Are Your Warranty Issues Subject to Arbitration?

Most construction contracts include some version of a warranty and/or a disclaimer of warranties. And almost as many include some version of an extended structural warranty, such as a 2-10 warranty, that covers major structural issues in the home for a period of ten years. Just as commonplace as these warranty provisions are arbitration provisions, which require that disputes relating to the construction contract be resolved through private arbitration rather than a trial.

But just because your contract has an arbitration provision in it, do not assume that your warranties are covered by it. In an opinion released today by Florida’s 1st District Court of Appeal, the court determined that the language of a warranty limiting its scope similarly limited the application of an arbitration clause contained in the warranty. In Wiener v. Taylor Morrison Services, Inc., homeowners sued a home builder claiming their home was built in violation of multiple building codes, especially with respect to the stucco. The home builder responded by moving to compel arbitration based on an arbitration clause found in the 10-year structural warranty it provided to the home owners.

While the trial judge ordered the case to arbitration, the First District Court reversed this ruling, finding that while the 10-year warranty contained an arbitration provision, it was not applicable to the issues raised in the complaint. Specifically, the warranty excluded coverage for claims related to stucco and expressly only covered specific load-bearing components of the home. With respect to arbitration, the 10-year warranty indicated that arbitration was required for claims relating to or arising out of the warranty. While Florida’s courts have typically viewed this language as being broad and inclusive of arbitration, the First District Court determined it was not broad enough to encompass and require arbitration of the homeowner’s claims that related primarily to stucco issues with their home.

There are several takeaways from this case that contractors can use to ensure their claims are submitted to arbitration, assuming that is what they want. First, have an arbitration clause in your construction contract and expressly indicate that it is applicable to all claims, including warranty claims. Second, check the language of any third-party, extended warranties that you offer customers. If the warranty limits what it is applicable to, you may need to add language to your construction contract to ensure that all disputes will be arbitrable. Finally, ensure that your arbitration provisions indicate that they will survive the completion of the work and disputes that arise long after the normal contractual warranties have expired.