Industry norm is that roof warranties disclaim any coverage for consequential damages.

Most manufacturers utilize that exclusionary language in discussions with owners to limit claims made under the warranty. However, the mere disclaimer of consequential damages does not always preclude those damages from being awarded in a lawsuit.

Courts have struggled for many years to distinguish between direct and consequential damages. Direct damages are defined as those which follow immediately upon the act done. They arise naturally and ordinarily from the breach of the contract. For example, when a manufacturer installs defective flashing, the cost to repair the flashing is a direct damage in the eyes of the law and the responsibility of the manufacturer. But what if the defective flashing causes water to run into the interior of the building or behind the walls? Is this a direct damage or a consequential damage?

The legal definition of consequential damage is injury or harm that does not ensue directly and immediately from the act of the party, but only from some of the consequences or results of the act. In order to recover consequential damages from the breaching party, the damages must be reasonably foreseeable at the time of contract formation.

It is certainly reasonable to expect that a leaky roof could cause damage to a building’s interior. However, some courts have ruled that damage to a building’s interior is a consequential damage and not covered under a warranty which includes a waiver of consequential damages. Other cases have similarly determined that water damage caused by a leak constitute consequential and not direct damages.
There are other courts, however, that have found the opposite and ruled that water damage caused by a leak are direct and not consequential damages. Because those damages are categorized as direct damages, the waiver or disclaimer of consequential damages within the warranty are no longer applicable.

The best way to combat against the uncertainty of court decisions on this issue are to use clear and unambiguous warranties. Warranties should not only disclaim consequential damages, but should use warranty language that is clear and precise (e.g. damage to the interior of the building is excluded) to avoid leaving the issue for courts to decide.

This post was written by Josh Baker

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