Deconstructing Construction Defect Fault Allocation and Damages Apportionment-part Ii
| Publication year | 2011 |
| Pages | 49 |
2011, December, Pg. 49. Deconstructing Construction Defect Fault Allocation and Damages Apportionment-Part II
December 2011
Vol. 40, No. 12 [Page49]
Construction Law articles are sponsored by the CBA Construction Law Section. They address construction-related issues. The coordinating editor and section encourage the submission of substantive law articles addressing issues of interest to practitioners in the field of construction law.
Coordinating Editor
James W. Bain of Benjamin, Bain and Howard, L.L.C., Greenwood Village-(303) 290-6600, jamesbain@bbhlegal.com
About the Authors
This two-part article analyzes fault allocation and damages apportionment in multi-party, multiple-defect construction cases. Colorado law offers guidance in addressing these issues; developing damages models; and crafting pretrial disclosures, trial proofs, and jury instructions. Part I discussed the legal theories underpinning allocation and apportionment. This Part II applies those theories in practice.
Colorado law permits a jury to allot damages among all parties and designated nonparties. Part I of this article, which was published in the November issue of The Colorado Lawyer, discussed case law suggesting that a claimant must establish a causal connection between a defendant's wrongful conduct and the claimant's damages attributable to that conduct, but not a percentage fault allocation to the defendant. Rather, claimants only need to provide a reasonable factual basis for the factfinder to make such an allocation. For indivisible injury damages, claimants may identify the persons responsible for those damages, claiming each is liable for the full amount. These issues are important to property owner plaintiffs and construction professional defendants, and are especially important to builders and developers asserting multiple third-party claims and cross-claims and making nonparty designations.
Part II of this article addresses burdens of proof, the scope of admissible evidence, Rule 26 disclosures, and jury instructions concerning damages apportionment and percentage fault allocation. For purposes of this article, fault allocation focuses on conduct and damages apportionment focuses on the consequences of that conduct. Case law suggests that, although a claimant must disclose and present evidence that provides a jury with a "reasonable basis" to causally link a defendant's wrongful conduct with damages and allocate percentage fault, a claimant generally need not disclose or prove a defendant's percentage fault allocation or indivisible damages apportionment. Additionally, although trial courts retain wide discretion to craft instructions that are administratively feasible and do not overwhelm the jury with their complexity, trial courts should use jury instructions and verdict forms from which a reviewing court may confirm that the jury considered, based on sufficient evidence, the amount of damages to which a party causally contributed, and found the percentage fault allocated to that party for those damages.
Evidentiary Concerns and Pretrial Disclosures
Courts recognize that practical problems arise from requiring claimants to disclose percentage fault allocations or specific damages apportionments. For example, such disclosures would be a significant disincentive to settlement, locking a claimant into preliminary or speculative categorizations that may have critical weight at trial. Settlement of complex construction defect cases would be exceedingly difficult if such apportionment and allocation by trade or defendant were required.(fn1) Moreover, even after significant discovery occurs, claimants typically lack complete information about various defendants' involvement so as to make definitive disclosures.
Because the Pro Rata Liability Act requires juries to allocate fault among parties and nonparties, claimants argue against requiring them to allocate fault or apportion damages among defendants because that invades the jury's province and may violate the indivisible injury rule (discussed in Part I). Defendants counter that because claimants must allege and prove liability and damages, claimants must disclose the damages amount and percentage fault for each defendant.
Case law supports an approach that accommodates both sides. First, as to indivisible injury, claimants must identify the defects and resulting damage for which they contend each defendant is liable and/or shares legal responsibility. Second, to satisfy the claimant's burdens of disclosure and proof, a claimant must provide an evidentiary basis that permits a jury to determine damages and to allocate fault among defendants. Third, if a defendant seeks to reduce the damages apportioned or fault allocated to it, that defendant bears the burden of proof. This general framework affords courts discretion to manage apportionment and allocation, to make their instructions understandable, and to accommodate uncertainties left by available evidence.(fn2)
Sufficient Evidence
A plaintiff asserting a damages claim must prove that a defendant's wrongful conduct was "a cause" of the plaintiff's damages and provide a "reasonable basis" for determining the amount of claimed damages. These concepts are discussed below.
Defining reasonable basis. Claimants must provide a "reasonable, albeit imprecise, basis on which to apportion damages" among multiple defendants.(fn3) "Reasonable basis" means more than a "scintilla" of evidence, but less than a preponderance of evidence.(fn4)
Some Colorado district courts have held that a claimant may establish a reasonable basis for construction defect damages by identifying: (1) each defect; (2) the corresponding repair; and (3) each defendant whose conduct contributed to causing the defect, any resulting damage, and required repairs.(fn5) Evidence that permits apportionment and allocation from being arbitrary may satisfy this standard.(fn6) For example, the Colorado Court of Appeals has held that dividing damages among eighteen defect categories provided a reasonable basis for the jury to apportion damages and allocate fault without distinguishing patent from latent defects.(fn7)
In contrast, the court of appeals also has held that an unitemized total replacement cost did not provide sufficient basis.(fn8) An unpublished case held that presenting evidence that provides only a basis for apportionment is inadequate, and that a defendant asserting third-party claims must present a specific damages apportionment.(fn9) This heightened standard apparently arose from several unique factors, including: (1) the third-party plaintiff developer's access to information and direct knowledge regarding the third-party defendant subcontractors' construction activities and involvement; (2) the developer's sworn representation promising to apportion damages among the responsible parties; and (3) the developer's prior settlement of the underlying claims for an unallocated lump sum with the property owner.(fn10)
Establishing a reasonable basis. Courts relax "the quality and quantity of evidence" required to apportion damages, allowing apportionment "[a]s long as there is some evidence that would permit such a determination."(fn11) Nearly all courts impose on defendants the...
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