net jwilliams@wplgattorneys.com CASE NO. 8229762 IN THE SUPREME COURTOF THE STATE OF CALIFORNIA McMILLIN ALBANY, LLC,et al. Petitioners, v. SUPERIOR COURT OF KERN COUNTY, Respondent CARL & SANDRA VAN TASSEL,etal. Real Parties in Interest. Kern County Superior Court Case No. S-1500-CV-279141 From the Published Opinion of the Court of Appeal, Fifth Appellate District, Civil Case No. F069370 APPLICATION TO FILE AMICUS CURIAE BRIEF and AMICUS CURIAE BRIEF OF THE NATIONAL ASSOCIATION OF SUBROGATION PROFESSIONALS (In support of Real Parties in Interest Carl & Sandra Van Tassel, et al) Susan M. Benson, SBN 146837 Jason P. Williams, SBN 232371 Benson Legal, APC Williams| Palecek Law Group, LLP 6345 Balboa Boulevard, Suite 365 3170 4" Ave, Suite 400 Encino, Ca 91316 San Diego, CA 92103-5850 (818) 708-1250 (tel) (619) 346-4263 (tel) (818) 708-1444 (fax) (619) 346-429] sbenson@bensonlegal.net jwilliams@wplgattorneys.com TABLE OF CONTENTS APPLICATION TO FILE AMICUS CURIAE BRIEF. .................05. APP - 1 INTRODUCTION0.00ecc cece eee e nee eeeeeesAPP —2 INTEREST OF AMICUS ... 0.000... ccc ccc ccc cece eee eeeeenesAPP —4 CONCLUSION...000ccccece eter eeeeneneeyAPP —5 CERTIFICATE OF SERVICE... 0.0.0.0... 000 ccc cece cece eee eeeeeee APP —6 STATEMENT OF FACTS AND NATURE OF PROCEEDINGS ............. 1 ARGUMENT wdccccect cert nen eee ebeceneeees 1 1. SB 800 DOES NOT APPLY TO THE WITHIN LOSS AND CLAIM...0.cece eee tee ee eennns ee 1 2. SB800 DOES NOT REQUIRE NOTICE BE GIVEN PRIOR TO REPAIRS FOR DAMAGES............ 000000. e eee 3 3. A BUILDER’S FAILURE TO COMPLY WITH SB800 RELEASES CLAIMANTS FROM THE REQUIREMENTS SET FORTH IN 352.10. 5 4. IF STRICT COMPLIANCE WITH SB800 IS MANDATED FOR EVERY LOSS, THEN HOMEOWNERINSURERS’ SUBROGATION RIGHTS WILL BE EXTINGUISHED ON EVERY SERIOUS PROPERTY DAMAGECLAIM..........cccccccecceccseceveceeceessssteuseuess 6 CONCLUSION ncntet eee nb ecenens 14 CERTIFICATE OF COMPLIANCE...... 0.0000 ccc cece cece eeeeeeeeecnrees 16 TABLE OF AUTHORITIES CASES Employers Mutual Liability Ins. Co. vs. Tutor-Saliba Corp. (1998) 17 Cal 4" 632, 639eee cece cece. 6 Fireman’s Fund Ins. Co. v. Morse Signal Devices (1984) 151 Cal. App. 3d 681,686............0000.. 000.0005. 7 KB Home Greater Los Angeles, Inc. v. Superior Court (2014) 223 Cal. App. 4" 1471 0.0. cece ccc ccc eee ee. 9, 10 Kingsbury v. U.S. Greenfiber, LLC (2009) U.S. Dist. LEXIS 92014, 20 (C.D. Cal.)). 0.0.00 00000... 4,5, 11 Liberty Mutual Ins. Co. vs. Altfillisch Construction Co. (1977) 70 Cal. App. 3d 789, 796. .....0... 7 Liberty Mutual Insurance Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4™ 98.00... cc icccecececceccecevecceceueeceseeees APP-2; 7, 8, 9, 10 McMillin Scripps North Partnership v. RoyalIns. Co. ofAm. (1993) 19 Cal. App. 4" 1215 ooo cece cece cece cee eceeees 7 RoosmoorSanitation, Inc. v. Pylon, Inc. (1975) 13 Cal. 3d 622,633) 0.ccccece eee 6 Standard Pacific Corp. v. Superior Court ; (2009) 176 Cal. App. 4th 828, 829........ 0.0000. cece 4,5,11 STATUTES AND REGULATIONS California Insurance Code §790.03..........0..0.. 0... c eee eee 12 California Civil Code §895 ow.cccece eens APP-2 California Civil Code § 896(a)(1) wkcece cee 1,2,9 California CivilCode§910 kscece cece. 3,4,6 ii California Civil Code § 91200 eeeee. 4 California Civil Code § 91300ceeeee 5,6 California Civil Code § 915 0c. 6 California Civil Code § 916 0eeeeee ee eee. 5 California Civil Code §917ceceeee eee 4 California Civil Code § 926eeeee eee eee. 5 California Civil Code §929(a) deecee eee. 5 California Civil Code § 929(b) keecece. 5 California Civil Code §930(a).... 0.00 cece cece cece ee cceceee. 6 California Civil Code §930(b). 0.0... 000 cece ccc cece eee eeee. 1,3 California Insurance Code § 790.03 0.0.0.0. cece ccc eee eeeeeee 5 iil The National Association of Subrogation Professionals ("NASP") respectfully moves this Honorable Court for leave to file a brief as amicus curiae pursuant to California Rule of Court 8.520. Counsel for NASP has notified all counsel ofits intent to file said brief. The Real Parties in Interest have consented to thefiling ofthebrief. The proposed amicus brief was prepared ona pro bonobasis by the undersigned and has not been drafted by counsel for any of the parties involved in thelitigation. INTRODUCTION The case presented by the Real Parties in Interest addresses the statutory requirements of SB800 (codified at Civil Code § 895, et seq.) as such requirementsrelate to a homeowner’s right to seek damages from a home manufacturer/builder when a single, possibly catastrophic loss involving damageto the structure occurs. The Real Parties in Interest assert that the statutory notice requirements of SB800 do not apply to the claims presented in their underlying complaint because the defective construction in the case caused other physical property damage, and not just pure economic loss. The Fifth District issued its opinion on August 25, 2016 finding that SB800 is the exclusive remedy for homeowners whoseek to bring a defect-related action against the builder of their homein direct conflict with the Opinion published in Liberty Mutual Insurance Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4"98. This case presents important issues to homeowners andtheir insurancecarriers in instances where there is a one-time loss resulting from defective construction. If homeowners are required to address the statutory requirements of SB800,it affects the APP- 2 ability homeowners have to obtain immediate relief from serious, possibly catastrophic losses, from their insurance carriers - and at the same time not lose rights to seek reimbursement against the truly responsible party for damages suffered or paid by such insurer. In many cases, immediate mitigation of damages requires a homeownerto seek assistance from an insurance carrier through a homeowner’s insurance policy. Amicus contends that the statutory requirements prescribed by SB800 were not designed or intended to address catastrophic and/or one-time unexpected property damage losses. Should the opinion issued by the Fifth District stand, it will greatly affect subrogation rights of insurancecarriers that pay to remediate such claims. Amicus asserts that SB800 does not apply to subrogating carriers because the very nature of the claim presented and paid under a homeowner’s insurance policy involves claims for restoration, remediation and property damages, and not pure economiclosses. Of great concern to Amicus is that the interpretation of SB800 by the Fifth District is in direct controversy with the Opinion published in Liberty Mutual. That Court clearly considered limiting the rights of homeowners/insurance carriers to pursue common law claimsresulting from one time losses. “Enforcement of a requirement of exclusive compliance with the notice provisions of the Act under those circumstances would effectively extinguish the subrogation rights of all homeowners’ insurers who promptly covertheir insureds’ catastrophic losses. There is nothing in the Actorinits legislative history that shows the Legislature intended to eliminate those subrogation rights.” [Liberty Mutual Opinion dated 8/28/2013, pg. 9]. Abrogating subrogation rights was unintended by the Legislature and that the same has resulted due to the misapplication of SB800 to such singular extensive property damage losses as in the APP- 3 within case. It is respectfully requested that this Honorable Court considerthe actual underlying implications of what builders are seeking to accomplish via a decision on SB800 andthe ripple effect its interpretation will have on homeowners andtheir insurers alike. INTEREST OF AMICUS The National Association of Subrogation Professionals (“NASP”) is a non-profit trade association of insurance companies, third party administrators, subrogation specialists, and attorneys practicing in the field of subrogation and recovery. NASP has approximately 3,000 members, representing more than 450 insurance companiesandself- funded entities. The purpose of NASPis to “create a national forum for the education, training, networking and sharing of information and, ultimately, the most effective pursuit of subrogation on an industry-wide basis.” NASP has become the "voice of subrogation" for the industry, the public and legislative bodies around the country. The members of NASPrecoverbillions of dollars in property and automobile insurance loss expenditures every year through subrogation and recovery practices, all resulting in reduced premiumsfor the public. NASPbelieves its submission of an amicuscuriae brief will assist the Court in deciding this matter by adding NASP’s unique and specialized perspective on subrogation and the significant policy considerations involved. NASP has previously filed amicus briefs in the U.S. Supreme Court and several state supreme courts. APP- 4 -l pe dl iy at ia is ee n ih NASPhasan interest in the issues presented in this case, as the court’s decision will affect its member carriers’ rights of reimbursement for claims that seemingly come within the purview of SB800. Such reimbursement rights also benefit the general public, as enhanced orunfettered rights have been shownto enhancethe recoveries of insureds’ policy deductible losses and, as noted above, to keep premiums more affordable. NASP has unique information to offer the Court in this regard beyond that which has been presented by the parties. NASP doesnotintendto merely duplicate the arguments of Plaintiff/Appellant's Brief. CONCLUSION NASPappreciates the Court’s kind consideration ofthis request, and respectfully praysthat its motion for leaveto file the attached brief as Amicus Curiae begranted. By: LuuGG,Orato —/ Susan M, Bensoh, Esq. Benson Legal, APC Attomeys for Amicus Curiae, National Association of Subrogation Professi By: Jasprf PfWilliams, Esq. illiams| Palecek Law Group, LLP Attorneys for Amicus Curiae, National Association of Subrogation Professionals APP- 5 CERTIFICATE OF SERVICE This is to certify that a true and correct copy ofthe foregoing Motion for Leave to File Amicus Curiae Brief has been served upon the following counsel of record onthis the 14th day of July, 2016 as follows: Milstein Adelman, LLP Mark A.Milstein, Esq. Fred M. Adelman,Esq. Mayo L. Makarczyk, Esq. 10250 Constellation Boulevard, 14" Floor Los Angeles, CA 90067 Calvin R. Stead,Esq. Andrew Morgan, Esq. Borton Petrini, LLP 5060 California Avenue, Suite 700 Bakersfield, CA 93309 Superior Court of Kern County 1415 Truxtun Avenue, Suite 212 Bakersfield, CA 93301 Alan H Packer Newmeyerand Dillion LLP 1333 North California Boulevard, Suite 6 Walnut Creek, CA Donald William Fisher Ulich Ganion Balmuth Fisher and Feld LLP 4041 MacArthur Boulevard, Suite 300 Newport Beach, CA Daniel Joseph Gonzalez Horvitz and Levy LLP 15760 Ventura Boulevard, 18th Floor Encino, CA Anne Lorentzen Rauch Epsten Grinnell and Howell APC 10200 Willow Creek Road, Suite 100 San Diego, CA APP- 6 Tyler P. Berding Berding and Weil 2175 North California Boulevard Suite 500 Walnut Creek, CA x I declare that I am employed in the office of a memberofthe bar ofthis court at whosedirection the service was made. Executed on July 14, 2016 at Encino, California. APP- 7 STATEMENT OF FACTS AND NATURE OF PROCEEDINGS This matter arises from a construction defect action involving homes built by McMillin Albany, LLC and McMillin Park Avenue, LLC (hereinafter collectively “McMillin”) in Bakersfield, California that suffered from a variety of defective conditions which resulted in damage to homes. The Plaintiff homeowners in the underlying action sued McMillin for various causes of action sounding in tort and contract along with a single cause of action for violation of the building standardsset forth in Civil Code Section 896, which is also referred to as “SB800” or the “Act.” Although Plaintiffs dismissed their cause of action alleged under SB800, McMillin filed a Motion to Stay the proceedings under Civil Code Section 930(b) based upon the Plaintiffs’ failure to complete the SB800 pre-litigation procedure. Thetrial court denied the Motion to Stay and upon Writ to the 5" District Court, the Motion to Stay was granted finding that SB800 is the exclusive remedy for homeowners whoseek to bring a defect-related action against the builder of their home. Amicus urges this Honorable Court to consider the actual underlying implications of what builders are seeking to accomplish via a decision on SB800 andtheripple effect its interpretation will have on homeownersandtheir insurersalike. ARGUMENT 1. SB800 DOES NOT APPLY TO THE WITHIN LOSS AND CLAIM SB800, which became effective on January 1, 2003, establishes a notification process to undertake prior to the filing of certain types of claims related to construction deficiencies. The bill provides that any “action ... related to deficiencies in ... residential construction” against a builder be governed by certain standards. SB800 attempts to define whatconstitutes a “defect” in a residential building. For example, with respect to water intrusion issues, SB800 mandatesthat the installation of windows, doors, roofs and plumbingare constructed so that they do not leak and allow waterto pass or enter. Civil Code § 896(a)(1). With respect to plumbing and sewer issues, SB800 requires that the same beinstalled to operate properly and not materially impair the use of the structure by its inhabitants. Jd. These are only a couple examples to illustrate to the Court the numerouslisted “defects” that can be presented to a builder for repair. Should there be a deviation from such standards, then SB800 states that the builder be put on notice of such deviation or deficiency so that the builder can repairit pursuant to the code’s requirement. Such pre-litigation procedures are in place to allow builders to repair “defects” to mitigate damages beforelitigation ensues with respect to these “defects,” not resultant damages from a “defect.” This can be particularly important when the deficiencies are similar across numerous properties in a new development or condominium community. Amicus asserts that the Legislature, by enacting SB800, did not intend to extinguish the right of a homeownerorits insurance carrier to pursue claims for serious or catastrophic property damagelosses (in other words, where a fire, water or exposure loss causes other property damage to the residence) that were caused by construction defects. Amicus notes that Plaintiff/Appellant’s claim is one for negligent construction leading to consequential damages, and not simply a deviation from the construction standards prescribed in SB800. As will be demonstrated further below, SB800 does not apply in this instance. 2. SB800 DOES NOT REQUIRE NOTICE BE GIVEN PRIOR TO REPAIRS FOR DAMAGES It is a builder’s general contention that notices of claim under Civil Code Section 910 must be provided to them before repairs of any kind are performed to the subject property. This is not true. By way of background, California Civil Code Section 930(a) explicitly states: “the time periods and all other requirements in this chapter are to be strictly construed, and, unless extended by the mutual agreement of the parties in accordance with this chapter, shall govern the rights and obligations underthistitle. If a builder fails to act in accordance with this section within the time frames _mandated...the claimant may proceed with filing an action” (emphasis added). Thus, in strictly construing the requirements of Civil Code Section 910, it does not make any mention that a written notice of claim must be delivered before repairs are made to the damaged home.It is clear from the language of Civil Code Section 910 itself that the builder must only be provided with a written notice of “claim” and that this notice must occur before filing an action. This is the only time frame given under Civil Code Section 910. Once a notice of claim was provided to a builder and they failed to respond, a Claimantis free to file their action. There is no mention of a requirement for notice prior to making any repairs for damages caused by a defect and requiring immediate, emergency repair or remediation. Builders are attempting to establish new time lines that are not set forth in the explicit language of Civil Code Section 910. This is essentially an effort to create unrealistic time lines in an attempt to have this Court establish that the pre-litigation procedures of SB800 serve as a statutory bar to a homeowner and their insurance company for claims for damages from “defects.” Clearly, this is contrary to the explicit language of Civil Code Sections 910 - 938 and contrary to the legislative intent of SB800. The Legislative intent of California Civil Code Sections 910 - 938 was to resolve “defect” only claims before litigation becomes necessary. It is not lost on this Amicus that California Courts have established that builders are entitled to enforce the pre- litigation requirements, and that it is the Plaintiff that bears the burden of proving compliance with SB800 or to establish why SB800 does not apply. (See Standard Pacific Corp. v. Superior Court (2009) 176 Cal. App. 4th 828, 829; and Kingsbury vy. U.S. Greenfiber, LLC (2009) U.S. Dist. LEXIS 92014, 20 (C.D. Cal.)) In Standard Pacific, several homeownersfiled suit against the builder for problems relating to the construction of homes located within a development. (Standard Pacific at 829.) The builder brought a motion to stay pursuant to Civil Code Section 930(b) for the homeowners'failure to comply with the pre-litigation proceduresset forth in Civil Code Section 910. In opposition, the homeowners asserted that the builder failed to comply with Civil Code Section 912, but offered no factual showing of non-compliance. (Ud. at 829.) In effect, the ruling in Standard Pacific granted the builders’ motion to stay the proceeding unless the homeowners could present to the lower court evidence that the builder did not comply with Civil Code Section 912. (/d. at 835.) The case of Kingsbury_y. U.S. Greenfiber, LLC involved thousands of homeowners whofiled a motion forclass certification. [Kingsbury v. U.S. Greenfiber, LLC (2009) U.S. Dist. LEXIS 92014, 20 (C.D. Cal.).] The heart of the lawsuit stemmed from the allegation that claimants purchased homesthat were constructed with a type of insulation that was deemed dangerous, in addition to numerous other nameddefects. Ud.) The Court in Kingsbury held that a homeownerinforming a builder of problems with the construction of residences through normal customerservice procedures does not satisfy SB800pre-litigation procedures.(/d.) Additionally, nowhere in SB800 does it state that the homebuilder or general contractorshall be the only person to perform repairs to a home damagedas result of a construction defect. In fact, SB800 specifically allows for other contractors to perform the repairs to a home. Pursuant to California Civil Code Section 917, a homeownerhas a right to use separate contractors to perform repairs to a home damaged by the homebuilder’s defect. Furthermore, there is no requirement in SB800 that the homebuilder perform any repairs to a home. Pursuant to California Civil Code Section 929(a), “nothing in this chapter prohibits the builder from making only a cash offer and no repair.” In fact, homebuilders have an incentive in making cash offers to homeowners in that they are then entitled to obtain a “reasonable release” in exchange for the cash payment. [California Civil Code Section 929(b).] Conversely, a homebuilder is prohibited from obtaining a release or waiver in exchange for repair work to a home. California Civil Code Section 926. Unfortunately, this does not happen and builders instead wait to see what happens from a procedural process, knowing full well that a homeowner’s insurer will have to pick up the tab and the builder will seek to avoid liability on a potential technicality under SB800. In the situations outlined in Standard Pacific and Kingsbury, the notification requirements set forth in SB800 make sense as they involve numerous properties with “defects” that can, or possibly can, be inspected and repaired. Therefore, such notice provides builders with opportunities to cure deficiencies or non-compliance issues with their own subcontractors, and possibly within their contractual obligations, if they so choose, BEFORE any appreciable or ACTUAL damageevent occurs. Whenthere is no defect to repair because it caused appreciable or catastrophic damages, this process makes no sense and wasclearly not contemplated by the legislature when the SB800 was enacted. However, if strict compliance is required in certain scenarios, the same must equally apply to builders as well. 3. A_ BUILDERS’ FAILURE TO COMPLY WITH SB800_ RELEASES CLAIMANTS FROM THE REQUIREMENTS SET FORTH IN SB800 Under California Civil Code Section 913,“a builder or his or her representative shall acknowledge, in writing, receipt of the notice of claim within 14 daysafter receipt of the notice of the claim.” Under California Civil Code Section 915, “if the builder fails to acknowledge receipt of the notice of claim within the time specified, elects not to go through the process set forth in this chapter, or fails to request an inspection within the time specified.....this chapter does not apply and the homeowneris released from the requirements of this chapter and may proceed with the filing of an action” (emphasis added). Regardless of when notice under Civil Code Section 910 is given, a builder has an obligation to respond, the sameas Plaintiffs are required to give notice. As such, when a builder fails to respond to any notice of claim, a claimant is then relieved from its duties under Civil Code Section 910 and thusis free to file their action under SB800 as stated by Civil Code Section 915. This unfortunately has not historically been the case. Rather, developers/builders lie in wait for lawsuits, ignoring notices of claims, whether those notices are deficient or not, and then try to hide behind SB800 asserting non-compliance with Civil Code Section 910, seeking dismissals of said lawsuits without any consequence for ignoring notices of claims. Whatis good for the goose should be good for the gander, andif a builder ignores a propernotice of claim, regardlessof its timing, then it too should be subjectto the strict interpretation of Civil Code Sections 913 and 915. Thus, if a builder failed to respond as stated by Civil Code Section 930(a), then a claimant may proceed with its action as the builder has waivedits rights to the pre-litigation process under SB800. 4. IF STRICT COMPLIANCE WITH SB800 IS MANDATED FOR EVERY LOSS, THEN HOMEOWNER INSURERS’ SUBROGATION RIGHTS WILL BE EXTINGUISHED ON EVERY SERIOUS PROPERTY DAMAGE CLAIM An insurance carrier that has been compelled to indemnify its insured for a loss created by another’s wrongful act is equitably entitled to “step into the shoes” of the injured party and pursue recovery from the wrongdoer. Employers Mutual Liability Ins. Co. vs. Tutor-Saliba Corp. (1998) 17 Cal.4th 632, 639. Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622, 633. This subrogation doctrine places the ultimate burden on the person who,“in equity and good conscience,” oughtto pay for the loss or damage incurred. Fireman’s Fund Ins. Co. v. Morse Signal Devices (1984) 151 Cal. App. 3d 681, 686. In the context of property insurance, the right of subrogation “remains inchoate before the loss and only matures into a legal conceptafter a loss to the insured’s property occurs.” Liberty Mutual Ins. Co. vs. Altfillisch Construction Co, (1977) 70 Cal. App. 3d 789, 796. There must be actual loss, “appreciable damage.” There is no obligation of the insurer to its insured as to potential losses, meaning if there are “defects”, but no damage. McMillin Scripps North Partnership v. Royal Ins. Co. ofAm. (1993) 19 Cal. App.4th 1215. The California Court of Appeals in the case of Liberty Mutual Ins. Co. v. Brookfield Crystal Cove, LLC (2013) 219 Cal. App. 4th 98, hit the nail on the head when it held that a homeowner whosuffers actual damagesas a result of a construction defect in a home has "a choice of remedies" and "nothing in the [Right to Repair] Act takes away these rights." (/d. at 104.) In Liberty Mutual, a homeownersustained extensive damages to his real property residence as a result of a failed sprinkler system. The builder, Brookfield Crystal Cove, LLC ("Brookfield"), made repairs to the subject property, however, deniedthe claim asserted by the homeowner's insurer, Liberty Mutual Insurance Company("Liberty Mutual"), for reimbursementof the relocation expensesit paid to the insured during the repairs of the damage. Thetrial court found that Liberty Mutual's claim was time barred under the Right to Repair Act, sustained Brookfield's demurrer, and dismissed the action. The Court of Appeals reversedthetrial court's ruling stating: "The Right to Repair Act was enacted to provide remedies where construction defects have negatively affected the economic value of a home, although no actual property damage or personal injuries have occurred as a result of the defects. We hold the Act does not eliminate a property owner's common law rights and remedies, otherwise recognized by law, where, as here, actual damage has occurred.” (/d. at 101.) Moreover, the Court of Appeals, in reaching its decision in Liberty Mutual, looked at the Legislative History of the Right to Repair Act in order to get a better "understanding of the Act's impetus and purpose." (/d. at 103.)(emphasis added). After a review of the Legislative History, the Court ultimately commentedthat: “Nowhere in the legislative history is there anything supporting a contention that the Right to Repair Act barred common law claims for actual property damages. Instead, the legislative history shows that the legislation was intended to grant statutory rights in cases where construction defects caused economic damages; the Act did nothing to limit the claims for actual property damage. Simply put, a homeowner who suffers actual damages as a result of a construction defect has a choice of remedies; nothing in the Act takes away those rights. (/d. at 104.)’(emphasis added) While the Right to Repair Act, and the previous rulings of the Courts involving the Right to Repair Act, do not specifically address the rights and duties of subrogating insurers in cases where construction defects cause actual damages, the holding in Liberty Mutual does, finding that subrogation claims are not covered by the Right to Repair Act (d.). More specifically, the Court in Liberty Mutual held: If, as Brookfield argues, the Right to Repair Act applies to all claims involving construction defects regardless of actual damage, a homeowner whose property was severely damaged or destroyed would be required to await a solution during a lengthy process. As noted by the amicus curiae on behalf of Liberty Mutual, enforcement of a requirement of exclusive compliance with the notice provisions of the Act under those circumstances would effectively extinguish the subrogation rights of all homeowners' insurers who promptly cover their insureds' catastrophic losses. There is nothing in the Act orin its legislative history that shows that the Legislature intended to eliminate those subrogation rights. (Ud. at 106.)(emphasis added). The facts in Liberty Mutual are not an uncommon anomaly whereinthereis a loss that involvesa single residencethat suffered catastrophic damage (water or fire normally) as a result of a construction defect, which rendered the residence uninhabitable. As such, under the holding in Liberty Mutual, in addition to its claims for violations of construction standards under California Civil Code § 896, et seq., insurers and homeowners alike have valid common law claims and remedies against builders/developers for the construction defects that caused actual damagesto thereal property. To hold otherwise would allow builders/developers to escapeliability for their defective construction that resulted in damages where repairing a defect after the fact is pointless. It may be argued that the holding of KB Home Greater Los Angeles, Inc. y. Superior Court (2014) 223 Cal. App. 4" 1471, addresses SB800 in relation to subrogation claims. This is distinguishable because at the time ofthat holding, the Liberty Mutual decision had just been published in the days before oral argument. As such, a reading of the procedural history of KB Home showsthat the subrogating carrier’s common law claims had been previously dismissed. Thus, the Court of Appeals in KB Homes only addressed the SB800 claims left over, but essentially invited an appeal from the Real Party in Interest insurance carrier for reconsideration of the previously dismissed commonlaw claims.! This is likely due to the Justices agreeing with the Liberty Mutual holding, but the same wasnot before them at that time, so further comment could not be made. That being said, even if this Court considers the argumentsset forth by McMillin in this present matter, the arguments are severely flawed. The facts in McMillin are completely different from the facts in normal subrogation settings and catastrophic losses involving one home. McMillin involved 37 homes which had similar construction defects. The homesin this instance had not suffered catastrophic damage which rendered the homes uninhabitable. Contrary to the present case, the Court’s ruling in Liberty Mutual deals with a substantially similar fact pattern and procedural history as all cases wherethere has been seriousor catastrophic damage to a residence and a homeowner’s insurer had to step in immediately to makerepairs. Not repairs to defects, but repairs for resultant damages from defects, something not contemplated by the Right to Repair Act or SB800. Rather, these losses involve one homethat sustains catastrophic water, fire or other damage rendering the residence uninhabitable, and where the builder, like in Liberty Mutual, had notice of the actual defect and resulting damages, and chose not to pay those damages. This is the custom andregular practice of builders, to lie in wait and then hide behind SB800to avoidliability for the damages resulting from a defect. ' See KB Home at 1474, stating, “That issue was the subject of KB Home's earlier writ petition, which wedismissed as mootafterthe trial court sustained the demurrer to Allstate's common law tort claims pursuantto ouralternative writ. ... Thus, whether the Act or tort common law applies in this case is not an issue properly before usat this time. (See Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2013) § 15:227.5, p. 15-96.16 [issues not raised in petition may not beraised in return].) Nothing in our decision prevents Allstate from raising that issue in an appeal from thefinal judgment. (See Mounger v. Gates (1987) 193 Cal.App.3d 1248, 1254 [order sustaining demurrer to some butnotall causes ofaction normally subject to appeal from final judgment]; cf. Angelica Textile Services, Inc. v. Park (2013) 220 Cal.App.4th 495, 504 [interlocutory order granting summary adjudication reviewable on appeal from final judgment].)_).” 10 To illustrate this a bit further, unlike the cases that gave rise to the rulings in Standard Pacific, Kingsbury, and the instant case, those cases involved dozens or hundreds of homeowners with claims for defects in the construction of homes within a development, or even a single homewith claims for multiple defects, such as faulty light switches, drainage problems, cracked drywall, shifting foundations,or cracking stucco, to name a few,that could be investigated and repaired after months of document exchanges, inspections and mediations.In these instances, the subject residences werestill habitable and its occupants could navigate the lengthy SB800 pre-litigation process while still living in their homes. Conversely, in cases that involve only one property, one Plaintiff, one Defendant, and a single incident, wherein a defect caused extensive water, fire, or other damage to the subject property due to the sub-standard construction by a builder/developer, which rendered the subject property uninhabitable and required immediate repairs to be performed, the lengthy SB800 process is not practicable whatsoever. The following is a time line representing the dates under the SB800 pre-litigation process: Day1 Homeowner's written notice of violation served on builder. Day 14 Written acknowledgment of homeowner's notice due from homebuilder (14 days from the date of notice). Day 28 Homebuilder to have completed initial inspection of home (14 days after acknowledgment). Day 75 Deadline for homebuilder to makeofferto repair, cash offer, or deny claim. Day 300 Date by which builder is to make “every effort" to have repairs completed if homebuilder agrees to makerepairs. 1] Based on the foregoing timeline, it is clear that SB800 was not intended to apply to catastrophic losses which result in extensive property damage and claimants seeking remedies for having sustained those damages. In these instances there is no defect to repair to prevent such damages andthusthe timeframe to make suchrepairs is moot. If SB800 wereto apply, a homebuilder would have over two (2) months before ever having to make an offer to repair, offer of cash, or deny the claim and ten (10) months before having the homeowner’s homerepaired. This could leave a homeowner without a residence for almost a year, and would contradict a homeowner’s, or insurer’s, statutory and contractual duty to mitigate damages. It would also violate an insurer’s obligation to properly respond to and adjust the claimsof its insureds. If a home insurer wasforced to decline to provide an immediate responseto its insureds’ catastrophic losses and go through the lengthyrepair processsetforth is SB800, the Courts would be inundated with bad faith claims. Homeowners’ insurers have obligations to act in good faith and handle, adjust and pay a claim independent of any statutory scheme as prescribed in SB800. Insurance Code §790.03. To require any insurancecarrier to wait longer before conducting repairs upon a catastrophic loss such as this, while attempting to meet the alleged standards within Civil Code §§ 895-945.5, would open a Pandora’s Box, which would be inconsistent with the governing of insurance claims, public policy, and the intent of the California Legislature. More specifically: 1. Insurers could be placed into a position of delaying payment on these types of claims while builders took their time in responding to noticesof potential claims and/or defects, up to 60 days, thus interfering with the public policy goal of reimbursementof individuals for losses; and, 2. Contractors and developers could avoidliability and their obligations to the public policy goal of having quality construction in California, just by virtue of the 12 fortuitous existence of insurance coverage to homeowners, essentially insuring themselves under homeowners’policies without ever paying a single premium. It is clear that from the statutory language of SB800, and the existing case law analyzing SB800, the legislative intent was to establish a non-judicial mechanism for resolving large construction defect cases, and not to shield builders from liability as to their sub-standard constructionofresidencesthat result in subsequent damages. Bringingthis full circle, if a homeownerhad a violation of one ofthe construction standards set forth in SB800, the homeowner could not make a claim under his or her homeowner’s policy because there would be no actual appreciable damage andno actual loss. The homeowner’s only remedy would be as prescribed in the statute,i.e. provide the builder with notice of the violation. Thus, if SB800 is construed in the manner which Plaintiff/Appellant and Amicus believe was contemplated by the Legislature - as only applying to violations of construction standards that need to be remediated and notclaims where the deficiencies have caused serious other property damages, then there is no conflict between the application of SB800 and a homeowner’s or an insurer’s common law rights and remedies. (The subrogationrights only arise upon an actual loss to the property). Thereality of what takes place where thereis a serious orcatastrophic loss caused by a defect that results in damages is that a homeowner immediately turns to their insurance company and makes a claim underhis/her homeowner’s policy, regardless of the statutory requirements of SB800. They don’t call the builderfirst after a loss resulting in serious or catastrophic damages, but instead do what every ordinary homeowner would do in that situation — they call their insurance company. Whenthere are “defects” that can be fixed by a builder, i.e. cracked drywall or a door that doesn’t shut property, but the homeis not uninhabitable, then an everyday homeowner maycall their builder. As such, it is clear that if a homeowner,orits insurer, is required to undertake the aforementioned strict notice procedures as a condition precedentto a later lawsuit, then a homeowner, or 13 an insurer that provides assistance to its insured, will not be ableto fully pursue their/its rights and remedies against the truly responsible party. CONCLUSION Amicus contends that the Legislature did not contemplate the application of SB800for such losses andit is readily apparent in the actual application of SB800in this instance and similar instances that insurers are facing throughout California. As the Plaintiff/Appellant aptly states, if this Honorable Court concludes that SB800 applies to such losses, then it has effectively turned California homeownerinsurers into de facto insurers for the builders and subcontractors — certainly not the intended result of SB800. As noted above, insurance subrogation efforts serve a very important role for insurance carriers and the general public (both social benefit and lower homeowner premiums).’ While SB800in its most general sense acts to create a fine balance when new homeowners discover construction defects, it was clearly not intended to undermine commonlaw remedies, which include such subrogation efforts, and the benefits that they create. The trial court erred in sustaining the demurrer on the grounds set forth by Plaintiff/Appellant and Amicus. This Court should reverse the trial court’s order sustaining Defendant/Appellee’s demurrer and remandthecasefortrial. * See http://www.youtube.com/watch?v=7pMwTliyvxI&feature=plcp (public service video providing overview of the benefits of insurance subrogation). 14 Dated: July 13, 2016 By: eyae, Susan M. Bensén, Esq. Benson Legal, APC Attorneys for Amicus Curiae, National Associati f Subrogation Professionals” Dated: July 2016 By: Jason PWilliams, Esq. _ Williams| Palecek Law Group, LLP Attorneys for Amicus Curiae, National Association of Subrogation Professionals CERTIFICATE OF COMPLIANCE Pursuant to California Rules of Court, Rule 8.204(c) (1), I certify that the total word count of the Amicus Curiae Brief of the National Association of Subrogation Professionals (In Support of Appellant), excluding the Application to File Amicus Curiae Brief, Table of Contents, Table of Authorities, and Certificate of Compliance is 4,422 words. DATED:July 13, 2016 Respectfully submitted, Benson Legal, APC [susan M. Bensort, Esq. Benson Legal, APC Attorneys for Amicus Curiae, National Association of Subrogation Professionals Dated: July Is 2016 Respectfully submitted, WILEIAMS| PALEGEK LAW GROUP, LLP Jasorf P. Williams, Esq. illiams | Palecek Law Group, LLP Attorneys for Amicus Curiae, National Association of Subrogation Professionals 16