COMPENDIUM OF COLORADO CONSTRUCTION LAW

The following outline is a brief overview of construction law in the State of Colorado. The fundamentals of 13 construction-related topics are explored and relevant case law is provided. While not all-inclusive to the particular area of law, the summary provides a synopsis of construction law in Colorado. This Compendium is provided for general information purposes only. It does not solicit, establish, or continue an attorney-client relationship with Rothgerber, Johnson, & Lyons LLP. The contents should not be construed as legal advice or opinion. I. BREACH OF CONTRACT Under Colorado law, a party attempting to recover for breach of contract must prove: 1) the existence of a contract; 2) performance by the plaintiff or some justification for nonperformance; 3) failure to perform the contract by the defendant; and 4) resulting damages. Western Distrib. Co. v. Diodosio, 841 P.2d 1053, 1058 (Colo. 1992). In Colorado, breach of contract claims can be brought by the owner against various parties with whom the owner has a contractual relationship, including the architect, engineer, contractor, or lender. Likewise, a breach of contract claim is available to these parties against the owner. Furthermore, a breach of contract action can arise from the relationship between the general contractor and the subcontractors. Horne Engineering Services, Inc. v. Kaiser-Hill Co., LLC, 72 P.3d 451, 452 (Colo. App. 2003). Claims for breach of contract accrue upon discovery of the breach or on the date when, in the exercise of reasonable diligence, the breach should have been discovered. C.R.S. § 13-80108(6) (2007); Hersh Cos. v. Highline Vill. Assocs., 30 P.3d 221, 224 (Colo. 2001). In general, a breach of contract action must be filed within a 3-year period. C.R.S. § 13-80-101 (2005). However, Colorado has enacted C.R.S. § 13-80-104 (2007), which imposes a limitation of actions against architects, contractors, builders or builder vendors, engineers, inspectors, and others. The statute provides a separate limitations period and accrual formula in some construction matters. Id. Under this statutory provision, "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 [2 years] after the claim for relief arises, and not thereafter, but in no event shall such an action be brought more than six years after the substantial completion of the improvement to the real property." Id. § 13-80-104(1)(a). If the action accrues in the fifth or sixth year the action can be brought within 2 years of the accrual date. Id. § 13-80-104(2). The general measure of damages for breach of a construction contract is that amount required to place the violated party "in the same position he would have occupied had the breach not occurred." Pomeranz v. McDonald's Corp., 843 P.2d 1378, 1381 (Colo. 1993). Where only rebuilding a defective building will provide an injured party with the benefit of its bargain, costs to rebuild rather than repair may be a reasonable measure of damages. Gold Rush Invs., Inc. v. G.E. Johnson Constr. Co., 807 P.2d 1169, 1174 (Colo. App. 1991).
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Generally.2d 1301. §§ 13-80-102(1)(a). Shiffers v. 770 P. BREACH OF WARRANTY Colorado law recognizes 2 general categories of warranties: express promises and implied obligations. any work undertaken by a professional must be done in a reasonable manner. An express warranty is not {00300784 / 6} 2 . supervision. the plaintiff must show an existence of a duty on the part of a defendant. 829 (Colo. App. design. A negligence claim stemming from a construction contract may be barred by Colorado's adoption of the Economic Loss Rule. Inc.. 1991). 598 (Colo. 1996). In most negligence-based claims. a negligence claim will carry a statute of limitations of 2 years. a breach of that duty..S. Inc. a plaintiff must prove that a warranty existed. However. or inspection. construction. Denver. 104(1)(a) (2000). NEGLIGENCE To succeed on a cause of action in negligence.2d 757. 1988). App. Triconsultants. including negligence in planning. when a contract does not encompass a duty.2d 1260. 759 (Colo.2d 440." Rian v. This rule "prevents recovery for negligence when the duty breached is a contractual duty and the harm incurred is the result of failure of the purpose of the contract. A.A. v. Colorado holds professionals to a higher standard. 1997). Even in the event that a common law negligence claim is barred. 953 (D. v. Section 13-80-104 applies to claims based on injuries to real property that result in a defect in the improvement itself. Colo. Id. Whether classified under section 13-80-104's special statute of limitations or the ordinary statute of limitations period for tort. Dillingham Constr. 1970). 932 P. and injury. Fiberglass Component Prod. However. 811 P. 1988). 845 P. Inc. Greenberg v. it does not apply to all injuries resulting from the professional's conduct.. Perkins. N. Heagy v.II. the breach proximately caused the losses claimed as damages. 948. 443 (Colo. and timely notice of the breach was given to defendant. App. Pshp. 1970). 1993). a contractor or subcontractor only carries the duty to perform in a workmanlike manner. 768 P. 1303 (Colo. C. 983 F.. v. Id. Supp.2d 827. App. Failure to do so could result in an award of actual damages on a negligence claim. 470 P.2d 593. Two Denver Highlands Ltd. Inc. III.. a duty is owed to anybody that could foreseeably suffer damages as a result of a defendant's negligent conduct. 1263 (Colo. 472 P. Cunningham Shepherd Builders Co. App. Reichhold Chems. App. the defendant breached the warranty. v. the duty owed is that of the reasonable person. a causal connection between the defendant's breach and plaintiff's injury.R. Imperial Municipal Services Group. Inc. nor requires that specific work be done. In Colorado.2d 530. Alexander Concrete Construction." Jardel Enterprises.. This professional standard of care does not require the design professional to be perfect or guarantee the results of his services. however. Consolidated Hardwoods. The duty owed by a professional is "measured by the normal standards of skill and competence exhibited by members of a defendant's profession. 537 (Colo. Breach of Express Warranty To recover for breach of express warranty. the defendant's negligent behavior remains important in establishing that the contractual duties have been breached.

Oberlohr. in these cases. Smith Harvestore Prods. Robins Co. "For construction to be done in a good and workmanlike manner. the test is reasonableness in terms of what the workmen of average skill and intelligence (the conscientious worker) would ordinarily do. Id." Roper v. Privity of contract or standing as a third-party beneficiary of the contract are required in order to be protected by the warranty. 585 P. Breach of Implied Warranty There are various implied warranties available in Colorado. design. 749 P. {00300784 / 6} 3 .2d 1148. and workmanship. Generally. Whether a statement is an express warranty is a question of fact. 789 P. such as soil expansion. Spencer." Erickson v. and it remains an open question in Colorado law. express warranties are often included to disclaim or limit implied warranties of habitability. Belt v. Inc. Implied Warranty of Habitability A buyer is "entitled to relief based on the theory of implied warranty of habitability if he proves the house was not built in a workmanlike manner or that it was not suitable for habitation. Roper. Two important warranties are the implied warranty of habitability and the implied warranty of workmanlike construction. 598 (Colo. 115-116 (Colo. Colorado courts recognize integration clauses in contracts as limits on the availability of parol evidence in establishing the existence of an express warranty.2d at 485.2d 111. 878 P. App.2d 922. 1150 (Colo.2d 69. Lastly. 166 (Colo. 2." Shiffers v.required to be in any specific form and "may be written or oral. 1994). Colorado builders often provide homebuyers with express warranties protecting various elements of the physical construction.. or preparations is sufficient to establish liability in the builder-vendor. Various defenses for a breach of warranty claim are recognized by Colorado courts. 1034 (Colo. 1981).. Villa Sierra Condominium Ass'n v..O. fitness. 1984). App. 925 (Colo. 208 (Colo. App. Inc. 485 (Colo. 1989). Colorado courts recognize the defense of waiver when a party relinquishes protection by not relying on or expecting the warranty to be fulfilled. Colorado courts have extended the implied warranty of habitability to situations in which a home becomes uninhabitable for reasons other than the workmanship. the Colorado Supreme Court has refused to answer whether these are enforceable. 72 (Colo.. 625 P. Implied Warranty of Workmanlike Construction The warranty of workmanlike construction is another implied warranty. 819 P. Foster Petroleum Corp.H. and proof of a defect due to improper construction. 1991). It does not guarantee perfect construction by the builder. 470 P. while several cases support the validity of such disclaimers. However. Co. App. 1993). the breach of the implied warranty of habitability occurs in the builder's selection of the building location. Associates of San Lazaro v. 1987). 998 (Colo. Additionally. A. Cunningham Shepherd Builders Co. App. 791 P. App.. Field Corp. San Lazaro Park Properties. there is no requirement of perfection. 864 P. Spring Lake Dev. B.2d 483.2d 593.. 1970). 789 P. Sloat v. Palmer v. A.2d 996. The warranty of habitability "has been likened to strict liability for construction defects.2d 161. 1978). 1990). Additionally. Keller v.2d 187.2d 1031. 684 P." Wall v.. 1. Matheny.

Murray. the buyer relied on the representation. See VIII. likely shortens the statute of limitations in a breach of warranty case against a design or construction professional to 2 years. Negligent Misrepresentation Colorado recognizes the tort of negligent misrepresentation in two separate situations: 1) when one negligently gives false information causing physical harm to the plaintiff's person or property. 2005). 226 (Colo. 1983). Circumstantial evidence can play an important role in a construction fraud case. 914 (Colo. or deceit are governed by a 3-year statute of limitations. 114 P.. 43 P. App. Hersh Cos. Supp. and 2) when false information is negligently provided and results in monetary business transaction losses. Inc. § 13-80-101 (2005).2d 599. Perrotti & Hauptman Dev. 601-602 (Colo. The Colorado Supreme Court has determined that section 13-80-104 is not intended to apply to claims for breach of warranties to "repair and replace. § 13-80-101(c) (2005). misrepresentation. a breach of warranty is governed by the statute of limitations for contract actions and must be filed within a 3-year period. Dyer. where the tort claim is available. 2001). 10 P. damages generally would be the difference in actual value and the represented value.C. Homes.2d 458. Morrison v. Yacht Club Homeowners Ass'n. 679 P. Its use can help demonstrate a systematic method of business by the builder or establish reliance on the part of the buyer. Colo. Kopeikin v. 867 (Colo. Excavating v. however. C. he must show that the builder made a false representation of a past or present fact. 1966). 2001). The duty of care owed {00300784 / 6} 4 . 646 P.2d 448. 451 (Colo.3d 862. Town of Alma v. or the cost to improve the property to the represented condition. Dann v. 1262 (Colo. Mortgage Trust Corp. CJI-CIV 19:1. the fact was material. Statute of Limitations for Breach of Warranty In general.S. 1982).. However.. v. 822. Generally. 1937). and this reliance caused damages to the buyer. Economic Loss Rule. Azco Constr. § 13-80-104(1)(a). the statute is tolled until the discovery occurs. the buyer's reliance was justified. C. B. 260 F.2d 907. Co. Merchs. Colo. Intentional Misrepresentation/Fraud For a home buyer to recover from a builder on a claim of fraud.S.3d 221. Id. 477-478 (Colo." even when the party against whom the claim is asserted is within the class of individuals protected by the statute.R. A. the builder made the representation knowing it to be false or was unsure whether it was true or false. Murphy v. Assocs. Bloskas v. 1984).C. Goodspeed. 68 P. Highline Vill. Colorado's Economic Loss Rule could bar a tort action stemming from the construction contract between the parties unless negligence occurred from a duty of care that existed independent of a contractual duty. the builder made the representation with the intent that the buyer would rely on the representation. MISREPRESENTATION/FRAUD A. When the defendant actively conceals the cause of action and the plaintiff has not discovered the cause of injury. concealment. all actions for fraud. 2000). 823 (D..3d 1256.. 30 P. IV.R. they are governed by the general statute of limitations for contracts and warranties. App. Instead. 670 P. Section 13-80-104.3d 718 (Colo.

App. Co. and supplied defective trusses to the project. Relaxing the rule of strict construction in construing indemnity contracts in commercial settings is a growing trend. 749 P. unless a party takes some role in the manufacture or selling of goods. Express Indemnity Express indemnity exists when the scope of indemnity has been defined through a contract or agreement of the parties. and identifying a negligent act in the chain is not as burdensome. Poudre Valley Federal Credit Union. v.by the supplier of information is measured by the use to which the information will be put. contracts for services and contracts for the sale of goods are distinguishable from each other.. 631 (Colo. courts have found that under certain circumstances. 1989). 784 P." Id. broad language is sufficient. 426 (Colo. Generally. 2007 WL 177686. Scientific Design Co. 1285 (Colo.2d 631. weighed against the magnitude and probability of loss that might attend that use if the information proves to be incorrect. Simkin.R. Id.2d 514. superseded by statute.2d 937. Inc. Samuelson v. 785 (Colo. INDEMNIFICATION AND CONTRIBUTION A. Williams v.2d 423. Unlike the sale of goods. Indemnity provisions are very prevalent in construction contracts. V. 1982). White Mountain Constr. 1992). the defendant designed. 863 (Colo. 687 P. Williams. 1968). Id. v. Robinson v. {00300784 / 6} 5 .16 (3d Cir. The word "indemnity" is not required and its use will not guarantee the creation of an indemnity contract. In Aetna Casualty and Surety Co. Public Service Co.2d 861. 529 P. VI. C. La Rossa v.2d 781. The damages recoverable for negligent misrepresentation include the difference between the value the plaintiff received in the transaction and its purchase price or other value given for it. Inc. strict liability is unavailable for an injury resulting from a construction defect. at 1284. While the general rule is that strict construction applies to indemnity agreements which purport to indemnify for the negligent conduct of an indemnitee. indemnity contracts can arise orally. Ambiguities in indemnity agreements are resolved against the party seeking indemnity. Applying the law of strict liability to professional services fails to accomplish the original purpose of the doctrine.. professional services are not usually provided in mass.S. Co. v.. United Cable Television of Jeffco. App. Chutich. STRICT LIABILITY Like many states. 1984). 749 P. App. Strict liability against design professionals and contractors is generally only available when products are provided. Lombard v. 517 (Colo. While express indemnity generally occurs through a written provision. The "inquiry should be whether the intent of the parties was to extinguish liability and whether this intent was clearly and unambiguously expressed. § 13-21-401 (2005). Colorado's strict or product liability laws are generally only applicable to manufacturers and sellers of products. 402 F.. and pecuniary loss suffered as a consequence of the plaintiff's reliance upon the misrepresentation. 943 n. 2007). Crissy Fowler Lumber Co. manufactured. 654 P." Heil Valley Ranch. +5 (Colo. 829 P.2d at 426. 1974).2d 1280. However. 1988). Outdoor.

Under section 13-80-104. supervision. 2000). C. § 13-80-101. they are governed by the general statute of limitations for contracts and warranties. Assocs. construction.S. 1264 (Colo. 30 P.. Additionally.R. C. VII. The proportionate fault statute abolished the harsh common law doctrine of joint and several liability which would require a defendant to bear a disproportionate share of liability for plaintiff's injuries. Joint tortfeasors are now subject to contribution among themselves based upon their relative degrees of fault. Brochner v. In recent years. 2001).. 2000). Western Ins. 10 P. "all actions against any architect. Instead.2d at 829. However. but in no event shall such an action be brought more than six years after the substantial completion of the improvement to the real property.. § 13-21-111 (2005). or builder vendor. STATUTE OF LIMITATIONS/REPOSE Contract causes of action generally carry a 3-year statute of limitations. Grynberg v. a non-negligent contractor held vicariously liable for the actions of a subcontractor could still recover through common law indemnification. builder.3d 221. regardless of his degree of relative fault.R. 1991). at 1297. v. engineer. An important point to note is that Colorado has enacted section 13-80-104. 226 (Colo. contractor." even when the party against whom the claim is asserted is within the class of individuals protected by that statute. 1298 (Colo. Id. Inc. 1986). planning. Thus.3d 1256. 1128 (Colo.. (2005). or observation of construction of any improvement to real property shall be brought within the time provided in section 13-80-102 [2 years] after the claim for relief arises. Graber v. inspection. or inspector performing or furnishing the design. If the action accrues in the fifth or sixth year. Common Law Indemnity and the Shift to Contribution Common law indemnity is available when there is no contractual right to indemnity. Agri Tech. or inspection that results in a defect in an improvement to the property and not to all injuries resulting from the professional's conduct..B.S. VIII.3d 1267. App. Co. the action can be brought within 2 years of the accrual date. v. common law indemnity claims remain for principals who are not directly at fault but may be vicariously liable for their agent's tort. 907 P.. 809 P. et seq. supervision.R. § 13-80-104(2). which provides a separate limitations period and accrual formula for some construction matters. construction. 932 P. Co. Dillingham. Mission Ins. and not thereafter. {00300784 / 6} 6 . 724 P. the doctrine has been limited through the Uniform Contribution Among Tortfeasors Act and the enactment of a pro-rata liability system. Ins. 10 P. The result is fewer claims for indemnification under the common law. § 13-50.5-101. Hersh Cos. 102 (2000). Inc. C. the limitations under section 13-80-104 only apply to negligence in planning. 1269 (Colo. The remedies of indemnity and contribution are in theory mutually exclusive. Section 13-80-104 is not intended to apply to claims for breach of warranties to "repair and replace. App. Co. 1994). Westaway. Highline Vill.2d 94. 97 (Colo. ECONOMIC LOSS RULE In an effort to maintain the boundary between contract law and tort law. the Colorado Supreme Court adopted the Economic Loss Rule in 2000.. design. Town of Alma v. and a claim may still exist based on common law agency principles. while tort-based claims are governed by a 2-year limitation. Azco Constr. Id. § 13-80-104(1)(a)." Id.2d 1126. Unigard Mut.2d 1293.S.

{00300784 / 6} 7 . Dufficy & Sons." Town of Alma. The Economic Loss Rule initially targeted tort claims by one party of a construction contract against another party of that contract." Id. 1998) (expressing that one who reasonably foresees that his act will involve an unreasonable risk of harm to another has a duty to prevent that harm). the Court found that the "policies underlying the application of the Economic Loss Rule to commercial parties are unaffected by the absence of a one-to-one contract relationship. 2001. See Stiff v.. 72 (Colo. Inc. rather than the status of the parties. the rule operates "to enforce expectancy interests of the parties so that they can reliably allocate risks and costs during their bargaining. BRW. CLPF-Parkridge One. In 2003. 962 P. v." Id. 88 P. L. Creative Corp.3d 66. CDARA was enacted to streamline construction defect litigation. Harwell Invs. v. Inc. 498 P. Community Corrections of Pikes Peak Region.3d 658. 664 (Colo.. The Economic Loss Rule focuses on the duties defined in the contract.. v. The protection of homeowners in residential construction projects. Inc." thus indicating tort claims may be barred even when a direct contract between the parties does not exist. While the Economic Loss Rule eliminates many common law actions available to participants in a construction project. and is applicable to all actions filed after August 8. Inc. the Colorado Supreme Court has recently expanded and clarified its application. Inc. App. and damage to property or persons unrelated to the construction contract present scenarios in which Colorado has refused to impose the Economic Loss Rule. 2003) (stating that the Economic Loss Rule will not bar a tort-based negligence claim against a homebuilder). 2001. 99 P. Wright v. IX. Economic loss is defined generally as damages other than physical harm to persons or property. and to encourage the parties to build the cost considerations into the contract because they will not be able to recover economic damages in tort. Inc.. Id. Specifically. App.3d at 1264. Duties can arise from the networks of interrelated contracts that stem from the primary contract. Inc.2d 963 (Colo. independent duties imposed by law to act or refrain from acting in a certain manner. Id. 2005). and a tort claim brought by a project participant against a party for the breach of these duties will likely be barred by the Rule. CONSTRUCTION DEFECT ACTION REFORM ACT (CDARA) The Construction Defect Action Reform Act (CDARA I) was first signed into law on April 19.. 2003. 2004). and the improved legislation (CDARA II) applies to all actions filed after April 25. 1972) (holding that a child injured by the builder's installation of clear glass rather than safety glass presented a case of actionable negligence). In BRW. Dufficy & Sons. the Act was subject to significant amendments. 105 P. however. In addition to clear lines between tort and contract..2d 1179 (Colo. Colorado courts have hesitated to completely bar tort-based claims stemming from construction contracts. see also Davenport v. the Act discourages the traditional reaction of a defendant general contractor who cross-names and adds "everybody and anybody who had any part to play in the construction chain. 10 P.3d 639 (Colo. Bilden Homes.The rule states that a "party suffering only economic loss from the breach of an express or implied contractual duty may not assert a tort claim for such a breach absent an independent duty of care under tort law.P..

or if the claimant rejects or fails to accept an offer within fifteen days of delivery. § 13-20-803.S. in accordance with the timetable set forth in the offer ." Id." Id. § 1320-802. A case will not be set for trial until the list has been filed by the claimant.5. .5(1).S. .5(4). The initial list of construction defects must include a description of the alleged defects. The notice provision requires that a claimant shall. or inspector performing or furnishing the design. including a general description of the type and location of the construction that the claimant alleges to be defective and any damages claimed to have been caused by the defect. a construction professional may send or deliver to the claimant . § 13-20803. send or deliver a written notice of claim to the construction professional by certified mail. . contractor. engineer. return receipt requested. Notice of Claim Before a claimant can file a cause of action against a construction professional. construction. § 13-20-802.5(3)." Id." Id. . Id. . developer. the "claimant shall provide the construction professional and its contractors or other agents reasonable access to the claimant's property during normal working hours to inspect the property and the claimed defect. "Within thirty days following the completion of the inspection." Id. The initial list of defects may be amended to identify additional construction defects as they become known to the claimant. "Notice of claim" is "a written notice sent by a claimant to the last known address of a construction professional against whom the claimant asserts a construction defect claim that describes the claim in reasonable detail sufficient to determine the general nature of the defect." Id. As used in the notice statute.5(4). the claimant must file an initial list of construction defects with the court. List of Defects In all actions brought against construction professionals. or no later than ninety days before filing the action in the case of a commercial property. builder vendor. Id. or complete "the remedial construction work . builder. § 13-20-803. and serve it on the construction professional. or observation of the construction of any improvement to real property. If the claimant accepts the offer. After serving the notice of claim.5(2). Id. "[n]o later than seventy-five days before filing an action against a construction professional. the construction professional fails to make an offer or to comply with an offer's terms. Id. . (7). C. The list of defects must be filed with the court and served on the defendant within 60 days after the commencement of the action. .5(5). § 13-20-803(3). The inspection "shall be completed within thirty days of service of the notice of claim.5(5). on the other hand. subcontractor. inspection.R. or within forty-five days following the completion of the inspection process in the case of a commercial property. a "construction professional" is "an architect. . an offer to settle the claim by payment of a sum certain or by agreeing to remedy the claimed defect described in the notice of claim. B. § 13-20803. he must provide statutory notice pursuant to C. the construction professional shall either pay the sum agreed upon in accordance with the offer. § 13-20-803(1) (2005). . (6). or by personal service. {00300784 / 6} 8 . .A. supervision." Id. Id. If. § 13-20-803(2). § 13-20-803.R. the claimant is then permitted to file its action. §§ 13-20-803.

actual damages also include "other direct economic costs related to loss of use.C. v. 680 P. Supp. the claimant must file within 60 days when any of the following transpire: the construction professional fails to inspect the premises within 30 days of receiving notice. § 13-20-805. Of course.2d at 1015-1016. 671 P.5(8). alter the procedure for the notice of claim process . 2007 Co.2d 1342. such as weather. H. § 13-20-803. Under section 13-20-802. then the statute of limitations or repose is tolled until sixty days after the completion of the notice claim process . DAMAGES A.When a "notice of claim is sent to a construction professional . v. Wheatland Rural Elec. administrative expenses.A.5.350. W. a construction professional is only liable for "actual damages" arising from a construction defect. 385 (D. or the reasonable cost to repair the alleged construction defect. For residential property. together with "relocation costs. App. the construction professional fails to make an offer.S.2d 1013 (Colo. for actions involving personal injury. 381. Delay Damages Delays in construction projects can be very costly to the parties involved. Colo.. James. Id. a claimant and construction professional may. Inc." Id. § 13-20-806 (2005) proposed beg. 347 F. 1972). within the time prescribed for the filing of an action under any applicable statute of limitations or repose. United States Fidelity & Guaranty Co. § 13-20-802. or the construction professional fails to comply with an offer to remedy or settle a claim. Ass'n. Generally. It is worthy to note that the statutes of limitations and repose can be extended indefinitely because "[a]fter sending the notice of claim. delay and disruption damages can include increased labor or equipment costs. 1983)(holding that a contractor could partially recover for delays caused by the defendant). such damages shall not exceed the sum of $269.R.. X. parties are free to specify recoverable delay damages in their contract.B. § 13-20-802.5(2). Actual damages are defined as the lesser of the fair market value of the real property without the alleged construction defect. Phillips Petroleum Co." Id.5(2)." Id. v. B. damages are those recoverable by law. 1984). the claimant rejects or fails to accept an offer. {00300784 / 6} 9 . R. . § 13-20-806(4). Asphalt Paving. 1338.. That the delay is a result of the parties' wrongful actions and not a result of unanticipated events. However. See Asphalt Paving Co. extended overhead. and can include provisions that prevent recovery of delay damages incurred absent fraud or bad faith. the replacement cost of the real property. indirect payroll expenses. a party to a construction contract is entitled to recover damages resulting from the delays and disruption caused by the other party. . must be shown. 671 P. Inc. in actions asserting personal injury or bodily injury as a result of a construction defect in which damages for non-economic loss or injury or derivative non-economic loss or injury may be awarded. Actual Damages Since Colorado's adoption of CDARA II. interest as provided by law. interest." Id. and such costs of suit and reasonable attorney fees as may be awardable pursuant to contract or applicable law. and other costs that can be causally linked to the hindrance. In other words. 1345 (Colo. Reither Const. If an unwarranted delay is established. if any. by written mutual agreement. C. App.

Pinkard Constr. Id. Stigma Damages The enactment of CDARA II may prevent the recovery of stigma damages in construction defect cases.C. 527 (Colo. Insurance companies have 2 basic duties in third-party policies: (1) a duty to defend. Similar to the majority of other jurisdictions. An insurer's duty to defend is independent of.3d 971. Soc'y. 2004)." Id. McGowan v. which is an "unanticipated or unusual result flowing from a commonplace cause. 74 P. v. v. Cyprus Amax Minerals Co. the insurance company must identify the duties owed to the insured for the particular claim. 2003). a jury may award exemplary damages. § 13-21-102 (2005). The duty to indemnify arises only when the harm is covered by the policy and typically cannot be determined until the underlying claims are resolved.. Co. An occurrence is defined as an accident. {00300784 / 6} 10 . Travelers Indem." Id. and (2) a duty to indemnify. App. Co. the duty to indemnify. C. 299 (Colo. it is undecided whether stigma damages can be encompassed in the provision allowing "other direct economic costs related to loss of use.5(2).3d 294. App. § 13-20-802. 894 P. Commercial General Liability Policy (CGL) The most common coverage under a CGL policy is for bodily injury and property damage. State Farm Fire & Cas.3d at 299. Co. or willful and wanton conduct. 811 P.2d 1083. B. malice. The Duty to Defend and The Duty to Indemnify When faced with an insurance claim for a construction defect. 976 (Colo. Bodily injury and property damage coverage requires an occurrence and damages.2d 954. 100 P. Co. at 1090. 1089 (Colo.3d 521. 1990)... Hecla Mining Co." Carroll v. Ins. However. D. v.. Coverage is triggered only if a third party suffered actual damage within the policy period. Globe Indem. with residential property. Punitive Damages CDARA II did not immunize the construction field from punitive damages. App.. XI. 1995). INSURANCE A. The duty to defend stems from the allegations in the underlying complaint and is triggered when the insured alleges any facts that could fall within the policy. Lexington Ins. New Hampshire Ins. Cuna Mut. In cases of personal injury or property damage. 753 (Colo. a breach of the duty to defend does not preclude an insurer from contesting its duty to indemnify. 98 P. 1991). Damages are limited to "actual damages. Co. § 13-20-802. and broader than. Cyprus." which are defined as the lesser of 3 methods of calculation. The lingering reduction in the fair market value is unlikely to be accounted for in the "actual damages. American Employer's Ins. 955-956 (Colo.R. Co.5(2). while the duty to indemnify occurs only when actual liability is imposed. Co. 74 P.2d 746. 806 P.S. An insurer is not excused from the duty to defend unless "no factual or legal basis on which the insurer might eventually be held liable to indemnify the insured" exists. upon a showing of fraud. 2004) The duty to defend includes any potential claims raised by the facts. v.

American Family Mutual Insurance Co. CUNA. C. 974 (Colo. App. Generally. 2006).2d 1094.. App. App. 1012 (Colo. Rademacher. Globe Indem. v. v." and coverage would not be prevented by the faulty workmanship exception. Lexington. 1994). United States Fid.. First Nat'l Bank. C. State Farm Fire & Cas. The mechanic's lien statute affords additional security by granting to persons who fall {00300784 / 6} 11 .2d 132. Co. 2006 WL 3094099 *2 (Colo. In Colard v. 893 P. 100 P. 709 P.. Travelers Indem.2d 608.S. 1903). Dist'g by Bainbridge. 395 (Colo. Richter Plumbing & Heating. 2004). 729 P." Id. 2002). However. The mechanic's lien statute is to be liberally construed in favor of lien claimants. 293 F.. Colorado law construes "occurrence" broadly against the insurer.3d 521. App. 76 (Colo. the court held that the unintended poor workmanship of the defendant created an exposure to a continuous condition that resulted in property damage to the plaintiffs. McGowan v. App. & Guar.. 73 P. 13 (Colo. 940 P. Beneficial Standard Life Insurance Co. 1184 (10th Cir. 2004). A. 134 (Colo. American Family Mutual Insurance Co. 622 P. Brannan Sand & Gravel Co. 525 (Colo... 1997). rather than a "fortuitous event" entitling the insured to coverage. 570 P. 609 (Colo.2d 393. v. including all resulting loss of use of that property. App. App. 1981). Nature of Lien Rights The primary purpose of a mechanic's lien is to benefit and protect those whom supply labor. The court found the damage at issue was the result of an "occurrence. City of Westminster v. 98 P. Property damage is defined as physical injury to property.3d 971. at 134 n. Fleming v. Co. The policies normally exclude coverage for faulty workmanship based on the rationale that poor workmanship is considered a business risk to be borne by the policyholder.2d 1009.Browder v. 1977) declined to extend by Carroll v. 876 P. Generally. 1995).3d 1180. The definition of property damage is less clear than bodily injury and accounts for more litigation. §§ 38-22-101 to 38-22-133 (2005). Bobier v. 1986). 752.2d 75. Mechanic's liens are based upon the principle that "one who has enhanced the value of property by his labor or material is entitled to a superior lien if he follows certain prescribed procedures. Id. Similar to all ambiguities in a construction policy. XII. Prudential Insurance Co. App. Colorado courts have found situations in which faulty workmanship can produce an occurrence. in the absence of a mechanic's lien.R.2. Co. A party that claims entitlement to the benefits of the lien must prove compliance with all the necessary statutory requirements." Amco Electric Co. it is to be strictly construed in determining whether the right to a lien exists. or services in order to enhance the value or condition of another's property. the "time of the occurrence of an accident is not the time the wrongful act was committed but the time when the complaining party was actually damaged.. Co. 1096 (Colo. 753 (Colo. a contractor could assert various contract claims against an owner. materials. however. App. 1985). Colard v. COLORADO MECHANIC'S LIEN STATUTE A mechanic's lien is statutory and had no place in the common law.2d 11. Faulty Workmanship Exclusion Comprehensive general liability policies that insure against liability for bodily harm and property damage do not insure the quality of the work provided. Inc.

. 549 P. v. § 38-22-109(1)(a)-(d). materials. C. Generally. Mountain States Tel. engineers. Inc. § 38-22-101 (2005). Id.2d 408. and a statement of the amount due or owing the claimant.R.S. C. a general contractor is entitled to a lien against the owner when the contract requirements of section 38-22101 are fulfilled. 556 (Colo. surveys. § 38-22-101 (2005). 410 (1976).. regardless of the state of the account between the owner and the contractor. Id. Naredel of Colo. App. the name of the person claiming the lien. thus creating an alternative remedy which is broader than an in personam contract action.. § 38-22-109(4). § 38-22-109(2). Interest on all amounts due is available under section 38-22-101(5). Anyone who has supplied equipment. draftsmen. C.. maps. B. the name of the person who furnished the laborers or materials or performed the labor for which the lien is claimed.2d 137. tools. machinery. Lien Statement Any person who wishes to place a mechanic's lien against property must record a statement of lien with the office of the county clerk and recorder of the county in which the property is located. Inc. Parties Who Can Claim a Mechanic's Lien Mechanic's liens are available to numerous parties who participate in a construction project. a statement to that effect. all other liens must be filed at any time within 4 months after the day on which the last labor is performed or the last laborers or materials are furnished by the lien claimant.S. or in case such name is not known to him. and the name of the contractor when the lien is claimed by a subcontractor or by the assignee of a subcontractor. Liens can be secured for all materials. Ridge Erection Co.R. Sub-contractors and materialmen are entitled to their own direct mechanic's liens. labor. & Tel. 1974). is eligible to assert a mechanic's lien. or who have rendered other professional or skilled service.. 138 (Colo. v. H. There must be a notice of intent to file a lien statement served upon the owner at least 10 days before the time of filing the lien statement with the county clerk and recorder. App. liens can be secured for the services of the construction superintendent and architect. Gilcrest Lumber Co. Inc. a description of the property to be charged with the lien. or labor to be used in the construction. cost estimates. Id. Id. specifications. 1977)(holding that an architect can have a lien for plans and specs even when the building is not erected). Section 38-22-101 provides an express and exhaustive enumeration of those classes of persons entitled to claim a mechanic's lien. Id. v. 136 P.within its provisions an in rem recovery against the land. or who makes an improvement upon the land itself. Laborers by the day or piece must file for a lien after their last work is completed and within 2 months after completion of the project. C & W Electric. sufficient to identify it. Mechanic's liens are also available to architects. C. drawings. § 38-22109(3). Casa Dorado Corp. § 38-22-109 (2006). a statement to that effect. 553. or superintendence. 523 P. and artisans who have furnished designs.2d 738 (Colo. § 38-22-109(5). tools. App. F.R. 1913). alteration. The statement must include the name of the owner or reputed owner of such property. Architects have been given the right to a mechanic's lien even when their designs are not used for the project. in case the name of such contractor is not known to a lien claimant.. Finally. See James H. Stewart & Assoc. plats. and equipment incorporated into the improvement of real property. Id. Additionally. Exceptions {00300784 / 6} 12 . or repair of any structure. v. Great Western Sugar Co. Id. 571 P. plans.S. or. Co. The statement must be sworn and signed by the party seeking the lien.

State entities can exercise discretion and require penal bonds for contracts that do not meet the $50. Acoustical and Construction Supply. v. Western Metal Lath v. No lien shall hold the property longer than 6 months after completion. Rio Grande {00300784 / 6} 13 . 1982). (2005). XIII.2d 426. § 38-22-110. Parties who do not receive payment for work or material provided have a right of action for amounts lawfully due to them from the contractor or subcontractor directly against the principal and surety of such bond.2d 760.S.. The term "subcontractor" has been broadened to include "sub-subcontractors" within its meaning. Statewide Supply Co. C. § 38-22-109(7). v.S. 1967).. C. laborers. General Electric Co. A. and other political subdivisions. § 38-26105(1) (2006). et seq. Parties to a Public Works Claim Various parties are covered by the Public Works Bond Statute. 651 P. Montezuma Plumbing & Heating. § 38-26-101. Heinrichsdorff v. App.R. 580 P. placing them within the scope of the statute. cities. Continental Casualty Co. 655 P.S.R. suppliers to materialmen are not covered by the statute. a general contractor on a public works project is required to give a bond guaranteeing payment for subcontractors. 1982).2d 860.000 threshold. Id. Inc. Inc. See id. Housing Authority of Montezuma County. Rather. Id. § 38-26-105(2). C. v. Establishing a Claim Under the Public Works Statute Actions for material provided or labor rendered must be brought within 6 months after substantial completion of the work. Substantial completion occurs when major items are completed and all that remains are minor deviations. a claimant must file a "verified statement" of claim with the public entity on or before the date of final settlement. 1978). 433 P. C.. 1993). Id. Scope of Statute Under the statute. COLORADO PUBLIC WORKS BOND STATUTE The mechanic's lien statute does not apply to construction projects for government agencies. Raat. App. v. its counties. Webco Construction Co. App.and extensions are available. The statute expressly covers contracts over $50. he is not barred from maintaining an action on the payment bond.R. § 38-26-105(1) (2005). C. B. 878 (Colo. 428 (Colo. school districts. In order to establish an enforceable lien on contract funds. by requiring that certain payment and performance bonds be posted in connection with public projects.R. municipalities. Lovell Clay Products Co. Id. the legislature enacted the Public Works Bond Statute protecting those furnishing labor and materials for public projects. § 38-22-109. Abandonment of work for 3 consecutive months is deemed to be the completion of the project. 763 (Colo.2d 1278. 851 P.000 awarded by the State of Colorado. and materialmen. App. 1280 (Colo. thus the 6-month period begins at that time. so one should consult the applicable statute when pursuing a lien. 862 (Colo. unless an action to foreclose is commenced within that time.2d 875. While materialmen are covered.S. § 38-26-106(1) (2005). If a claimant fails to perfect a lien on funds held by the public entity.

the claimant will have only 90 days to file suit to foreclose a lien and provide a lis pendens to the contracting body.com Jeffrey Phipps is an associate in Rothgerber Johnson & Lyons LLP's Denver office. Rothgerber Johnson & Lyons LLP 1200 Seventeenth Street. Ochoa. If the claimant does not sue by this deadline. 1941). real estate and commercial litigation. 651 P. CO 80202 (303) 623-9000 bochoa@rothgerber.. Esq. Suite 3000 Denver. Esq.com Ben Ochoa is a partner in Rothgerber Johnson & Lyons LLP's Denver office. Suite 3000 Denver. At the time of final settlement between the contractor and State. Phipps. 621 (Colo. Final settlement is the date that all payments from the State to the contractor are complete and the business relationship is concluded. Montezuma. Rothgerber Johnson & Lyons LLP 1200 Seventeenth Street. His practice is focused in the areas of construction and commercial litigation. His practice is focused in the areas of construction. Ben M.2d at 429.Fuel Co. CO 80202 (303) 623-9000 jphipps@rothgerber.2d 618. 119 P. he loses the right to sue the State and the State pays the general contractor the funds that would have otherwise been withheld. {00300784 / 6} 14 . Jeffrey D.