If they could prove it was because of the shoddy repair, and prove negligence, then yes your friend could be liable. The current homeowner would be fully insured as they did not perform, nor have any knowledge of the repair. It would be the insurance companies decision whether or not to sue the previous owner, which is highly unlikely.
This is the reason you have to be very honest when you sign or accept a PCDS when you sell a house.
This scenario happened to a friend of mine and SGI just paid out on the house. No parties ever went after the past owner. I am sure that the value of the house might dictate how far the insurance company is willing to go.
Injuries or fatalaties would be the bigger threat, the fire inspector and police will be prepared to go a lot further the the insurance company.
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