What Construction Professionals in Colorado Must Know About Green Building

Establishing and effectively enforcing legal regulations that promote green building requires a great deal of time and effort from all involved. After years of advocating, implementing and responding to environmentally conscious building policies, we know that small changes made now can make a huge impact later on — especially when the initiative is backed by government regulations. For these changes to really be effective, all parties involved must adhere to the laws that promote green building practices. As such, construction professionals in Colorado should be aware of the following legal issues related to green building.

LEED certification expectations

Created by the United States Green Building Council, Leadership in Energy and Environmental Design — or “LEED” for short — is a set of guidelines used to identify and implement practical and measurable green building design, construction, operations and maintenance solutions. Building owners and construction professionals can use the guidelines to gain official LEED certification, which verifies that a building, home or community was designed and built using techniques aimed at achieving high performance in certain areas of human and environmental health. These techniques include:

• sustainable site development
• water savings
• energy efficiency
• materials selection
• indoor environmental quality

On July 15, 2005, then-Gov. Owens signed executive order #D005 05, which adopted LEED for existing buildings and incorporated LEED for the construction practices of all new state buildings in Colorado.

Evolving green building laws in other states

As we’ve seen time and time again, when one major government agency makes a significant change to its construction laws, a ripple effect takes place causing change in other areas. By passing the Green Building Act of 2006 (GBA), the Washington, D.C. Council decided to hold contractors to a higher standard when it comes to green building regulations. The law, which went into effect in January 2012, requires that all non-residential buildings larger than 50,000 square feet in the district be LEED certified. Contractors must prove their intention to meet LEED by filing some sort of financial collateral, such as performance surety bond insurance, which the government can collect if the contractor fails to meet LEED standards. If this law is any indication of things to come, construction professionals across the country can expect a great deal more of accountability when it comes to the environmental classification of their finished structures.

Legal resources regarding green building in Colorado

When it comes to the ever-changing construction policies surrounding green building, you need to stay on top of new developments. As a construction professional, you don’t want to accidentally break a law just because you were either uninformed or misinformed. Failing to meet green building standards in your area — whether accidentally or intentionally — could result in penalties such as fines, license revocation and/or legal action. For more information on green building in Colorado, check out the following resources.

• As the state’s official government department in charge of promoting sustainable economic development, the Colorado Energy Office aims to advance the state’s energy market and industry.
• A non-profit trade organization representing a wide range of green building leaders, the Colorado Green Building Guild works to bridge consumer interests with eco-minded contractors.
• Made up of representatives from each state agency and department, the Colorado Green Government Coordinating Council develops and implements new conservation policies and augments existing ones.

With this knowledge at your disposal, you can make informed decisions when working on new construction projects in your area. Educating yourself on evolving policies can help you develop new building strategies that reduce energy consumption or persuade you to incorporate eco-friendly products that have less harmful impacts on the environment. How you respond to existing and evolving green building policies has a great affect on the future, so take your responsibility seriously.

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Today’s post comes from Danielle Rodabaugh, our first guest blogger. Ms. Rodabaugh is the director of educational outreach at SuretyBonds.com, a nationwide surety bond producer that helps contractors fulfill their bonding requirements. Danielle writes to help leading industry professionals better understand the legal aspect of managing successful construction operations, especially those related to emerging green building practices. You can keep up with Danielle on Google+.

One Colorado Court Allows Negligence Claim by General Contractor Against Subcontractor

Judge Paul King of the Douglas County District Court recently confirmed that subcontractors in residential construction owe an independent duty, separate and apart from any contractual duties, to act without negligence in the construction of a home in Colorado.  See Order, dated September 7, 2010, Sunoo v. Hickory Homes, Inc. et al., Case No. 2007CV1866; see also Cosmopolitan Homes, Inc. v. Weller, 663 P.2d 1041 (Colo. 1983); A.C. Excavating v. Yacht Club II Homeowners Ass’n, Inc., 114 P.3d 862 (Colo. 2005).  He also verified that the holding in the B.R.W. Inc. v. Dufficy & Sons, Inc., 99 P.3d 66 (Colo. 2004)[1] case does not prohibit general contractors, such as Hickory Homes, from enforcing a subcontractor’s independent duty to act without negligence in the construction of a home.  In his Order, Judge King stated:

The independent duty to construct in a non-negligent manner is not dependent on the nature of the party presenting the claim in residential contract.  It is independent of any agreement and there is nothing that precludes the homeowner or the general contractor from seeking to enforce it in a residential homeowner setting.     

See Order, Sunoo v. Hickory Homes, Inc. et al., p. 7.

In the Hickory Homes case, an excavation subcontractor filed a motion for partial summary judgment on Hickory’s third-party claims for negligence, contribution, and breach of implied warranty.  The excavation subcontractor argued that Hickory’s claims for negligence and contribution were barred by the Economic Loss Rule as a contract existed between it and Hickory.  Hickory asserted that the excavation subcontractor is subject to an independent duty that can form the basis of any tort claim, which bars summary judgment.  Judge King agreed, and denied the excavation subcontractor’s motion for partial summary judgment. 

Another subcontractor joined the excavation subcontractor’s motion for partial summary judgment concerning Hickory’s breach of implied warranty claim, arguing that the implied warranty of habitability did not apply to it.  Hickory clarified that the breach of implied warranty claims were not predicated upon said warranty of habitability.  Rather, Hickory’s claims of breach of implied warranty arise out of implied warranties of merchantability and fitness for a particular purpose.  The court found it undisputed that this subcontractor provided goods in connection with its work on the plaintiffs’ home.  Accordingly, Judge King found that an implied warranty of merchantability and fitness applied to those goods and denied the subcontractor’s joinder in the motion for partial summary judgment.  Judge King’s Order serves as further confirmation that subcontractors engaged in residential construction in Colorado are subject to the same independent duty applicable to builders. 

Additionally, in his Order, Judge King verified that the trial court should follow the criteria set forth in the Redden v. SCI Colorado Funeral Services, Inc., 38 P.3d 75 (Colo. 2001) case in determining whether to permit designations of nonparties beyond statutory time frame allowed, or within 90 days after commencement of the action.  C.R.S. § 13-21-111.5(3)(b) provides that the negligence or fault of a nonparty may be considered if the claimant entered into a settlement agreement with the nonparty or if the defending party gives notice that the nonparty was wholly or partially at fault within 90 days following the commencement of the action unless the court determines a longer period is necessary.  In the Hickory Homes Order, Judge King indicated that the trial court should, in accordance with Redden, “strive to promote justice and should be guided by the following three criteria: 1) was the neglect excusable; 2) was there a meritorious claim; and 3) whether the designation would be consistent with equitable considerations.”  See Order, Sunoo v. Hickory Homes, Inc. et al., p. 2.  

 

Hickory sought to designate several potential nonparties at fault outside of the 90-day time frame allowed by statute following its receipt of expert reports from the plaintiffs.  As such, the court found Hickory’s delay in seeking to designate the nonparties excusable.  Id. at p. 3.  Hickory argued that provisions in the contract dictate that the owners were responsible for certain construction elements, including the structural floor system.  As a result, the court found that Hickory had established a meritorious claim.  As the plaintiffs did not raise structural or geotechnical issues until its experts’ second reports, the court found that equitable considerations favored granting Hickory permission to make its nonparty designations and thereby granted its motion for leave.  For those of us defending construction defect cases, the opportunity to designate nonparties following the receipt of a plaintiff’s expert report(s) is, in many instances, extremely vital to our client’s defense and almost always outside the statutory time frame of 90 days.  Accordingly, it is reassuring to see the Douglas County District Court give consideration to the timing predicaments facing construction defect defendants.

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] In the B.R.W. Inc. case, the Colorado Supreme Court held that the Economic Loss Rule barred the steel subcontractor’s negligence claims against the engineering firm and inspector for a public works project, even though the subcontractor had not directly contracted with the engineering firm or inspector.             

In Colorado, Repair Vendors Can Bring First-Party Bad Faith Actions For Amounts Owed From an Insurer

With the aftermath of Sandy still being felt up and down the Eastern seaboard, the question of many victims turns to how they can rebuild their lives and homes.  One of the first things many people do is call on their insurance carriers to help rebuild whatever damaged property they have.  In a recent case here in Colorado, those rebuilding efforts got reaffirmed by a Court of Appeals case, Kyle W. Larson Enterprises, Inc., Roofing Experts, d/b/a The Roofing Experts v. Allstate Insurance Company, --- P.3d ----, 2012 WL 4459112 (Colo. App. September 27, 2012).

The facts of the case are pretty straightforward and could describe many repair vendors in numerous situations.  Roofing Experts contracted with four homeowners insured by Allstate to repair their damaged roofs.  The contracts provided that repair costs would be paid from insurance proceeds.  The contracts also allowed Roofing Experts full authority to communicate with Allstate regarding all aspects of the insurance claims.  Before work began, Roofing Experts met with adjusters from Allstate to discuss the four homes and the amount of each claim.  After receiving approval for the claims, Roofing Experts began the repairs.  During construction, Roofing Experts discovered additional repairs were necessary to maintain certain manufacturer’s warranties and to conform to applicable building codes.  Roofing Experts made the additional repairs and invoiced Allstate for them.  Allstate agreed to pay the originally claimed amounts, but refused to pay for the additional repairs.  Roofing Experts brought a first-party bad faith action under C.R.S. § 10-3-1115 and 1116 as a first-party claimant.

At the trial court level, Allstate moved for summary judgment, arguing that Roofing Experts was not a first-party claimant entitled to bring a bad faith action. The trial court agreed and granted the motion.  Roofing Experts moved for reconsideration, which request was denied.  Roofing Experts then appealed those rulings to the Court of Appeals, which reversed the trial court’s rulings.

Allstate moved for summary judgment, claiming under those same statutes that Roofing Experts did not qualify as a first-party claimant.  The trial court agreed and granted Allstate’s motion for summary judgment.

In making its decision, the Court of Appeals reviewed the statutes at issue.  Specifically, the Court of Appeals reviewed C.R.S. § 10-3-1115(1), which states:

(1)(a) A person engaged in the business of insurance shall not unreasonably delay or deny payment of a claim for benefits owed to or on behalf of any first-party claimant.

(b) For the purposes of this section and section 10-3-1116:

(I) “First-party claimant” means an individual, corporation, association, partnership, or other legal entity asserting an entitlement to benefits owed directly to or on behalf of an insured under an insurance policy. “First-party claimant” includes a public entity that has paid a claim for benefits due to an insurer’s unreasonable delay or denial of the claim.

(II) “First-party claimant” does not include:

(A) A nonparticipating provider performing services; or

(B) A person asserting a claim against an insured under a liability policy.

The Court of Appeals focused on the fact that the legislature, in drafting the statute, included parties who might make claims on behalf of insureds as demonstrated in the language in section (1)(a) and (1)(a)(I).  In explaining the decision, the Court of Appeals first stated that the intent of passing C.R.S. § 10-3-1115 and 1116 was to create a statutory duty for insurers to refrain from unreasonable delay or denial of payment of any claim for benefits owed.  The Court of Appeals also found that the legislature made it clear that persons or entities other than the insured are included as potential “first-party claimants.”  Additionally, the Court found that the statute enumerated what the definition of first-party claimant does not include.  The Court of Appeals found it persuasive that repair vendors like Roofing Experts were not listed in that section.

The Court of Appeals rejected Allstate’s argument that the statue was ambiguous and did not include Roofing Experts or other repair vendors.  In response, the Court of Appeals stated that Allstate’s interpretation of the statutes was strained and unreasonable.  The only reasonable reading of the statute’s language, according to the Court of Appeals, is a reading of the plain meaning of the words used.  In this case, the only reasonable interpretation of the “on behalf of” language is that the definition of a first-party claimant includes those who assert, “on behalf of an insured,” “an entitlement to benefits owed . . . under an insurance policy.”

The Court of Appeals reversed the trial court’s ruling of summary judgment dismissing Roofing Experts’ action under C.R.S. § 10-3-1115 and 1116.  For now, repair vendors can continue working knowing they will have the full support of the law on their side, should they need it in pursuing an insurance claim made for a homeowner.

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

Colorado Court of Appeals Finds Damages to Non-Defective Property Arising From Defective Construction Covered Under Commercial General Liability Policy

The recently decided case of Colorado Pool Systems, Inc. v. Scottsdale Insurance Company (Colo. Ct. App. 10CA2638, October 25, 2012), confirms that absent specific exclusions in the policy, a commercial general liability (“CGL”) policy covers damages to non-defective property arising from a builder’s own defective workmanship.

Colorado Pool Systems, Inc. (“Colorado Pool”) was hired as a subcontractor to install a swimming pool at Founders Village Pool and Community Center (“Founders Village”) in Castle Rock, Colorado.  After the concrete shell of the pool was placed, some of the rebar frame was found to be too close to the surface.  Founders Village demanded that Colorado Pool remove and replace the pool, and Colorado Pool contacted its insurance carrier, Scottsdale Insurance Company (“Scottsdale”), with which Colorado Pool held a CGL policy.  After inspecting the pool, Scottsdale’s claims adjuster stated that the insurance policy would cover losses associated with removing and replacing the pool.

Relying on the claim adjuster’s statement, Colorado Pool paid for the demolition of the pool’s concrete shell.  After demolition was complete, however, Scottsdale refused to pay for the demolition or for the cost of replacing the pool, and denied all coverage under the CGL policy.  Colorado Pool, after paying damages to the general contractor for the pool project, filed suit against Scottsdale asserting that Scottsdale had a duty to defend and indemnify Colorado Pool pursuant to the applicable CGL policy.  The trial court found that the CGL policy did not cover Colorado Pool’s claimed damages, and Colorado Pool appealed.

The Court of Appeals first addressed whether the Builders Insurance Act, C.R.S. § 13-20-808, applied to Colorado Pool’s claims.  The Court found that while the Act was intended to apply retroactively, such an application to Colorado Pool’s CGL policy would be impermissibly retrospective because it would change the coverage under the policy that the parties had originally bargained for. 

The Court, therefore, interpreted the CGL policy and the term “accident” in the policy under the common law, and adopted the test from Greystone Construction, 661 F.3d 1272 (10^th Cir. 2011).  Applying the Greystone test, the Court held that coverage exists under a CGL policy for damages arising from improper or faulty workmanship if those damages are not specifically excluded in the policy, if non-defective property is damaged, and if the damage was unforeseen and unexpected.   For Colorado Pool, that meant that Scottsdale did not have to pay for removing and replacing the pool, since Colorado Pool was obligated to replace its own defective work product.  Related damage to a non-defective deck, sidewalk, retaining wall, and electrical conduits, however, were covered under the CGL policy, because such damages were not specifically excluded, the property was not defective, and Colorado Pool did not expect or foresee the damage.

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