Wednesday, January 25, 2012

Higgins, Hopkins, McLain & Roswell Promotes Derek J. Lindenschmidt to Partner


Higgins, Hopkins, McLain & Roswell is pleased to announce the promotion to partner (with effect from January 1, 2012) of Derek J. Lindenschmidt.

Since joining the firm in 2006, Derek’s practice has focused on representation of construction professionals in a wide variety of both litigated and non-litigated matters, including the defense of developers and general contractors in complex construction defect lawsuits. He has defended against claims in all phases of development, from initial design through post-construction, and has been very successful in recovering from subcontractors in subrogation.

“Derek’s singular dedication to our clients has resulted in favorable outcomes in mediated, arbitrated, and litigated cases. His work ethic and drive has helped us further the firm’s continuing mission to reimagine the way construction claims are defended. I am delighted to have Derek as a partner,” said founding member David M. McLain.  Co-founder Sheri Roswell added, “Whether a client or a colleague, Derek is the one you want in your corner.  Personally and professionally, we are truly fortunate to have Derek on our team.”

“I am very excited and honored. HHMR prides itself on providing its clients with smart, yet aggressive representation. I am proud to be a part of a team whose number one goal is to look out for Colorado’s builders and developers in some very trying times,” commented Derek on his promotion.

Thursday, January 19, 2012

ISO Rolls Out Colorado-Specific Insurance Forms in Response to the Colorado Anti-Indemnity Statute.

If you take a look at the bottom of any page of your (or your client’s) insurance contract, it is most likely a copyrighted form issued by Insurance Services Office, Inc. (ISO). ISO develops standardized insurance policy language and forms that most insurer companies use in order to create insurance policies for consumers. 

ISO has recently released several Colorado-specific forms with policy language that takes into account Colorado’s 2007 anti-indemnity legislation, C.R.S. § 13-21-111.5. The Colorado anti-indemnity law limits a defendant’s liability to “the degree or percentage of the negligence or fault attributable” to the defendant. Pursuant to this law, the forms limit liability coverage to injury or damage caused by the insured, or by those acting on the insured’s behalf.

What does this mean for you or your clients?

We previously discussed on this blog that it is more important than ever to procure the proper insurance for your construction business. You can find that entry here. Many general contractors and developers have relied on a few of their subcontractors to procure the correct insurance that pays for the defense of, and indemnifies, the general contractor and/or developer from any suits. However, C.R.S. § 13-21-111.5 limits each subcontractor’s indemnity share to the degree of fault they are held liable.

For example, it is not uncommon for one subcontractor to be found 70% at fault in a construction defect action. If this subcontractor did not procure the correct additional insurance in favor of the general contractor or developer, those parties would lose the ability for the AI carrier to pick up 70% of the costs of defending the suit.

What should you or your clients do?

If you are a general contractor or developer, you need to ensure every subcontractor[1] working on your projects is procuring both ongoing and completed operations coverage that includes you as an additional insured for both coverages. To do so, you should speak with your insurance coverage attorney and ensure your subcontractors are getting the following forms (or the equivalents) as a part of their policies:

  1. A form CG 32 29 06 10, naming you as an additional insured, or a CG 32 27 06 10 (automatic additional insured status if agreed by contract), to cover ongoing operations, such as workers compensation litigation.
AND

  1. A form CG 32 28 06 10, naming you as an additional insured, to cover completed operations, such as construction defect litigation.
The name of the general contractor or developer should appear either on the actual ISO form listed above or in the policy declarations, along with the subject project(s). Although it is common in the industry, you should not merely accept a checklist form from the subcontractor’s insurance agent that states the proper coverage is in the policy. You should request certified copies of the subcontractors’ policies and ensure that the policies are reviewed by your own insurance company, or an attorney that specializes in construction coverage matters. Alternatively, you can ask the subcontractors' insurance producers to sign a subcontractor insurance compliance form, certifying that the proper coverages are in place.

If you are a subcontractor, you need to speak with an insurance coverage attorney and demand your insurance company write you the above-referenced forms or the equivalents. If your current insurance company will not, shop around. The failure to procure the correct insurance could leave you with millions of dollars in uncovered liabilities such as the attorney fees and expert costs of the project owner, general contractor, and/or developer in any construction defect litigation. Please understand that this is not inserted here as a pitch for work. We are not coverage attorneys, we just happen to think this is a good idea.

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


[1] Engineers, Architects, and Surveyors have different coverage forms.

Thursday, January 12, 2012

Colorado's legislature is back in action. What does this mean for Colorado's construction professionals?

Yesterday was the first day of the 2012 legislative session of the Colorado General Assembly, which promises to be an exciting year.  From what we have heard around town (and from the mouth of a plaintiffs' construction defect attorney at an out-of-state seminar) there is likely to be a construction defects bill at the Capitol this year.  This attempt will likely take the form of a bill providing for the payment of attorneys' fees to homeowners and homeowners associations in residential construction defect cases.  Whether it happens or not, there are enough people talking about the prospect that it was picked up by The Denver Business Journal

For the roofers out there, you may want to pay attention to Senate Bill 12-038, "concerning measures to protect consumers who engage a roofing contractor to perform roofing services on residential property," which requires "residential roofing contractors to sign a written contract with customers that details the following:"
 - The scope of roofing services and materials to be provided;
 - The approximate dates of service;
 - The costs of the services;
 - The roofing contractor's contact information;
 - Identification of the roofing contractor's surety and liability coverage insurer and their contact information, if applicable;
 - The roofing contractor's policy regarding cancellation of the contract and refund of any deposit, including a rescission clause allowing the client to rescind the contract and obtain a full refund of any deposit within 72 hours after entering the contract; and
 - A written statement that if the client plans to use the proceeds of a property or casualty insurance policy to pay for the roofing work, the roofing contractor cannot pay, waive, rebate, or promise to pay, waive, or rebate all or part of any deductible applicable to the claim for payment for roofing work on the covered residential property.
Finally, despite meetings through the summer and fall, it looks as though the Colorado Association of Home Builders will not again support a bill to require pre-lien notices as a prerequisite to the validity of mechanics' liens. 

Stay tuned and hang on, it could be a wild ride. If you would like to discuss the prospects of the upcoming session, please call me at (303) 987-9813 or e-mail me at mclain@hhmrlaw.com

Thursday, January 5, 2012

It is time to clarify that plaintiffs in construction defect cases cannot recover more than 100% of their actual damages.


Developers in Colorado could be facing more of an uphill battle than the economy.  Attorneys for homeowners’ associations have conceived a new argument whereby they seek to hold the developer liable for one hundred percent of the damages in a construction defect action as a fiduciary under Colorado law.  As most of us know, developers rarely participate in the actual construction work of any given project.  However, pursuant to Colorado’s Common Interest Ownership Act (“CCIOA”), board members appointed by the declarant developer are fiduciaries of the unit owners.  See 38-33.3-301, et seq.  Attorneys for homeowners’ associations argue that this designation of a declarant as a fiduciary creates a non-delegable duty to assure that there is no negligence in the construction of a home.  See Cosmopolitan Homes Inc. v. Weller, 663 P.2d 1041 (Colo. 1983). [1]  

Taking this argument one step further, attorneys for homeowners’ associations are now arguing that, in accordance with its non-delegable duty, a developer should not be allowed to allocate any liability to settling parties, including general contractors and/or subcontractors, which actually performed the work on a project.  If successful, the ultimate result of this argument precludes the developer from seeking a set-off for any of the settlements between the association and the settling parties, thereby allowing the homeowners’ associations to potentially recover more than one hundred percent of their claimed damages. 


In a recent construction defect suit, the plaintiff homeowners’ association successfully argued that the developer, as a fiduciary, has a non-delegable duty under CCIOA.  As a result, the association argued that the jury should not allocate any liability to the general contractor, which had already settled.  The jury then allocated one hundred percent of the liability for the claimed construction defects to the developer on the verdict form.  As a result, the developer was precluded from seeking a set-off for the amount of settlement between the general contractor and the association, which essentially allowed the homeowners’ association to recover from the developer what it had already recovered from the general contractor.            

While Colorado law would seemingly prohibit this outcome, those involved and/or interested in the home building industry are urged to speak up and get involved. Perhaps there should be an amendment to Colorado’s statute concerning pro rata liability that would explicitly preclude the ability to recover more than one hundred percent of a party’s claimed damages.  See C.R.S. § 13-21-115.5.  Currently, Colorado’s statute concerning contribution among tortfeasors provides that a release given in good faith to a person liable in tort for the same injury does not discharge any of the other tortfeasors from liability for their respective pro rata share of liability for the injury.  C.R.S. § 13-50.05-105.  Pursuant to Colorado’s pro rata statute, no defendant is liable for an amount greater than represented by the degree or percentage of fault or negligence attributable to such defendant.  C.R.S. § 13-21-115.5.  However, both statutes are silent on the issue of recovery, which is why many believe an amendment is necessary to preclude what is essentially double recovery by homeowners’ associations in construction defect actions.
 
Another way to skin the cat may be to make clear, statutorily, that C.R.S. § 13-21-115.5(6)(a)(I) means what it says, that “every construction business in the state is financially responsible under the tort liability system for losses that a business has caused.” This can be accomplished by making clear that developers and general contractors are not liable for the negligence of the subcontractors and design professionals they hire, but are only liable for their own negligence.

- Heather M. Anderson
 



[1] The Colorado Supreme Court has also recognized that subcontractors are also under an independent to act without negligence in the construction of homes.  See A. C. Excavating v. Yacht Club II Homeowners Ass’n, Inc., 114 P.3d 862 (Colo. 2005); see also Driscoll v. Columbia Realty-Woodland Park Co., 590 P.2d 73 (Colo. App. 1973).        

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.