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A negligence and breach complaint related to a mold-infested building can continue after the Court of Appeals of Indiana reversed the entry of summary judgment.
In 2016, Daewoong LLC owned property in Bloomington and contracted with Building Associates Inc. for the construction of a mixed-use building on the property. The bottom floor consisted of commercial units, while the top two floors were residential apartments.
In 2019, BMI Properties LLC entered into a purchase agreement with Daewoong for the mixed-use building and property.
The purchase agreement provided that BMI had the right to obtain a physical inspection of the property for any major defects and to withdraw from the transaction within 15 days of the receipt of the inspection report if there were any defects. The agreement also provided that if BMI didn’t make a written objection, the property would be deemed acceptable.
After the inspections were completed, the parties closed in July 2019.
The next month, a residential tenant’s bedpost fell through the floorboard on the day they moved into the apartment. Bricks also fell off the exterior of the building, damaging a tenant’s vehicle.
BMI then had the building inspected, and the inspection found moisture damage to the south and west exterior walls and adjacent areas, cracks located in the brick veneer, improper drainage systems for the brick veneer, and design defects in how the brick veneer was to be constructed.
BMI also hired Mold Diagnostics LLC to perform spore trapping and surface testing. That inspection revealed there were multiple areas with unacceptable levels of airborne spores within the building and visible black mold.
BMI filed its complaint against Daewoong, the general contractor and building’s architect, raising a breach of contract claim against Daewoong and claims of negligence and breach of the warranty of habitability against the others.
While Daewoong was served by publication, it has failed to appear or participate in the case. The other defendants filed separate motions for summary judgment, each claiming that BMI was precluded from recovery against them under the acceptance rule and economic loss doctrine.
The Monroe Circuit Court granted the motions for summary judgment, prompting BMI’s appeal.
The Court of Appeals reversed, finding the trial court erred in granting summary judgment under both the acceptance rule and the economic less rule.
“No injuries to a person are alleged to have occurred. And, fortunately, no one was injured when the bedpost broke through the floorboard, no one became ill due to exposure to the airborne spores and/or black mold, and no passersby were injured when the brick veneer peeled away from the building due to the alleged faulty work, falling and striking the vehicle,” Senior Judge John Baker wrote. “However, whether personal injury was a foreseeable consequence … presents a genuine issue of material fact. We conclude that the trial court, although not having the benefit of our Supreme Court’s decision in (Automatic Sprinkler Corp. v. Erie Ins. Exchange, 204 N.E.3d 215 (Ind. 2023)), erred by granting summary judgment under the acceptance rule.”
Further, “The economic loss doctrine does not apply to this situation because there is no contractual relationship between the parties and, thus, no network or chain of contracts where the parties allocated risks,” Baker wrote.
The appellate court remanded the matter to the trial court for further proceedings.
Judges Melissa May and Nancy Vaidik concurred in BMI Properties, LLC v. Daewoong, LLC; Tabor/Bruce Architecture & Design, Inc.; Building Associates, Inc.; and Edwards Masonry, Inc., 23A-PL-988.
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