Negligence Claims in Kansas Home Construction Cases
Kansas Supreme Court Finds Economic Loss Doctrine Inapplicable to Home Construction Cases
In David v. Hett, the Kansas Supreme Court held that the economic loss doctrine should not preclude claims by homeowners seeking to recover economic damages resulting from negligently performed residential construction services. In reaching this holding, the David Court overturned the Kansas Court of Appeals’ 2004 decision, which had previously barred such negligence claims.
The case arose from a claim for negligent workmanship brought by the Appellants, Scott and Sherry David, who had acted as their own general contractor in the construction of their home. In the course of this venture, the Davids hired David Hett d/b/a Hett Construction to excavate and lay the foundation for their new home. Hett’s bid was orally accepted by the Davids and then orally modified at a later date; there was some dispute regarding the terms of the modification. Regardless, the Davids accepted Hett’s finished work in 1998. In 2003, the Davids’ home began experiencing unusual settling, and in 2005 the Davids sued Hett for breach of contract, negligence, fraud, fraudulent concealment, and violation of the Kansas Consumer Protection Act. Seeking damages to bring the house into compliance with the original plans, the Davids alleged that Hett had negligently performed the contractually required work. The sole issue on appeal was whether the economic loss doctrine barred the Davids’ negligence claims.
As noted in David, the economic loss doctrine is “a judicially created doctrine that sets forth the circumstances under which a tort action is prohibited if the only damages suffered are economic losses.” (internal citations omitted). The rationale for the doctrine, which arises out of product liability law, is that a manufacturer is tasked with guarding against dangerous products, but cannot be expected to protect against a product not meeting a consumer’s expectations. The Supreme Court of the United States previously approved the practicality of the economic loss doctrine by offering the following justifications: 1) the damage to a product is substantially less than that of personal injury; 2) warranty and contract law were better positioned to handle commercial disputes; and 3) allowing negligence theories exposed the manufacturers to an unlimited number of claimants who might not have privity with the manufacturer.
The Kansas Supreme Court previously identified situations where the law imposed a duty irrespective of the existence of a contract. In such instances any negligence actually arises out of the breach of the actual or implied duty, rather than under the terms of a contract. In applying this theory in the context of medical malpractice claims, the Kansas Supreme Court held that “an injury is remediable in tort if it traces back to the breach of tort duty arising independently of the terms of the contract.” (internal citations omitted).
The Kansas Court of Appeals had been the highest court in Kansas to consider whether the economic loss doctrine should apply in negligent home construction claims in Prendiville v. Contemporary Homes, Inc. The Court of Appeals reasoned that the plaintiff’s claims were governed by contract and warranty, and therefore were more properly disposed under those areas of the law. Accordingly, the court decided that any claims for negligent home construction were barred by the economic loss doctrine.
The Kansas Supreme Court overruled Prendiville because it found that a contractor has a duty to perform their obligations in a workmanlike manner and exercise reasonable care in the course of such performance. As a foundation for this point, the Court demonstrated that the workmanlike manner and reasonable care standards were widely recognized in Kansas case law. The David Court found this result equitable because service contracts are not armed with the warranty protections afforded goods under the Kansas Uniform Commercial Code. As further rationale for this holding, the Court demonstrated that the home buyer, who is typically not in the same bargaining position as the contractor, should be afforded additional protections. Lastly, the Court felt that the application of the economic loss doctrine could potentially expose two contractors to different results of liability on the basis of when the damage was discovered.
As it was unclear from the record whether the Davids had sufficiently plead an alleged breach of duty, the Court remanded the case for that determination.