Buying a Newly Constructed Home? Be Wary of Waivers!

If you’re purchasing a newly constructed home, a recent case out of the Pennsylvania Superior Court signals that you better take a good look at your contract with the builder. The case, Streiner v. Baker Residential of Pennsylvania, involves the following facts. Patricia Streiner executed a sales agreement for the purchase of a newly constructed home built by Baker Residential of Pennsylvania, LLC, in July of 2003. In 2013, Ms. Streiner brought suit in the Chester County Court of Common Pleas alleging that the home contained structural defects that allowed for water intrusion that caused $90,000 in property damage. In her lawsuit, Ms. Streiner (as Plaintiff) asserted claims for violation of the implied warranty of habitability, as well as claims for negligent misrepresentation and breach of the implied warranty of merchantability, and fitness for a particular purpose.

 

The law in Pennsylvania is clear: there is an implied warranty of habitability in new home contracts. However, tNew Househis case made it very clear that the warranty may be waived. In fact, the Court went so far as to state that an effective waiver provision (one in which the language is clear and unambiguous) combined with an integration clause is a powerful impediment available to builders of new homes to defeat a plaintiff’s claim for breach of implied warranties at the pre-trial stage.

In the time leading up to trial, Baker Residential (as Defendant) sought summary judgment on all claims relying upon the language of the parties “new home contract.” The notable provision was found at paragraph 21 and stated: “All warranty provisions are set forth in the customer care manual delivered to [Streiner] prior to execution of this agreement… All other express or implied warranties are excluded, including specifically any implied warranties of merchantability, fitness for a particular purpose, reasonable workmanship, or habitability.”

Relying on this language, the Court ruled in favor of the Defendant and granted Baker Residential’s motion for summary judgment. On appeal, the following lesson was imparted by the Honorable Judge Correale F. Stevens: “The parties’ written contract makes plain that no implied warranty applied to the home,” Justice Stevens wrote for the panel. “Accordingly, the parole evidence rule bars Appellant’s attempt to avoid the disclaimer…”

Although this case is deemed “non-precedential,” meaning it should be used prudently (if at all) in official documents filed with the Court, it provides several important lessons. First, if you’re a home builder, this case law indicates that you can waive implied warranties which would otherwise apply provided you do so in a clear and unambiguous fashion. What does clear and unambiguous mean? It should be written in easily understood language which leaves out the likely potential for misinterpretation. It’s prudent to have an attorney prepare the provision initially for your incorporation in your agreements, and then to periodically review the language of your contracts with your attorney and modify if necessary. You also want to be sure you can satisfy to the Court that you made the language as visible and obvious as possible, SUCH AS BY PROVIDING THE WAIVER IN ALL CAPS AND BOLDED! It should also be noted as food for thought, and as an additional avenue for maximizing your protection as a home builder when you include a warranty waiver, that Baker Residential provided Streiner a ten (10) year home-warranty in the place of the otherwise implied warranties waived in the contract.

If you’re the purchaser, prior to settlement you should have an attorney review your contract to ensure you’re not relinquishing your rights to recovery at a later date or at least explain to you the effects of the builder’s inclusion of certain language. This is arguably the largest decision and purchase of your life, such that now is not the time to cut corners. As the home purchaser, it is critical you perform your due diligence with the help of agents who specialize in those fields (like real estate agents and attorneys).

Whether you’re a builder or buyer of a new home, the attorneys at Howland Hess O’Connell are available today to craft and/or review the contracts governing your arrangement. Although likely an obvious statement, it bears emphasizing that whether you’re the buyer or builder, your contracts should be reviewed by an attorney prior to anyone’s signature being placed on the document.

Legal Disclaimer: The contents of this website are intended solely for informational purposes. They neither constitute nor imply an official legal opinion on behalf of Howland, Hess, Guinan, Torpey, Cassidy and O’Connell nor do they establish an attorney-client relationship of any kind. Howland Hess O’Connell encourages all readers to seek and consult professional counsel before acting upon the information contained on this site.

Subcontractor’s Insurer Not Required to Defend General Contractor for General Contractor’s own Negligence

In a recent decision issued in the Carbon County Court of Common Pleas, and reported in the September 15, 2015 edition of Pennsylvania Law Weekly (Vol. XXXIII, No. 37, p. 38PLW854), it was ruled that a subcontractor’s agreement to obtain liability insurance to protect a general contractor from claims caused [in whole or in part] by the subcontractor does not require the subcontractor’s insurer to defend the general contractor against a claim alleging injuries from negligence caused by the general contractor.

Construction Contract

The underlying facts of the case are as follows: an employee of the subcontractor was injured while working on a project in Carbon County. The employee and his wife sued the general contractor, not the subcontractor. The plaintiffs’ complaint contained numerous allegations of negligence, but solely alleged this negligence on the part of the general contractor. Despite being the sole defendant named, the general contractor-defendant tendered the defense of the plaintiff’s claim to the subcontractor’s insurer. The insurer denied coverage, at which time the general contractor filed a third-party complaint against the subcontractor for breach of contract for failing to provide adequate coverage.

In reaching his decision, Common Pleas President Judge Roger N. Nanovic relied on a plain meaning interpretation of the insurance provisions and agreement between the general contractor and subcontractor. In so doing, Judge Nanovic ruled that the subcontractor’s insurer was not responsible for defending a claim alleging negligence solely by the general contractor and that the subcontractor did not breach its contract by failing to protect the general contractor. Although it was true that the general contractor was an additional assured under the subcontractor’s policy, the Court found that the general contractor was essentially a qualified additional assured. The Court ruled, based on the policy, that in order for the general contractor to be recognized as an additional insured under the subcontractor’s policy, the injuries alleged by the plaintiff must have been caused by the subcontractor’s own negligence. Since the only negligence alleged here was on the part of the general contractor, the insurer was correct in denying coverage. Furthermore, the Court ruled the subcontractor did not breach its contract with the general contractor because it complied with the agreement of defending the general contractor for injuries caused by the subcontractor. Requiring the subcontractor to cover for the negligence of the general contractor requires more specificity, absent in that policy and not called for in the agreement between the two parties at issue.

So if you’re a contractor or subcontractor, what does this mean for you? It means the language included (or, if you’re like the general contractor above, not included) can mean the difference between whose insurance is on the hook for claims arising in the general contractor-subcontractor setting. The legal team at Howland Hess O’Connell has extensive experience in transactional and litigation work in the field of Construction Law. If you’re a general contractor or subcontractor in need of legal advice or a review of your current insurance policies, schedule a consultation with Thomas Guinan, Karen Angelucci, or  John Howland today to find out how you can best protect yourself in light of this recent court holding.

Legal Disclaimer: The contents of this website are intended solely for informational purposes. They neither constitute nor imply an official legal opinion on behalf of Howland, Hess, Guinan, Torpey, Cassidy and O’Connell nor do they establish an attorney-client relationship of any kind. Howland Hess O’Connell encourage all readers to seek and consult professional counsel before acting upon the information contained on this site.