Friday, September 25, 2020

Colorado’s abbreviated legislative session offers builders a reprieve

Would you believe me if I told you that this year could have been worse for builders? Had COVID-19 not hit, the Colorado Legislature may have passed bills that would have had a severely negative impact on the home building industry. In response to the COVID-19 pandemic, the Legislature temporarily adjourned in mid-March, 67 days into the 120-day legislative session. After a two-month recess, the Legislature returned for approximately one month to pass critical bills including the state budget, the school finance act and what to do with the money from the federal CARES Act. Of the bills on the calendar when the Legislature temporarily adjourned, legislators focused on those that were “fast, free, and friendly,” and let the others fall by the wayside. 

Bills that died included SB 20-138, which would have extended Colorado’s statute of repose for construction defect claims from six plus two years to 10 plus two years. The bill also contained a number of accrual and tolling provisions, which would have made it harder for builders to convince tribunals that claims were untimely. This bill died on the Senate floor, for lack of support. We will see whether plaintiffs’ attorneys will revive this effort next year. 

SB 20-093, while not an outright ban on arbitration or a legislative overturning of the Vallagio decision, would have made it harder to administer and more difficult to get cases into arbitration. The bill died under the “fast, free, and friendly” test, i.e., it faced too much opposition. I expect to see this bill again next year, in some form.

HB 20-1046 would have limited retainage to 5% on certain construction contracts. The bill also included requirements on timing of payments, interest on late payments, and attorneys’ fees and costs to be awarded to those who sued for late or non-payment. The bill died in committee prior to the COVID-19 recess in the face of opposition from owners’ groups. It remains to be seen whether this bill will be rerun next year.

The Legislature did pass a number of bills that will impact the home building community. Among them, HB 20-1155 will require, once it goes into effect, home builders to offer: a solar panel system, a solar thermal system or both; prewiring or pre-plumbing for the solar systems; and a chase or conduit for future installation of such systems. The bill will further require builders to offer: an electric vehicle charging system; prewiring for the future installation for such a system; or a plug-in receptacle in a place accessible to a vehicle parking area. Finally, the bill will require builders to offer electrical heating systems.

Buckle up for next year when some or all of the unsuccessful bills from this year return, and the plaintiffs’ bar takes another crack at the home building industry.


For additional information on Colorado's legislative session, or construction litigation in Colorado, you can reach Dave McLain by telephone at (303) 987-9813 or by email at mclain@hhmrlaw.com

Thursday, September 10, 2020

David McLain Recognized Among the 2021 Edition of The Best Lawyers in America© for Construction Law

David McLain is a founding member of Higgins, Hopkins, McLain & Roswell.  Mr. McLain has over 22 years of experience and is well known for his work in the defense of the construction industry, particularly in the area of construction defect litigation. He is a member of the Executive Committee of the CLM Claims College - School of Construction, which is the premier course for insurance, industry, and legal professionals. Law Week Colorado recently named Mr. McLain as the 2019 People’s Choice for Best Construction Defects Lawyer for Defendants.

HHMR is highly regarded for its expertise in construction law and the litigation of construction-related claims, including the defense of large and complex construction defect matters. Our attorneys provide exceptional service to individuals, business owners, Fortune 500 companies, and the insurance industry. The firm is experienced in providing legal support throughout trials and alternative dispute resolution such as mediations and arbitrations.

Since it was first published in 1983, Best Lawyers has become universally regarded as the definitive guide to legal excellence. Best Lawyers lists are compiled based on an exhaustive peer-review evaluation. Almost 108,000 industry leading lawyers are eligible to vote (from around the world), and is has received over 13 million evaluations on the legal abilities of lawyers based on their specific practice areas around the world. For the 2021 Edition of The Best Lawyers in America, 9.4 million votes were analyzed, which resulted in more than 67,000 leading lawyers being included in the new edition. Lawyers are not required or allowed to pay a fee to be listed; therefore, inclusion in Best Lawyers is considered a singular honor.

 

For information about construction litigation in Colorado, you can reach Mr. McLain by e-mail at mclain@hhmrlaw.com or by telephone at (303) 987-9813.

Tuesday, September 8, 2020

Requesting an Allocation Between Covered and Non-Covered Damages? [Do] Think Twice, It’s [Not Always] All Right.

As is often the case in construction defect and other insurance defense litigation, a plaintiff’s claims for relief typically encompass both covered and uncovered damages.  Obviously, it is in the insured’s best interests to have as many damages covered by insurance as possible.  From the insurer’s perspective and against the backdrop of owing duty of good faith and fair dealing to its insureds, however, it is generally better to have an allocation of covered vs. non-covered damages.  This places the insurer, insured, and insurance retained defense counsel in a difficult position. 

A recent opinion from U.S. District Court for the District of Colorado, Rockhill Ins. Co. v. CFI-Global Fisheries Mgmt, Civil Action No. 1:16-CV-02760-RM-MJW, 2020 U.S. Dist. LEXIS 35209 (D. Colo. Mar. 2, 2020), sheds light on the issue, even though some may feel it only further muddies already murky waters.  

Rockhill involved review of an arbitration proceeding that property-owner, Heirloom I, LLC (“Heirloom”) filed against CFI-Global Fisheries Management (“CFI”).  Rockhill Insurance Company (“Rockhill Insurance”) was asked to defend the arbitration as CFI’s professional and general liability insurer.  At issue in the arbitration was Heirloom’s claim that CFI defectively designed and constructed a fisheries enhancement that was destroyed by natural processes four times in three years.

Rockhill Insurance agreed to defend the arbitration but reserved the right to deny coverage based on various exclusions, including a faulty workmanship exclusion.  The arbitrators ultimately awarded Heirloom $609,995.91, and the parties subsequently stipulated an additional $265,000 award of attorney fees. The decision was not accompanied by a reasoned award as neither party requested such.

Prior to the issuance of the arbitration award, Rockhill Insurance filed a federal declaratory judgment action against CFI and Heirloom alleging that it had no duty to defend and indemnify CFI in the arbitration.  CFI asserted counterclaims for declaratory judgment, breach of contract, and bad faith for Rockhill Insurance’s failure to timely settle.  After the arbitration award entered, the U.S. District Court for the District of Colorado granted summary judgment in favor of Rockhill Insurance, holding, in pertinent part, that the entirety of the arbitration award was excluded under the policy’s faulty workmanship exclusion. 

The Tenth Circuit Court of Appeals, in Rockhill Ins. Co. v. CFI-Global Fisheries Mgmt., 782 F. App'x 667 (10th Cir. 2019), disagreed, and found that the faulty workmanship exclusion did not apply to design failing, and remanded the case for the district court to consider in the first instance whether the entire arbitration award is covered under a correct reading of the exclusion, or whether the damages could be apportioned between covered professional design services and non-covered construction work.

On remand, the Rockhill court emphasized that because Rockhill Insurance controlled the defense, it “had a corresponding duty to ensure that the damages were allocated between those that were covered under CFI’s policy and those that were not.”  Because Rockhill Insurance failed to request an allocated or reasoned award, the arbitrators issued a standard, non-explanatory, award that said nothing with respect to allocation between covered and non-covered damages.  Under such circumstances the Rockhill court held that all damages awarded are presumed covered under the policy.  To support its finding that Rockhill Insurance did not meet its burden of establishing that it was not liable for the entire award, the Rockhill court relied on the fact that the arbitrators were presented with evidence that CFI’s design work was so faulty that that project was destined to fail, and there was no evidence that any of the damages awarded were due solely to CFI’s construction work.

Though the Rockhill decision may surprise Colorado insurance practitioners, especially insurance defense attorneys, one must bear in mind that like other opinions of the U.S. District Court for the District of Colorado, Rockhill is not binding on Colorado state courts.  Further, Rockhill does not go so far as to expressly state that insurance defense counsel has any affirmative duty to seek an allocation between covered and non-covered damages, or that an insurer can direct insurance defense counsel to seek such an allocation.  Such a proposition would insert potentially prejudicial coverage issues into a case in direct contravention of, for example, Colorado Rule of Evidence 411 or insurance defense counsel’s ethical duties as set forth in Colorado Ethics Opinion 91. 

The important takeaway from Rockhill is that it highlights the danger for insurers relying on coverage defenses that do not, prior to an action’s conclusion, at least request intervention in order to seek allocation of covered vs. non-covered damages.  While Colorado courts almost always deny such requests, the fact that such a request was made can be used in an effort to preserve an insurer’s right to subsequently seek allocation.  If no request is made, regardless of whether it is successful, Rockhill makes clear that the carrier risks both waiving its right to seek allocation after the fact, and liability for an entire damages award.

Rockhill’s effect may be that insurers ramp up efforts to request that an insured seek allocation through not only special verdict forms and reasoned arbitration awards, but also case investigation and discovery.  The extent to which it is advisable for an insured defendant to cooperate with such requests is outside the scope of this article.  In such situations, insurance defense counsel should inform its client of the issues and the client’s right to consult with, and follow, the often nuanced, case-specific advice of coverage or other independent counsel.


For additional information regarding the Rockhill decision, or construction litigation in Colorado, you can reach out to Todd Likman by telephone at (303) 987-9814 or by e-mail at likman@hhmrlaw.com.





Monday, June 29, 2020

Colorado Legislative Update: HB 20-1155, HB 20-1290, and HB 20-1348

This year’s Colorado State Legislative session was cut short. However, in the period of time Colorado’s Legislature was in session, it passed and evaluated important legislation for Colorado homebuilders. This article highlights relevant legislation for Colorado homebuilders.

1.      HB 20-1155

This Bill creates new requirements on new homebuilders to offer renewable energy systems to the buyer of a new home. Specifically, the Bill requires homebuilders to offer each of the following:

  • A solar panel system, a solar thermal system, or both;
  • Prewiring or pre-plumbing for the above solar systems; and,
  • A chase or conduit for future installation of such systems.

The Bill further requires Colorado homebuilders to offer homebuyers one of the following:

  • An electric vehicle charging system;
  • Prewiring for the future installation for such a system; or, 
  • A plug-in receptacle in a place accessible to a vehicle parking area.

Colorado homebuilders must also offer a homebuyer an electrical heating system.

The Bill passed Colorado’s Legislature is currently awaiting signature of the Governor.

2.      HB 20-1290

This Bill sets forth additional requirements that an insurance carrier must prove in order to successfully plead a failure-to-cooperate defense in an action concerning an insurance policy providing first-party benefits or coverage. The conditions that must be present are the following.

  • The insurer submitted a written request to the insured for the requested information;
  • The information requested was necessary for litigation and was not available to the insurer without the assistance of the insured;
  • The insured was provided 60 days to respond;
  • The written request was for information a reasonable person would determine the insurer needed to adjust the claim filed by the insured or to prevent fraud; and
  • The insurer gave the insured an opportunity to cure within 60 days and provided notice to the insured within 60 days, describing, with particularity, the alleged failure to cooperate.

Additionally, the Bill does not relieve the insurer of its duty to investigate and any language in a policy that conflicts with this Bill is void.

The Bill passed the Colorado Legislature and is awaiting signature of the Governor.

3.      HB 20-1348

This Bill proposed expanding employer liability for the tortious actions of its employees. The Bill was in response to a 2017 Colorado Supreme Court decision which held that when an employer admits liability for the actions of its employee, the plaintiff cannot assert additional claims against the employer arising out of the same incident. The Bill intended to reverse the Colorado Supreme Court’s decision and allow a plaintiff, bringing a civil tort claim, to bring additional claims against an employer arising out of the same incident as the one involving an employee.

The consequence of the Bill would have been to prevent an employer from avoiding liability for negligent acts by admitting an employee was in the course and scope of employment when the tortious act was committed. 

Fortunately, for employers, the Bill failed to pass to the Colorado Legislature.




For additional information regarding any of the above Bills 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.




 


Thursday, June 18, 2020

Most Common OSHA Violations Highlight Ongoing Risks

In the 12 months from October 2018 through September 2019, the most recent period reported by OSHA,[1] the workplace safety agency cited the following standards[2] more than any other in the 28 states which do not have OSHA-approved state plans, including Colorado:

  1. 1926.501 – Duty to have fall protection – included in 459 citations, resulting in $2,475,596 in penalties ($5,393/citation);
  2. 1926.451 – General requirements for scaffolds – included in 265 citations, resulting in $834,324 in penalties ($3,148/citation);
  3. 1926.1053 – Requirements for ladders including job-made ladders – included in 164 citations, resulting in $354,853 in penalties ($2,163/citation);
  4. 1926.503 – Training requirements related to fall protection - included in 114 citations, resulting in $156,076 in penalties ($1,369/citation); 
  5. 1926.405 - Wiring methods, components, and equipment for general use – included in 93 citations, resulting in $150,821 in penalties ($1,621/citation);
  6. 1926.20 - General safety and health provisions – included in 85 citations, resulting in $328,491 in penalties ($3,864/citation);
  7. 1926.1052 – Requirements for stairways – included in 79 citations, resulting in $155,651 in penalties ($1,970/citation);
  8. 1926.102 – Requirements for eye and face protection - included in 67 citations, resulting in $165,595 in penalties ($2,471/citation);
  9. 1926.403 – General requirements for electrical conductors and equipment – included in 63 citations, resulting in $146,050 in penalties ($2,318/citation), and;
  10. 1926.100 – Requirements for head protection – included in 55 citations, resulting in $127,274 in penalties ($2,314/citation).

For those companies facing a slow-down in production related to the COVID-19 outbreak, it may be a good time to revamp safety programs.  A good place to start this process is the OSHA Compliance Assistance Quick Start webpage.[3] Note that pursuant to OSHA’s Multi-Employer Citation Policy,[4] construction jobsites can involve multiple employers (i.e., general contractors, construction managers, subcontractors, etc.), each of which may be liable for OSHA violations.  OSHA's construction standard 1926.20(b) requires construction employers to have accident prevention programs that provide for frequent and regular inspection of the jobsites, materials, and equipment by competent persons designated by the employers.

For those companies interested in instituting a safety & health program, or reevaluating the program they have in place, three good resources include OSHA’s Construction eTool: Safety & Health Program Component,[5] its Recommended Practices for Safety and Health Programs in Construction,[6] and its Recommended Practices for Safety and Health Programs.[7]

As OSHA states in the Foreword to its Recommended Practices for Safety and Health Programs in Construction:


Establishing a safety and health program at your job site is one of the most effective ways of protecting your most valuable asset: your workers. Losing workers to injury or illness, even for a short time, can cause significant disruption and cost - to you as well as the workers and their families. It can also damage workplace morale, productivity, turnover, and reputation. 

Particularly with respect to health and safety, an ounce of prevention is worth a pound of cure.  As Sergeant Phil Esterhaus admonished each week on Hill Street Blues, “Let’s be careful out there.”  In the construction industry, this starts with a good safety and health program; take this time to reevaluate yours now.    

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For additional information regarding OSHA violations, or construction litigation in Colorado, you can reach out to Dave McLain by telephone at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.







Tuesday, June 9, 2020

Colorado Legislature Postpones Indefinitely SB 20-093

As previously reported, for certain consumer and employment arbitrations, Senate Bill 20-93 would have:

  • Prohibited the waiver of standards for and challenges for evident partiality prior to a claim being filed and required any waiver of such provisions after the claim is filed to be in writing;
  • Provided that the right of a party to challenge an arbitrator based on evident partiality is waived if not raised within a reasonable time of learning of the information leading to the challenge but that such right is not waived if caused by the opposing party;
  • Established ethical standards for arbitrators; and
  • Required specified public disclosures by arbitration services providers but included protections for certain confidential information.

The SB 93 would also have required an individual arbitrator for certain consumer and employment arbitrations to make additional disclosures of information that might affect the arbitrator’s impartiality.  The Bill also specified how attorney fees and other reasonable expenses are to be awarded if a court vacates an award because of an arbitrator’s evident partiality or failure to make required disclosures and clarifies when appeals of orders may be made in consumer and employee arbitrations.

The Bill also provided that for a standard form contract involving a consumer or employee:

  • Specified terms are unenforceable as against public policy;
  • Including an unenforceable term constitutes a deceptive trade practice under the "Colorado Consumer Protection Act"; and 
  • Determined how certain cost-shifting provisions are to be interpreted.

On June 4th, the House Finance Committee postponed indefinitely SB 93.  I assume that the bill was killed because it was not Fast, Friendly (i.e., lacking opposition), and Free.  Though enough amendments were made to ameliorate some of the most serious concerns raised by opponents, including the construction industry, to get it out of the Senate, enough resistance remained to violate the “Friendly” test for whether the Colorado Legislature would pass is this year.  Stay tuned next year, as this issue is sure to have a repeat performance.


For additional information regarding construction litigation in Colorado, or the legislative measure which may impact such litigation, feel free to reach out to David M. McLain by telephone at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.



 


Tuesday, June 2, 2020

Scholarships Available for the 2020 CLM Claims College

I am pleased to have been invited to serve on the Executive Council and Faculty for this year’s CLM Claims College – School of Construction, which will be held at the Marriott Baltimore Waterfront from Wednesday, September 9, 2020 through Saturday, September 12, 2020.  This year’s Level 1 courses are being held virtually, so there is no need to travel to Baltimore if you are interested in starting the three-year program this year.

As a result of my service on the Executive Council, I can offer scholarships (registration fee only) to industry professionals (insurance - risk, adjusters, claims, etc. and corporate) interested in attending. Please e-mail me if you would like to take advantage of the free registration scholarship offered by the CLM.

2020 Claims College Overview

The education of claims resolution professionals is important to the CLM. That is why CLM established the Claims College in 2012 and enlisted some of the industry’s best professionals to create and teach courses. Since its inception, hundreds of students have attended the Claims College, earning their CCP (Certified Claims Professional) designation.

The College presents courses in eight three-level specialty schools and three one-level schools with more on the horizon. Schools include:

Casualty Claims

Claims Mediation

Construction

Cyber Claims

Extra-Contractual Claims

Leadership

Professional Lines

Property Claims

Transportation

Workers Compensation

Students must pass all three levels of a school to earn their CCP. Each level consists of reading materials, in-class instruction, group projects, and an exam. 

2020 School of Construction Overview

Construction claims present complexities in claim handling, are often multiparty cases with cross claims and third-party claims between and among the numerous defendants, intertwined with issues involving insurance coverage. The stakes for these types of cases are high as the damages claimed 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. The construction claims world is an unfriendly place for the claims professional who has not been properly trained and exposed to these issues.

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.

About The CLM

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 45,000 Members and Fellows—a number that grows by hundreds each month.


For additional information regarding the CLM Claims College, you can reach out to Dave 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.