Legal Update

A BUYER’S CLAIM AGAINST A HOME INSPECTOR ACCRUES WHEN THE BUYER DISCOVERS OR SHOULD HAVE DISCOVERED THE INSPECTOR’S NEGLIGENCE

SUMMARY: The California Court of Appeal in Los Angeles ruled on March 17, 2003 that a home inspector could not limit by contract the statute of limitations applicable to a claim against the inspector, to one year after the inspection. Rather the applicable statute of limitations does not accrue until the home buyer discovers or should have discovered the inspector’s negligence.  Moreno v. Sanchez 106 CA4th 1315 (2003).

FACTS: A home buyer interested in a 49 year old house, inspected the property 6 times and then hired a home inspector to perform a professional inspection. The home inspector’s contract shortened the statute of limitations applicable to a claim against the inspector to one year after the date of the inspection. Absent such agreement the applicable statute of limitations for a negligent home inspection is 4 years (B&P §7199).

In his report, the inspector noted asbestos materials may have commonly been used in heating systems but the presence of asbestos could only be determined by laboratory testing. He did not note anyasbestos-like materials and described the heating ducts as serviceable. Shortly after buying and moving into the house, the buyers became ill. Subsequent inspections revealed the heating ducts were insulated with asbestos. Buyer filed suit for negligence and breach of contract against the home inspector, one year and 11 days after the initial home inspection.

The home inspector demurred, seeking to dismiss the complaint on the grounds that it was barred by the one year statute of limitations specified in the inspection contract. The trial court sustained the demurrer and dismissed the complaint.

ISSUES: The issue before the Court of Appeal was whether or not a home inspector could limit by contract the statute of limitations to one year after the date of the inspection.

DECISION: The Court of Appeal evaluated whether or not the discovery rule should apply to a claim against a home inspector. Under the discovery rule a cause of action does not accrue (start the clock running) until the claimant actually discovers or in the exercise of reasonable care should have discovered all facts essential to his cause of action. This rule applies where the relationship between the parties is one of special trust and confidence such as with trustees, stockbrokers, escrow agents, insurance agents, accountants, physicians, attorneys and title companies.

The Court of Appeal ruled that because of the hidden nature of a home’s systems and components a home buyer may not see or recognize a homes inspector’s negligence until long after the inspection date. This fact, coupled with the trust a home buyer necessarily places in the professional home inspector compels the conclusion that claims against a home inspector should accrue in all cases, not on the date of the inspection, but when the homeowner discovers, or with the exercise of reasonable diligence should have discovered, the inspector’s negligence.

The judgment dismissing the complaint was reversed and the lawsuit re-instated.

ANALYSIS: It is important to note the Court of Appeal did not forbid the home inspector from shortening the statute of limitations to less than 4 years, rather the Court only held that the accrual date began upon the date of actual or implied discovery, not upon the date of inspection. The Court acknowledged that parties to a contract may stipulate therein for a period of limitation, shorter than that fixed by the statute of limitations without violating public policy provided the period fixed be not so unreasonable as to show imposition or undue advantage. The Court declined to say whether or not a one year after discovery limitations period was reasonable.

Although the Court closed the door on contractual waivers of the delayed discovery rule, it seems to have opened the door to permitting other professionals to shorten by contract, the statute of limitations otherwise applicable to claims against them. The extent of this freedom will undoubtedly be determined by future appellate decisions.