Potential Extension of the Statutes of Limitation and Repose for Colorado Construction Defect Claims

On January 27^th, Senator Robert Rodriguez introduced SB 20-138 into the Colorado Legislature.  The bill has been assigned to the Senate Judiciary Committee and has not yet been scheduled for its first hearing in that committee.  In short, Senate Bill 20-138, if enacted, would:

1)      Extend Colorado’s statute of repose for construction defects from 6+2 years to 10+2 years;

2)      Require 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)      Permit statutory and equitable tolling of the statute of repose.

Colorado’s statute of repose for construction defect claims are codified at C.R.S. § 13-80-104.  In 1986, the Colorado Legislature set the statute of repose period at 6+2 years.  For the last 34 years, Colorado’s statute of repose for owners’ claims against construction professionals has been substantially the same, to wit:

(1)  (a) Notwithstanding any statutory provision to the contrary, all actions against any architect, contractor, builder or builder vendor, engineer, or inspector performing or furnishing the design, planning, supervision, inspection, construction, or observation of construction of any improvement to real property shall be brought within the time provided in section 13-80-102 after the claim for relief arises, and not thereafter, but in no case shall such an action be brought more than six years after the substantial completion of the improvement to the real property, except as provided in subsection (2) of this section.

(2)  In case any such cause of action arises during the fifth or sixth year after substantial completion of the improvement to real property, said action shall be brought within two years after the date upon which said cause of action arises.

C.R.S. § 13-80-104.

The language of SB 20-138 would amend these sections to read:

(1) (a) Notwithstanding any statutory provision to the contrary, all actions against any architect, contractor, builder or builder vendor, engineer, or inspector performing or furnishing the design, planning, supervision, inspection, construction, or observation of construction of any improvement to real property shall MUST be brought within the time provided in section 13-80-102 after the claim for relief arises, and not thereafter LATER, but in no case shall such MAY an action be brought more than six TEN years after the substantial completion of the improvement IMPROVEMENTS to the real property, except as provided in subsection (2) of this section.

(2) In case IF any such cause of action DESCRIBED IN SUBSECTION (1) OF THIS SECTION arises during the fifth NINTH or sixth TENTH year after substantial completion of the improvement IMPROVEMENTS to real property, said THE action shall MUST be brought within two years after the date upon which said THE cause of action arises.

It cannot be overstated what a devastating effect this would have on the ability of builders to provide affordable or attainable housing in Colorado.  Such a shock to the system would make insurers shy away from insuring projects more than they already do.  With the hardening of the insurance market as it is, this would certainly not help the housing crisis in Colorado.

With respect to the accrual of construction defect claims, Senate Bill 138 would change Colorado law as follows:

(b) (I) Except as otherwise provided in subparagraph (II) of this paragraph (b) SUBSECTION (1)(b)(II) OF THIS SECTION, a claim for relief arises under this section at the time the claimant or the claimant's predecessor in interest discovers or in the exercise of reasonable diligence should have discovered BOTH the physical manifestations AND THE CAUSE of a defect in the improvement which THAT ultimately causes the injury.

Enactment of this section would legislatively overturn a long line of Colorado Appellate Court decisions, including Highline Village Assocs. v. Hersh Cos., 996 P.2d 250, 253 (Colo. App. 1999) (holding, “under the contractors’ statute, a claim accrues when a physical manifestation of a defect appears, even though its cause is not known at that time.”); United Fire Group v. Powers Elec., Inc., 240 P.3d 569, 572 (Colo. App. 2010) (stating, “we also conclude that it was not necessary to know that the defect caused the fire for the fire to be the defect’s physical manifestation.”), and; Broomfield Senior Living Owner, LLC v. R.G. Brinkmann Co., 413 P.3d 219, 226 (Colo. App. 2017) (“Accrual under CDARA, therefore, depends on the discovery of the manifestation of the defect and not its cause.”) (emphasis in the original).

Finally, with respect to equitable tolling of the statute of repose, Senate Bill 138 inserts a section, which reads:

(3) The limitations provided by this section:

(a) ARE SUBJECT TO BOTH STATUTORY AND EQUITABLE TOLLING;

There are several statutes that may toll the statute of repose, including C.R.S. 13-80-104(3), which this bill would amend to read:

(3) The limitations provided by this section:

*          *          *

(b) Shall MAY not be asserted as a defense by any person in actual possession or control, as owner or tenant or in any other capacity, of such an improvement at the time any deficiency in such an THE improvement constitutes the proximate cause of the injury or damage for which it is proposed to bring an action.

Colorado’s Common Interest Ownership Act also provides for statutory tolling for claims brought under C.R.S. § 38-33.3-311(1), which states, in pertinent part: “Any statute of limitation affecting the association’s right of action under this section is tolled until the period of declarant control terminates.”  While it is hard to conceive of a claim that would arise under this section arising out of a construction defect claim, it may be theoretically possible.

In any event, the fact that Senate Bill 138 seeks to provide for equitable tolling is a frontal assault on the Colorado Supreme Court, which previously did away with the repair doctrine, a form of equitable tolling, by stating: “"equitable tolling is not permissible where it is inconsistent with the text of the relevant statute.”  Smith v. Exec. Custom Homes, Inc., 230 P.3d 1186, 1191-1192 (Colo. 2010).  The Court concluded on this issue, stating: “equitable tolling pursuant to the repair doctrine is inconsistent with the CDARA [the Construction Defect Action Reform Act, C.R.S. § 13-20-801, et seq.] because the CDARA already provides an adequate legal remedy in the form of statutory tolling of the limitations periods under specific and defined circumstances, including during the time in which repairs are being conducted.”  Id.

It remains to be seen whether this bill gets legs at the state legislature, stay tuned in that regard.  Between this and SB 20-093, previously discussed, it appears that after quiet session in 2019, the plaintiffs’ lawyers are back at the Colorado State Capitol, with a vengeance, seeking their laundry list of legislative changes to open the tap for construction defect litigation.  Will one-way attorneys’ fees provisions and uncapping the treble damage component of the Colorado Consumer Protection Act be next?  I hope not, but this legislative session is certainly starting off with a bang.

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