Recovering Actual Damages Under Colorado's Construction Defect Action Reform Act-part I
| Publication year | 2009 |
| Pages | 41 |
2009, May, Pg. 41. Recovering Actual Damages Under Colorado's Construction Defect Action Reform Act-Part I
May 2009
Vol. 38, No. 5 [Page 41]
Construction Law articles are sponsored by the CBA Construction Law Section.
Coordinating Editor
James W. Bain of Benjamin, Bain & Howard, L.L.C., Greenwood Village-(303) 290-6600, jamesbain@bbhlegal.com
About the Authors
Ronald M. Sandgrund is Of Counsel, Mari K. Perczak is a Shareholder, and Leslie A. Tuft is an Associate with the law firm of Sullan,(fn2) Sandgrund, Smith & Perczak, P.C. in Denver. The firm represents commercial and residential property owners and homeowners associations and unit owners in construction defect and insurance coverage disputes.
This two-part article analyzes the meaning of "actual damages" as used in Colorado's Construction Defect Action Reform Act and its provisions limiting damages in construction defect actions.
Colorado's Construction Defect Action Reform Act's (CDARA)(fn1) multi-part definition of "actual damages"(fn2) describes and limits the recoverable damages for property damage and personal injury claims arising from construction defects. Colorado's appellate courts have not yet interpreted CDARA's definition of "actual damages" or applied its damages limitations.
This two-part article provides an issues checklist for construction defect practitioners and examines several unanswered substantive and procedural questions related to CDARA's "actual damages" definition and limits. Part I of this article discusses who bears the burden to prove which of CDARA's property damage limitations applies, whether and to what extent CDARA preempts common law construction defect damage principles, when recovery of more than actual damages is proper, and which questions a judge or jury must decide. Part II, which will be published in the June issue of The Colorado Lawyer, will discuss the evidence admissible to prove actual damages under CDARA, recovery of prejudgment interest, attorney fees and costs, and whether CDARA prohibits punitive damages in construction defect actions.
CDARA governs claims against construction professionals arising from construction defects.(fn3) In most cases, CDARA limits damages available in such actions to actual damages.(fn4)
"Actual damages" means:
This definition applies to both residential and commercial construction defect claims.(fn6)the fair market value of the real property without the alleged construction defect, the replacement cost of the real property, or the reasonable cost to repair the alleged construction defect, whichever is less, together with relocation costs, and, with respect to residential property, other direct economic costs related to loss of use, if any, interest as provided by law, and such costs of suit and reasonable attorney fees as may be awardable pursuant to contract or applicable law. "Actual damages" as to personal injury means those damages recoverable by law, except as limited by the provisions of section 13-20-806(4).(fn5)
CDARA does not expressly state whether its "actual damages" definition is meant to serve as: (1) a monetary cap on damages (limiting the dollar amount); (2) a quantitative damages measure (a means of measuring damages); (3) a qualitative or generic description of the kinds of recoverable damages; or (4) a mixture of these things.
Construction professionals argue that the "whichever is less" provision restricts recoverable damages so that the claimant bears the burden of proving: (1) the market value of the property without the construction defect; (2) the replacement cost of the property; and (3) the reasonable cost to repair the defect, to establish the lowest measure. Claimants conversely argue that this provision merely caps the dollar amount of certain recoverable damages, and the defendant bears the burden to prove this affirmative defense. Thus, claimants argue they need to prove only the common law damages measure, typically the repair cost.(fn7)
The correct interpretation affects the timing and types of expert witness endorsements, and may be needed to avoid summary judgment or a directed verdict as to part or all of a claimant's recoverable damages. The discussion below examines the various arguments supporting each position and how Colorado's district courts have responded to these arguments to date.
Construction professionals argue that claimants bear the burden of proving all three prongs of the "whichever is less" provision. In support of this argument, construction professionals rely on several alternative grounds.
Claimant bears the burden of proving the fact and amount of damages. Under well-settled law, claimants have the burden of proving the fact and amount of their claimed damages. For example, in Westminster v. Centric-Jones Constructors,(fn8) the Colorado Court of Appeals explained that to recover breach of contract damages, a "plaintiff must . . . provide the fact finder with a reasonable basis for calculating actual damages in accordance with the relevant measure." Construction professionals argue that, because CDARA limits damages to the lowest alternative, claimants must prove the three alternatives set forth in the actual damages definition to prove which is least. Thus, if a claimant fails to present evidence to determine the three alternatives, the claimant fails to meet its burden of proof and no damages may be recovered under CDARA.
CDARA does not identify the actual damages provision as an affirmative defense. Nowhere in CDARA did the general assembly characterize the actual damages limits as an affirmative defense. In contrast, the general assembly has specifically identified other statutory provisions as affirmative defenses to be pled and proven by defendants.(fn9) Accordingly, the general assembly's failure to identify CDARA's actual damages limits as an affirmative defense renders the Act unambiguous,(fn10) general burden of proof rules control, and claimants bear the burden to prove which of the three alternate limits applies.
Other statutory damage caps are not affirmative defenses. Some courts have held that certain statutory damage caps are not affirmative defenses. For example, in Leprino Foods Co. v. Industrial Claim Appeals Office,(fn11) the Colorado Court of Appeals held that a statutorily fixed $60,000 benefits cap in a workers' compensation proceeding was not an affirmative defense that the employer/defendant had to plead. In some cases construing statutory exceptions to the application of certain kinds of damages caps, courts have held that where the claimant seeks to avoid application of a cap he or she has the burden to prove the cap does not apply.(fn12)
Construing actual damages as an affirmative defense would hinder trial efficiency. Construction professionals argue that if claimants do not bear the burden of proof to show which of the three alternative damages limits applies, trial time will be extended because claimants will offer only evidence of the repair costs during the case-in-chief. Then, defendants will offer evidence of the lower fair market value or replacement costs, so that claimants will require additional trial time to respond to defendants' evidence in a rebuttal case. Conversely, if claimants bear the burden of proof, all of a claimant's evidence relevant to the issue will be presented during the claimant's case-in-chief, and the defendant will offer any counter evidence during its case, eliminating the need for a rebuttal case.
Claimants argue that defendants bear the burden of proving any damages recovery limitation imposed by the "whichever is less" provision. In support of this argument, claimants rely on several alternate bases.
CDARA's three alternative damages limitations are caps, not measures. Damages are the means by which the fact finder measures a legal injury.(fn14) Claimants argue that CDARA's reference to the "fair market value of the real property without the defect" does not measure a claimant's legal injury; rather, it measures the property's value absent any legal injury. In other words, this phrase merely describes a cap (or monetary limit) on a claimant's recoverable damages, as do the other two alternative actual damages limits-replacement and repair cost.
In O'Donnell v. Roger Bullivant of...
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