In Pennsylvania, Subsequent Purchasers Can Pursue Fraud and Unfair Trade Practices Claims Against Builders

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In Adams v. Hellings Builders, Inc., 2016 Pa. Super. 192, 2016 Pa. Super. LEXIS 487, Christopher Adams and his wife, Margaret Adams (Plaintiffs), filed suit against Defendant Hellings Builders, Inc. (Hellings) to recover for moisture-related damage to their home caused by Hellings’ allegedly defective installation of stucco. Hellings filed Preliminary Objections, arguing that Plaintiffs failed to state a claim because they were not in privity with Hellings and they had no direct business dealings with Hellings.

The trial court sustained Hellings’ Preliminary Objections and Plaintiffs appealed to the Pennsylvania Superior Court. The Superior Court reversed the trial court and held that the subsequent purchaser of a new home can pursue the builder for claims based on fraud and violations of Pennsylvania’s Unfair Trade Practices and Consumer Protect Law (UTPCPL), 73 P.S. 201-1 et. seq., when reliance on the builder’s misrepresentations is specially foreseeable and damage proximately results. Mark L. Parisi, a Partner in White and Williams’ Construction and Surety practice group, discusses the decision in more detail in a September 23, 2016 Construction and Surety Alert.

Based on the holding in Adams, when Pennsylvania subrogation practitioners consider potential claims against a homebuilder for damage to a house owned by a subsequent purchaser, they should consider whether, despite the lack of privity between the homebuilder and the insured, they can state a claim for fraud and/or a violation of the UTPCPL against the homebuilder.

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