Tuesday, March 14, 2017

Colorado Supreme Court Weighs in on Timeliness of Claims Against Subcontractors in Construction Defect Actions

On February 27, 2017, the Colorado Supreme Court announced its decision in the Goodman v. Heritage Builders, No. 16SA193, 2017 CO 13 (Colo. February 27, 2017) case.  In ten short pages, the Colorado Supreme Court completely reshuffled Colorado construction law with respect to application of the statutes of limitation and repose on third-party claims in construction defect cases.  Specifically, the Colorado Supreme Court overruled a series of earlier Court of Appeals' decisions that found C.R.S. § 13-80-104(1)(b)(II) (“104(1)(b)(II)”) had no effect on the six-year statute of repose.  For context, 104(1)(b)(II) permitted third-party actions for indemnity and contribution to toll until ninety days after the claims in the underlying action were resolved by settlement or judgment. In the construction context, 104(1)(b)(II) was intended to allow a general contractor’s claims against liable subcontractors to toll for the statutorily defined period.  This allowed the general contractor to first focus its attention on defending the claims against and thereafter to pursue its claims against the subcontractors.

However, beginning in 2008, in the Thermo Dev., Inc. v. Cent. Masonry Corp., 195 P.3d 1166 (Colo. App. 2008) case, the Colorado Court of Appeals began chipping away at the force of 104(1)(b)(II).  This trend continued in the Shaw Constr., LLC v. United Builder Servs., Inc., 2012 COA 24, 296 P.3d 145 decision, the Sierra Pac. Indus., v. Bradbury, 2016 COA 132, ­_ P.3d_ decision, and culminating in the Sopris Lodging, LLC v. Schofield Excavation, Inc., 2016 COA 158, reh'g denied (Nov. 23, 2016) decision.  Effectively, in these decisions, the Colorado Court of Appeals determined that third-party claims could not be brought beyond Colorado’s six-year statute of repose, regardless if they were brought within the ninety day tolling provision set forth in 104(1)(b)(II).

From a general contractor’s perspective, these decisions were considered particularly disconcerting in that they expressly stood for the proposition that a general contractor could be faced with the possibility of having a homeowner’s claims against the general contractor found to be timely, yet the general contractor would be left with no recourse against the implicated trades responsible for the alleged damages.  Such a situation could hypothetically arise if the homeowner brought suit on the last day before the expiration of the six-year statute of repose and the general contractor, despite acting expeditiously in its pursuit against the subcontractors by bringing suit against the subcontractors the very next day, would be left with no recourse owing to the fact its claims were time barred.  

Fortunately for general contractors, and unfortunately for subcontractors, the Colorado Supreme Court insisted that 104(1)(b)(II) not be rendered “superfluous.”  In this vein, as a result of the Goodman decision, a general contractor’s claims against subcontractors may now be tolled beyond the period of the statute of repose as long as the claims are brought during the construction defect litigation or within ninety days following the date of judgment or settlement.

For more information about the Goodman decision, or construction defect litigation in Colorado, you have reach Jean Meyer by telephone at (303) 987-9815 or by e-mail at meyer@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.