Thursday, January 23, 2014

Milwaukee Journal/Sentinel Article Shows Why Wisconsin Supreme Court Needs To Overrule Linden

Earlier this week, the Milwaukee Journal/Sentinel told the story of John and Beth Liebl, who purchased a million-dollar home near Oostburg only to discover that it is infested with mold. The article is available here.
In short, this home was built in 2004 and sold to the Liebls in 2010. During an extensive remodeling project between 2012 and 2013, the Liebls discovered that all of the walls in their home were covered with mold. The article briefly discusses why the Liebls have no legal remedy against any of the parties involved in the construction or sale of their home.

Based upon the limited information provided, I would have likely rejected the Liebls' potential case against their sellers. I see no evidence that these sellers were aware of moisture intrusion, much less rot or mold. When considering such a case, I primarily look at how long the sellers lived in the property and how soon the buyers discovered problems. However, the overriding factor in this case is how the buyers discovered problems - through making major alterations to their home. Unless the sellers made major alterations to the home during their ownership, I don't see how they could have been aware that the inside of their walls were rotten and moldy. As I discussed in a previous post, buyers need to be able to prove that their sellers were aware of problems that they did not disclose in order to have a case against them.

While the sellers likely did nothing wrong, the contractors involved in the construction of this home most certainly did. This home is less than ten years old, but it almost had to be torn down as a result of moisture intrusion, severe wood rot, and mold. Though the article does not discuss the cause of the moisture intrusion in great detail, these problems often occur due to negligent siding, window, or flashing installation.

Unfortunately for homeowners, the Wisconsin Supreme Court held in Linden v. Cascade Stone Co., 2005 WI 113, that negligence claims against builders and their subcontractors are barred by the economic loss doctrine. Wisconsin law does nothing to deter slipshod and shoddy construction work by builders and their subcontractors, and it does nothing for homeowners (like the Liebls) who have been victimized by such carelessness. Deterring contractor negligence is an important public safety issue, as homeowners, renters, and their children are all endangered by sloppy construction practices. As discussed in the Milwaukee Journal/Sentinel article, the quality of residential construction has been declining for years, and construction professionals are seeing more and more mold cases as a result.

At some time in the future, the Wisconsin Supreme Court will be presented with another negligent construction case. When that day comes, our supreme court needs to consider the interests of all present and future homeowners and the public health, safety and welfare, instead of just considering the private interests of contractors and their insurance companies. The time has come for the Wisconsin Supreme Court to overrule Linden and bring back the negligent construction claim.   


Wednesday, January 1, 2014

Wisconsin's New Stormchaser Law

Wisconsin's new Stormchaser Law takes effect today. Wis. Stat. s. 100.65 affects both homeowners and contractors who repair or replace roofing or siding on residential homes. Contractors are prohibited from promising to rebate any part of a homeowners' insurance deductible to induce a sale and are also prohibited from negotiating (or even offering to negotiate) with the insurance company on the homeowner's behalf. If the homeowner will make an insurance claim relating to the contemplated work, the contractor must provide the homeowner with WRITTEN notice of his right to cancel the contract in the event that the insurance company denies the claim. If the insurance company denies the claim, the homeowner has three business days to give the contractor WRITTEN notice of cancellation. If the homeowner cancels the contract, the contractor must refund any payments already made.

Wis. Stat. s. 100.65 is an insurance company protection law; not a consumer protection law. Supporters of this law spun the tale of out-of-state fly by night contractors preying on Wisconsin homeowners, but the truth is that insurance companies pushed this law to reduce the number of hail claims. Here's an insightful discussion from an insurance defense attorney in Texas. If Wis. Stat. s. 100.65 was truly a consumer protection law, it would specifically declare that contractors cannot enforce home improvement contracts that violate its terms. If Wis. Stat. s. 100.65 was truly a consumer protection law, it would have given homeowners a civil cause of action for damages resulting from its violation. Instead, contractors get a $500-$1,000 slap on the wrist for violating this law, and homeowners have to hire someone like me to argue that contracts that violate this law are illegal and unenforceable. Fortunately, a violation of Wis. Stat. s. 100.65 is likely also a violation of the Home Improvement Practices Code. If a homeowner proves that a contractor violated the Home Improvement Practices Code, he can recover twice his damages plus reasonable attorneys' fees pursuant to Wis. Stat. s. 100.20(5).      

Homeowners need to understand that they must provide their contractor with WRITTEN notice of cancellation under Wis. Stat. s. 100.65(5); otherwise, cancellation will be ineffective and the homeowner will be contractually obligated to pay the amount due under the contract. Verbal notice won't cut it.  In fact, faxing or emailing the contractor won't cut it.  Homeowners need to follow the letter or the law and either hand-deliver or snail-mail written notice of cancellation to the contractor. Since Wis. Stat. s. 100.65(3)(b) requires contractors to provide homeowners with a separate document that they can use to cancel the contract simply by signing and dating it, homeowners should be able to provide contractors with the required WRITTEN notice without any difficulty.