Monday, January 18, 2010

Recoverability of prejudgment interest in Colorado construction defect lawsuits.


In Goodyear Tire & Rubber Co. v. Holmes, 193 P.3d 821 (Colo. 2008), a homeowner brought an action against the manufacturer of a defective Entran II hose used in an embedded heating system. The homeowner sought to recover the cost of replacing the entire heating system. The rubber hose that was part of the system began to leak in 1993. After the hose continued to leak for several years, despite numerous repairs, the homeowner replaced the entire heating system in 2001 and 2002. In a suit against the manufacturer of the hose, the homeowner sought and recovered the costs of replacing the heating system. The homeowner also moved, post trial, for prejudgment interest under C.R.S. § 5-12-102, as of the date of the installation of the defective hose in 1991. The homeowner’s motion was denied. On appeal, the Court of Appeals, relying on Mesa Sand & Gravel Co. v. Landfill, Inc., 776 P.2d 362 (Colo. 1989), held that prejudgment interest should run from the time of installation of the defective hose in 1991.

After granting certiorari, the Supreme Court held that: 1) “wrongful withholding” occurred, for purposes of the accrual of prejudgment interest in replacement cost cases involving damage to property, after the plaintiff was wronged, disapproving of Porter Constr. Services, Inc. v. Ehrhardt, Keefe, Steiner and Hottman, P.C., 131 P.3d 1115 (Colo. App. 2005) and Isbill Associates, Inc. v. Denver, 666 P.2d 1117 (Colo. App. 1983); and 2) prejudgment interest started accruing on the date homeowner replaced the heating system rather than on the date the defective hose was installed.

Plaintiffs’ attorneys in construction cases have historically relied upon accrual of interest from the time of incorporation of defective construction elements to pay their contingent fees, leaving the homeowners with a greater portion of the jury award or settlement amount. The Goodyear case has left such attorneys scrambling to address this issue at the legislature. There will be more to come on this issue as the 2010 Colorado legislative session continues and plaintiff attorneys attempt to circumvent this ruling.

The attorney who drafted this entry is no longer with the firm. For additional information regarding Colorado construction litigation, please contact David M. McLain at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com
 

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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.