Construction Law in Colorado

Major Developments in Colorado Insurance Coverage Law

By Joe Ramirez

Insurance coverage litigation and construction defects seem to go hand in hand in Colorado. And this summer has produced some of the most significant changes in insurance coverage litigation in Colorado in decades. First, the State Legislature amended Colorado’s Unfair Claims Practices Act to provide policyholders with substantial remedies against insurers who unreasonably delay or deny benefits under an insurance policy. The statute provides much needed help for policyholders who are forced by their insurers to litigate claims to obtain coverage. Meanwhile, the Colorado Court of Appeals ruled in favor of property insurers who use Anti-Concurrent Causation language in their exclusions. The decision is extremely important for businesses who own and insure real or personal property; such businesses must be vigilant against such language in their commercial property policies. Finally, the Court of Appeals ruled that lawyers who represent clients on behalf of an insurance company have a duty to recommend independent counsel where the client’s interests conflict with the insurers. All of these developments have changed the landscape of insurance coverage litigation in Colorado.

Cert. granted on whether subrogation waiver applies only to the "Work"

Copper Mountain, Inc. v. Industrial Systems, Inc. (Colo. 2008)

Today, the Supreme Court of Colorado granted cert. on the following issue: Whether the court of appeals erred in ruling a waiver of subrogation provision in an American Institute of Architects ("AIA") form contract barred all of owner-plaintiff’s claims, thereby creating a conflict with another decision of the court of appeals, Town of Silverton v. Phoenix Heat Source System, Inc., 948 P.2d 9 (Colo. App. 1997), which held the waiver provision barred only claims for damages to the "Work" required to be insured by the owner under the contract.

Owner's Claim Asserting Faulty Construction Insufficient To Trigger Subcontractor's Duty To Indemnify General

Boulder Plaza Residential, LLC v. Summit Flooring, LLC (Colo. App. 2008)

The Colorado Court of Appeals holds that an owner's claim of alleged defective workmanship is not sufficient, under the particular subcontract at issue, to trigger the subcontractor's duty to indemnify the general.  Instead, the subcontractor only has to indemnify the general contractor if there is damage caused by the subcontractor's actual negligent acts, breach of contract, or intentional torts.

(Update - cert. granted) Subrogation Waiver Covers The Entire Loss, Not Just "The Work"

Copper Mountain, Inc. v. Industrial Systems, Inc. (Colo. App. 2007)

Creating a split in the Colorado Court of Appeals, a division of the Court held that the subrogation waiver in AIA A201 covers any damage to the building, not just loss to the work being performed.

On June 9, 2008, the Supreme Court of Colorado granted cert. on the following issue: Whether the court of appeals erred in ruling a waiver of subrogation provision in an American Institute of Architects ("AIA") form contract barred all of owner-plaintiff’s claims, thereby creating a conflict with another decision of the court of appeals, Town of Silverton v. Phoenix Heat Source System, Inc., 948 P.2d 9 (Colo. App. 1997), which held the waiver provision barred only claims for damages to the "Work" required to be insured by the owner under the contract.

Additional Insured Provision Did Not Protect GC For Completed Operations

Weitz v. Mid-Century Insurance (Colo. App. 2007)

The Court of Appeals held that an additional insured provision in a subcontractor's policy that is meant to protect the general contractor did not apply to completed operations because it, by its terms, applied only to "ongoing operations." Said another way, the endorsement that extends coverage to the general contractor against its liability “arising out of [the subcontractor’s] ongoing operations” does not insure the general contractor against liability arising out of the subcontractor’s “completed operations.”

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CGL Policy Covered Claim By Subsequent Purchaser Of Home

Hoang v. Assurance Co. of America (Colo. 2007) and Travelers v. Village Homes (Colo. 2007)

The Supreme Court holds that the proceeds of a CGL insurance policy are available to satisfy the judgment of a subsequent purchaser of damaged property against the homebuilder when (1) the builder insured itself against liability for damage occurring during the policy period, (2) the damage to the property occurred during the policy period, (3) no exclusion to the policy rendered the insured’s policy coverage inapplicable because of a change in the property’s ownership, and (4) the builder was liable for the damage to the property. The Court also applies this holding in Travelers, decided the same day.

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90-Day Statute Of Limitations Not Applicable To Subrogation Claim

Fire Insurance Exchange v. Monty's Heating (Colo. App. 2007)

After a homeowner's home burnt down, plaintiff insurance company paid the homeowner under the homeowner’s policy. Plaintiff then brought a subrogation claims against the contractors, alleging faulty HVAC work.

The trial court entered summary judgment dismissing the claims based on the 90-day statute of limitations in C.R.S. § 13-80-104(1)(b)(II). The Court of Appeals reversed, holding that the 90-day statute of limitations for indemnification and similar claims applied to claims by the defendants of construction-defects cases, not the plaintiffs.

Read slip opinion

CGL Policy Covered Claim By Subsequent Purchaser Of Home

Hoang v. Assurance Co. of America (Colo. 2007) and Travelers v. Village Homes (Colo. 2007)

The Supreme Court holds that the proceeds of a CGL insurance policy are available to satisfy the judgment of a subsequent purchaser of damaged property against the homebuilder when (1) the builder insured itself against liability for damage occurring during the policy period, (2) the damage to the property occurred during the policy period, (3) no exclusion to the policy rendered the insured’s policy coverage inapplicable because of a change in the property’s ownership, and (4) the builder was liable for the damage to the property. The Court also applies this holding in Travelers, decided the same day.

Read slip opinion