Can a Homeowner Sue a Subcontractor for Negligence?
In residential construction projects, the homeowner often hires a contractor, who in turn may hire subcontractors to perform certain aspects of the work. When defects in the construction arise, a homeowner will then need to determine the best course of action for recovery, and will certainly look to the general contractor as the primary target of contract and tort claims. In response, the general contractor will usually seek to bring the subcontractors into the suit through contractual indemnity principles. However, the homeowner may also seek to assert direct claims against the subcontractor as a means to increase their chances of full recovery. Because no direct contractual relationship exists, the homeowner is limited to tort claims. While this is not common, it does pose a question undecided by Arizona law: does the subcontractor owe the homeowner a legal duty sufficient to support a tort/negligence claim? This is undecided.
Under Arizona law, there is no express authority that precludes a homeowner from suing a subcontractor in tort. In Flagstaff Affordable Hous. Ltd. P'ship v. Design All., Inc., 223 Ariz. 320, 326 (2010), the Supreme Court mandated that all construction defect claims are subject to the economic loss rule, which only allows for tort claims against contractors when there is resultant damage. In other words, a homeowner can theoretically sue a subcontractor when its work causes personal injury or damage to other property (i.e., property outside the scope of that subcontractor’s work). However, whether a subcontractor caused such a loss is a question of whether it breached its standard of care. But at all times, the homeowner must establish the subcontractor owed a legal duty before any breach is considered.
Arizona law is generally silent on whether a subcontractor owes a duty of care to a homeowner. Legal duties may arise from special relationships, conduct undertaken by the defendant, or public policy. Gipson v. Kasey, 214 Ariz. 141, 145 (2007). Moreover, “[a] contractual undertaking significantly influences the determination of whether a duty exist[s]”. Diaz v. Phoenix Lubrication Service, Inc., 224 Ariz. 335, 339 (App. 2010). In Diaz, the Court of Appeals relied exclusively on the contract between the parties to define the legal duties owed. Even though this was not a construction case, it reinforces the notion that courts will not contradict or expand upon a written agreement when determining whether a duty exists as a matter of law.
When the subcontractor agrees to perform work for the general contractor, it of course must perform its work with reasonable care and in accordance with industry standards. See, e.g., Woodward v. Chirco Const. Co., 141 Ariz. 514, 515 (1984) (imputing into all residential building contracts an implied warranty of workmanship and habitability). When the subcontractor’s work causes personal injury or damage to other property (i.e., damages outside the economic loss rule), it can be held liable in tort . . . but to whom? On the one hand, the contract for the work is exclusively between the general contractor and the subcontractor, which could mean that any damages arising out of the subcontractor’s work can only be recovered by the general contractor, and not the homeowner. On the other hand, the homeowner could argue that it is a third-party beneficiary of the work, and that the subcontractor’s legal duty extends to the homeowner. In any event, Arizona public policy could influence a court struggling to reach a conclusion.
In Yanni v. Tucker Plumbing, Inc., 233 Ariz. 364 (App. 2013), the Court of Appeals commented on a significant aspect of public policy that could impact the legal duty analysis. The Court contemplated whether homeowners could assert breach of the implied warranty of workmanship and habitability against subcontractors. Even though that warranty is imputed into every construction contract, the Court of Appeals declined to extend its availability to homeowners suing subcontractors. The Court found no reason to complicate construction defects cases by recognizing an additional avenue of relief because homeowners may fully recover from the general contractor. As such, Yanni stands for the proposition that Arizona public policy will primarily seek to protect homeowners, but limit claims that unnecessarily expand the law when homeowners are already afforded complete relief under the circumstances.
Ultimately, the question of whether a subcontractor owes the homeowner a legal duty will require analysis of the relevant contract and Arizona public policy. As the subcontractor will only have a contractual relationship with the general contractor, the subcontractor could argue that it never owes a legal duty to the homeowner because the homeowner’s sole avenue for complete recovery is with the general contractor. This is a question the courts have yet to decide. Until then, the construction defects landscape in this regard is free to be shaped by the litigants that traverse it.