Thursday, May 5, 2016

HOA Coalition Statement on Construction-Defects Transparency Legislation


FOR IMMEDIATE RELEASE
Contact: Bill Ray / 303-885-1881

DENVER—The Homeownership Opportunity Alliance—a broad coalition of business groups, builders, elected officials and affordable housing advocates—provided the following statements on reports that there will be no construction-defects transparency legislation this session:

“We are disappointed that negotiations broke down today and that event was immediately turned into an effort to use the media to score political points. The Homeownership Opportunity Alliance has worked on this issue for three years, and we are committed to finding a resolution that will address Colorado’s housing needs, especially through the development of attainable condominiums,” said Tom Clark, Chief Executive Officer of the Metro Denver Economic Development Corporation. “We understand the importance of this issue for our state, for working families, for first-time homebuyers and for anyone along the housing spectrum who is struggling to find a home. That's why we will remain committed to working on this issue.”                                                                                                                                                                                                
The Homeownership Opportunity Alliance’s diverse coalition includes more than 50 organizations from across Colorado. The coalition also includes individual mayors and 14 different communities that have passed local ordinances to address attainable condominium development.

“Affordable and attainable housing has been a top priority of the 41-member Metro Mayors Caucus for decades,” said Lakewood Mayor Adam Paul. “Throughout this process, we have partnered with affordable housing advocates and the business community because we know that providing a spectrum of housing, from millennials to seniors, is so critical to creating and maintaining inclusive communities."

“While we are disappointed that we could not convince the other side to increase transparency and give homeowners a voice in whether their most precious asset—their home—is tied up in long and costly litigation, we are not without hope,” Mayor Paul continued. “In more than 14 communities, representing nearly 2.4 million Coloradans, we have taken steps to ensure that homeowners receive information and have a say in whether their board engages in litigation that could leave them unable to sell or refinance their home—and on the line for costly assessments. We will continue to pursue transparency and accountability at the local level through the passage of local ordinances.”

The coalition also has featured our state’s leading affordable-housing advocates, including Housing Colorado, Habitat for Humanity and the Urban Land Conservancy.

“Housing Colorado’s interest in this issue has always been—and will remain—seeking reform that will result in more affordable, entry-level homeownership opportunities for moderate income Coloradans,” said Sara Reynolds, executive director of Housing Colorado. “We are profoundly disappointed that once again, the opportunity for meaningful reform on construction-defects litigation has failed due to long-standing and entrenched political alliances."

“The construction defects issue is a complex one, but the tools were available to provide a common-sense solution that would address many of the flaws in our current system.  The opportunity has been lost.  With median home prices leaping 12 percent in just one year alone, homeownership will continue to get farther and farther out of reach for hundreds of thousands of Coloradans,” Reynolds concluded.

Homeownership Opportunity Alliance Coalition

American Council of Engineering Companies of Colorado
American Institute of Architects – Colorado Chapter
American Subcontractors Association
Apartment Association of Metro Denver
Associated Builders and Contractors, Rocky Mountain
Associated General Contractors
Aurora Economic Development Council
Building Jobs 4 Colorado
Cherry Creek Area Business Alliance
Colorado Apartment Association
Colorado Association of Commerce and Industry
Colorado Association of Home Builders
CO Association of Mechanical and Plumbing Contractors
CO Association of Plumbing-Heating-Cooling Contractors
Colorado Association of REALTORS
Colorado Bankers Association
Colorado BUILDS
Colorado Business Roundtable
Colorado Civil Justice League
Colorado Competitive Council
Colorado Concern
Colorado Contractors Association
Colorado Mortgage Lenders Association
Colorado Municipal League
Colorado Springs Business Alliance
Colorado Women's Chamber of Commerce
Denver Metro Chamber of Commerce
Denver South Economic Development Partnership
Douglas County Business Alliance
Douglas County Commissioners
Downtown Denver Partnership
Economic Development Council of Colorado
Habitat for Humanity
Hispanic Chamber of Commerce of Metro Denver
Hispanic Contractors of Colorado
Home Builders Association of Metro Denver
Hope Communities
Housing and Building Association of Colorado Springs
Housing Colorado
Independent Bankers of Colorado
Independent Electrical Contractors
International Council of Shopping Centers
Land Title Association
Mechanical Contractors Association of Colorado
Mechanical Service Contractors of Colorado
Metro Denver Economic Development Corporation
Metro Mayors Caucus
NAIOP Colorado
National Electrical Contractors
NFIB—Colorado
Parker Area Chamber of Commerce
Sheet Metal and Air Conditioning Contractors
South Metro Denver Chamber
Transit Alliance

Urban Land Conservancy

Tuesday, May 3, 2016

KF-103 v. American Family Mutual Insurance: Tenth Circuit Upholds the “Complaint Rule”

In Colorado, the “complaint rule” requires insurance carriers to provide a defense to its insured when the allegations contained in the complaint allege any set of facts that may fall within an insurance policy.  Some insurers have pushed back on this rule arguing that it may cause an insurer to exercise its duty to defend although the underlying facts ultimately do not fall within the policy.

In KF 103-CV, LLC v. American Family Mutual Insurance Company, 2015 WL 6517782, the Tenth Circuit of the United States Court of Appeals upheld the complaint rule.  In its decision, the Tenth Circuit cited several Colorado state court rulings recognizing the courts’ intent to incentivize insurers to defend policies that may facially fall within the terms of the policy.  Where there is uncertainty about coverage, the Tenth Circuit cited a Colorado Supreme Court case stating, “[t]he appropriate course of action for an insurer who believes that it is under no obligation to defend, is to provide a defense to the insured under the reservation of its rights.” 

KF 103 v. American Family arose out of an underlying easement dispute.  KF 103 purchased a piece of property from the Infinity Group and, as a condition of the purchasing agreement, KF 103 required the Infinity Group to make improvements to an intersection near the property.  Several neighbors complained, contending that the improvements interfered with their easements adjacent to the property.

KF 103 brought a quiet title action and, on October 13, 2010, the state district court ruled that the improvement was trespass and intentional damage to the easement, ordering KF 103 to restore the easement.  In a second hearing to determine remedies, the El Paso County Court held KF 103 liable for trespass, conspiracy to trespass, and negligence.  KF 103 requested that American Family reimburse it for its attorney’s fees and defense costs, which it refused.  KF 103 then brought suit against American Family alleging breach of contract and bad faith for its refusal to defend.  The case was removed to federal district court where American Family was found to have no duty to defend KF 103 because the claims did not fall within the coverage.  KF 103 appealed.

The Tenth Circuit opined that, to date, neither the Colorado Supreme Court nor the Colorado Court of Appeals have recognized any exceptions to the complaint rule.  The Court explained that Colorado courts are reluctant to do so to protect an insured party’s reasonable expectation that “[b]y purchasing insurance … he will not be required to furnish the cost of defending actions that facially fall within the terms of the policy.”  Cotter Corp v. Am. Empire Surplus Lines Ins. Co., 90 P.3d 814, 828 (Colo. 2004) (en banc).  The Tenth Circuit further stated that Colorado courts acknowledge the purpose of insurance coverage and place the burden on the insurer, rather than the insured, to “accommodate the uncertainty of what the underlying litigation might reveal regarding the duty to defend.”    

Specific to KF 103, its general liability insurance policy with American Family covered damages that KF 103 “becomes legally obligated to pay” because of “property damage” resulting from an “occurrence.”  Additionally, the policy excluded damages “expected or intended from the standpoint of the insured.”  To determine whether American Family had a duty, the Tenth Circuit analyzed only “the factual allegations in the complaint, and not the legal claims …” Gerrity Co. v. CIGNA Prop. & Cas. Ins. Co., 850 P.2d 606, 607 (Colo. App. 1993). 

American Family argued that the claims, like trespass, brought against KF 103 are intentional torts and therefore, excluded from the policy.  However, the Tenth Circuit found that volitional acts do not always have “expected or intended” damages.  Trespass only requires the intent to do the act that itself constitutes, or inevitably causes—the intrusion; intent to violate property rights is not required.  Burt v. Beautiful Savior Lutheran Church, 809 P.2d 1064, 1067 (Colo. App. 1990).  Thus, KF 103 could be liable for trespass because it intended to alter the property but still covered by the policy because it did not intend to harm the neighbors’ easement rights. 

Furthermore, the Tenth Circuit found that where the allegations asserted KF 103 was deliberate in its actions, they also asserted KF 103 was reckless as an alternative.  Recklessness is not necessarily conduct causing damage that is “expected or intended” from the standpoint of the insured.  Because there is some doubt as to whether the damage to the easement rights was “expected or intended,” the Tenth Circuit held that the allegations are arguably covered by the policy as an occurrence.  It stated that terms of an insurance policy should be construed broadly in favor of a duty to defend.  The district court decision was reversed and remanded finding that American Family had a duty to defend.

The complaint rule remains the general rule.  Developments in KF 103 v. American Family indicate that some Colorado courts view intentional claims as exclusions to insurance policies.  However, the Tenth Circuit challenges such courts to place the burden on the insurer regarding the duty to defend, then conduct a more in-depth analysis of exclusions of intentional claims.

For more information regarding the KF 103 decision or Colorado construction litigation, you can reach Adria Robinson by e-mail at robinson@hhmrlaw.com or by telephone at (303) 987-9814.

Friday, April 29, 2016

Landmark Towers Association, Inc. v. UMB Bank, N.A. or: One Bad Apple Spoils the Whole Bunch

On April 21, 2016, the Colorado Court of Appeals issued an opinion that immediately drew the ire of the greater real estate development industry and those concerned about affordable housing in a state in the midst of unprecedented soaring rent and housing prices. The Landmark Towers Assn., Inc. v. UMB Bank, N.A., 2016 COA 61, decision is the result of protracted litigation arising out of construction and sale of the ill-fated European Village (“Village”) residential community. For a thorough summary of the origins of the development and the unfortunate story of the man behind the curtain, review the Denver Post’s article titled “Zachary Davidson, Denver Landmark developer, and his fall from grace.” (http://www.denverpost.com/ci_22656011/fall-from-grace-zach-davidson-landmark denver)

Despite the unique facts and circumstances relating to the questionable dealings by the developer, Mr. Zachary Davidson, the decision now stands to turn the Colorado real estate development business on its head. Specifically, a group of condominium owners, who did not live in the Village, learned that their properties had been included in a special district, the Marin Metropolitan District (“District”), to finance the Village. Prior to their purchase, Mr. Davidson failed to disclose to the condominium owners that they would be responsible for financing the Village’s development through previously issued bonds by the District to be paid for through their property taxes. Understandably frustrated by this discovery the condominium owners, through the Landmark Towers Association, Inc. (“Landmark HOA”), investigated the origin of these unforeseen property taxes.

The owners discovered that, prior to the construction of their condominium units; Mr. Davidson bought land near their units and created the District under Title 32, Article 1 of the Colorado Revised Statutes including their future units in the District. Mr. Davidson included their condominiums specifically to provide a sufficient tax base for the Village construction. Once the District was created, by means of misrepresentations to the city and fraud on the district court, Mr. Davidson and other organizers (his associates) then submitted a service plan for the District which provided that the District could issue up to $35,000,000.00 in general obligation bonds bearing an interest rate of as much as 12% which would be paid over a thirty-year period. The service plan also provided that the District would give notice of the special district to individuals under contract to the condominium units before conveyance of title. It failed to provide such notice. Mr. Davidson and the other organizers then filed a petition for organization with the district court which then instructed that an organizational election had to be held for the District’s service plan to be ratified.

So that Mr. Davidson could in effect ratify his own service plan, he and his associates entered into sham transactions to become “eligible electors” under C.R.S. § 32-1-103(5)(a). Specifically, they executed contracts to purchase 1/20th interests in ten-by-ten parcels in the District. They did so as a thinly veiled attempt to comply with the Tax Payer Bill of Rights (“TABOR”). Not surprisingly, the “tax bill,” Mr. Davidson’s concocted service plan, passed with voter approval. Skipping over a litany of fraud, the condominium unit owners then purchased their units without notice of their impending tax debt, discovered the tax debt, and then brought this case an attempt to recover taxes paid to the District. The Court ruled the organizers’ contracts did not make them eligible electors under TABOR. Thus, the organizers illegally participated in the election and their votes were void.

Unfortunately, the Colorado Court of Appeals in issuing its ruling appears to have used too broad of a brush to wipe away Mr. Davidson’s pervasive fraud and invalidated a common practice among real estate developers. In Colorado, it is common among real estate developers, when dealing with undeveloped parcels, to make themselves eligible electors through similar small transactions in the subject development. The reason for this being that it is an undeveloped lot and there is no one to vote. What is not common is concealing the impending tax liability from prospective purchasers and sticking them with the bill for pay for developments which do not benefit the district.

To fully appreciate the ramifications of the Landmark case it is important to consider the following: 1) there has been over $9,000,000,000 in local government debt issued in Colorado since 2001; 2) a significant portion of that debt is held by local investors; and 3) a perception that the debt is at risk due to potential legal claims could negatively impact Colorado’s credit rating. Further, in direct response to the Landmark case, seven transactions, worth in excess of $73,000,000 have been postponed due the financial uncertainty the case has created.

In sum, immediate legislative action is required to resolve the well intentioned, but perhaps financially devastating effects of Landmark ruling. Should nothing be done, Coloradoans can anticipate a significant reduction in housing development, construction layoffs, and small investors losing collectively large sums of money.


For more information regarding the Landmark case, you can reach Jean Meyer by telephone at (303) 987-9815 or by e-mail at meyer@hhmrlaw.com.

Saturday, April 16, 2016

HHMR has an Opening for a New Associate with 3-5 Years' Experience

Higgins, Hopkins, McLain & Roswell, LLC, located in Cherry Creek, has an opening for a litigation associate with 3-5 years experience in Civil Litigation, preferably in Construction Defect and/or in General Casualty/Insurance Defense. Deposition experience needed. Trial experience is a significant plus. We seek team players who are detail-oriented. We offer a competitive salary commensurate with experience and offer a strong benefit plan. Please submit resume, references, and writing samples to Kelli Andrews at Andrews@hhmrlaw.com.

Thursday, March 10, 2016

HHMR Attorneys to Speak at an Upcoming Seminar Regarding Managing Risk, Insurance, and a Legislative Overview

On March 16th, Sheri Roswell, Lisa Dunn, and Dave McLain will be speaking at a seminar covering risk management, insurance, and a legislative overview:

3:00 - 3:15         Program Introductions
3:15 - 3:40         Managing Risk and Legal Considerations
3:40 - 4:05         Insurance - Considerations, Options, Builder's Risk and Third-Party Inspections
4:05 - 4:30         Legislative Update - Recent Changes at the Local Level and State-Wide Initiatives
4:30 - 5:00         Questions and Answers  

The program, sponsored by energyLogic and Tyvek and will be followed by a happy hour.  To learn more about this event please reach out to Sheri Roswell at (303) 987-9812 or roswell@hhmrlaw.com.

Friday, October 30, 2015

HHMR Attorneys to Speak at an Upcoming CRG Lunch & Learn

Dave McLain, Sheri Roswell, and Lisa Bondy Dunn will be speaking at the final installment of a four-part series hosted by the Construction Resource Group's entitled "Everything You Need to Know About Risk Management Through the Life of Your Project and Beyond."  The November 11th Lunch & Learn, "You Did Everything Right - And You Still Got Sued. What Now?," will cover responding to a notice of claim, the litigation process, and the political environment and potential changes to the law.  

Registration is still open, through the link in the brochure below.  We hope to see you on November 11th!  

Thursday, September 10, 2015

David M. McLain named Law Week Colorado’s 2015 Barrister’s Best Construction Defects Lawyer for Defendants

It is my sincere pleasure to announce Law Week Colorado named my friend and partner, Dave McLain, as the 2015 Barrister’s Best Construction Defects Lawyer for Defendants.  Law Week Colorado’s summary of David’s accomplishments includes the following recognition: 
David McLain has set himself apart in the heated area of construction defects litigation as a founding member of his firm and as a member of several associations that serve developers.  As one of the most connected and most vocal members of this area of law, we certainly know whom to go to when the construction defects issue inevitably bubbles up again.
I can say with pride and certainty, that there is no one more deserving of such recognition in the legal and construction community than David.  I have had the honor of working side by side with David since he began practicing law.  Together, fourteen years ago, we founded Higgins, Hopkins, McLain & Roswell, LLC with a vision of serving the construction industry at the highest level.  Our firm’s Mission Statement states that “HHMR exists to embody and exemplify the principles of service and stewardship.  In everything we do, we focus on serving our clients selflessly and to the best of our ability.”  David lives our values each and every day. 

Throughout his general civil litigation career, David’s practice has focused on the representation of construction professionals and their insurers.  David has become one of the most sought after legal professionals in the region, both for his keen skills in construction litigation and for his unsurpassed leadership in professional organizations and legislative efforts.  When it comes to issues of risk management, David has an uncanny ability to evaluate exposures, identify the issues, and forge a path toward a positive outcome for his clients.  David brings intelligence, integrity and a sharp wit to all that he does.  Congratulations David; well done.

-          Sheri Roswell

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.