THE CONSTRUCTION INDUSTRY IN CALIFORNIA caught a break when the Fourth Appellate District court threw out 157 homeowners' claims of construction defects because the statute of limitations had expired. In deciding for the builder in Inco Development v. Superior Court, the court leveled the scales between business and the consumer, who has typically prevailed in the state's litigious and consumer-centric legal environment.

Lee Thunberg, a partner with Wood, Smith, Henning & Berman, which represented the home builder Inco, says, “[This case has] a very large impact in protecting the builders.”

Two hundred and fifteen single-family homeowners in Adelanto, Calif., sued Inco for construction defects. But 157 of those homeowners filed after the 10-year statute of limitations expired. They argued that the statute on filing for construction defects should be extended because Inco had been in bankruptcy procedures during that period of time. However, the court disagreed, stating that the builder's 19 months in bankruptcy did not qualify for an extension.

Thunberg says that the decision resulted in a “tightening [of the] loopholes to protect builders against open-ended liability.” Without hard-and-fast statute of limitations, builders, especially those with large developments, are more vulnerable to lawsuits. An extended statute could put thousands of additional homes at issue because they typically are all under construction at roughly the same time.

Such negligence claims intend to protect homeowners from latent construction defects. However, Thunberg says, many homeowners never contact their builder when they discover a problem; the first thing they do is file a lawsuit. But, Thunberg says this ruling “balances the needs of the construction industry with the needs of the homeowner.”