Mid-Session Overview of Colorado’s 2017 Construction Defect Legislation

As the 2017 Colorado legislative session reaches the halfway point, I thought it an opportune time to provide a quick overview of the construction defect bills introduced so far this session.

Senate Bill 17-045, “Concerning a Requirement for Equitable Allocation of the Costs of Defending a Construction Defect Claim,” sponsored by Senators Grantham and Angela Williams and Representatives Duran and Wist, was introduced on January 11^th and assigned to the Senate Business, Labor, and Technology Committee.  This bill affects construction defect actions in which more than one insurer has a duty to defend a party by providing that if the carriers cannot agree regarding how to allocate defense costs within 45 days of the filing of a contribution action, a court must conduct a hearing regarding the apportionment of the costs of defense, including reasonable attorneys’ fees, among all carriers sharing in the duty to defend within 60 days after an insurer files its claim for contribution, unless the carriers agree to resolve the issue through a mutually agreeable, alternative process.  The bill further provides that the court must make a final apportionment of costs after entry of a final judgment resolving all of the underlying claims against the insured.  The bill also makes clear that an insurer seeking contribution may also make a claim against an insured or additional insured who chose not to procure liability insurance during any period of time relevant to the underlying action.  Finally, the bill states that a claim for contribution may be assigned and that bringing such a claim does not affect any insurer’s duty to defend.  The Senate Business, Labor, and Technology Committee heard SB 17-045 on February 8^th and referred the bill, as amended, to the Senate Appropriations Committee.

Senate Bill 17-155, “Concerning the Statutory Definition of a Construction Defect for Purposes of the ‘Construction Defect Action Reform Act,” sponsored by Senator Tate and Representative Saine, was introduced on February 3^rd and assigned to the Senate Business, Labor & Technology Committee.  The bill defines construction defect to mean “a defect in the design or construction of any improvement to real property that causes: (a) any damages to, or the loss of use of, real or personal property; or (b) personal injury.”  SB 17-155 has not yet been heard in committee.

Senate Bill 17-156, “Concerning Prerequisites to the Authority of a Unit Owners’ Association to Pursue Resolution of Disputes Involving Construction Defects,” sponsored by Senator Hill and Representatives Wist and Saine, was introduced on February 1^st and assigned to the Senate Business, Labor & Technology Committee.  The bill provides that when an association’s governing documents require mediation or arbitration of a construction defect claim, which is later amended or removed, mediation or arbitration is still required, and provides certain requirements for such mediation or arbitration.  With respect to arbitration, the bill provides that the arbitrator is required to follow the substantive law of Colorado with regard to any claim or defense, and that failure to do so is grounds for a district court to vacate or refuse to confirm the arbitrator’s award.  Finally, the bill provides that before an association may file a construction defect action, the parties must mediate the dispute and the association must obtain the informed written consent of the owners of units to which at least a majority of the votes in the association are allocated.  The Senate Business, Labor, and Technology Committee heard SB 17-156 on February 27^th and referred the bill, as amended, to the Committee of the Whole.

Senate Bill 17-157, “Concerning Prerequisites for the Authority of a Unit Owners’ Association to Pursue Litigation Involving Alleged Construction Defects, and, in Connection Therewith, Imposing Notification, Disclosure, and Voting Requirements Prior to Commencement of an Action,” sponsored by Senator Angela Williams and Representative Melton, was introduced on February 17^th and Assigned to the Senate Business, Labor & Technology Committee.  The bill requires that, before the executive board of an association in a common interest community brings suit against a developer or builder on behalf of unit owners, the board must notify all unit owners and, except when the association contracted with the developer or builder for the work complained of or the amount in controversy is less than $100,000, obtain the approval of a majority of the unit owners after giving them detailed disclosures about the lawsuit and its potential costs and benefits.  The bill also limits the amount and type of contact that a developer or builder that is potentially subject to a lawsuit may have with individual unit owners while the association is seeking their approval for the lawsuit.  SB 17-157 has not yet been heard in committee.

House Bill 17-1169, “Concerning a Construction Professional’s Statutory Right to Repair Under the ‘Construction Defect Action Reform Act,” sponsored by Representative Leonard and Senator Tate, was introduced on February 6^th and assigned to the House State, Veterans, and Military Affairs Committee.  The bill altered Colorado’s notice of claim process by providing that a construction professional could either offer to settle a claim by payment of a sum certain or by actually repairing the defect.  The bill also provided certain requirements in the event that the construction professional undertakes repairs.  The House State, Veterans, and Military Affairs Committee heard, and postponed indefinitely, HB 17-1169 on March 1^st.  

To learn more about this year’s construction defect legislation, you can reach David McLain by telephone at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.  Also, you can track the progress of any legislation at the Colorado Legislature’s website.