Source: http://www.coloradoconstructionlitigation.com/2016/
Timestamp: 2019-04-22 12:48:04+00:00

Document:
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 (emphasis added).
As the battle raged on at the trial court level, subcontractors and design professionals argued that their work should be deemed “substantially complete” when they finished their discrete scope of work within a project. Developers and general contractors, seeking to maintain third-party claims against the subcontractors and design professionals, typically argued either that the subcontractors’ and design professionals’ work should be deemed “substantially complete” upon the issuance of the final certificate of occupancy on the project, or upon the issuance of the final certificate of occupancy for the last building within a project on which the subcontractor or design professional worked. Trial court judges and arbitrators have been split on this issue, with perhaps a slight majority favoring one or the other approaches advocated by developers and general contractors, that the subcontractors’ and design professionals’ work is “substantially complete” upon the issuance of the last certificate of occupancy in a project (the minority view) or upon the issuance of the last certificate of occupancy for the last building within a project on which the subcontractor of design professional worked (the majority view).
When the Court of Appeals analyzed this issue in 2012, in Shaw Construction, LLC v. United Builder Services, 296 P.3d 145 (Colo. App. 2012), it held that: “an improvement may be a discrete component of an entire project, such as the last of multiple residential buildings. Therefore, we need not resolve subcontractors’ argument that an improvement should be determined even more narrowly on a trade-by-trade basis.” Id. at 154. This case did not fully resolve the issue and the battle raged on at the trial court level, with more than a few judges and arbiters commenting in their orders on the issue that the Shaw decision was not particularly helpful in explaining the applicable law.
Our prior decisions have recognized that, depending upon the circumstances, “substantial completion” of a project can occur by the time mechanics’ liens could be filed “after the completion of the building, structure, or other improvement,” or, in the case of subcontractors working on the last building in a condominium complex, when a certificate of occupancy was issued.
But as the division in Shaw pointed out, CDARA does not define “substantial completion.” In 1986, an amendment removed the prior definition, “the degree of completion of an improvement to real property at which the owner can conveniently utilize the improvement for the purpose it was intended.” The legislative history does not explain the reason for this deletion.
In settling this dispute, at least for the time being, the Court of Appeals ruled that “a subcontractor has substantially completed its role in the improvement at issue when it finishes working on the improvement.” Id. at *5.
The obvious impact of this ruling will be that if substantial completion of a subcontractor’s or design professional’s work is to be determined under Colorado case law, the claims against the subcontractor or design professional will become stale before the owner’s claims against the developer or general contractor. For this reason, there will be a gap in the risk management program, such that developers and general contractors will be left holding the bag with respect to liability to the owner.
In order to combat the risk of this occurrence, it would behoove developers and general contractors to include clauses in their subcontract agreements contractually defining “substantial completion” in such a way as to make it contemporaneous with the substantial completion of the developer’s or general contractor’s work on the project. By doing so, developers and general contractors can prevent their claims against subcontractors and design professionals from becoming stale before an owner’s claims against them become stale.
To learn more about the Sierra Pacific case or to discuss updating your subcontract agreement to define substantial completion in such a way as to avoid the pitfall of the Sierra Pacific case, you can reach Dave McLain by telephone at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.
David M. McLain is a founding Member of Higgins, Hopkins, McLain & Roswell, LLC and is proud to have received the CLM designation as a Certified Litigation Management Professional. When not representing Colorado’s construction professionals in construction defect litigation, Mr. McLain serves as a member of the Colorado Association of Home Builders’ Board of Directors, Executive Committee, and Government Affairs Committee, serving as the chairman of its Construction Defect Task Force. In 2015, Law Week Colorado named Mr. McLain as the Barrister’s Best Construction Defects Lawyer for Defendants.
Higgins, Hopkins, McLain & Roswell is looking for the next great associate attorney to add to our growing litigation team.
Higgins, Hopkins, McLain & Roswell, LLC is looking to add a new associate to our construction litigation and general casualty defense practice. Our ideal candidate is one with three to five years of experience in the litigation of construction defect, personal injury, and/or general casualty claims. We have a lot of trials and arbitrations on the calendar for the foreseeable future and we don’t expect to slow down any time soon, so we need an associate to participate in all facets of a busy litigation practice.
Instead of assigning new associates to the same, repetitive task in each case, we typically assign a new associate to a new file and mentor him or her on all aspects of that case as it proceeds through the initial investigation and pleading stages, written and testimonial discovery, motions practice and, eventually, trial or arbitration. To be successful a candidate, you must be an optimist, well spoken, have exceptional research and writing skills, and be able to think on your feet. Given that most of our files are document-intensive, you must also be very organized and detail-oriented.
To apply for the position, please send a cover letter, resume, and writing sample to our office administrator, Ms. Lauren Parks, Higgins, Hopkins, McLain & Roswell, LLC, 100 Garfield Street, Suite 300, Denver, CO 80206, or by e-mail at parks@hhmrlaw.com.
Higgins, Hopkins, McLain & Roswell (“HHMR”) exists to embody and exemplify the principles of service and stewardship. In everything we do, we focus on serving our clients selflessly and to the best of our ability. In doing so, we always have in the forefront of our minds our obligation to act as the stewards of our clients’ trust, confidences, and resources.
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. In addition to their construction law background, HHMR’s attorneys are well versed and experienced in tort, contract, property, and general casualty litigation ranging from products liability to personal injury and premises liability claims.
I am happy to have been asked to serve as an instructor at this year's CLM Claims College – School of Construction, to be held at the Marriott Baltimore Waterfront in Baltimore, Maryland on Wednesday, September 7, 2016 through Saturday, September 10, 2016.
Construction claims present myriad complexities in claim handling. Construction defect lawsuits are often multi-party cases with cross claims and third-party claims between and among the numerous defendants. Insurance coverage is intertwined and complex due to the interplay of primary, excess, wrap, and additional insurers for the numerous defendants. All this is further complicated by statutes and regulations, inconsistent case law and procedural peculiarities throughout the United States. The economic stakes are high as the damages claims 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. This is no place for the average adjuster and certainly no place for the adjuster who has not been properly trained.
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.
Upon satisfactory completion of all three levels, graduates will receive the Certified Claims Professional (CCP) in Construction designation.
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 30,000 Members and Fellows — a number that grows by hundreds each month.
As an instructor, I have the ability to offer three scholarships (registration fee only) to industry professionals (insurance - risk, adjusters, claims, etc. and corporate) to attend Claims College. In order to attend, you need not to be a current CLM Fellow – however you will need to register (at no cost) to receive the scholarship. If you are interested in attending, please let me know by August 1st so that I can put you in touch with the proper person at the CLM to register. I look forward to the event and hope that there are folks out there interested in taking advantage of the scholarships.
I am a founding member of Higgins, Hopkins, McLain & Roswell, LLC, a firm which specializes in construction law and construction litigation throughout Colorado. I completed the Claims and Litigation Management Alliance Litigation Management Institute, earning the designation from that organization as a Certified Litigation Management Professional and have a general civil litigation practice with an emphasis on the defense of complex construction lawsuits on behalf of developers and general contractors. As a result of the experience gained by defending some of Colorado’s largest construction defect lawsuits, developers, general contractors, and subcontractors seek me out to consult on risk avoidance and risk management strategies. In 2015, Law Week Colorado named me as the Barrister’s Best Construction Defects Lawyer for Defendants. I am an AV® Preeminent™ Peer Review Rated attorney by Martindale-Hubbell and am a regular speaker at local, regional, and national seminars regarding construction defect litigation.
We have previously reported on the Vallagio v. Metropolitan Homes case, in which the Colorado Court of Appeals upheld a provision in an association's declaration of covenants, conditions, and restrictions, which required declarant consent before an arbitration provision could be amended out of the document. To read the past articles on the case, please review Vallagio v. Metropolitan Homes: The Colorado Court of Appeals' Decision Protecting a Declarant’s Right to Arbitration in Construction Defect Cases and The Vallagio HOA Appeals the Decision from the Colorado Court of Appeals.
Whether the court of appeals erred by holding as a matter of first impression that Colorado’s Common Interest Ownership Act (“CCIOA”) permits a developer-declarant to reserve the power to veto unit owner votes to amend common interest community declarations.
Whether the court of appeals erred in holding that Colorado’s Consumer Protection Act (“CCPA”) claims are subject to pre-dispute mandatory arbitration provisions where this Court previously held, “We leave open the question of whether CCPA claims might be deemed non-arbitrable,” Ingold v. AIMCO/Bluffs, LLC Apartments, 159 P.3d 116, 122 n.5 (Colo. 2007).
The Supreme Court denied the petition for writ of certiorari on all other issues.
For more information about the Vallagio case or construction law in Colorado, you can reach David M. McLain by e-mail at mclain@hhmrlaw.com or by telephone at (303) 987-9870.
For more information about this event or to register to attend, please visit http://junelnl.eventbrite.com.
The Homeownership Opportunity Alliance’s diverse coalition includes more than 50 organizations from across Colorado. The coalition also includes individual mayors and 14 different communities that have passed local ordinances to address attainable condominium development.
“Affordable and attainable housing has been a top priority of the 41-member Metro Mayors Caucus for decades,” said Lakewood Mayor Adam Paul. “Throughout this process, we have partnered with affordable housing advocates and the business community because we know that providing a spectrum of housing, from millennials to seniors, is so critical to creating and maintaining inclusive communities."
The coalition also has featured our state’s leading affordable-housing advocates, including Housing Colorado, Habitat for Humanity and the Urban Land Conservancy.
“Housing Colorado’s interest in this issue has always been—and will remain—seeking reform that will result in more affordable, entry-level homeownership opportunities for moderate income Coloradans,” said Sara Reynolds, executive director of Housing Colorado. “We are profoundly disappointed that once again, the opportunity for meaningful reform on construction-defects litigation has failed due to long-standing and entrenched political alliances."
“The construction defects issue is a complex one, but the tools were available to provide a common-sense solution that would address many of the flaws in our current system. The opportunity has been lost. With median home prices leaping 12 percent in just one year alone, homeownership will continue to get farther and farther out of reach for hundreds of thousands of Coloradans,” Reynolds concluded.
In Colorado, the “complaint rule” requires insurance carriers to provide a defense to its insured when the allegations contained in the complaint allege any set of facts that may fall within an insurance policy. Some insurers have pushed back on this rule arguing that it may cause an insurer to exercise its duty to defend although the underlying facts ultimately do not fall within the policy.
KF 103 v. American Family arose out of an underlying easement dispute. KF 103 purchased a piece of property from the Infinity Group and, as a condition of the purchasing agreement, KF 103 required the Infinity Group to make improvements to an intersection near the property. Several neighbors complained, contending that the improvements interfered with their easements adjacent to the property.
KF 103 brought a quiet title action and, on October 13, 2010, the state district court ruled that the improvement was trespass and intentional damage to the easement, ordering KF 103 to restore the easement. In a second hearing to determine remedies, the El Paso County Court held KF 103 liable for trespass, conspiracy to trespass, and negligence. KF 103 requested that American Family reimburse it for its attorney’s fees and defense costs, which it refused. KF 103 then brought suit against American Family alleging breach of contract and bad faith for its refusal to defend. The case was removed to federal district court where American Family was found to have no duty to defend KF 103 because the claims did not fall within the coverage. KF 103 appealed.
Specific to KF 103, its general liability insurance policy with American Family covered damages that KF 103 “becomes legally obligated to pay” because of “property damage” resulting from an “occurrence.” Additionally, the policy excluded damages “expected or intended from the standpoint of the insured.” To determine whether American Family had a duty, the Tenth Circuit analyzed only “the factual allegations in the complaint, and not the legal claims …” Gerrity Co. v. CIGNA Prop. & Cas. Ins. Co., 850 P.2d 606, 607 (Colo. App. 1993).
American Family argued that the claims, like trespass, brought against KF 103 are intentional torts and therefore, excluded from the policy. However, the Tenth Circuit found that volitional acts do not always have “expected or intended” damages. Trespass only requires the intent to do the act that itself constitutes, or inevitably causes—the intrusion; intent to violate property rights is not required. Burt v. Beautiful Savior Lutheran Church, 809 P.2d 1064, 1067 (Colo. App. 1990). Thus, KF 103 could be liable for trespass because it intended to alter the property but still covered by the policy because it did not intend to harm the neighbors’ easement rights.
Furthermore, the Tenth Circuit found that where the allegations asserted KF 103 was deliberate in its actions, they also asserted KF 103 was reckless as an alternative. Recklessness is not necessarily conduct causing damage that is “expected or intended” from the standpoint of the insured. Because there is some doubt as to whether the damage to the easement rights was “expected or intended,” the Tenth Circuit held that the allegations are arguably covered by the policy as an occurrence. It stated that terms of an insurance policy should be construed broadly in favor of a duty to defend. The district court decision was reversed and remanded finding that American Family had a duty to defend.
The complaint rule remains the general rule. Developments in KF 103 v. American Family indicate that some Colorado courts view intentional claims as exclusions to insurance policies. However, the Tenth Circuit challenges such courts to place the burden on the insurer regarding the duty to defend, then conduct a more in-depth analysis of exclusions of intentional claims.
For more information regarding the KF 103 decision or Colorado construction litigation, you can reach Adria Robinson by e-mail at robinson@hhmrlaw.com or by telephone at (303) 987-9814.
Despite the unique facts and circumstances relating to the questionable dealings by the developer, Mr. Zachary Davidson, the decision now stands to turn the Colorado real estate development business on its head. Specifically, a group of condominium owners, who did not live in the Village, learned that their properties had been included in a special district, the Marin Metropolitan District (“District”), to finance the Village. Prior to their purchase, Mr. Davidson failed to disclose to the condominium owners that they would be responsible for financing the Village’s development through previously issued bonds by the District to be paid for through their property taxes. Understandably frustrated by this discovery the condominium owners, through the Landmark Towers Association, Inc. (“Landmark HOA”), investigated the origin of these unforeseen property taxes.
The owners discovered that, prior to the construction of their condominium units; Mr. Davidson bought land near their units and created the District under Title 32, Article 1 of the Colorado Revised Statutes including their future units in the District. Mr. Davidson included their condominiums specifically to provide a sufficient tax base for the Village construction. Once the District was created, by means of misrepresentations to the city and fraud on the district court, Mr. Davidson and other organizers (his associates) then submitted a service plan for the District which provided that the District could issue up to $35,000,000.00 in general obligation bonds bearing an interest rate of as much as 12% which would be paid over a thirty-year period. The service plan also provided that the District would give notice of the special district to individuals under contract to the condominium units before conveyance of title. It failed to provide such notice. Mr. Davidson and the other organizers then filed a petition for organization with the district court which then instructed that an organizational election had to be held for the District’s service plan to be ratified.
So that Mr. Davidson could in effect ratify his own service plan, he and his associates entered into sham transactions to become “eligible electors” under C.R.S. § 32-1-103(5)(a). Specifically, they executed contracts to purchase 1/20th interests in ten-by-ten parcels in the District. They did so as a thinly veiled attempt to comply with the Tax Payer Bill of Rights (“TABOR”). Not surprisingly, the “tax bill,” Mr. Davidson’s concocted service plan, passed with voter approval. Skipping over a litany of fraud, the condominium unit owners then purchased their units without notice of their impending tax debt, discovered the tax debt, and then brought this case an attempt to recover taxes paid to the District. The Court ruled the organizers’ contracts did not make them eligible electors under TABOR. Thus, the organizers illegally participated in the election and their votes were void.
Unfortunately, the Colorado Court of Appeals in issuing its ruling appears to have used too broad of a brush to wipe away Mr. Davidson’s pervasive fraud and invalidated a common practice among real estate developers. In Colorado, it is common among real estate developers, when dealing with undeveloped parcels, to make themselves eligible electors through similar small transactions in the subject development. The reason for this being that it is an undeveloped lot and there is no one to vote. What is not common is concealing the impending tax liability from prospective purchasers and sticking them with the bill for pay for developments which do not benefit the district.
To fully appreciate the ramifications of the Landmark case it is important to consider the following: 1) there has been over $9,000,000,000 in local government debt issued in Colorado since 2001; 2) a significant portion of that debt is held by local investors; and 3) a perception that the debt is at risk due to potential legal claims could negatively impact Colorado’s credit rating. Further, in direct response to the Landmark case, seven transactions, worth in excess of $73,000,000 have been postponed due the financial uncertainty the case has created.
In sum, immediate legislative action is required to resolve the well intentioned, but perhaps financially devastating effects of Landmark ruling. Should nothing be done, Coloradoans can anticipate a significant reduction in housing development, construction layoffs, and small investors losing collectively large sums of money.
For more information regarding the Landmark case, you can reach Jean Meyer by telephone at (303) 987-9815 or by e-mail at meyer@hhmrlaw.com.

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