Monday, September 26, 2011

Another Colorado District Court Refuses to Apply HB 10-1394 Retroactively.

In Martinez v. Mike Wells Construction Company, 09CV227, Teller County District Court Judge Edward S. Colt refused to apply C.R.S. § 13-20-808 retroactively to provide coverage for the underlying construction defect allegations. According to the recitation of facts in Judge Colt’s March 2011 order, Martinez contracted with Mike Wells Construction to serve as the general contractor for the construction of a home. At that time, Mike Wells Construction was insured through ProBuilders Specialty Insurance Company, RRG. Disputes arose between Martinez and Mike Wells Construction, resulting in Martinez ordering it off of the project in mid-November 2007 and terminating its right to work there by letter dated November 28, 2007.

Mike Wells, the owner of the corporation, subsequently died. Martinez sued Mike Wells Construction in July 2009 for breach of contract and various claims relating to alleged defecting workmanship. Martinez provided notice of the suit to the special administrator of the probate estate. No answer having been filed, the court entered a default judgment against Mike Wells Construction and Martinez sought to garnish Mike Wells Construction’s ProBuilders insurance policy.

In framing the issues related to the cross motions for summary judgment filed by Martinez and ProBuilders, Judge Colt stated:

At its core, the issue here is whether Plaintiff may recover against ProBuilders for damages she incurred due to Mike Wells’ faulty workmanship.  Under General Security, supra, she may not recover, and summary judgment for ProBuilders is appropriate.  Should the Court apply the subsequently-adopted statute, which presumes that shoddy work is a covered event unless the property damage is intended and expected by the insured, then a different result is warranted.

In looking at the statute, Judge Colt noted that the editor’s note to the statute provides that “Section 3 of Chapter 253, Session Laws of Colorado 2010, provides that the act adding this section applies to all insurance policies in existence as of, or issued on or after, May 21, 2010.”  While Martinez obviously argued that the statute applies, ProBuilders argued that such retroactive application of the statute to an insurance policy which expired prior to its enactment would be unconstitutional.  The obvious issue, as framed in the order, was “what significance should be given to the legislative term ‘currently in existence?’”

After discussing various previous cases on the subject, Judge Colt found persuasive ProBuilders’ argument that the statute does not apply retroactively, and that:

the policy at issue, which would have expired not later than March 28, 2008, and which was purportedly terminated by written notice of the insurer on November 18, 2007, must be interpreted by the standards set out in General Security, supra.  There is no evidence that the Colorado legislature intended retroactive application, at least to policies which had already expired prior to the date of the legislation.

In applying the General Security standards, Judge Colt held:

The policy at issue before the Court does not, by its terms, cover faulty workmanship, and, following existing Colorado precedent, . . . , the substandard workmanship alleged by Plaintiff is not a fortuitous event resulting in an occurrence which would trigger coverage.  The insurer had no duty to defend under these facts, nor any duty to indemnify.  ProBuilders’ motion for cross summary judgment is granted, Plaintiff’s motion for summary judgment is denied.

As I stated in a previous blog entry, until there is appellate case law on the subject, I expect that there will be continued interest in any and all trial court orders interpreting or applying C.R.S. § 13-20-808. If you would like a copy of the order discussed in this entry, please send me an e-mail at Also, if you have any additional orders on point, I would very much like to see them. Please send me any orders you may have.

-- David M. McLain

For additional information regarding Colorado construction litigation, please contact David M. McLain at (303) 987-9813 or by e-mail at

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