Deconstructing Construction Defect Fault Allocation and Damages Apportionment-part I
| Publication year | 2011 |
| Pages | 37 |
2011, November, Pg. 37. Deconstructing Construction Defect Fault Allocation and Damages Apportionment-Part I
November 2011
Vol. 40, No. 11 [Page 37]
Construction Law
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
Ronald M. Sandgrund (rsandrgund@vsss.com) is of counsel and Jennifer A. Seidman (jseidman@vsss.com) is an associate with the Denver law firm Sullan 2, Sandgrund and Perczak P.C. University of Colorado Law School student Michael Lutz helped research and edit this article. The firm represents commercial and residential property owners, homeowner associations, and unit owners in construction defect and insurance coverage disputes.
This two-part article analyzes percentage fault allocation and damages apportionment in multi-party, multiple-defect construction cases. Colorado common law and statutes offer guidance for addressing these issues; developing appropriate damages models; and crafting pretrial disclosures, trial proofs, and jury instructions. This Part I focuses on the legal theories underpinning allocation and apportionment. Part II will apply those theories in practice.
Construction defect cases typically involve many potentially responsible persons whose actions each contributed to creating defects, often with resulting property damage. Allocating percentage fault and apportioning damages among the responsible parties, who most often are construction professionals, raises difficult and important issues. These issues affect litigants' respective burdens of proof and disclosure obligations and the nature of admissible evidence, as well as the appropriate distinctions among juries' fact-finding responsibilities, experts' testimony, attorneys' arguments, and courts' jury instructions. They also affect settlement negotiations. These issues are important not only to property owner plaintiffs and construction professional defendants, but especially to builders and developers asserting multiple third-party claims and cross-claims and making nonparty designations.
Part I of this article examines relevant Colorado case and statutory law, which supports the conclusion that juries may apportion damages for divisible injury where a reasonable basis exists to do so, and that juries-not claimants-must allocate fault on a percentage basis for indivisible injuries among all potentially responsible parties and properly designated nonparties. Part II, which will be published in the December issue of The Colorado Lawyer, will explore the scope of claimants' and defendants' obligations to disclose and present evidence to support a jury's damages apportionment and fault allocation.
For purposes of this article, "defect" refers to a deficiency or error in a structure's design or construction. "Property damage" refers to physical injury to or the loss of use of all or part of a structure due to a defect. "Allocation" refers to the percentage fault responsibility a person bears for creating a defect, causing any resulting property damage, or causing another to incur damages, such as repair costs. "Apportionment" refers to separating damages arising from conduct that combines to create a particular defect or type of property damage from damages arising from conduct that does not create or combine to create that particular defect or type of property damage. (Note that case law and other authority may use these terms differently.) In sum, fault allocation focuses on conduct, while damages apportionment focuses on the consequences of that conduct.
Typical Construction Defect Case
Consider a typical construction defect claim involving water leaking at a single, interior building location near a window. The evidence suggests that the many persons and disparate conduct described in the accompanying sidebar, Example 1, contributed to the leak and/or caused the leak damage to worsen.
The building's owner, the construction professionals, the window manufacturer, and their respective experts all agree that water leaks damaged the framing and drywall behind the window. Each disputes: (1) the existence and extent of any alleged defects; (2) whether a particular defect contributed to the damage; (3) each potentially responsible person's role in creating the defect(s) causing the damage; and (4) the scope of appropriate repair.
Example 1 illustrates that discrete and unrelated design and construction defects may contribute to the same, indivisible injury; that a combination of different persons' work may create such defects; and that various persons' potential negligence or fault may or may not overlap in time, place, and resulting injury.(fn1) Example 1 also shows the difficulty in indentifying who created a specific defect or caused specific damage. The complexity increases in projects with numerous defects in multiple buildings. Further complicating matters is that differing claims, such as negligence, breach of warranty, and misrepresentation, may give rise to identical injury, and each claim's damages measure may or may not be the same.
As discussed below, three principles circumscribe the damages analysis in complex construction cases. First, a wrongdoer is responsible only for those damages proven to be casually connected to the wrongdoer's conduct. Second, if the conduct of two or more wrongdoers combines to cause injury, the factfinder is charged with allocating the percentage fault for the injury among all properly identified wrongdoers.(fn2) Third, these standards must remain flexible enough to ensure that they can be understood and applied by both juries and courts in a reasonably efficient manner and that they will accommodate uncertainties arising from the available evidence.(fn3)
Causal Connection and Damages Apportionment
A jury may award damages against a defendant only if a claimant proves a causal connection between a particular defendant's wrongful conduct and some or all of the claimant's damages.(fn4) The jury also must determine whether a claimant's damages resulted from an indivisible injury arising from the combined wrongful conduct of two or more persons, and either the judge or the jury must decide whether such damages are divisible and can be traced to separate wrongful acts.(fn5)
Indivisible Injury Rule and Percentage Fault Allocation
When the wrongful conduct of two or more persons combines to cause an indivisible injury, the injured claimant need prove only that a particular tortfeasor's conduct was a cause of the claimant's damages and the total amount of those damages (indivisible injury rule).(fn6) No case law supports the notion that the injured claimant must disclose and prove how much percentage fault should be allocated to each alleged tortfeasor. Instead, Colorado's Pro Rata Liability Act (Pro Rata Act), CRS § 13-21-111.5, provides that the jury is to make this allocation.(fn7)
Percentage Fault Allocation and
Damages Apportionment Difficulties
Even after significant discovery occurs, claimants such as property owners typically lack complete and undisputed information regarding the nature and extent of various construction professionals' involvement in the construction process. Claimants argue that it is improper to burden them with identifying specific percentage fault allocation because the Pro Rata Act requires that the jury allocate percentage fault among parties and nonparties, and that the Pro Rata Act did not "abolish the legal principle that two or more persons may concurrently cause" one indivisible injury.(fn8) Claimants also argue that because the indivisible injury rule does not require a claimant to apportion indivisible damages among tortfeasors, such apportionment is effectively subsumed by the jury's percentage fault allocation under the Pro Rata Act.
Claimants assert that any requirement to prove the percentage fault of each potentially responsible person is as misguided as demanding that a person injured in a car accident disclose and prove the percentage fault of two negligent drivers who contributed to...
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