Confidential
Settlement – $685,000Facts
In 1995, the plaintiffs purchased a new, semi-custom tract home in a subdivision in the hills in the city of
Fremont. The price was approximately $750,000. The defendants were the developer and general contractor,
separate companies but owned by the same person. In the fall of 1998, the plaintiffs discovered that the garage
slabs had lifted, a gap occurred between the slabs and grade beam, doors were sticking, interior sheet rock and
exterior stucco cracked.
The defendantsÆ warranty representative inspected the house and decided to take no further action. In March,
1999, the plaintiffs reported continued movement and further cosmetic damage. The defendants had the project
structural engineer and soil engineer inspect the house. The soil engineer concluded that the cause of the
damage was due to a combination of expansive soil, adjustment of fill to ordinary landscape irrigation, and the
curing of framing lumber. He was of the opinion that the house would reach equilibrium within three to five
years of original landscaping and recommended that cosmetic repairs be performed. Those repairs were
performed in the fall of 1999, but movement continued. The plaintiffs then requested that the defendants
provide them with copies of all soil engineering reports and construction plans for their house, but the
defendants refused to provide these documents.
During subsequent investigations and the course of discovery, the plaintiffs learned that
their house was constructed on a cut-fill lot, with fill commencing at the front of their house and
reaching depths of up to 19 feet behind the rear of their house. The house had been constructed
with underpinning piers which extended at least five feet below the depth of the fill. These piers
were not designed to prevent uplift of expansive soils or lateral movement of fill. The engineers
determined that there was a little over three inches of differential movement to the house.
Movement appeared to have stopped and the only concern regarding future movement was in
case of extreme drought causing the expansive soils to dry out. It was felt that if there were no
further movement of the foundation, underpinning would not be required.
Settlement Discussions
The case settled for $685,000, with the defendants paying $315,000 and their two insurers paying $370,000. Settlement occurred after two mediations before Jack Schwartzman of Griffith, Castle & Schwartzman and two mandatory court settlement conferences.
Damages
The plaintiffs alleged causes of action for strict products liability, breach of warranty, negligence and breach of contract. The plaintiffs alleged $780,000 in damages, composed of $51,000 for investigative expenses, $389,000 to underpin the house; $61,000 for various cosmetic repairs and $271,000 to remove and replace damaged hardscape.
Other Information
The defendantsÆ two insurance companies had subsidence exclusions within their insurance policies. The only covered portion of the loss was $32,000 for cosmetic repairs from a leaking window. The insurers had exposure for the cost of defense and the plaintiffÆs attorneyÆs fees.
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