Insurance Claims


Homeowners Beware!! You May Not Recover For Subsequently Discovered Construction Claims After Signing Construction Claim Releases

James C. Earle | Ervin Cohen & Jessup LLP
February 19, 2015

Homeowner, David Belasco (“Belasco”) [1] bought a newly constructed Manhattan Beach residence in 2004 from the builder defendant Gary Loren Wells (“Wells”). In 2006, Belasco filed a complaint against Wells with the Contractors State License Board (“Board”) regarding alleged patent construction defects. Belasco and Wells settled the dispute in 2006 by written agreement which resulted in Wells paying $25,000 and Belasco executing a release and a Civil Code section 1542 waiver of all known or unknown claims.

In 2012, Belasco filed a new action alleging latent construction defects (“roofing”) against Wells, Wells’ surety American Contractors Indemnity Company (“American Contractors”), and Glenn Hatch, based on an alleged defect in the roof that Belasco discovered in 2011.[2]

The trial court granted summary judgment in favor of Wells and American Contractors, ruling that the action was barred as a matter of law by the 2006 settlement that included a release and waiver of all claims, known or unknown, in connection with the construction of the property and the Second Appellate District affirmed the trial court decision.

Homeowner Argued the Purported Vagueness of the 2006 Agreement

Belasco argued the 2006 release and section 1542 waiver were too vague to bar Belasco’s 2012 claim regarding the roof. The appellate court found that this argument was devoid of merit, because the language of the 2006 agreement could not have been more clear. It left no doubt that Belasco’s acceptance of $25,000 was in return for his release and waiver of all claims of construction defect, known or unknown. “[A] general release can be completely enforceable and act as a complete bar to all claims (known or unknown at the time of the release) despite protestations by one of the parties that he did not intend to release certain types of claims. (Winet v. Price[, supra,] 4 Cal.App.4th [at p.] 1173.)” (San Diego Hospice, supra, 31 Cal.App.4th at p. 1053.)

Belasco argued that the 2006 agreement did not apply to his 2012 claim for a defective roof because that potential defect was not specifically mentioned in the prior settlement agreement. The appellate Court found that this contention amounted to nothing more than an assertion that section 1542 waivers of unknown claims are invalid. As set forth in the above-cited authorities, this type of waiver is enforceable. The appellate Court also found that Belasco, an attorney who was represented by counsel, expressly acknowledged his understanding of the scope of the agreement and release.

This case seems like a harsh result for the Homeowner. However, it was the trial and appellate courts’ determination that the 2006 release was the reasonable result of an arms-length negotiation, with counsel on both sides, that settled Belasco’s 2006 claim and all other potential claims in return for a $25,000 payment by Wells.

Lessons to be Learned for Homeowners with Design and Construction Defect Claims

  • Retain a qualified construction defect attorney with trial and litigation experience who preferably has construction experience to investigate your design and construction claims;
  • Work with your construction defect attorney to retain a qualified expert who will perform a comprehensive investigation of your home to locate all design and construction defects so that your claim is comprehensive and complete;
  • Work with your construction defect attorney to prepare a complaint or claim that addresses all of your construction defect claims and also other claims related to breach of contract, fraud, misrepresentation, etc.;
  • Do not settle your lawsuit or claim until after a complete investigation and comprehensive cost of repair has been prepared;
  • Be aware that you may not have a second chance to make additional claims;
  • Accept the advice of your construction defect attorney and do not sign a settlement agreement and release unless all of the design and construction defects have been addressed in your settlement.

[1] Belasco is an attorney.
[2] Belasco v. Wells – filed February 17, 2015, Second District, Div. Five
Cite as 2015 S.O.S. 927

The content of this article is intended to provide general information and as a guide to the subject matter only. Please contact an Advise & Consult, Inc. expert for advice on your specific circumstances.

SOURCE: www.ecjlaw.com

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