Construction Law in Colorado

Loss-of-Bonding-Capacity Claims Are Back in Colorado

Denny Construction v. Denver (Colo. 2009)

Reversing a Court of Appeals opinion, the Colorado Supreme Court holds that impaired bonding capacity claims are not speculative as a matter of law.  Instead, like all claims for lost profits, they must be established with reasonable certainty.  Far from finding such a claim speculative as a matter of law as the Court of Appeals did, the Colorado Supreme Court lends support for such a claim:

"At bottom, then, a reduction in bonding capacity indicates a reduction in responsibility, which, in turn, will impair a contractor’s ability to obtain public works contracts. This is not speculation; on the contrary, it is the intended function of the bonding system."

Court of Appeals Addresses Unjust Enrichment Claims by Subcontractors and Suppliers

Redd Iron, Inc. v. Int'l Sales and Service Corp. (Colo. App. Dec. 24, 2008).

In DCB Construction Co., Inc., v. Central City Development Co., 965 P.2d 115 (Colo. 1998), the Supreme Court of Colorado held that, in order for a property owner to be liable under a theory of unjust enrichment to a tenant's contractor, the contractor must show some type of improper, misleading, or deceitful conduct by the owner.  Now in Redd Iron, Inc., a division of the Colorado Court of Appeals held that the requisite showing of improper, misleading, or deceitful conduct by the owner is not a required element outside the context of a claim against a landlord by a party working at the tenant's behest, and that malfeasance need not invariably be shown to establish unjust enrichment.

Owner Can Pursue Trust-Fund Claim Against General Without First Paying Subcontractors

Syfrett v. Pullen (Colo. App. Dec. 24, 2008).

A division of the Court of Appeals held that a project owner has standing to sue a general contractor for violation of the trust fund statute due to the general contractor's failure to pay its subcontractors, even though the owner had not paid any of the unpaid subcontractors, laborers, or suppliers.

But the Court of Appeals also held that when an owner recovers against a general contractor for violation of the trust fund statute, and the subcontractors and suppliers remain unpaid, then the owner is only entitled to judgment for a constructive trust on the funds.  Thus, the owner becomes the constructive trustee of any funds collected, and must hold the funds for the benefit of the subcontractors, laborers, and suppliers who are unpaid and have claims on those funds.  This includes any treble damages awarded.

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Can I Fire This Empoloyee Based On Off-Duty Conduct?

By Jim Goh, partner, Holland & Hart LLP.

The Colorado Anti-Discrimination Act (CADA) prohibits employers from, among other things, firing employees for engaging in lawful, off-duty, off-premises activities.  While this provision of CADA was originally passed to prevent employers from firing smokers, employees have used the provision to challenge their discharge for a variety of other lawful, off-duty activities, such as engaging in unpopular political activities or in homosexual relationships.  And while originally believed to protect employees from discharge only for off-duty conduct unrelated to their jobs, on October 16, 2008, the Colorado Court of Appeals expanded the scope of protections and held that the provision also protects employees from discharge due to job-related whistleblowing.

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.

Court of Appeals Delivers A Blow To Pay And Chase In Colorado

Thermo Development, Inc. v. Central Masonry Corp. (Colo. App. Sept. 18, 2008)

The Colorado Court of Appeals rules that statute allowing the maintenance of an indemnification action within 90 days of settling an underlying lawsuit does not toll the six-year statute of repose.

Keeping Your Green Project Out of the Red

By Melissa A. Orien and David W. Zimmerman*

With the buzz of “going green” as the latest trend, public and private owners alike are seeking environmentally friendly construction projects. The trend comes with an increased risk of liability for designers and contractors on green projects. Designers and contractors should adjust their practices to keep their green projects from dragging their bottom line into the red.

Three such best practices include (1) engaging in clear project-level communication to adequately adjust the parties’ expectations, (2) understanding green products to be used on the project, including their limitations and availability; and (3) avoiding conduct that warrants or guarantees a final result.

Who is that worker? (Government Contractors and Forthcoming E-Verify Requirements)

By John Scorsine
July 11, 2008

All employers have various requirements placed upon them when hiring new employees. Companies doing business with the Government have additional requirements for reporting and compliance in the realm of employment law. This last month the President began the process of creating an additional “new hire” requirement for employers that contract with the Federal government.

Contractor only required to repair, not replace, defective windows

Ranta Construction, Inc. v. Anderson (Colo. App. 2008)

In a 34-page opinion regarding defective windows, the Court of Appeals explains at length why the homeowners' refusal to allow the contractor and window vendor to repair admittedly-defective windows justifies the trial court's judgment against the homeowner.

Subcontractor not required to perform its paving work at midnight using teaspoons

New Design Construction Company, Inc. v. Hamon Contractors, Inc. (Colo. App. 2008)

The Court of Appeals holds that the duty of good faith and fair dealing applies to a prime contractor's right to schedule and sequence the work.  Additionally, the Court holds that a subcontractor not suing CDOT directly is not required to exhaust the CDOT administrative remedies prior to maintaining a suit against the prime contractor.  Finally, the Court addresses when penalty interest under Colorado's prompt pay act applies and begins accruing.