Stuart D. Morse & Associates, L.L.C. Stuart D. Morse & Associates, L.L.C.
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Colorado considering modifications to construction defect laws

Colorado’s 2017 regular session has seen several significant bills introduced that could impact insurers, developers and contractors in construction defect claims. One bill would require mediation or arbitration in homeowners’ association claims alleging defects, even if the mediation or arbitration requirement in the governing documents has been amended or revoked. A second would require a court to apportion the costs of defense when more than one insurer has the duty to defend a party in a construction defect. A bill has also been introduced to define the term construction defect under the Construction Defect Action Reform Act.

The three bills are briefly addressed below.

Mediation and arbitration in homeowner’s association claims

A bill under consideration would force arbitration or mediation even in instances where the homeowner’s association agreed to revoke or amend such provisions in the original governing documents. The bill, SB 17-156, passed the State Senate on March 7, and is currently under consideration by the House State, Veterans & Military Affairs Committee. The bill also sets forth certain requirements for an HOA to notify homeowner’s when initiating a construction defect claim.

Equitable allocation in insurance defense

One bill that could have a significant impact for insurers is SB 17-045. Construction defect claims can quickly become complex. It is not unusual for multiple insurers to ultimately end up responsible for the defense of a construction defect claim, sometimes to varying degrees. In such cases, SB 17-045 would have the court apportion costs equitably (not necessarily equally) in the defense of the claim upon the request of an insurer. This apportionment includes reasonable attorney fees. The court would make an initial apportionment within 90 days of filing, and the final apportionment would be decided after the final judgment is rendered. This bill, too, is still under consideration, although it has passed out of the Senate Committee on Business, Labor & Technology and is now in Appropriations.

Definition of a construction defect

The Construction Defect Action Reform Act does not currently define the term “construction defect.” The CDARA governs construction defect claims against professionals. The proposed bill, SB 17-155, would define construction defect as a design or construction defect that causes:

  • Damage to real or personal property, or
  • Personal injury

As of this writing, the bill is still under consideration in the Senate Business, Labor & Technology Committee.

Questions on the impact of these bills?

It is not yet clear which, if any of the above bills, will pass. Each would have a varying degree of influence on insurers, developers and contractors involved in construction defect claims. Nothing in this blog should be considered legal advice. For questions about these bills or other legal aspects of a construction defect claim, contact an attorney experienced in construction defect lawsuits.

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