Colorado Limits Construction Defect Claims

By Janet Lawler McDaniel
Faegre & Benson LLP

Contractors and subcontractors in Colorado will begin to see some relief from claims for damages because of alleged construction defects now that the legislature has passed the construction defects bill. The new law preserves the ability of owners to recover actual damages but limits the amount of treble damages and attorneys' fees recoverable.

The highlights of the bill, which applies to all lawsuits filed after April 25, 2003, are summarized in this article.

Who Is Protected?

The statute limits claims for damages against "construction professionals," defined to include "an architect, contractor, subcontractor, developer, builder, builder vendor, engineer or inspector performing or furnishing the design, supervision, inspection, construction or observation of the construction of any improvement to real property." If the improvement involves commercial property, "construction professional" also includes any previous owner of the property at the time the work was performed.

What Is Included?

The new law applies to both residential and commercial property. It applies to a civil lawsuit - as well as an arbitration - seeking damages, indemnity or contribution against a construction professional caused by a defect in the design or construction of an improvement.

What Is the Process?

The Notice of Claim process in the statute requires the claimant to provide the construction professional with written notice of the alleged defects and damages, access to the property for inspection and an opportunity to repair the alleged deficiencies. If the claimant fails to follow the procedure in the statute and files a lawsuit, the lawsuit will be stayed until the claimant complies with these requirements.

The notice must describe the "general nature" of the alleged defects in "reasonable detail" and be sent to the construction professional 75 days before the claimant can file a lawsuit - 90 days on commercial projects.

The construction professional has 30 days to inspect the property and 30 days after the inspection to submit an offer of monetary settlement, or offer to remedy the alleged defect with a schedule for completion of the work.

The claimant then has 15 days to accept the offer. If there is no offer - or if the claimant rejects the offer, or if the construction professional does not comply with its offer - then the claimant can file a lawsuit against the construction professional.

If a written notice of claim is served before the statute of limitations expires, the limitations period is extended to 60 days after the conclusion of the notice of claim process.

What Are the Damage Limits?

Damages are limited to "actual damages," defined as the lesser of the fair market value of the property without the alleged defect, or the replacement cost of the property, or the reasonable cost to repair the defect, plus relocation costs. If the property is residential, costs related to loss of use, interest and attorneys' fees may be recovered if provided by contract or by law.

Treble damages could be awarded if the claimant wins on a claim under the Colorado Consumer Protection Act and the construction professional's offer before the lawsuit was less than 85 percent of the actual damages awarded - not including interest, costs and attorneys' fees; or if the construction professional made no offer in response to the notice of claim or failed to perform the terms of an accepted offer.

In any event, even if treble damages and attorneys' fees are awarded, the maximum limit will be $250,000 beyond actual damages.

Hopefully, this limit on damage claims for alleged construction defects will translate into relief for contractors and subcontractors on the premiums for general liability insurance coverage in the near future.

-From AGC/C ON Site

State Transportation Commission Decides to Issue TRANs Bonds

On May 15, the Colorado Transportation Commission unanimously approved a resolution directing the staff of the Colorado Department of Transportation to move forward with another issuance of TRANs bonds to accelerate additional projects within the 28 Strategic Transportation Corridors.

"Economic conditions for bonding are favorable right now," said Transportation Commission Chairman Joseph Jehn. "We've been making great progress on critical transportation projects all across the state and we'd be remiss not to take advantage of the bond market to continue improving Colorado's transportation system."

The Transportation Commission has approved a fiscal year 2004 issuance for approximately $100 million and a follow-up issuance in fiscal year 2005 for the remainder of bonding capacity, estimated to be approximately $120 million. The FY 2005 bonds will be issued only if market conditions allow.

The resolution adopted only the financial plan for bonding. It did not prioritize projects to be funded with bond revenues. At their budget workshop in June, CDOT staff will provide the commission with several scenarios showing which projects could start construction quickly. At that time, the commission will decide which projects to fund over the next year.

The state Transportation Commission is appointed by the governor to set policy and approve CDOT's budget.

Colorado Asphalt Producers Make Significant Environmental Progress

The Colorado Department of Public Health and Environment - Air Pollution Control Division has completed a two-year study of hot mix asphalt production facilities and concluded that significant environmental progress has been made by Colorado Asphalt Pavement Association member companies.

Nineteen CAPA-member companies representing 44 hot-mix asphalt production facilities participated in the study. Chuck Hix of the state's Air Pollution Control Division said: "The study - COMPASS project - should be viewed as a highly successful program. The participants greatly improved both their compliance rate and their understanding of environmental compliance issues."

Facilities were reviewed for air emissions, water, and pollution prevention control.

For a copy of the executive summary of the study, go to:
co-asphalt.com/pdf/Exec Summary COMPASS Asphalt Project - Chuck Hix.pdf

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