Monday, December 18, 2017

Association Insurance Company v. Carbondale Glen Lot E-8, LLC: Federal Court reaffirms that there is no duty to defend or indemnify a builder for defective construction work

In a case that squarely confronts the juxtaposition of an insurer’s duty to defend or indemnify its insured for construction related defects, the United States District Court for the District of Colorado recently granted an insurer’s motion for summary judgment on both matters against a construction subrogee, in Ass’n Ins. Co. v. Carbondale Glen Lot E-8, LLC, No. 15-cv-02025-RPM, 2016 WL 9735743, at *1 (D. Colo. Oct. 10. 2017).

Mountainview Construction Services, LLC (“MCS”) served as the general contractor for the construction of a residence on a lot owned by Glen Lot E-8, LLC (“E-8”).  MCS took out a Commercial General Liability Policy (“Policy”) with Association Insurance Company (“AIC”) that provided coverage to MCS for the relevant time period for the construction of the residence.  E-8 then asserted a series of claims against MCS, based on the allegation that MCS and its subcontractors defectively constructed the home by, among other things, building the residence two feet too high in violation of applicable codes.  E-8 also argued that MCS and its subcontractors made significant alterations and/or deviations from the original project specifications without obtaining E-8’s consent or approval from relevant authorities.   MCS tendered the claim to AIC for defense and indemnity.  In turn, AIC declined coverage on the argument that the Policy precluded any coverage for defective work MCS may have performed on the project, absent damage to person or other property.

MCS and E-8 subsequently settled all of E-8’s claims against MCS.  As part of the settlement terms, however, MCS assigned all of its rights against AIC to E-8 related to AIC’s refusal to defend and indemnify MCS.  In the ensuing action by E-8 against AIC, AIC moved for summary judgment on its declaratory judgment claim.  In doing so, AIC argued that the relevant Policy language prevented it from defending or indemnifying MCS for the allegations contained in E-8’s operative complaint against MCS in the underlying action.

In holding that AIC did not owe MCS any duty to defend it for E-8’s claims, Judge Richard Matsch first delved into the relevant language of the Policy.  Indeed, the Policy provided in pertinent part that AIC would cover and pay sums to MCS for “bodily injury” or “property damage” to property which the Policy covered.  The Policy, however, defined property damage as follows:

a. Physical injury to tangible property, including all resulting loss of use of that property.  All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or

b. Loss of use of tangible property that is not physically injured.  All such loss of use shall be deemed to occur at the time of the ‘occurrence’ that caused it.

Construing the foregoing language, the Judge Matsch held that AIC did not have a duty to defend MCS against E-8’s claims because E-8 did not allege “physical injury to tangible property,” or “loss of use of tangible property that is not physically injured.”  Rather, E-8’s allegations against MCS made clear that its grievance stemmed from a defectively built house.  What is more, E-8 never implied in its complaint that the flawed workmanship “caused the loss of use of some other tangible property that was not physically injured.”  The court also stressed that the Policy’s exclusionary language that prohibited coverage for faulty workmanship, effectively put an end to any duty on AIC’s part to defend or indemnify MCS for any defect, deficiency, or inadequacy germane to MSC’s work on the project.

Having been precluded from coverage based on the Policy language, E-8 then argued that C.R.S. § 13-20-808 effectively mandated a duty to defend on AIC’s part since the duty is triggered where there is a “potentially covered liability” against a “construction professional concerning a construction defect.”  Even so, the court noted that the duty to defend under the statute is still subject to the express terms of the Policy language between an insurer and its insured, and the duty is not triggered where the claims at issue are not covered by the insurance policy.  For the foregoing reasons, the court held that AIC had no duty to defend or indemnify MCS pursuant to the Policy.  Accordingly, the court entered summary judgment in AIC’s favor and dismissed all of E-8’s counterclaims against AIC.

In application, the ruling reaffirms the well-established principle that the express terms of a policy will continue to be the benchmark with which courts determine an insurer’s duty to provide coverage, in the absence of any contravention of public policy.  Further, policy language that expressly discounts coverage for a contractor’s substandard work on a project, absent injury to person or other property, remain enforceable provisions.  The public policy underlying this appears to be the need to discourage shoddy workmanship and to provide contractors the incentive to avoid preventable defective work during the construction of a project.   


For more information about the Association Insurance Company v. Carbondale Glen Lot E-8, LLC case or about construction law in Colorado, you can reach Olayinka Hamza by e-mail at hamza@hhmrlaw.com or by telephone at (720) 630-2709.

Monday, October 16, 2017

Recent Changes in the Law Affecting Construction Defect Litigation


At Long Last, the Colorado Legislature Passed Construction Defect Reform
By David M. McLain
On May 23, 2017, Governor Hickenlooper signed HB17-1279 into law.  The bill states that before an HOA’s executive board can institute a construction defect action, it must provide notice of the anticipated commencement of the action to each of the HOA’s unit owners, along with certain disclosures about the anticipated action.  The bill also requires that the HOA executive committee convene a meeting of the unit owners to consider the action, and that the construction professionals against which the claim is being brought have the opportunity to address the members of the HOA.  The bill also states that the HOA executive committee may only initiate a construction defect action if it is approved by “owners of units to which a majority of votes in the association are allocated.” 
While this sounds good, the bill goes on to state that for purposes of calculating the required majority vote, the following votes are excluded:
  1. Any votes allocated to units owned by a contractor, subcontractor, developer, or builder responsible for any part of the design, construction, or repair of any portion of the common interest community, or any affiliate of such a party, including any entity controlled or owned, in whole or in part, by any person that controls or owns the company, or by the spouse of such a person.
  2. Any votes allocated to units owned by banking institutions, unless a vote from such an institution is actually received by the association.
  3. Any votes allocated to units of a product type in which no defects are alleged, in a common interest community whose declaration provides that common expense liabilities are not shared between the product types.
  4. Any votes allocated to units owned by owners who are deemed “nonresponsive”.
The problem with this is that the exclusions render the informed consent meaningless.  Prior to HB17-1279, a declaration could provide that in order for an association to have standing to sue for construction defects, it had to obtain the informed consent of up to 67% of the owners within the community, with no exclusions.  For example, in a common interest community of 100 units, the association would need to obtain the affirmative vote of 67 of the units owners within the community, regardless of ownership, in order to proceed with a construction defect action.  That is no longer the case under HB17-1279.
Under HB17-1279, the HOA’s executive committee needs only the approval of a simple majority of responsive owners in order to proceed with an action.  Two years ago, a plaintiffs’ construction defect attorney that also sits on the executive committee for his HOA testified at the Colorado legislature that even on uncontested issues, it is rare for his HOA to receive a response rate above 20% of the total membership.  Assuming that response rate is reflective of most associations, under the same example above and under HB17-1279, if an HOA were to send out 100 ballots seeking approval of a construction defect action and get back only 20 ballots, it could proceed with an action so long as 11 votes were in favor of an action.
That said, there remains some question among the legal community as to the effectiveness of a 67% supermajority clause in a declaration.  There are those among defense attorneys who questioned whether such clauses were ever enforceable, and there are no appellate cases upholding such clauses, so it is not as though the decision was made to trade 67% for a simple majority of responsive owners.  In fact, if the 67% supermajority clauses were not enforceable, a simple majority of responsive owners is still a higher threshold than the executive committee making the decision itself.  
Colorado Supreme Court Upholds “Consent-to-Amend” Provision in an HOA’s Declaration. A Step in the Right Direction.   
On June 5, the Colorado Supreme Court announced the Vallagio at Inverness Residential Con. Ass’n v. Metro. Homes, Inc., No. 15SC508, 2017 CO 69 (Colo. June 5, 2017) decision.  By way of background, Metro Inverness, LLC developed the Vallagio at Inverness Residential Condominiums and served as the declarant for its homeowners association.  When it set up the Association, the Declarant included within the Association’s declaration a mandatory arbitration provision specific to construction defect claims. This provision stated that it “shall not ever be amended without the written consent of Declarant and without regard to whether Declarant owns any portion of the Real Estate at the time of the amendment.”

The HOA purportedly amended the declaration to remove the arbitration provision, without the Declarant’s consent, and filed a construction defect lawsuit in district court.  The defendants moved to compel arbitration, relying on the arbitration provision for construction defect claims and arguing that the purported amendment to remove it was invalid because the unit owners did not obtain the Declarant’s consent for the amendment. The Association, in response, argued that the unit owners validly amended the declaration to remove the arbitration provision and that the declarant consent requirement violated the Colorado Common Interest Act (“CCIOA”).

Briefing and arguments on this issue made their way from the district court, through the Colorado Court of Appeals, and ultimately to the Colorado Supreme Court, which agreed to decide two issues:
  1. Did CCIOA permit a developer-declarant to retain a right of consent to amendments to a provision of a common interest community’s declaration mandating arbitration of construction defect claims.
  2. Were claims brought under the Colorado Consumer Protection Act, §§ 6-1-101 to -1121, C.R.S. (2016) (“CCPA”) arbitrable.  In response to these questions, the Supreme Court made short work of the arguments advanced by the Association and concluded that CCIOA did not void the declarant “consent-to-amend” provisions and that CCPA claims are arbitrable.

In sum, the Supreme Court’s decision is certainly a positive development for the Colorado construction community as it preserves the builder’s ability to enforce arbitration provisions in construction defect cases.  To protect your ability to arbitrate any construction defect claims brought against you by an association, be sure to include a declarant “consent-to-amend” provision in the association’s declaration. 


- Reprinted from Colorado Builder Forum (Summer 2017)

Monday, June 5, 2017

Vallagio v. Metropolitan Homes: Colorado Supreme Court Upholds Declarant Consent Provision to Amend Arbitration Out of Declarations

On June 5, 2017, the Colorado Supreme Court announced the Vallagio at Inverness Residential Con. Ass’n v. Metro. Homes, Inc., No. 15SC508, 2017 CO 69 (Colo. June 5, 2017) decision. In short, the Colorado Supreme Court upheld the validity of declarant “consent-to-amend” provisions and expressly held that claims under the Colorado Consumer Protection Act are arbitrable.

By way of background, the Vallagio at Inverness Residential Condominiums were developed by Metro Inverness, LLC, (“Declarant”) which also served as the declarant for its homeowners association. Metropolitan Homes was Metro Inverness’ manager and the general contractor on the project. Greg Krause and Peter Kudla served as declarant-appointed members of the Association’s board during the period of declarant control.

When it set up the Association, the Declarant included within the Association’s declaration a mandatory arbitration provision specifically for construction defect claims. This provision stated that it “shall not ever be amended without the written consent of Declarant and without regard to whether Declarant owns any portion of the Real Estate at the time of the amendment.”

The HOA purportedly amended the declaration to remove the arbitration provision, without the Declarant’s consent and filed a construction defect lawsuit in district court.  The defendants moved to compel arbitration, relying on the arbitration provision for construction defect claims and arguing that the purported amendment to remove it was invalid because the unit owners did not obtain the Declarant’s consent for the amendment. The Association, in response, argued that the unit owners validly amended the declaration to remove the arbitration provision and that the declarant consent requirement violated the Colorado Common Interest Act (“CCIOA”).

The district court denied the defendants’ motion to compel arbitration, concluding that the Declarant’s consent was not required to remove the arbitration provision because, inter alia, the declarant consent requirement violated CCIOA and was, therefore, void and unenforceable. Specifically, the district court held that the declarant consent provision violated C.R.S. § 38-33.3-302(2), which provides: “The declaration may not impose limitations on the power of the association to deal with the declarant that are more restrictive than the limitations imposed on the power of the association to deal with other persons.” The court also found that the declarant consent provision violated C.R.S. § 38-33.3-217(1)(a)(I), which states:

[T]he declaration . . . may be amended only by affirmative vote or agreement of unit owners to which more than fifty percent of the votes in the association are allocated or any larger percentage, not to exceed sixty-seven percent, that the declaration specifies. Any provision in the declaration that purports to specify a percentage larger than sixty-seven percent is hereby declared void as contrary to public policy, and until amended, such provision shall be deemed to specify a percentage of sixty-seven percent.
The Declarant then brought an interlocutory appeal to the Colorado Court of Appeals and a division of that court reversed the district court’s denial of the motion to compel arbitration. Vallagio at Inverness Residential Condo. Ass’n v. Metro. Homes, Inc., 2015 COA 65, ¶¶ 1, 72, __P.3d__.

Thereafter, the petitioner, Vallagio at Inverness Residential Condominium Association, Inc. (the “Association”), petitioned the Colorado Supreme Court, which granted certiorari in order to answer two chief questions: 1) did CCIOA permit a developer-declarant to retain a right of consent to amendments to a provision of a common interest community’s declaration mandating arbitration of construction defect claims, and; 2) were claims brought under the Colorado Consumer Protection Act, §§ 6-1-101 to -1121, C.R.S. (2016) (“CCPA”) arbitrable. In response to these questions, the Supreme Court concluded that CCIOA did not void the declarant “consent-to-amend” provisions and that CCPA claims are arbitrable.

Underlying its decision, the Supreme Court was unpersuaded by the Association’s three principle arguments that the “consent-to-amend” provision was violative of CCIOA. Specifically, the Association argued that the “consent-to-amend” provision was void for the following reasons: 1) the provision exceeded the 67% voting threshold established by C.R.S. § 38-33.3-217(1)(a)(I), for amending a declaration; 2) it was a device intended to evade the foregoing 67% limitation and thus is proscribed by C.R.S. § 38-33.3-104, and; 3) in violation of C.R.S. § 38-33.3-302(2), it imposed limitations on the power of the Association to deal with the Declarant that were more restrictive than the limitations imposed on the power of the Association to deal with other persons.

The Supreme Court ultimately made short work of the arguments advanced by the Association. First, the Supreme Court agreed with the Court of Appeals’ conclusion that nothing in CCIOA precluded a declaration from imposing additional requirements (i.e., non-percentage based requirements) for amendments. The Supreme Court illustrated this conclusion by evaluating other provisions of CCIOA that expressly contemplated such additional requirements.

Second, the Supreme Court was similarly unpersuaded with the Association’s second argument because it appeared to be premised on the Association’s first argument, that CCIOA establishes an absolute 67% voting limitation, and the Supreme Court concluded that the “consent-to-amend” provision did not contravene any of CCIOA’s policies or purposes. The Supreme Court supported the later conclusion by noting that CCIOA patently permits a declaration to “specify situations in which disputes shall be resolved by binding arbitration. . .” In this context, the Supreme Court concluded that it was unable to find that the “consent-to-amend” provision evaded the limitations of CCIOA.

In response to the Association’s third argument, with respect to C.R.S. § 38-33.3-302(2), the Supreme Court recognized that the Association had no power to amend the declaration. Rather, the Supreme Court concluded that CCIOA provides that unit-owners, not the Association, have the power to amend the declaration by a 67% vote. Therefore, the “consent-to-amend” provision did not impose any limitation on “the power of the association” under C.R.S. § 38-33.3-302(2).

Lastly, turning to the Association’s argument that CCPA claims were not arbitrable, the Supreme Court was not persuaded by the Association’s proposition that the statutory right to file a civil action may not be waived pre-dispute. In coming to this conclusion, the Supreme Court noted that the CCPA contains no language expressly precluding a waiver of a “court action” found in the statutes that Association sought to analogize. Nor was the Supreme Court persuaded by the Association’s assertion that the Colorado Construction Defect Action Reform Act (“CDARA”) precluded a waiver of a plaintiff’s CCPA claims, given that CDARA expressly envisions the possibility of an arbitration proceeding involving CCPA claims. See C.R.S. § 13-20-806(7)(a).

For these reasons and others, the Supreme Court concluded that the “consent-to-amend” provision was enforceable and consistent with CCIOA and that claims for violations of the CCPA may be properly arbitrated. In sum, the Supreme Court’s decision is certainly a positive development for the Colorado construction community as it preserves the builder’s ability to enforce arbitration provisions in construction defect cases.


For additional information regarding Vallagio v. Metropolitan Homes or about construction defect litigation in Colorado, generally, you can reach Jean Meyer by telephone at (303) 987-9815 or by e-mail at meyer@hhmrlaw.com.

Monday, May 29, 2017

Taylor Morrison v. Terracon: Adjustment of Verdicts to Account for Others’ Liability and Contractual Limitation of Liability Clauses

In a case of first impression, a division of the Colorado Court of Appeals weighed in on how a trial court should adjust a jury verdict against a contractor when two critical components are still at play: (1) a setoff from other liable parties and (2) a clause in the contract limiting liability.   In short, the court concluded the correct approach is to first apply the setoff against the jury verdict and then apply the contractual limitation against the recoverable amount. 

The facts in Taylor Morrison of Colorado, Inc. v. Terracon Consultants, Inc., 2017 COA 64, highlight the massive difference in what order the court factors in the setoff from the contractual liability.  In this case, Taylor Morrison of Colorado, Inc. (“Taylor Morrison”), was the developer of a residential subdivision.  Terracon Consultants, Inc. (“Terracon”) was the geotechnical engineering firm which performed services at the project. In a written contract, Terracon was responsible for testing the soil for compliance with project specifications and building codes. Taylor Morrison and Terracon further agreed to place a cap on Terracon’s total liability to Taylor Morrison at $550,000 for any and all damages or expenses arising out of its services or the contract.
Several years after Terracon performed its work, the homeowners sued Taylor Morrison alleging cracks in the drywall of their houses, and Taylor Morrison in turn sued Terracon and various subcontractors for damages relating to those defects.  Among other reasons, Taylor Morrison attempted to void the limitation of liability clause on the ground that Terracon’s conduct was willful and wanton.  The court dismissed Terracon after it depositing $550,000 in the court registry.  Taylor Morrison proceeded to trial against other subcontractors and settled for $592,000 with remaining subcontractors. 
Taylor Morrison appealed the court’s dismissal of its willful and wanton claim Terracon on the ground that it should have been allowed to introduce evidence of Terracon’s willful and wanton conduct so as to void the limitation of liability clause.  The appellate court remanded the case to determine whether Taylor Morrison should have been allowed to introduce such evidence.  The trial court concluded that Taylor Morrison should have been able to, so it ordered a new trial against Terracon alone.  At the trial, the jury awarded Taylor Morrison $9,586,056 in damages.  Despite the large verdict, after reviewing post-trial briefings, the court entered a final judgment of zero dollars due from Terracon to Taylor Morrison. 
The trial court arrived at this result by applying the contractual limitation of liability to reduce the jury verdict of $9,586,056 down to the limitation of $550,000.  Finally, it then deducted the $592,500 setoff from the prior settlement from the other parties against the $550,000 to arrive at zero dollars owed. 
Taylor Morrison appealed again and contended that the trial court erroneously deducted the $592,500 setoff from Terracon’s contractual limitation of liability of $550,000 rather than deducting the setoff from the $9,586,056 jury damages verdict.  The appellate court agreed.
Consequently, the court concluded that the trial court must first apply the setoff against the jury verdict to ascertain the allowable amount of recovery, and then apply any contractual limitation against this reduced amount.  “This approach prevents double recovery by the plaintiff, preserves the parties’ right to have the terms of a contract enforced, and best gives effect to the jury verdict.” Taylor, 2017 COA 64, ¶ 25.
In application, this would mean the court should have applied the $592,500 setoff to the $9,586,057 jury verdict.  This would have resulted in a new total of $8,993,556.  The trial court then should have applied limitation of liability and reached a final judgment of $550,000 due from Terracon to Taylor Morrison.  The Court of Appeals remanded the case back to the trial court to enter this new judgment.
For more information regarding the Taylor Morrison v. Terracon lawsuit or about construction defect litigation in Colorado, you can reach Scott Sweeney by telephone at (303) 653-0044 or by e-mail at Sweeney@hhmrlaw.com.

Friday, April 21, 2017

Colorado Homebuyers Must be in Privity of Contract with Developer to Assert Breach of Implied Warranty of Suitability.

On April 17, 2017, the Colorado Supreme Court announced its decision in Forest City v. Rogers, No. 15SC1089, 2017 CO 23 (Colo. Apr. 17, 2017). The Court held that privity of contract is necessary for a homebuyer to assert a claim for breach of implied warranty of suitability against a developer. In other words, one must be a party to a contract to pursue a claim for breach of any implied warranty of suitability therein.

Defendant Forest City was the developer of a mixed use property in Stapleton. Forest City subdivided the land and sold the vacant lot at issue to a professional builder, Infinity. Infinity then built a residence and sold it to the plaintiff, Tad Rogers. After moving into the home, Rogers came to believe that the water table beneath the house along with calcite leaching from the road material led to a buildup of calcite in the foundation drain, making the basement uninhabitable and causing the sump pump to work overtime. Rogers sued Forest City on various theories, including breach of the warranty of suitability. In particular, Rogers alleged that Forest City impliedly warranted to him that his lot was suitable for a home with a finished basement, when in fact it was not. He prevailed on this claim at the trial court level.

On appeal, a divided Colorado Court of Appeals held that the implied warranty of suitability can exist between a developer who sells a vacant lot and a homeowner who is not the first purchaser of the lot if (1) the developer improves the lot for a particular purpose and (2) all subsequent purchasers rely on the developer's skill or expertise in improving the lot for that particular purpose. Rogers v. Forest City Stapleton, Inc., 2015 COA167M, ¶ 19 (Dec. 17, 2015). In reaching that determination, the Court of Appeals cited the comparative expertise of the developer to the homebuyer and, in extending protection to subsequent purchasers, adopted the reasoning of an Indiana Court of Appeals case from 1989. Id. at ¶ 16 (citing Jordan v. Talaga, 532 N.E.2d 1174 (Ind. Ct. App. 1989) (theorizing that absent an implied warranty of proper drainage extending from the developer to the homeowner “unscrupulous developers would be vested with impunity to develop marginal and unsuitable land” and “[h]omeowners would be left without a remedy for latent undisclosed defects in real estate not chargeable to the builder.”)) The appellate court did not ultimately reach the issue of whether the implied warranty of suitability existed in the case at hand, however, because the trial court did not properly instruct the jury and the jury did not make the relevant factual findings. Forest City and Rogers both filed petitions for certiorari.

The Colorado Supreme Court reasoned that, by their very nature, implied warranties are contractual obligations – promises implied in contracts – and thus breaches of these implied warranties give rise to contract claims that must be analyzed according to contract principles. Privity of contract is an established contractual principle that requires that one must be a party to a contract to enforce a term in the contract or an implied warranty arising out of the contract. Therefore, for a homebuyer to bring a breach of the implied warranty claim against a developer, the parties must be in privity of contract.

Although privity of contract is not required to bring a claim for implied warranty in product liability matters related to the sale of personal property, such cases are distinguishable from those involving the sale of real property. In the construction context, Colorado courts continue to require privity of contract to bring a claim for breach of the implied warranty of habitability. And, at least one Colorado court previously suggested that the implied warranty of suitability is a subset of the implied warranty of habitability.

In addressing policy arguments, the Court explained, “The policy rationale for imposing an implied warranty between a developer and home buyer does not exist when, as here, the developer sells a lot to a professional builder who in turn improves the lot and sells it to a third-party home buyer.” Rogers contracted with Infinity, a professional builder, and thus, it was Infinity, not Forest City, that had superior knowledge and expertise as to the defect at issue. “In circumstances such as these, there is no reason to presume that a disparity exists in sophistication between the developer and the professional builder, that the builder was in a worse position than the developer to know of and assess potential defects in a lot, or that the professional builder would rely upon the developer - rather than its own investigative resources – to provide lots suitable for the builder’s intended purposes.”

The court concluded by dismissing Rogers’ claim for breach of implied warranty of suitability against Forest City, but left some wiggle room for future plaintiffs by indicating that it might entertain a third-party beneficiary theory. Overall, the decision represents a modest victory for developers of residential construction as it serves to curtail the potential claims against them. In addition, this opinion is likely to reverberate through analysis of other implied warranties and encourage a more practical, examined assessment of relative bargaining power in years to come.

For more information regarding the Forest City v. Rogers case or construction law in Colorado, you can reach Maggie Stewart by telephone at (303) 987-9814 or by e-mail at stewart@hhmrlaw.com.  

Thursday, March 30, 2017

David M. McLain to Speak at the CLM Claims College - School of Construction - Scholarships Available

Dave McLain will again be serving as an instructor at the CLM's Claims College – School of Construction, to be held this year at the Marriott Baltimore Waterfront in Baltimore, Maryland on Wednesday, September 6, 2017 through Saturday, September 9, 2017.

Overview of the 2017 School of Construction

Construction claims present  myriad complexities in claim handling. Construction defect lawsuits are often multi-party cases with cross claims and third-party claims between and among the numerous defendants. Insurance coverage is intertwined and complex due to the interplay of primary, excess, wrap, and additional insurers for the numerous defendants. All this is further complicated by statutes and regulations, inconsistent case law and procedural peculiarities throughout the United States. The economic stakes are high as the  damages claims can be in the multi-millions.

Competent construction claims handling requires an understanding of the distinct legal and practical  issues between commercial and residential claims. This is no place for the average adjuster and certainly no place for the adjuster who has not been properly trained.

The School of Construction will provide adjusters with the knowledge, tools, and understanding required to navigate these complex claims. Professionals seeking to expand their knowledge of construction risk concepts and seasoned professionals looking to move into construction claims are encouraged to attend.
Upon satisfactory completion of all three levels, graduates will receive the Certified Claims Professional (CCP) in Construction designation.

About the Claims and Litigation Management Alliance

The Claims and Litigation Management (CLM) Alliance is the only national organization created to meet the needs of professionals in the claims and litigation management industries. Founded in 2007, the CLM currently has more than 30,000 Members and Fellows — a number that grows by hundreds each month.

Scholarships Available

As an instructor, I have the ability to offer three scholarships (registration fee only) to industry professionals (insurance - risk, adjusters, claims, etc. and corporate) to attend Claims College.  In order to attend, you need not to be a current CLM Fellow – however you will need to register (at no cost) to receive the scholarship. If you are interested in attending, please let me know by May 9th so that I can put you in touch with the proper person at the CLM to register.  I look forward to the event and hope that there are folks out there interested in taking advantage of the scholarships.

Monday, March 27, 2017

Colorado House Bill 17-1279 – A Misguided Attempt at Construction Defect Reform

On March 17th, House Bill 17-1279,  concerning the requirement that a unit owners’ association obtain approval through a vote of unit owners before filing a construction defect action, was introduced and assigned to the House State, Veterans, and Military Affairs Committee.  The bill is currently scheduled for its first committee hearing on March 29th, at 1:30 in the afternoon.  While, on its face, this appears to be a step in the right direction towards instituting “informed consent” before an HOA can file a construction defect action, the bill actually restricts the ability of developer to include more stringent requirements in the declaration of covenants, conditions, and restrictions for an association, thereby lowing the threshold of “consent” required to institute an action.

House Bill 17-1279 would amend C.R.S. § 38-33.3-303.5 to require an association’s executive board to mail or deliver written notice of the anticipated commencement of a construction defect action to each unit owner and to call a meeting of the unit owners to consider whether to bring such an action.  Any construction professional against which a claim may attend the unit owners’ meeting and have an opportunity to address the unit owners and may include an offer to remedy any defect in accordance with C.R.S. § 13-20-803.5(3).  The conclusion of the meeting would initiate a 120-day voting period, during which period the running of any applicable statutes of limitation or repose would be tolled.  Pursuant to this bill, an executive board may only institute a construction defect action only if authorized by a simple majority of the unit owners, not including: 1) any unit owned by any construction professional, or affiliate of a construction professional, involved in the design, construction, or repair of any portion of the project; 2) any unit owned by a banking institution; 3) any unit owned in which no defects are alleged to exist, and/or 4) any unit owned by an individual deemed “nonresponsive.”    

While this may seem helpful in curbing construction defect litigation, it is actually a step in the wrong direction.  Currently, under Colorado’s Common Interest Ownership Act, a developer may include a language in an HOA’s declaration requiring that the association provide owners with certain information about a proposed construction defect action, and requiring the approval of 67% of the unit owners, with no restrictions on which unit owners’ votes actually count towards the total.

Additionally, the bill extends the voting period from 60 days, as set forth in C.R.S. § 7–127–107, to 120 days.  Currently, any time spent by an association to gather votes necessary to proceed with a construction defect action does not toll the running of any applicable statutes of limitation or repose, where HB 1279 would provide for such tolling. 

I fail to see how those in the Colorado Legislature actually believe that reducing the owner consent level from the 67% a declaration can currently require to a simple majority, excluding the votes of numerous categories of owners, and extending the statutes of limitation and repose will do anything to cool the litigious environment when it comes to condominiums and townhomes.  Making it easier for an association to bring a claim is certainly not the answer, and will do nothing to spur future construction of for sale multi-family housing.

To learn more about House Bill 17-1279, you can reach David McLain by telephone at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com

Disclaimer

The information contained in this blog is provided for informational purposes only. It is not legal advice and should not be construed as providing legal advice on any subject matter.