Section 5.9.2.2.2 Negligence

• Library: Construction Law Practice Manual 3rd Edition 2016

§ 5.9.2.2.2 Negligence

In Woodward v. Chirco Construction Co.,¹⁸ the Arizona Supreme Court held that an injury suffered due to the negligent construction of a residence may give rise to an action for breach of a contractor’s common law duty of care. An action for negligence in home construction must establish defects in workmanship, supervision, or design by the individual defendant; proof of a defect alone is not enough to establish the claim.¹⁹ Proof of negligence in the construction of a house requires that a builder or contractor be found to have fallen below the standard of reasonable care towards foreseeable users of the property.²⁰

The availability of a negligence claim against a builder, however, may be limited by the Economic Loss Rule, which evolved in response to the efforts of plaintiffs to avail themselves of tort theories, such as negligence, for remedies often more beneficial and less restrictive than those available under contract law. Essentially, the Economic Loss Rule provides that recovery of purely economic losses falls within the area of contract law, not tort. Thus, when applied to construction defect cases, when the only damages sustained are to the subject matter of a contract, namely structure itself, a plaintiff’s cause of action sounds in contract rather than tort.²¹

The Economic Loss rule was first addressed by the Arizona Supreme Court in Salt River Project Agriculture Improvement & Power Dist. v. Westinghouse Electric Corp.²² As noted in Southwest Pet Products, Inc. v. Koch Industries, Inc.,²³ the “economic loss rule serves to prevent parties from undermining the certainty of contractual relationships by attempting to convert contract actions into tort actions whenever their contractual language bars a claim.”

The Economic Loss Rule does not bar torts that are truly independent of any contract claim, but it does bar torts that are “interwoven” with or “indistinguishable from” breaches of contract. In Nastri v. Wood Bros. Homes, Inc.,²⁴ the Arizona Court of Appeals addressed this issue with regards to construction defects, where the damage claimed involved the structure itself and there were no independent or distinguishable claims for damage to personal property or personal injury. The court held that the purchaser of a home could sue in both contract and tort for injuries sustained due to the builder’s failure to construct the house in a workmanlike manner. The action in contract would be for defects in the structure itself, as such defects render the home less than the purchaser bargained for, whereas the available tort claim would be for ‘damage to personal property or personal injury’ caused by the defective construction.²⁵

In Colberg v. Relinger,²⁶ Division One of the Arizona Court of Appeals addressed this issue. Colberg was a purchaser of a home that had latent defects. Colberg brought suit under contract and tort principles for the cost to repair the home caused by defective construction. The court relied upon Nastri, but also two other out of state authorities to reach the...