Real Estate Statute of Repose Wipes Out Fire Loss Case

In Hayes v. Coopertown’s Mastersweep, Inc., No. W2014-00783-COA-R3-CV (Tenn. Ct. App. April 17, 2015), plaintiffs brought a negligence claim based on the alleged negligent inspection of their fireplace. Two issues were addressed on appeal—whether defendant owed a duty of care to plaintiffs and whether this case fell under the four-year statute of repose applicable to injuries to real property related to deficient design and construction.

In 2000, plaintiffs purchased a house built in 1964 that had a fireplace, which plaintiffs had remodeled by a third party. Part of this remodel included lowering the firebox to be flush with the floor. The remodeled fireplace did not work well, allowing smoke to escape into the den, the upper floors and the attic. Plaintiffs thus hired defendant to inspect the fireplace and determine what was causing the smoke issues. Plaintiffs did not tell defendant about the previous fireplace renovations or that the firebox had been lowered. Defendant performed the inspection requested, and part of the defendant’s work “went beyond the inspection that [plaintiffs] contracted for,” including inspecting beneath the fireplace from the crawlspace and drilling into the fireplace to determine whether any combustible material was coming into contact with the fireplace. Because of the design and construction of the fireplace, however, “there were areas underneath the fireplace that could not be seen or inspected” by defendant. Defendant made certain redesign recommendations based on his inspection, and plaintiffs hired defendant to perform the recommended work. Defendant completed this work on October 8, 2003. Subsequently, on January 17, 2005, plaintiffs’ home was damaged by fire when “wooden floor joists that had been in contact with the firebox ignited from exposure to heat generated by the fireplace,” a problem related to the first remodel done by the unnamed third party.

The trial court granted a directed verdict for defendant on two grounds: 1) that the claims were barred by the applicable statute of repose, and 2) that defendant owed no duty of care to plaintiffs. The Court of Appeals affirmed on both of these grounds.

As to the statute of repose, Tenn. Code Ann. § 28-3-202 states that “[a]ll actions to recover damages for any deficiency in the design, planning, supervision, observation of construction, or construction of an improvement to real property, for injury to property, …shall be brought…within four (4) years after substantial completion of such an improvement.” To get around this time limitation, plaintiffs argued that their claim arose from an improper inspection, not negligent construction. The Court of Appeals, however, disagreed. The Court noted that to determine whether this statute applied, the court had to look beyond the plaintiffs’ characterization of their claims. Here, “[a]lthough the complaint allege[d] that [defendant] was negligent in his inspection of the fireplace, from the entirety of the complaint, and considering the damages sought, [the Court concluded] that [plaintiffs’] causes of action, including the claim for negligent inspection, arise from deficiencies ‘in the design, planning…or construction of an improvement to real property.” And while plaintiffs argued that the work done by defendant was repair work at best and not subject to the statute of repose, the Court found that the work “enhanced the utility of the home by enabling [plaintiffs] to use their fireplace without smoke escaping into several different parts of the house,” and thus was an amelioration constituting an improvement to real property, not simple repair work. Accordingly, plaintiffs’ claims were barred because they were brought more than four years after the work was substantially completed.

Although the statute of repose alone was enough to affirm dismissal, the Court of Appeals still addressed the issue of whether defendant owed plaintiffs a duty of care, finding that he did not. Plaintiffs argued that defendant “assumed a duty of care when he examined the fireplace from the house’s crawlspace because that action constituted an affirmative act that created a duty.” But the Court sided with defendant, finding that he “was hired to address the problem of smoke escaping from the fireplace, and the inspection [defendant] needed to perform to assess this problem did not require destruction of the fireplace structure, which would have been necessary to expose the defect that ultimately caused the fire.” The Court quoted an earlier holding, noting that “a fireplace inspector does not assume a duty of care when the inspection itself is reasonably performed and does not suggest a potential hazard.”

Here, defendant’s inspection did not show any signs of a potential hidden defect in the fireplace; defendant checked the visible areas of the fireplace and drilled into the firebox to check for combustible materials; nothing in his inspection suggested that any combustible materials were close to or coming into contact with the firebox; defendant “knew the house was over thirty years old and that the fireplace had been in use during that time;” defendant would have had to “destroy part of the fireplace in order to discover the hidden defect;” and defendant was not told about the prior remodel. From the circumstances of this case, the Court of Appeals affirmed that defendant performed a reasonable inspection and did not assume a duty of care to locate the hidden defect.

Although this makes sense, it unfortunately leaves plaintiffs (and their homeowner’s insurance company) with no one to pursue for the damages to their home. It seems that the more sensible defendant here would have been the company that initially remodeled the fireplace, but the statute of repose blocked claims against that party. Instead, plaintiffs attempted to proceed against the second contractor for not finding the first contractor’s shoddy work, and the Court did not allow this tactic. It would be interesting to know whether the result would be different if defendant had been told about the first remodel. The Court of Appeals did not seem to weigh this fact heavily, but did quote the trial court’s reliance on it. Would telling the inspector about the remodel, or even showing him the remodel plans, have created a duty to look further?   Although the statute of repose issue would still most likely come out the same, it is unclear how heavily this fact could have played into this case.