Win $500 For Your Favorite Charity: Connect with HHMR Online to Win.

Your friends at HHMR are participating in the Social Madness Contest sponsored by American City Business Journals.  This is a national and local contest with no monetary prize . . . we potentially will win bragging rights!  To win these bragging rights, we will need your help and are willing to pay for it!  The contest opened up on June 1^st and will consist of four phases.  If we make the first cut, we’ll let you know.  In the meantime, all you have to do is spend a few minutes: 1) Liking us on Facebook, 2) making a LinkedIn Connection, and 3) following us on Twitter. To make this easy for you, just use the links below.   Each one of these actions will earn us points and will move us closer to the top of the heap! 

Higgins, Hopkins, McLain & Roswell, LLC Facebook Page 
Higgins, Hopkins, McLain & Roswell, LLC LinkedIn Page 

Higgins, Hopkins, McLain & Roswell, LLC Twitter Page

If you are wondering how your favorite charity will win $500 . . . Well, that’s easy.  For each new LinkedIn connection, Twitter follow, and Facebook Like, we will enter your name into a drawing.  At the end of the contest, whether we win the Social Madness Contest or not, we will select one lucky winner from our entries.  Note that the charity cannot be you, but must be a verifiable 501(c)(3) organization.  HHMR will make the donation in your name before the end of the 2012 calendar year.  For nothing more than a few minutes of your time, a deserving charity will be given $500 . . . Not a bad way to spend a few minutes. We look forward to seeing you online.

Colorado Defense Lawyers Association Elects New Board Members

I am proud of the two years I served as an At-Large Director for the CDLA and am happy to have been part of the team responsible for reinvigorating the CDLA's Trial Academy. As I now rotate off of the Board of Directors, I would like to recognize and encourage those who will be leading the CDLA over the next year. Below is the recent announcement regarding next year's Board. - David M. McLain

Denver, CO (PRWEB) May 18, 2012

The Colorado Defense Lawyers Association (CDLA) today announced that Kristin Caruso, Esq., McElroy, Deutsch, Mulvaney & Carpenter, LLP, Gregg Rich, Esq., Lambdin & Chaney, LLP, Jane Mitchell, Esq., Hall & Evans, LLC, Brendan O. Powers, Esq., Spies, Powers & Robinson, P.C., Tanner Walls, Esq., Jaudon & Avery, LLP, have joined the Association’s Board of Directors. Ms. Caruso will serve on the Executive Committee as Secretary of the organization, Mr. Rich was elected as an At-Large Board member, Ms. Mitchell as Ex-Officio member, Mr. Powers was elected as the DRI State Representative, and Tanner Walls will serve as Co-Chair of the Young Lawyers Committee.

“These appointments reflect CDLA’s continued commitment to find the best civil defense attorneys to lead and guide CDLA,” commented Teresa Seymour, CDLA Vice-President. “Their knowledge, professionalism and expertise will be invaluable to CDLA’s future as we collectively defend the interests of business and individuals in civil litigation”.

The appointments of, Mr. Rich, Mr. Powers and Mr. Walls will fill seats vacated by At-Large Director David McLain, Esq., Higgins, Hopkins, McLain & Roswell, LLC; DRI State Representative Janet Spies, Esq., Spies, Powers & Robinson, P.C.; and Young Lawyer Jody Haskins, White and Steele, P.C. CDLA thanks Ms. Salg, Harris, Karstaedt, Jamison & Powers, P.C. and for her contribution to our organization as Communications Director.

Kristin A. Caruso, Esq.

Ms. Caruso, Of Counsel, McElroy, Deutsch, Mulvaney & Carpenter, LLP, holds a B.S. from Cornell University’s School of Hotel Administration, an M.B.A. from the University of Denver, and a J.D. from the University of Denver, where she served as an editor of the Denver Journal of International Law and Policy. She is also a Medicare Set-Aside Consultant, Certified. She practices litigation in the area of general civil litigation, including workers' compensation defense. There is no issue or claim in Workers’ Compensation law or procedure that Ms. Caruso has not analyzed for employers and their insurers. She is a member of the American Bar Association, Colorado Bar Association (CBA), Denver Bar Association (DBA), CBA/DBA Interprofessional Committee, Cornell Hotel Society, the National Alliance of Medicare Set Aside Professionals, and the Defense Research Institute.

Gregg Rich, Esq.

Mr. Rich received a B.A. from California State Polytechnic University, and a J.D. from the University of Denver. His areas of expertise include construction defect, personal injury, employment and telecommunications. Currently, his practice focuses on litigation, with a special emphasis on the defense of general contractors and subcontractors in defect actions, representation of contractors in their pursuit of payment, and coverage issues. He has tried several bench trials, jury trials and arbitrations and has argued three times to the Colorado Court of Appeals. Mr. Rich is licensed to practice law in Colorado state and federal courts, the Tenth Circuit Court of Appeals and the U.S. Supreme Court. He is a member of the American Bar Association (ABA), Colorado Bar Association (CBA), Denver Bar Association (DBA), Defense Research Institute and William E. Doyle Inn of Court.

S. Jane Mitchell, Esq.

Ms. Mitchell practices in the areas of medical malpractice defense, medical device and pharmaceutical products liability, and professional licensing. She obtained a B.S. from the University of South Florida and a J.D. from the University of Florida. Ms. Mitchell is trained and experienced as a critical care nurse, and applies her extensive knowledge of all aspects of medicine in her defense of medical professionals. She has successfully defended physicians, hospitals and nurses in medical malpractice cases throughout Colorado and Florida.

Brendan O. Powers, Esq.

Mr. Powers has served as lead counsel in state and federal trials involving insurance bad faith, arson, fraud, environmental hazards, personal injury and product liability. His commercial litigation practice focuses upon contract disputes, client ownership, non-competition, trade secrets, business dissolution and landlord-tenant issues.

While the bulk of this experience naturally involves fraud and arson in the area of property and casualty insurance, Mr. Powers has been called upon to resolve questions concerning errors and omissions, business losses, fidelity bonds, forgery claims, excess and umbrella coverages, theft losses, product failure and automobile claims. He has acted as a consulting expert, including the post-litigation defense of claim denials with attendant allegations of bad faith. Mr. Powers is a frequent lecturer on these topics throughout the insurance community.

Tanner J. Walls, Esq.

Mr. Walls received his B.S. from the University of Colorado and J.D. from University of Denver Sturm College of Law and graduated in May of 2009. The majority of his practice focuses on legal and medical malpractice defense, as well as other forms of complex civil litigation. Mr. Walls’ practice also includes defending attorneys involved in disciplinary actions in front of Attorney Regulation Counsel, and representing physicians in peer review proceedings and other professional licensing matters.

About Colorado Defense Lawyers Association:

CDLA is a statewide organization of attorneys defending the interests of business and individuals in civil litigation. CDLA provides numerous educational and informational resources to its members and offering many opportunities for connections among defense trial lawyers. The following are CDLA's goals:

• Education: To teach and educate and to improve the skills of the civil defense law practitioner.

• Justice: To strive for improvement in the civil justice system.

• Balance: To be a counterpoint to the plaintiff's bar and seek balance in the justice system.

• Economics: To assist members in dealing with the economic realities of the defense law practice.

• Professionalism and Service: To urge members to practice ethically and responsibly, keeping in mind the lawyer's responsibilities that go beyond the interest of the client to the good of society as a whole.

An Analysis of the District Court Order on TCD v. AmFam.

Recently, this blog posted several articles regarding HB 10-1394, codified at C.R.S. § 13-20-808. As mentioned in those posts, C.R.S. § 13-20-808 has gathered an increasing amount of attention. Part of the interest is due to the ambiguous nature of how the trial courts are interpreting the statute. The following post analyzes the District Court of Summit County rulings in TCD, Inc. v. American Family Mutual Insurance Company, 2009CV148, which ultimately gave rise to the Court of Appeals' affirmation of the District Court's order that C.R.S. § 13-20-808 does not apply retroactively. The blog entry on that decision can be found here.

The TCD, Inc. case stems from construction of the Rio Grande Building at 333 Main Street, Frisco, Colorado (the “Project”). On or about September 15, 2006, TCD, Inc. (“TCD”) as general contractor, entered into an agreement with Frisco Gateway Center, LLC (“Gateway”), as developer, regarding construction of the Project. TCD then entered into a subcontract with Petra Roofing and Remodeling Company (“Petra”). The subcontract required Petra to “indemnify, hold harmless, and defend” TCD against claims arising out of the performance of Petra’s work on the Project. The subcontract also called for Petra to be named as an additional insured on the commercial general liability (“CGL”) insurance policy.

American Family Mutual Insurance Company (“AmFam”) issued a CGL insurance policy to Petra, effective August 22, 2006. It was amended on January 22, 2007 to add TCD, as an additional insured. The court found that the policy was cancelled, effective June 10, 2007, because of Petra’s failure to pay its premium.

A dispute eventually arose on the Project over performance and payment, which led to TCD filing a lawsuit against Gateway, (the “Underlying Action”). The Underlying Action’s purpose was to perfect and establish TCD’s right to a mechanic’s lien against the property. The Underlying Action also included counterclaims by Gateway which alleged, inter alia, that the roof installed by Petra leaked, failing to comply with the architect’s plans and specifications.

TCD demanded that AmFam defend and indemnify it in the Underlying Action, in accordance with the subcontract agreement with Petra and the insurance policy. Once AmFam denied that the policy provided TCD with any coverage, TCD initiated the present case, TCD, Inc. v. American Family Mutual Insurance Company, 2009CV148, in the District Court of Summit County, Colorado. TCD’s complaint sets forth claims for relief grounded in declaratory judgment, breach of insurance contract, breach of contract, and negligence. The issues raised, via summary judgment, are typical of insurance disputes: (1) does AmFam actually owe a duty to defend TCD regarding the counterclaims in the Underlying Action?; and (2) does AmFam actually have a duty to indemnify TCD regarding damages arising from the counterclaims in the Underlying Action?

The court decided that, as a matter of law, an insurer’s duty to defend arises solely from the complaint in the underlying action. To begin with, the court analyzed specific language of the CGL policies at issue, including the phrase “property damage,” which was caused by an “occurrence” during the policy period.[1] The policies also had an additional insured endorsement with exclusions for bodily injury or property damage.[2]

Upon review of the counterclaims in the Underlying Action, the court found that no claims of actual physical injury to tangible property existed, and especially none that purportedly occurred before the policy was canceled on June 10, 2007. The court found that none of the counterclaims in the Underlying Action set forth any averments, which fell within the property damage definition of the policy and which may have triggered a duty to defend TCD by AmFam.

TCD also argued that the damage itself manifested in the form of loss of use of tangible property that is not physically injured. According to the definition of property damage (see Footnote No. 1), loss of use would be deemed to occur at the time of the “occurrence” that caused it. The policy defines “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”

Here is where the court began its discussion and analysis of General Security Indemnity Company of Arizona v. Mountain States Mutual Casualty Company, 205 P.3d 529 (Colo. App. 2009) and C.R.S. § 13-20-808 (also known as HB 10-1394). The court quoted General Security saying, “a claim for damages arising from poor workmanship, sanding alone, does not allege an accident that constitutes a covered occurrence, regardless of the underlying legal theory pled.” General Security, 205 P.3d at 534. TCD counter-argued that HB 10-1394, recently codified as C.R.S. § 13-20-808, was enacted by the legislature to overrule the General Security decision.

While the court agreed with the intention of C.R.S. § 13-20-808, it still found the statute wanting in relation to TCD’s position. The court found that the applicability clause of the statute provided that the statute would apply to all insurance policies “currently in existence” or issued on or after the effective date of May 21, 2010. Focusing on the phrase currently in existence, the court found that the policy at issue became effective in August 2006 and ended in June 2007. The court concluded that by the ordinary meaning of the plain language, the policy at issue was not currently in existence in May 2010, when the statute was enacted.

The court explained why C.R.S. § 13-20-808 did not apply to policy at issue, stating that statutes in general are presumed to be prospective. Only clear legislative intent must appear from the statute to overcome the presumption of prospective effect. The court found no clear legislative intent in the language of the statute, pointing out specifically the “currently in existence” language, that would overcome the presumption and demonstrate retrospective application was intended.

In sum, the court found that the counterclaims in the underlying complaint contained no allegations of property damage, which fell under the policy definitions or took place before the policy was cancelled in June 2007. The court granted AmFam’s motion for summary judgment, concluding that there was no issue of material fact as to both the lack of duty to defend and the duty to indemnify owed by AmFam to TCD, regarding the counterclaims in the Underlying Action.


For more information regarding the TCD decision or the application of C.R.S. § 13-20-808, you can reach Brady Iandiorio at (303) 987-9870 or by e-mail at iandiorio@hhmrlaw.com. 

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[1] Property damage means: “(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.”

[2] Additional Insured Endorsement: Insurance does not apply to “property Damage” occurring after: “(1) All work, including materials, parts or equipment furnished in connection with such work, on the project (other than service, maintenance or repairs) to be performed by or on behalf of the additional insured(s) at the location of the covered operations has been completed; or (2) that portion of “your work” out of which the injury or damage arises has been put to its intended use by any person or organization other than another contractor or subcontractor engaged in performing operation for a principal as a part of the same project.”

Colorado Senate Bill 12-181: 2012's Version of a Prompt Pay Bill.

A potentially important legislative bill has been introduced in waning days of the 2012 legislative session, which would change many of the commercial practices that prevail in the construction industry. Senate Bill 12-181 applies to all building and construction contracts and would prohibit any contract provision that requires a contractor, subcontractor, or supplier to waive their lien in advance of payment. It also would ban any “choice of law” provisions that make a Colorado-based construction contract subject to enforcement only in another state, or under the laws of another state. 

The bill also seeks to change many existing commercial practices between contractors, subcontractors, and suppliers. It is presently unclear whether the bill allows parties to contract around these payment procedure provisions, or whether these requirements are simply “gap filling” provisions that pertain if there are no written contract terms specified on these issues.  The proposed statute would mandate payment to subcontractors and material suppliers due within seven days in the absence of a dispute about the work or materials being billed. After this seven day period, the bill would require the payment of interest at the rate of 1.5% monthly (18% annually).  In any later suit for payment, the creditor would also be able to collect reasonable attorneys’ fees.  Additionally, non-payment to a subcontractor or supplier who is later found to be entitled to prompt payment would excuse the subcontractor or supplier, and its surety bond provider, from any further performance under the contract.

It is presently unclear whether the bill allows parties to contract around these payment procedure provisions. However, it is clear that the bill provides some leeway for change orders, as long as there is (1) negotiation in good faith between the parties concerning the changed scope of work, and (2) a 50% payment of a subcontractor’s costs by the changing party within 30 days of the change order work being done. Additionally, the bill provides for retainage, but in an amount of no more than 5%.

The bill is presently set for hearing before the Colorado Senate Committee on Business, Labor, and Technology Committee on May 2, 2012 at 1:30 p.m. For more information about SB 12-181 or Colorado's lien laws, you can reach Buck Mann, Special Counsel, by e-mail at mann@hhmrlaw.com or by telephone at (303) 987-7143.

Otteman v. Journey Homes, LLC.: Slipping Out of Contractual Arbitration Provisions

Recently, the District Court of Weld County Colorado granted a motion for preliminary injunction regarding the enforceability of an arbitration provision in a purchase and sales agreement. Ms. Sue E. Otteman (the “Plaintiff”) signed a Purchase and Sale Agreement for a residence in Windsor, Colorado with Journey Homes, LLC (the “Defendant”). The agreement contained a provision calling for binding arbitration to resolve any and all claims arising between the two parties. The provision called for arbitration to be conducted by three arbiters from the American Arbitration Association (”AAA”) and for the costs to be divided equally.

Plaintiff filed a demand for arbitration with the AAA and paid the initial filing fee of $2,750 and a deposit of $1,620. Upon receiving an invoice from the AAA totaling $17,280 for her half of the arbitration fees, Plaintiff filed a motion seeking that the Defendant advance Plaintiff’s share, or in the alternative, allowing Plaintiff to commence suit in District Court. The Court granted Plaintiff’s request because Defendant refused to advance payment on behalf of the Plaintiff and Plaintiff provided a Financial Affidavit showing her inability pay for the arbitration bills.

Based on prior decisions from the Tenth Circuit Court of Appeals, the U.S. Supreme Court, and the Colorado Court of Appeals, the Weld County District Court found that Plaintiff adequately proved her inability to financially pursue her claims in arbitration, paving the way for her claims in the District Court. See Shankle v. B-G Maintenance Management of Colorado, Inc., 163 F.3d 1230 (10th Cir. 1999); see also Green Tree Financial Corp. - Alabama v. Randolph, 531 U.S. 79 (2000); and see Rains v. Foundation Health Systems Life & Health, 23 P.3d 1249 (Colo. App. 2001).

In Shankle, the Tenth Circuit Court of Appeals found that a plaintiff could not afford the cost of arbitration and affirmed the district court’s decision not to compel arbitration. In coming to the decision, the appellate court found compelling arbitration would have put the plaintiff between a rock and a hard place, which would have prohibited plaintiff from being able to resolve his claims. Shankle, 163 F.3d at 1235. The court found persuasive the fact that the arbitration provision, because of its expense to the plaintiff, failed to provide an accessible forum in which plaintiff could resolve his claims. Id.

A year later the United States Supreme Court, in Green Tree, upheld the notion that an arbitration provision could be disregarded where the costs preclude a plaintiff from vindicating his or her rights. Green Tree, 531 US at 90. However, the Supreme Court stated that such determination must be on a case-by-case inquiry and also, the party claiming the arbitration is prohibitively expensive has the burden to prove the likelihood of incurring such expenses. Id. at 92.

The Colorado Court of Appeals' case, Rains, relies on both Shankle and Green Tree in coming to its holding that arbitration provisions may, in some cases, be circumvented. See Rains, 23 P.3d 1253 – 1254. In Rains the court followed Green Tree finding that a court must, on a case-by-case inquiry, determine whether enforcing the arbitration provision will prohibit a party from pursuing its claims. Id. at 1253. The court eventually found that the Rains plaintiff did not establish the cost of arbitration would prohibit enforcement of her rights when compared to the cost of pursuing those right in court. Id.

In the Otteman v. Journey Homes, LLC case, the court found that Plaintiff met her burden by showing that she would incur at least $17,280 of additional fees in arbitration. Plaintiff also met her burden of showing that such amount was beyond her means to pay and that Defendant was unwilling to advance payment for Plaintiff. Because of all of these factors the court found that arbitration would not allow here to vindicate her rights and that Plaintiff would be allowed to proceed with her claims in District Court.

Defendant immediately appealed the order to argue that Plaintiff did not adequately prove her case regarding prohibitive costs of arbitration. Particular to Defendant's appeal was that Plaintiff’s financial affidavit, standing alone, was not sufficient to support a finding that Plaintiff could not pay the $17,280 up front arbitration costs. Additionally, Defendant argued that Plaintiff did not make any comparison to those costs which she might incur in court as opposed to arbitration. The Court of Appeals agreed with Defendant in part, vacating the order, but remanding the case with instructions for further evidentiary hearings regarding Plaintiff’s financial position.

Upon remand the court again found Plaintiff was not financially able to pay for arbitration. However, soon after that Defendant moved for summary judgment based on the statute of limitations, which was granted. Plaintiff’s claims were dismissed but after she won a reprieve from arbitration to pursue her claims in District Court. The lesson here seems to be, arbitration provisions are as susceptible to judicial tinkering as other contractual provisions. Until someone drafts a better arbitration provision, that is.

For more information regarding construction litigation in Colorado, or the enforceability of arbitration provisions in construction contracts, you can reach Brady Iandiorio at (303) 987-9816 or by e-mail at iandiorio@hhmrlaw.com.

Colorado Court of Appeals Rejects Retroactive Application of C.R.S. § 13-20-808.

In TCD, Inc. v. American Family Mutual Insurance Company, TCD appealed the district court’s summary judgment ruling in favor of American Family. TCD, Inc. v. American Family Mutual Insurance Company Colo. App. No. 11CA1046 (April 12, 2012). TCD was the general contractor on a project to construct a building for Frisco General Gateway Center, LLC (“Gateway”). TCD subcontracted with a roofer named Petra Roofing and Remodeling Company (“Petra”) to performing the roofing work for the building. The subcontract required Petra to defend and indemnify TCD and to name TCD as an additional insured under its CGL policy. American Family issued a CGL policy to Petra that named TCD as an additional insured from 2006-2007.

TCD filed suit against Gateway seeking payment for its work at the project. Gateway counterclaimed against TCD for breach of contract, negligence, and violation of the CCPA. TCD demanded that American Family defend it from the counterclaims pursuant to Petra’s policies. American Family denied coverage and a separate coverage suit ensued. At the trial court level, the court entered summary judgment for American Family because the counterclaims of Gateway did not trigger the duty to defend or indemnify TCD as an additional insured.

On appeal, TCD argued that: 1) the counterclaims raise a genuine issue of material fact regarding American Family’s duty to defend; 2) the court should hear evidence beyond the four corners of the complaint; and, 3) the court should apply C.R.S. § 13-20-808 retroactively.

Gateway’s counterclaims alleged that defective work was performed, but did not specify any resulting property damage from such work. Therefore, the Court of Appeals upheld the trial court’s ruling that the counterclaims do not constitute property damage caused by an occurrence.

TCD next argued that the court should allow it to bring in evidence beyond the counterclaims to determine if coverage exists for TCD. TCD cited two federal cases that interpreted Colorado’s “four corners of the complaint” rule liberally.[1] The Court of Appeals in this matter characterized these two cases as narrow exceptions, and found no reason to depart from the broad rule.

Finally, TCD argued that C.R.S. § 13-20-808(3) should be applied retroactively. This statute, if applied retroactively, would give TCD the benefit of a presumption for coverage. HB 10-1394, the legislation which gave rise to C.R.S. § 13-20-808, stated that the law “applies to all insurance policies currently in existence or issued on or after [May 21, 2010].” As this blog has previously covered, Colorado trial courts have held both for and against the retroactive applicability of this statute. Until this decision, no appellate court had weighed-in on whether the statute should be applied retroactively.

The Court of Appeals found the HB 10-1394 language to be unambiguous, and held that the statute should not be applied retroactively. The Court furthered its rationale with Colorado’s presumption that statutes are to be prospectively applied. The Court also heard TCD’s well-reasoned argument that this particular “occurrence” policy, like most CGL policies, would allow for claims after the prescribed policy period had ran. Under this premise, TCD argued that the CGL policy is still “in existence” on or after May 21, 2010. In rejecting this argument, the Court of Appeals concluded with “[a] plain reading of ‘currently in existence’ supports the conclusion that section 13-20-808 applies only to policies for which the policy period had not yet expired on May 21, 2010.” Therefore, as the law stands today, Colorado construction professionals will not gain the benefit of retroactive applications of C.R.S. § 13-20-808.

For more information regarding the TCD decision or the application of C.R.S. § 13-20-808, you can reach Chad Johnson at (303) 987-9870 or by e-mail at johnson@hhmrlaw.com.

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[1] See Apartment Investment Co. v. Nutmeg Insurance Co., 593 F.3d 1188 (10^th Cir. 2010); Pompa v. American Family Mutual Insurance Co., 520 F.3d 1139 (10^th Cir. 2008).

Yet Another District Court Weighs in on HB 10-1394

Since its inception, HB 1394, memorialized as C.R.S. § 13-20-808, has gathered an increasing amount of attention. Part of the interest is due to the ambiguous nature of how the second part of the statute is being ruled on by trial courts. There is a dispute which has not yet been resolved by appellate courts in Colorado regarding whether the second part of the statute is retrospective or not. The following is an analysis of an order regarding summary judgment in American States Insurance Company v. J.P. Enterprises, 2010 CV215, District Court of Larimer County.

American States Insurance Company (“ASIC”) filed a motion for summary judgment against J.P. Enterprises (“JPE”) on the basis that coverage had not been triggered and therefore, ASIC did not owe a duty to defend or indemnify. In its analysis, the court decided that ASIC did have a duty to defend based on the language of C.R.S. § 13-20-808, which did allow for retrospective application.

The background facts of the case entail a complaint by the Board of County Commissioners for Larimer County (the “Board”) filed against JPE and Delta Construction (“Delta”). The Board amended its complaint twice, alleging that the Board hired, was a third party beneficiary, or was in privity with all named defendants relating to the design and construction of the buildings which collectively comprise the Larimer County Fairgrounds buildings. All of the buildings included in that collection were completed and delivered in September 2003.

The complaint alleges that the buildings contained a number of construction defects including, but not limited to: inadequate load bearing capacity; resulting damage to real property; actual loss of use of real property and risk of bodily injury and death; construction failing to meet the standard of care resulting in defective construction, which caused material physical property damage; and, failure to use reasonable care. The Board claims the buildings need to be repaired or replaced and seek remuneration and compensation for all direct and direct costs of repairing the buildings, and for the loss of use of the buildings, which are not suitable or fit for their intended purpose.

At and around the time that the alleged causes of action arose, ASIC provided a series of insurance policies to JPE which are generally described as Commercial General Liability (“CGL”) policies and umbrella policies. The CGL policies were issued from February 22, 2002 through July 18, 2005, while the umbrella policies were issued from April 21, 2004 through July 18, 2006. The CGL policies cover any “property damage” which was caused by an “occurrence” during the policy period.[1] The ASIC policies also have the typical exclusions for damage to “your product” and to “your work.”[2]

Based on the language in the CGL policies (and similar language in the umbrella policies), ASIC sought summary judgment using the argument that ASIC has no duty to defend or indemnify JPE because the underlying complaint neither alleges property damage nor an occurrence as required by the CGL and umbrella policies. In denying ASICs motion for summary judgment in part, the court found that the second amended complaint alleged both physical property damage and loss of use resulting from JPE’s negligent work. Since these are the distinct situations the CGL and umbrella policies define as property damage, the court found that the complaint implicates both the CGL and umbrella policies.

As for whether an occurrence has been triggered under the policies, ASIC argued that the General Security Indemnity Company of Arizona v. Mountain States Mutual Casualty Company, 205 P.3d 529 (Colo. App. 2009) case applies. General Security defined “occurrence” in the same manner as the policies in the present case, however, General Security held that “a claim for damages arising from poor workmanship, standing alone, does not allege an accident that constitutes a covered occurrence, regardless of the underlying legal theory pled.” Id. at 532. ASIC argued under General Security, that JPE’s poor workmanship does not rise to the definition of “occurrence” triggering the policies.

JPE, countered that, General Security was no longer good law due to the passage of HB 1394 into law as, C.R.S. § 13-20-808. According to JPE, along with overruling General Security, C.R.S. § 13-20-808 also applied to policies in effect before the statute’s effective date of May 21, 2010. JPE argued that because the policies are occurrence-based policies that continue in effect long after the policy periods cease and have not expired, then the application would not implicate retroactivity. ASIC disagreed, arguing such application would be unconstitutionally retrospective.

The court found that C.R.S. § 13-20-808 properly applies to the CGL and umbrella policies both under JPE’s argument and under a retroactive analysis. The court acknowledged that retroactive application of statutes is general disfavored, but nevertheless noted that it is permitted in certain circumstances. A two-part analysis determines whether retroactive application of a statute is appropriate.[3]

In the first step, the Court determined that the language of the statute clearly indicated the legislature’s intention for retroactive application. C.R.S. § 13-20-808 states in pertinent part, “This act applies to all insurance policies in existence or issued on or after the effective date of this act.” Section 3 of HB 10-1394 (emphasis added). The court found that the distinction between policies “in existence” and those “issued on or after the effective date,” demonstrates the legislatures intent for C.R.S. § 13-20-808 to apply to policies issued before May 21, 2010, the effective date of the statute.

Having met the first step of the analysis, the court tackled the second step. In its analysis, the court found that C.R.S. § 13-20-808 does not implicate a vested right and thus must create a new obligation, impose a new duty, or attach a new disability for it to be applied retroactively. The court found that because of General Security, insurers would not be required to defend those insureds who had been sued for damages arising solely from such insureds’ alleged poor workmanship, under an occurrence based policy. C.R.S. § 13-20-808, on the other hand, obligates insurers to defend those insured against allegations that such insured’s work caused damage to another construction professionals work. Thus, C.R.S. § 13-20-808 creates a different obligation for insurers than had existed after General Security satisfying the second step of the two part analysis.

In the end, the court found that ASIC had a duty to defend JPE, pursuant to the CGL and umbrella policies. The motion for summary judgment was denied in part on these issues and granted on separate issues, regarding Delta.  

As stated above, the retroactive issue is still in dispute and will not be conclusively resolved until the appellate courts weigh in. This ruling is only one more on the side of retroactive application. Stay tuned for another case analysis, TCD, Inc. v. American Family Mutual Insurance Company which comes out on the other side, denying the retroactive application of C.R.S. § 13-20-808.

- For more information regarding the J.P. Enterprises case or construction litigation in Colorado, you can reach Brady Ianiorio at iandiorio@hhmrlaw.com or by calling Higgins, Hopkins, McLain & Roswell at (303) 987-9870.

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[1] Both phrases are defined in the typical language of CGL policies. Occurrence means: “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Property damage means: “(a) physical injury to tangible property, including all resulting loss of use of that property. All such loss 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.”

[2] Your Product Exclusion: “Property Damage” to “your product” arising out of it or any part of it. Your Work Exclusion: “Property Damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard.”

[3] In the first step the Court must look at whether the legislature intended the statute to be applied retroactively. The second step states that a statute can be retrospective if it either: (1) impairs a vested right; or (2) creates a new obligation, imposes a new duty, or attaches a new disability. With regard to vested rights, three factors apply: (i) whether the public interest is advanced or retarded; (ii) whether the statute gives effect to or defeats the bona fide intentions or reasonable expectations of the affected individuals; and (iii) whether the statute surprises individuals who have relied on contrary law.