3.8.15 The Integrated Systems Limitation

• Jurisdiction: Arizona

Other jurisdictions, asked to consider the application of the ELR in claims by home buyers against subcontractors, have not placed the same emphasis on privity of contract, as have our Arizona courts. Instead, the focus has been on the identification of the damaged “product.” As some of these other decisions were cited in Hughes, they merit further discussion.

In arriving at its decision, the court of appeals in Hughes found persuasive the analysis in Gunkel v. Renovations, Inc.,^[47] where the Supreme Court of Indiana ruled that “other property” did not include other parts of a finished product damaged by components supplied to the seller by other manufacturers and incorporated into the seller’s product. There, water damage to the interior of a residence was caused by the faulty installation of exterior stone and masonry by the home builder’s subcontractor. The exterior finish was deemed a component of “the product” purchased by the homeowner. The ELR was deemed applicable even in the absence of privity between plaintiff and defendant.

The Gunkel court, in turn, relied on the U.S. Supreme Court reasoning...