HBA of Metro Denver speaks out about Colorado House Bill 10-1394.

In a recent edition of the Home Builder Advocate, the Home Builders Association of Metro Denver included an article entitled, "What was accomplished by the passage of House Bill 1394? What does it mean to our industry?" In defense of the HBA's support of the bill, the article states:

Since the signing of House Bill 1394 by Gov. Ritter, some members have heard from a few fellow construction professionals that they have experienced an increase in their general liability insurance rates. The Colorado Association of Home Builders (CAHB), believes that rates for some policies have in fact increased, but they also believe that for those construction professionals with appropriate general liability insurance coverage prior to the passage of HB-1394, there were no significant changes in their premiums or coverage.

To adequately explain why CAHB supported the measure and why it was so important to our industry, we have attached two documents provided to us by CAHB which will help answer any questions that you may have regarding the provisions of HB-1394 or if you feel like you have been adversely affected by the new law. The summary of the two documents, “Colorado Instructs Courts on How to Interpret Liability Policies Issued to Contractors,” and a legal opinion from the law firm of Sherman & Howard, are particularly important. We encourage you to read both documents (see attachments) for a clear explanation of what was accomplished by the passage of House Bill 1394.

One issue addressed that is of particular importance is making clear why the exit from Colorado of some insurance companies due to the passage of HB 1394 will increase consumer protection and provide construction professionals with the general liability insurance that they thought they had actually purchased – an improvement for both the industry and the consumer. The last paragraph in the Sherman & Howard document states “while certain insurers have announced intent to vacate the Colorado construction market as a result of the new law, we believe these insurers never intended to provide coverage for construction defect claims.” Many of the policies written with a “super Montrose” exclusion, were never intended to provide insurance protection but rather a certificate of coverage which would have failed to protect both its purchaser and the public at large.

Should you have any questions regarding this bill, please do not hesitate to contact Rob Nanfelt, Executive Vice Officer of CAHB at rob@hbacolorado.com or at 303-691-2242. Or if you’d like perspective regarding CAHB’s own general liability insurance program, please contact Jon Lindstrom at 303-765-3635.

Most importantly, you should be aware that this legislation has saved several Colorado contractors from bankruptcy since, with its passage, the insurance companies that had issued policies to them are now involved in defending the companies and paying damages where appropriate.

To access the final version of the bill, go to http://www.state.co.us/gov_dir/olls/sl2010a/sl_253.pdf.

To obtain copies of any of the documents attached to this edition of the Home Builder Advocate, please contact David M. McLain by e-mail at mclain@hhmrlaw.com or by phone at (303) 987-9813.






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Sheri H. Roswell to Speak at MC Consultants' 16th Annual West Region Construction Defect and Insurance Coverage Conference

Later this week, our own Sheri Roswell, will moderate and participate in a panel discussion regarding Rocky Mountain Coverage and Current Trends.  Other panelists will include:

• Robert N. Clark, Esq., Robertson Clark, LLP; 
• Edward J. Godin, Esq., Godin & Baity; 
• Michael A. Hearn, Esq., McKenzie Rhody & Hearn; 
• Brad Ramming, Esq., Sweetbaum, Levin & Sands, P.C.; 
• Ivan A. Sarkissian, Esq., McConaughy & Sarkissian, P.C. 
• Clayton Sharkey, IMA of Colorado, and; 
• Bradley N. Shefrin, Esq., Pryor Johnson Carney Karr Nixon

This panel will discuss recent case law affecting coverage for construction defect cases in Colorado, including the General Security and Greystone decisions as well as the recent, controversial, legislation affecting coverage, Colorado House Bill 10-1394.  The panel will also discuss the practical ramifications of the new legislation and ways in which insurers may attempt to write around the new law.

About Sheri H. Roswell:

Ms. Roswell is a founding member of Higgins, Hopkins, McLain & Roswell, LLC. For the past fifteen years her practice has focused on the defense of a complex construction defect lawsuits on behalf of developers, general contractors, and other construction professionals. Ms. Roswell’s practice also frequently includes providing consulting and risk management services to clients in both residential and commercial construction matters. Her clientele includes a variety of construction professionals, from Fortune 400 companies to single contractor entities.

Ms. Roswell received her undergraduate education at the University of Colorado, School of Business in Boulder, Colorado and her Juris Doctorate from the University of Denver, College of Law. 

Ms. Roswell speaks locally and nationally on topics pertinent to the construction industry; lecturing to attorneys, construction professionals, and insurance organizations.  To contact her, call (303) 987-9812 or e-mail roswell@hhmrlaw.com.

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Tougher for Insurance Carriers to Reserve the Right to Recoup Litigation Costs in Wyoming.

The United States Court of Appeals for the Tenth Circuit, interpreting Wyoming law, recently held that a reservation-of-rights letter from an insurance company to its insured was not sufficient to allow the insurer to recoup the costs of defending the insured in construction litigation.  Rather than relying on a reservation-of-rights letter to seek recoupment of defense costs, an insurance company subject to Wyoming law should deny defense of companies at the outset if they do not agree to bear the costs.

In Emp’rs Mut. Cas. Co. v. Bartile Roofs, Inc., 2010 WL 3473382 (C.A.10 (Wyo.)), the insurance company (“EMC”) agreed to defend Bartile based on the commercial general liability (“CGL”) insurance policy it issued to Bartile.  At the same time, EMC reserved its right to “recoup defense costs from Bartile should it be determined that EMC had no duty to defend Bartile in this litigation.”

Ruling on EMC’s motion for summary judgment, the District Court for Wyoming determined that EMC had no duty to defend Bartile. However, the court also held EMC could not recover its costs of defending Bartile. The 10^th Circuit Court of Appeals affirmed the decision.[1]  The Court of Appeals first noted that the CGL insurance policies issued to Bartile contained no provision for recovering defense costs from Bartile. The court then pointed to Wyoming case law that supported its decision. In Shoshone First Bank v. Pac. Emp’rs Ins. Co., 2 P.3d 510 (Wyo. 2000), the court held that a reservation letter cannot unilaterally change an insurance contract. Further, "if an insurance carrier believes that no coverage exists, then it should deny its insured a defense at the beginning instead of defending and later attempting to recoup from is insured the costs of defending the underlying action."  Am. States Ins. Co. v. Ridco, Inc., No. Civ. 95CV158D, 1996 WL 334001184.

Wyoming follows the minority position regarding reservation letters and recoupment of costs. EMC attempted to change that in its reply brief. First, EMC argued that its reservation letter is enforceable because it was immediate, explicit, and provided adequate notice of the possibility of reimbursement. Next, EMC argued for enforcement because it was an implied-in-fact contract. Last, it argued for enforcement because the defense was provided under the reservation letter, not the CGL policy.

Unfortunately for EMC, the court did not weigh in on these issues because EMC waived them by not raising them at the District Court level.  Also worth mentioning, the term “accident” (the event that triggered EMC’s duty to defend under the CGL) was not defined in the CGL policy. The court looked to state law for the definition and found that Wyoming and Utah define the term “accident” differently when interpreting CGL policies. “Wyoming law focuses on the unexpectedness of the event, while Utah law focuses on the unexpectedness of the result or injury.” Emp’rs, at 15. Nonetheless, the court held that difference immaterial because neither definition would have triggered coverage under the CGL policy.

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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[1] The Court of Appeals also went into detail about the procedural issues raised by Bartile. Those issues were personal jurisdiction, venue, and choice of law. However, the most noteworthy issues for purposes of this blog are the recoupment-of-costs and “accident” issues.