Colorado requires builders to accommodate high-efficiency devices in new homes

Starting in 2009, the Colorado Legislature began adding requirements that builders offer certain options to accommodate high-efficiency devices. These requirements started with solar prewire options in 2009, then water-smart home options in 2010. In 2020, the Legislature added requirements for electric vehicle charging and heating systems. These sections apply to unoccupied homes serving as sales inventory or a model home or manufactured homes, as defined by Colorado law. While the Legislature has only required builders to include options to accommodate these devices, it may be just a matter of time until builders must install the prescribed devices themselves.

In 2009, the Legislature passed C.R.S. 38-35.7-106, which was amended this year by HB 20-1155. As it now reads, Colorado law requires every builder of single-family detached residences to offer to have the home’s electrical or plumbing system, or both, include:

1. A residential photovoltaic solar generation system or a residential thermal system, or both;
2. Upgrades of wiring or plumbing, or both, planned by the builder to accommodate future installation of such systems; and
3. A chase or conduit, or both, constructed to allow ease of future installation of the necessary wiring or plumbing for such systems.

The builder must also provide buyers with a list of businesses in the area that offer residential solar installation services.

In 2010, the Legislature passed C.R.S. 38-35.7-107, which requires every builder of single-family detached residences to offer one or more of the following water-smart home options:

1. Energy Star dishwashers or washing machines;
2. Landscaping that follows the practices outlined in “Green Industry Best Management Practices for the Conservation and Protection of Water Resources in Colorado: Moving Toward Sustainability,” released in May 2008, or this document’s successor; or
3. A pressure-reducing valve that limits static service pressure in a residence to a maximum of 60 pounds per square inch.

Finally, in 2020, the Legislature passed HB 20-1155, to be codified as C.R.S. 38-35.7-109. This law requires every builder of new residences to offer to have the home’s electrical system include one of the following:

1. An electric vehicle charging system;
2. Upgrades of wiring to accommodate future installation of an electric vehicle charging system; or
3. A 208- to 240-volt plug-in receptacle accessible to a motor vehicle parking area.

Builders must also offer buyers an option for an efficient electrical heating system, including an electric water heater, electric boiler, or electric furnace or heat-pump system. Finally, this law requires that the builder offer the buyer pricing, energy efficiency and utility bill information for each natural gas, electric or other option available, either from the federal Energy Star program, or similar information reasonably available to the builder.

Nothing in these laws preclude the builder from charging or requiring deposits for these upgrades, or requiring that the decision to include the upgrade be made according to a specific deadline or construction schedule; or prohibit the builder from selecting the contractors for installation of the offered upgrades. These sections all state that the builder can, by contract, indicate that the higher efficiency options are based on technology available at the time of installation; that they may not support high-efficiency devices installed in the future, or that additional upgrades, retrofits or other alterations may be necessary to accommodate high-efficiency devices installed in the future; and that the builder is not liable for any such upgrades, retrofits or alterations. Builders should be sure to include this language in their purchase and sale documents.

For additional information on green building, or construction litigation in Colorado, you can reach Dave McLain by telephone at (303) 987-9813 or by email at mclain@hhmrlaw.com.

Colorado’s abbreviated legislative session offers builders a reprieve

Would you believe me if I told you that this year could have been worse for builders? Had COVID-19 not hit, the Colorado Legislature may have passed bills that would have had a severely negative impact on the home building industry. In response to the COVID-19 pandemic, the Legislature temporarily adjourned in mid-March, 67 days into the 120-day legislative session. After a two-month recess, the Legislature returned for approximately one month to pass critical bills including the state budget, the school finance act and what to do with the money from the federal CARES Act. Of the bills on the calendar when the Legislature temporarily adjourned, legislators focused on those that were “fast, free, and friendly,” and let the others fall by the wayside. 

Bills that died included SB 20-138, which would have extended Colorado’s statute of repose for construction defect claims from six plus two years to 10 plus two years. The bill also contained a number of accrual and tolling provisions, which would have made it harder for builders to convince tribunals that claims were untimely. This bill died on the Senate floor, for lack of support. We will see whether plaintiffs’ attorneys will revive this effort next year. 

SB 20-093, while not an outright ban on arbitration or a legislative overturning of the Vallagio decision, would have made it harder to administer and more difficult to get cases into arbitration. The bill died under the “fast, free, and friendly” test, i.e., it faced too much opposition. I expect to see this bill again next year, in some form.

HB 20-1046 would have limited retainage to 5% on certain construction contracts. The bill also included requirements on timing of payments, interest on late payments, and attorneys’ fees and costs to be awarded to those who sued for late or non-payment. The bill died in committee prior to the COVID-19 recess in the face of opposition from owners’ groups. It remains to be seen whether this bill will be rerun next year.

The Legislature did pass a number of bills that will impact the home building community. Among them, HB 20-1155 will require, once it goes into effect, home builders to offer: a solar panel system, a solar thermal system or both; prewiring or pre-plumbing for the solar systems; and a chase or conduit for future installation of such systems. The bill will further require builders to offer: an electric vehicle charging system; prewiring for the future installation for such a system; or a plug-in receptacle in a place accessible to a vehicle parking area. Finally, the bill will require builders to offer electrical heating systems.

Buckle up for next year when some or all of the unsuccessful bills from this year return, and the plaintiffs’ bar takes another crack at the home building industry.

For additional information on Colorado's legislative session, or construction litigation in Colorado, you can reach Dave McLain by telephone at (303) 987-9813 or by email at mclain@hhmrlaw.com. 

David McLain Recognized Among the 2021 Edition of The Best Lawyers in America© for Construction Law

David McLain is a founding member of Higgins, Hopkins, McLain & Roswell.  Mr. McLain has over 22 years of experience and is well known for his work in the defense of the construction industry, particularly in the area of construction defect litigation. He is a member of the Executive Committee of the CLM Claims College - School of Construction, which is the premier course for insurance, industry, and legal professionals. Law Week Colorado recently named Mr. McLain as the 2019 People’s Choice for Best Construction Defects Lawyer for Defendants.

HHMR is highly regarded for its expertise in construction law and the litigation of construction-related claims, including the defense of large and complex construction defect matters. Our attorneys provide exceptional service to individuals, business owners, Fortune 500 companies, and the insurance industry. The firm is experienced in providing legal support throughout trials and alternative dispute resolution such as mediations and arbitrations.

Since it was first published in 1983, Best Lawyers has become universally regarded as the definitive guide to legal excellence. Best Lawyers lists are compiled based on an exhaustive peer-review evaluation. Almost 108,000 industry leading lawyers are eligible to vote (from around the world), and is has received over 13 million evaluations on the legal abilities of lawyers based on their specific practice areas around the world. For the 2021 Edition of The Best Lawyers in America, 9.4 million votes were analyzed, which resulted in more than 67,000 leading lawyers being included in the new edition. Lawyers are not required or allowed to pay a fee to be listed; therefore, inclusion in Best Lawyers is considered a singular honor.

 

For information about construction litigation in Colorado, you can reach Mr. McLain by e-mail at mclain@hhmrlaw.com or by telephone at (303) 987-9813.

Requesting an Allocation Between Covered and Non-Covered Damages? [Do] Think Twice, It’s [Not Always] All Right.

As is often the case in construction defect and other insurance defense litigation, a plaintiff’s claims for relief typically encompass both covered and uncovered damages.  Obviously, it is in the insured’s best interests to have as many damages covered by insurance as possible.  From the insurer’s perspective and against the backdrop of owing duty of good faith and fair dealing to its insureds, however, it is generally better to have an allocation of covered vs. non-covered damages.  This places the insurer, insured, and insurance retained defense counsel in a difficult position. 

A recent opinion from U.S. District Court for the District of Colorado, Rockhill Ins. Co. v. CFI-Global Fisheries Mgmt, Civil Action No. 1:16-CV-02760-RM-MJW, 2020 U.S. Dist. LEXIS 35209 (D. Colo. Mar. 2, 2020), sheds light on the issue, even though some may feel it only further muddies already murky waters.  

Rockhill involved review of an arbitration proceeding that property-owner, Heirloom I, LLC (“Heirloom”) filed against CFI-Global Fisheries Management (“CFI”).  Rockhill Insurance Company (“Rockhill Insurance”) was asked to defend the arbitration as CFI’s professional and general liability insurer.  At issue in the arbitration was Heirloom’s claim that CFI defectively designed and constructed a fisheries enhancement that was destroyed by natural processes four times in three years.

Rockhill Insurance agreed to defend the arbitration but reserved the right to deny coverage based on various exclusions, including a faulty workmanship exclusion.  The arbitrators ultimately awarded Heirloom $609,995.91, and the parties subsequently stipulated an additional $265,000 award of attorney fees. The decision was not accompanied by a reasoned award as neither party requested such.

Prior to the issuance of the arbitration award, Rockhill Insurance filed a federal declaratory judgment action against CFI and Heirloom alleging that it had no duty to defend and indemnify CFI in the arbitration.  CFI asserted counterclaims for declaratory judgment, breach of contract, and bad faith for Rockhill Insurance’s failure to timely settle.  After the arbitration award entered, the U.S. District Court for the District of Colorado granted summary judgment in favor of Rockhill Insurance, holding, in pertinent part, that the entirety of the arbitration award was excluded under the policy’s faulty workmanship exclusion. 

The Tenth Circuit Court of Appeals, in Rockhill Ins. Co. v. CFI-Global Fisheries Mgmt., 782 F. App'x 667 (10^th Cir. 2019), disagreed, and found that the faulty workmanship exclusion did not apply to design failing, and remanded the case for the district court to consider in the first instance whether the entire arbitration award is covered under a correct reading of the exclusion, or whether the damages could be apportioned between covered professional design services and non-covered construction work.

On remand, the Rockhill court emphasized that because Rockhill Insurance controlled the defense, it “had a corresponding duty to ensure that the damages were allocated between those that were covered under CFI’s policy and those that were not.”  Because Rockhill Insurance failed to request an allocated or reasoned award, the arbitrators issued a standard, non-explanatory, award that said nothing with respect to allocation between covered and non-covered damages.  Under such circumstances the Rockhill court held that all damages awarded are presumed covered under the policy.  To support its finding that Rockhill Insurance did not meet its burden of establishing that it was not liable for the entire award, the Rockhill court relied on the fact that the arbitrators were presented with evidence that CFI’s design work was so faulty that that project was destined to fail, and there was no evidence that any of the damages awarded were due solely to CFI’s construction work.

Though the Rockhill decision may surprise Colorado insurance practitioners, especially insurance defense attorneys, one must bear in mind that like other opinions of the U.S. District Court for the District of Colorado, Rockhill is not binding on Colorado state courts.  Further, Rockhill does not go so far as to expressly state that insurance defense counsel has any affirmative duty to seek an allocation between covered and non-covered damages, or that an insurer can direct insurance defense counsel to seek such an allocation.  Such a proposition would insert potentially prejudicial coverage issues into a case in direct contravention of, for example, Colorado Rule of Evidence 411 or insurance defense counsel’s ethical duties as set forth in Colorado Ethics Opinion 91. 

The important takeaway from Rockhill is that it highlights the danger for insurers relying on coverage defenses that do not, prior to an action’s conclusion, at least request intervention in order to seek allocation of covered vs. non-covered damages.  While Colorado courts almost always deny such requests, the fact that such a request was made can be used in an effort to preserve an insurer’s right to subsequently seek allocation.  If no request is made, regardless of whether it is successful, Rockhill makes clear that the carrier risks both waiving its right to seek allocation after the fact, and liability for an entire damages award.

Rockhill’s effect may be that insurers ramp up efforts to request that an insured seek allocation through not only special verdict forms and reasoned arbitration awards, but also case investigation and discovery.  The extent to which it is advisable for an insured defendant to cooperate with such requests is outside the scope of this article.  In such situations, insurance defense counsel should inform its client of the issues and the client’s right to consult with, and follow, the often nuanced, case-specific advice of coverage or other independent counsel.

For additional information regarding the Rockhill decision, or construction litigation in Colorado, you can reach out to Todd Likman by telephone at (303) 987-9814 or by e-mail at likman@hhmrlaw.com.

Colorado Legislative Update: HB 20-1155, HB 20-1290, and HB 20-1348

This year’s Colorado State Legislative session was cut short. However, in the period of time Colorado’s Legislature was in session, it passed and evaluated important legislation for Colorado homebuilders. This article highlights relevant legislation for Colorado homebuilders.

1.      HB 20-1155

This Bill creates new requirements on new homebuilders to offer renewable energy systems to the buyer of a new home. Specifically, the Bill requires homebuilders to offer each of the following:

• A solar panel system, a solar thermal system, or both;
• Prewiring or pre-plumbing for the above solar systems; and,
• A chase or conduit for future installation of such systems.

The Bill further requires Colorado homebuilders to offer homebuyers one of the following:

• An electric vehicle charging system;
• Prewiring for the future installation for such a system; or, 
• A plug-in receptacle in a place accessible to a vehicle parking area.

Colorado homebuilders must also offer a homebuyer an electrical heating system.

The Bill passed Colorado’s Legislature is currently awaiting signature of the Governor.

2.      HB 20-1290

This Bill sets forth additional requirements that an insurance carrier must prove in order to successfully plead a failure-to-cooperate defense in an action concerning an insurance policy providing first-party benefits or coverage. The conditions that must be present are the following.

• The insurer submitted a written request to the insured for the requested information;
• The information requested was necessary for litigation and was not available to the insurer without the assistance of the insured;
• The insured was provided 60 days to respond;
• The written request was for information a reasonable person would determine the insurer needed to adjust the claim filed by the insured or to prevent fraud; and
• The insurer gave the insured an opportunity to cure within 60 days and provided notice to the insured within 60 days, describing, with particularity, the alleged failure to cooperate.

Additionally, the Bill does not relieve the insurer of its duty to investigate and any language in a policy that conflicts with this Bill is void.

The Bill passed the Colorado Legislature and is awaiting signature of the Governor.

3.      HB 20-1348

This Bill proposed expanding employer liability for the tortious actions of its employees. The Bill was in response to a 2017 Colorado Supreme Court decision which held that when an employer admits liability for the actions of its employee, the plaintiff cannot assert additional claims against the employer arising out of the same incident. The Bill intended to reverse the Colorado Supreme Court’s decision and allow a plaintiff, bringing a civil tort claim, to bring additional claims against an employer arising out of the same incident as the one involving an employee.

The consequence of the Bill would have been to prevent an employer from avoiding liability for negligent acts by admitting an employee was in the course and scope of employment when the tortious act was committed. 

Fortunately, for employers, the Bill failed to pass to the Colorado Legislature.

For additional information regarding any of the above Bills or about construction defect litigation in Colorado, generally, you can reach Jean Meyer by telephone at (303) 987-9815 or by e-mail at meyer@hhmrlaw.com.

 

Most Common OSHA Violations Highlight Ongoing Risks

In the 12 months from October 2018 through September 2019, the most recent period reported by OSHA,[1] the workplace safety agency cited the following standards[2] more than any other in the 28 states which do not have OSHA-approved state plans, including Colorado:

1. 1926.501 – Duty to have fall protection – included in 459 citations, resulting in $2,475,596 in penalties ($5,393/citation);
2. 1926.451 – General requirements for scaffolds – included in 265 citations, resulting in $834,324 in penalties ($3,148/citation);
3. 1926.1053 – Requirements for ladders including job-made ladders – included in 164 citations, resulting in $354,853 in penalties ($2,163/citation);
4. 1926.503 – Training requirements related to fall protection - included in 114 citations, resulting in $156,076 in penalties ($1,369/citation); 
5. 1926.405 - Wiring methods, components, and equipment for general use – included in 93 citations, resulting in $150,821 in penalties ($1,621/citation);
6. 1926.20 - General safety and health provisions – included in 85 citations, resulting in $328,491 in penalties ($3,864/citation);
7. 1926.1052 – Requirements for stairways – included in 79 citations, resulting in $155,651 in penalties ($1,970/citation);
8. 1926.102 – Requirements for eye and face protection - included in 67 citations, resulting in $165,595 in penalties ($2,471/citation);
9. 1926.403 – General requirements for electrical conductors and equipment – included in 63 citations, resulting in $146,050 in penalties ($2,318/citation), and;
10. 1926.100 – Requirements for head protection – included in 55 citations, resulting in $127,274 in penalties ($2,314/citation).

For those companies facing a slow-down in production related to the COVID-19 outbreak, it may be a good time to revamp safety programs.  A good place to start this process is the OSHA Compliance Assistance Quick Start webpage.[3] Note that pursuant to OSHA’s Multi-Employer Citation Policy,[4] construction jobsites can involve multiple employers (i.e., general contractors, construction managers, subcontractors, etc.), each of which may be liable for OSHA violations.  OSHA's construction standard 1926.20(b) requires construction employers to have accident prevention programs that provide for frequent and regular inspection of the jobsites, materials, and equipment by competent persons designated by the employers.

For those companies interested in instituting a safety & health program, or reevaluating the program they have in place, three good resources include OSHA’s Construction eTool: Safety & Health Program Component,[5] its Recommended Practices for Safety and Health Programs in Construction,[6] and its Recommended Practices for Safety and Health Programs.[7]

As OSHA states in the Foreword to its Recommended Practices for Safety and Health Programs in Construction:

Establishing a safety and health program at your job site is one of the most effective ways of protecting your most valuable asset: your workers. Losing workers to injury or illness, even for a short time, can cause significant disruption and cost - to you as well as the workers and their families. It can also damage workplace morale, productivity, turnover, and reputation. 

Particularly with respect to health and safety, an ounce of prevention is worth a pound of cure.  As Sergeant Phil Esterhaus admonished each week on Hill Street Blues, “Let’s be careful out there.”  In the construction industry, this starts with a good safety and health program; take this time to reevaluate yours now.    

.

For additional information regarding OSHA violations, or construction litigation in Colorado, you can reach out to Dave McLain by telephone at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.

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[1] https://www.osha.gov/pls/imis/citedstandard.naics?p_naics=2361&p_esize=&p_state=FEFederal.

[2] The full list of standards applicable to the construction industry can be found here: https://www.osha.gov/laws-regs/regulations/standardnumber/1926.

[3] https://www.osha.gov/complianceassistance/quickstarts/construction.

[4] https://www.osha.gov/enforcement/directives/cpl-02-00-124.

[5] https://www.osha.gov/SLTC/etools/construction/shprogram.html.

[6] https://www.osha.gov/Publications/OSHA3886.pdf

[7] https://www.osha.gov/shpguidelines/.

Colorado Legislature Postpones Indefinitely SB 20-093

As previously reported, for certain consumer and employment arbitrations, Senate Bill 20-93 would have:

• Prohibited the waiver of standards for and challenges for evident partiality prior to a claim being filed and required any waiver of such provisions after the claim is filed to be in writing;
• Provided that the right of a party to challenge an arbitrator based on evident partiality is waived if not raised within a reasonable time of learning of the information leading to the challenge but that such right is not waived if caused by the opposing party;
• Established ethical standards for arbitrators; and
• Required specified public disclosures by arbitration services providers but included protections for certain confidential information.

The SB 93 would also have required an individual arbitrator for certain consumer and employment arbitrations to make additional disclosures of information that might affect the arbitrator’s impartiality.  The Bill also specified how attorney fees and other reasonable expenses are to be awarded if a court vacates an award because of an arbitrator’s evident partiality or failure to make required disclosures and clarifies when appeals of orders may be made in consumer and employee arbitrations.

The Bill also provided that for a standard form contract involving a consumer or employee:

• Specified terms are unenforceable as against public policy;
• Including an unenforceable term constitutes a deceptive trade practice under the "Colorado Consumer Protection Act"; and 
• Determined how certain cost-shifting provisions are to be interpreted.

On June 4^th, the House Finance Committee postponed indefinitely SB 93.  I assume that the bill was killed because it was not Fast, Friendly (i.e., lacking opposition), and Free.  Though enough amendments were made to ameliorate some of the most serious concerns raised by opponents, including the construction industry, to get it out of the Senate, enough resistance remained to violate the “Friendly” test for whether the Colorado Legislature would pass is this year.  Stay tuned next year, as this issue is sure to have a repeat performance.

For additional information regarding construction litigation in Colorado, or the legislative measure which may impact such litigation, feel free to reach out to David M. McLain by telephone at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.

 

Scholarships Available for the 2020 CLM Claims College

I am pleased to have been invited to serve on the Executive Council and Faculty for this year’s CLM Claims College – School of Construction, which will be held at the Marriott Baltimore Waterfront from Wednesday, September 9, 2020 through Saturday, September 12, 2020.  This year’s Level 1 courses are being held virtually, so there is no need to travel to Baltimore if you are interested in starting the three-year program this year.

As a result of my service on the Executive Council, I can offer scholarships (registration fee only) to industry professionals (insurance - risk, adjusters, claims, etc. and corporate) interested in attending. Please e-mail me if you would like to take advantage of the free registration scholarship offered by the CLM.

2020 Claims College Overview

The education of claims resolution professionals is important to the CLM. That is why CLM established the Claims College in 2012 and enlisted some of the industry’s best professionals to create and teach courses. Since its inception, hundreds of students have attended the Claims College, earning their CCP (Certified Claims Professional) designation.

The College presents courses in eight three-level specialty schools and three one-level schools with more on the horizon. Schools include:

Casualty Claims

Claims Mediation

Construction

Cyber Claims

Extra-Contractual Claims

Leadership

Professional Lines

Property Claims

Transportation

Workers Compensation

Students must pass all three levels of a school to earn their CCP. Each level consists of reading materials, in-class instruction, group projects, and an exam. 

2020 School of Construction Overview

Construction claims present complexities in claim handling, are often multiparty cases with cross claims and third-party claims between and among the numerous defendants, intertwined with issues involving insurance coverage. The stakes for these types of cases are high as the damages claimed can be in the multi-millions. 

Competent construction claims handling requires an understanding of the distinct legal and practical issues between commercial and residential claims. The construction claims world is an unfriendly place for the claims professional who has not been properly trained and exposed to these issues.

The School of Construction will provide adjusters with the knowledge, tools, and understanding required to navigate these complex claims. Professionals seeking to expand their knowledge of construction risk concepts and seasoned professionals looking to move into construction claims are encouraged to attend.

About The CLM

The Claims and Litigation Management (CLM) Alliance is the only national organization created to meet the needs of professionals in the claims and litigation management industries. Founded in 2007, the CLM currently has more than 45,000 Members and Fellows—a number that grows by hundreds each month.

For additional information regarding the CLM Claims College, you can reach out to Dave McLain by telephone at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.

Colorado Legislature Kills SB 20-138 – A Bill to Extend Colorado’s Statute of Repose

As previously reported, SB 20-138, “Concerning Increased Consumer Protection for Homeowners Seeking Relief for Construction Defects,” would have extended the Colorado statute of repose applicable to construction defect claims.  Senate Bill 20-138, if enacted, would have:

1. Extended Colorado’s statute of repose for construction defects from 6+2 years to 10+2 years;
2. Required tolling of the statute of repose until the claimant discovers not only the physical manifestation of a construction defect, but also its cause; and
3. Permitted statutory and equitable tolling of the statute of repose.

Now that the legislature is back in session, it will be a shortened session because of Covid-19 and, other than dealing with budget shortfalls, it seems like any bills that are not free, fast, and easy to pass will likely die in this year’s session.  Perhaps in line with this thinking, Senator Robert Rodriguez, opted to kill Senate Bill 20-138.  On second reading in the Senate on May 28^th, the bill was laid over until December 31^st, effectively killing the bill.  While the battle may be over for this year, rest assured it will be back in the future as plaintiffs’ attorneys seek to attach recent construction defect reforms. 

For additional information regarding SB 138, or construction litigation in Colorado, you can reach out to Dave McLain by telephone at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.

Don’t Conspire to Build a Home…Wait…What?

In 1986, the Colorado General Assembly enacted the Pro Rata Liability Act, codified at C.R.S. § 13-21-111.5, which eliminated joint and several liability for defendants in favor of pro rata liability.[1] The statute was “designed to avoid holding defendants liable for an amount of compensatory damages reflecting more than their respective degrees of fault.”[2] However, the following year, the Colorado legislature carved out an exception to preserve joint liability for persons “who consciously conspire and deliberately pursue a common plan or design to commit a tortious act.”[3] Because of this conspiracy exception, plaintiffs try to circumvent the general rule against joint and several liability by arguing that construction professionals defending construction defect cases were acting in concert, as co-conspirators. Plaintiffs argue that if they can prove that two or more construction professionals consciously conspired and deliberately pursued a common plan or design, i.e., to build a home or residential community, and such a plan results in the commission of a tort, i.e., negligence, the defendants may be held jointly and severally liable for all of the damages awarded.

Since 1986, Colorado courts have construed the “conspiracy” provision in § 13-21-111.5(4), but some have disagreed as to what constitutes a conspiracy for purposes of imposing joint liability.

Civil Conspiracy

In Colorado, the elements of civil conspiracy are that: “(1) two or more persons; (2) come to a meeting of the minds; (3) on an object to be accomplished or a course of action to be followed; (4) and one or more overt unlawful acts are performed; (5) with damages as the proximate result thereof.”[4]

With respect to the fourth element, Colorado adheres to the view that “[t]he gist of [a civil conspiracy] action is not the conspiracy charged, but the tort working damage to the plaintiff.”[5] In Contract Maintenance Co. v. Local No. 105, the Colorado Supreme Court stated “the purpose of the conspiracy must involve an unlawful act or unlawful means.”[6]

In Pinon Sun Condo. Ass’n, Inc. v. Atain Specialty Ins. Co., a condominium association hired a public adjuster for the claims process and a construction company to conduct estimates and repairs after the condominiums sustained hail damage.[7] After a dispute over the amount of the claims paid, the association sued the insurers for breach of contract, among other claims.[8] The insurers counterclaimed, alleging fraud and civil conspiracy against the association, the public adjuster, and the construction company.[9] In its Order Granting in Part and Denying in Part Motions for Summary Judgment, the court granted summary judgment in favor of the association, public adjuster, and construction company on the fraud claim because the insurers failed to prove one of the elements of fraud.[10] Noting that the fourth element of a civil conspiracy requires an unlawful overt act, the court also granted summary judgment in favor of the association, public adjuster, and construction company on the civil conspiracy claim because the insurer failed to prove fraud, which was critical to showing an unlawful overt act.[11] Thus, although the association, public adjuster, and construction company acted in concert with one another, no conspiracy existed because no unlawful act or unlawful means in furtherance of a conspiracy existed.

Conspiracy in the Construction Context

However, in construction defect cases, the fourth element of civil conspiracy is not so clear.

In Resolution Trust Corp. v. Heiserman, the Colorado Supreme Court opined that “although the execution of a common plan or design may in many circumstances not result in wrongful conduct causing injury or damages,” . . . it may in some circumstances result in a tort such as negligence, causing injury or damages.[12] Thus, joint and several liability may be imposed on two or more persons pursuant to C.R.S. § 13-21-111.5(4), even when the conspiracy results in the tort of negligence.

Although the language of Heiserman appears to say that one may “conspire” to be negligent and thus be held jointly and severally liable, trial courts will not equate lawful contracting to do construction and design work with tortious conspiracy, absent some other evidence of tortious conduct. Indeed, Heiserman held that for joint and several liability to be applied, the trigger for liability had to be based on something other than a breach of contract.[13] The following cases help define the contours of this issue.

Rivergate Lofts Condo. Owners Ass’n v. Rivergate Lofts Partners, LLP: A tort must be reasonably foreseeable to result from the agreement.

On a partial summary judgment motion regarding joint and several liability in a construction defect case, La Plata County District Court Judge David Dickinson concluded the Colorado Supreme Court’s discussion in Heiserman regarding whether an agreement must include intent to commit a tort is dicta.[14] Judge Dickinson further concluded “as a result of the agreement, it must at a minimum be reasonably foreseeable that the agreement will result in the commission of tortious acts in furtherance thereof.” Id. at *7. Thus, due to a lack of evidence of agreement to violate the building code in the design-build agreement, Judge Dickinson found no conspiracy existed and granted partial summary judgment in favor of the construction company defendant. Id.

Villas at La Campanella Property Owners v. Hunnahs, LLC et al.: Benign cooperation does not establish joint liability.

In another La Plata County case, on a defendant’s motion for determination of a question of law regarding joint and several liability, Judge William Herringer determined that construction defect defendants would not be held jointly and severally liable because the plaintiff homeowners association was unable to establish facts to show the defendants agreed, in any way, to engage in tortious conduct.[15] More specifically, the judge acknowledged that the plaintiff presented factual evidence that the defendants worked together and coordinated closely on the construction project. However, the judge stated:

[That defendants worked together] is unsurprising and would be expected for a project of this nature. However, the mere fact that there were cooperative efforts and communication is insufficient for the imposition of joint liability. While the Plaintiff does not need to show that the defendants had the “specific intent” to commit a tortious act, the Plaintiff must produce some evidence of a “common plan or design” that results in the commission of a tort. Benign cooperation with a tortfeasor does not make a defendant jointly responsible for the tortfeasor’s misconduct. “One who innocently, and carefully, does an act which happens to further the tortious purpose of another is not acting in concert with the other.”[16]

Polmer et al. v. Hi Point Home Builders LLC et al.: Lawful contracting to build a home is not in and of itself a C.R.S. § 13-21-111.5(4) conspiracy.

In Polmer v. Hi Point Home Builders, El Paso County District Court Judge William Bain also ruled on a motion to determine a question of law regarding joint and several liability in a construction defect case.[17] In this case, RMG engineers designed the grading and excavation plans for a new development, conducted soils testing, and provided the structural designs and observation and compliance services for construction of the homes.[18] Ruling against joint and several liability, Judge Bain found that the plaintiff provided insufficient evidence that RMG “conspired” with the other construction defendants to recommend a new design, or that the construction defendants conspired to market the home fraudulently or build it defectively, based merely on the fact the parties lawfully contracted with each other.[19]

Conclusion

Taken together with Heiserman, the cases are clear on this point: Parties cannot be said to conspire when they have merely engaged in lawful contracting.[20] However, each case presents “unique factual circumstances” and “detailed factual findings will be necessary” to make a determination of whether any given contractual relationship among construction professionals will rise to the level of conspiracy under C.R.S. § 13-21-111.5(4).[21]

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[1] James W. Avery, The Pro Rata Liability Act and Imposition of Joint Liability Against Physicians, Colo. Law., 2/98, at 89.

[2] B.G.’s, Inc. v. Gross ex rel. Gross, 23 P.3d 691, 694 (Colo. 2001).

[3] C.R.S. § 13-21-111.5(4). This is also known as “actions in concert,” which is broader than civil conspiracy, not requiring express agreement or proof of intent to commit a tortious act. Resolution Tr. Corp. v. Heiserman, 898 P.2d 1049, 1056-57 (Colo. 1995).

[4] Loughridge v. Goodyear Tire & Rubber Co., 192 F. Supp. 2d 1175, 1186 (D. Colo. 2002).

[5] Resolution Tr. Corp. v. Heiserman, 898 P.2d 1049, 1055 (Colo. 1995) (quoting Prosser and Keeton on the Law of Torts § 46, at 324 (5th ed. 1984)).

[6] Contract Maintenance Co. v. Local No. 105, 415 P.2d 855, 857 (Colo. 1966) (en banc); see also Nelson v. Elway, 908 P.2d 102, 106 (Colo. 1995) (en banc) (An unlawful overt act is a required element of civil conspiracy.).

[7] Pinon Sun Condo. Ass'n v. Atain Specialty Ins. Co., No. 17-cv-01595, 2019 WL 4747673, at *1 (D. Colo. Sept. 27, 2019).

[8] Id. at *2.

[9] Id.

[10] Id. at *4-6.

[11] Id. at *9.

[12] Resolution Tr. Corp. v. Heiserman, 898 P.2d 1049, 1055 (Colo. 1995).

[13] Heiserman, 898 P.2d at 1055 (“We conclude that the term ‘tortious act’ appearing in section 13–21–111.5(4) includes any conduct other than breach of contract that constitutes a civil wrong and causes injury or damages.”).

[14] Rivergate Lofts Condo. Owners Ass'n v. Rivergate Lofts Partners, LLP, No. 10CV19, Order on Motion for Partial Summary Judgment of Defendants Okland and Sill, at *6 (La Plata Ct. Dist. Ct. Oct. 4, 2011).

[15] Villas at La Campanella Property Owners v. Hunnahs, LLC et al., No. 13CV30099, Order Granting Defendant ABC Welding, Inc.’s Motion for Determination of a Question of Law Regarding Joint and Several Liability, (La Plata Ct. Dist. Ct. Aug. 21, 2015).

[16] Id. at *2-3 (internal citations removed & emphasis added).

[17] Polmer et al. v. Hi Point Home Builders LLC et al., No. 2013CV30763, Order: (Proposed) Order: re: Motion for Determination of a Question of Law Regarding Joint and Several Liability, (El Paso Ct. Dist. Ct. Oct. 15, 2015).

[18] Polmer et al. v. Hi Point Home Builders LLC et al., No. 2013CV30763, First Amended Complaint at ¶¶ 16-19, (El Paso Ct. Dist. Ct. Oct. 15, 2015).

[19] Polmer et al. v. Hi Point Home Builders LLC et al., No. 2013CV30763, Order: (Proposed) Order: re: Motion for Determination of a Question of Law Regarding Joint and Several Liability, at *2 (El Paso Ct. Dist. Ct. Oct. 15, 2015).

[20] See also Logixx Automation, Inc. v. Lawrence Michels Family Trust, 56 P.3d 1224, (Colo. App. 2002) (“[W]e conclude that there can be no conspiracy by two or more parties to a contract to breach that contract.”); In re Stanley, 2011 WL 10656536 (E.D. Cal. July 1, 2011) (“[A] party to a contract cannot be bootstrapped into a conspiracy tort.”). “The claim of civil conspiracy . . . requires proof of an unlawful intent.” Nelson v. Elway, 971 P.2d 245, 250 (Colo. App. 1999). Joint and several liability cannot be imposed “for doing in a proper manner that which they had a right to do . . . .” Id.

[21] Resolution Trust Corp. v. Heiserman, 898 P.2d 1049, 1057 (Colo. 1995).

For more information regarding joint and several liability in construction defect cases, you can reach Ben Volpe at (303)-987-7140 or by e-mail at volpe@hhmrlaw.com.