Philadelphia Indemnity Ins. v. Simplex Grinnell

MEMORANDUM ** We hold that Simplex Grinnell, LP (“Simplex”) owed a duty of care to the *872 owner and tenant of the University of Sports (“UoS’’) facility and that the “completed and accepted” doctrine does not bar this insurance subrogation suit. 1. Simplex owed a duty of reasonable care to El Capitan Investments, LLC (“El Capitan”), the owner of the UoS facility, and University of Sports, LLC, its tenant. The district court held that Simplex was not a “design-builder” and did not owe plaintiffs a duty of care under Biakanja v. Irving, 49 Cal.2d 647, 320 P.2d 16 (1958), which established a multi-factor test for determining when a defendant may be liable to a party hot in privity. Id. at 19. Courts analyze the Biakanja factors on a case-by-case basis, but “it is possible to derive general rules that govern common scenarios.” Beacon Residential Cmty. Ass’n v. Skidmore, Omngs & Merrill LLP, 59 Cal.4th 568, 173 Cal.Rptr.3d 752, 327 P.3d 850, 857 (2014). This case falls closely under the reasoning of the California Supreme Court’s recent decision in Beacon. There, applying Biakanja, the court held that architects who had provided services to an apartment development owed a duty of care to a homeowners association and its members — subsequent purchasers of condominiums in the development with whom the architects were not in privity. Id., 173 Cal.Rptr.3d 752, 327 P.3d at 852, 857, 859. As the court explained, California case law establishes that architects, engineers, and other “design professionals” who act negligently in the exercise of their specialized services may be liable when their negligence causes personal injury or property damage to owners and third parties. Id., 173 Cal.Rptr.3d 752, 327 P.3d at 855. They owe duties of care not only to current owners, see Stewart v. Cox, 55 Cal.2d 857, 13 Cal.Rptr. 521, 362 P.2d 345, 347-48 (1961), but also to future owners and other parties who would foreseeably be harmed by negligence in construction. See Beacon, 173 Cal.Rptr .3d 752, 327 P.3d at 854; Sabella v. Wisler, 59 Cal.2d 21, 27 Cal.Rptr. 689, 377 P.2d 889, 893 (1963) (future homeowners); Stewart, 13 Cal.Rptr. 521, 362 P.2d at 348 (neighbors). The parties stipulated that Simplex acted as the “design-builder of the sprinkler system.” The general contractor, Zak’s Enterprises, and original owner, Bishop & Bishop Land, relied at least in part on Simplex’s design and implementation of the sprinkler system, even if the general contractor or owner could have rejected Simplex’s design. See Beacon, 173 Cal. Rptr.3d 752, 327 P.3d at 859. Beacon suggests that Simplex therefore owed a duty of care in its design and implementation of the sprinkler system both to current and future owners and to tenants who, like the neighbors briefly alluded to in Stewart, belong to the class of third parties who would foreseeably suffer injury from the failure of a sprinkler. Simplex owed these duties even though it was engaged as a subcontractor, see Stewart, 13 Cal.Rptr. 521, 362 P.2d at 348, and served as design-builder for the sprinkler system rather than for the facility as a whole, see Beacon, 173 Cal.Rptr.3d 752, 327 P.3d at 854. Simplex argues that any fault in its sprinkler system was actionable only in contract, not in tort. California law is clear, however, that a subcontractor may be liable in tort for defective design or construction work. See, e.g., Beacon, 173 Cal.Rptr.3d 752, 327 P.3d at 854-55; Stewart, 13 Cal.Rptr. 521, 362 P.2d at 348. Thé cases cited by the district court involve instances in which it was not clear that the claims were cognizable in tort at all. See Aas v. Superior Court, 24 Cal.4th 627, 101 Cal.Rptr .2d 718, 12 P.3d 1125, 1130-31 (2000) (negligence causing solely economic damage), superseded by statute as stated *873 in Rosen v. State Farm Gen. Ins. Co., 30 Cal.4th 1070,-135 Cal.Rptr.2d 361, 70 P.3d 351, 356-57 (2003); Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503, 28 Cal.Rptr .2d 475, 869 P.2d 454, 460-61 (1994) (conspiracy to interfere with contract); Mintz v. Blue Cross of Cal., 172 Cal.App.4th 1594, 92 Cal.Rptr.3d 422, 432 (2009) (interference with contractual relations). Generally, California “tort law provides a remedy for construction defects that cause property damage.” Aas, 101 Cal.Rptr .2d 718,12 P.3d at 1130. 2. The “completed and accepted” doctrine does not bar plaintiffs’ suit against Simplex. The completed and accepted doctrine protects contractors from liability to third parties for injury or damage resulting from “patent” construction defects — those defects that an owner knew or should have known about — in the contractors’ completed and accepted work. Neiman v. Leo A. Daly Co., 210 Cal.App.4th 962, 148 Cal.Rptr.3d 818, 823 (2012). The completed and accepted doctrine, however, bars liability only to third parties, not owners. Jones v. P.S. Dev. Co., Inc., 166 Cal.App.4th 707, 82 Cal.Rptr.3d 882, 891-92 (2008), disapproved on other grounds, Reid v. Google, Inc., 50 Cal.4th 512, 113 Cal.Rptr.3d 327, 235 P.3d 988, 1001 n. 7 (2010). Nor does the completed and accepted doctrine bar suit by third parties to whom a duty is owed under the Biakanja factors. See id. at 892. In addition, the completed and accepted doctrine does not bar suit here because the defect in question was not “patent.” “In the context of a patent defect, the word ‘patent’ ‘refers to the paten-cy of danger and not merely to exterior visibility.’ ” Sanchez v. Swinerton & Walberg Co., 47 Cal.App.4th 1461, 55 Cal.Rptr.2d 415, 421 (1996) (quoting Holliday v. Greene, 244 Cal.App.2d 482, 53 Cal.Rptr. 267, 271 (1966)). Neither the stipulated fact that a soccer ball had previously struck a guarded sprinkler head, causing some water discharge, nor the conclusion that the absence of a protective net was “obvious to anyone who looked up at the ceiling of the UoS soccer facility,” necessarily renders “patent” the risk that a soccer ball would strike a guarded sprinkler head and cause catastrophic damage. If UoS and El Capitan knew that the head guards were inadequate to guard the sprinklers against a risk of serious flooding, that knowledge might constitute a supervening cause or affect recovery under a theory of contributory negligence. But it would not imply that Simplex owed them no duty. See Stewart, 13 Cal.Rptr. 521, 362 P.2d at 348-49. 3. The district court held that Simplex had no duty bo install stronger guards or recommend protective netting. Whether Simplex should have installed stronger head guards or recommended installation of a protective net is relevant not to the existence of a duty but to whether that duty was breached. Because the parties did not brief this issue below or on appeal, we do not address that issue here. REVERSED and REMANDED. Footnotes [**] This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3.