Chapter 5 - § 5.1 • NEGLIGENCE

• Jurisdiction: Colorado

§ 5.1 • NEGLIGENCE

A builder has an obligation to construct a home non-negligently even where implied warranties do not apply.⁴ Any homeowner, even a subsequent purchaser, may seek redress from a builder for negligently caused latent defects discovered within the relevant statutory limitations period.⁵

The Construction Defect Action Reform Act (CDARA), passed in 2001 and amended in 2003, 2007, and 2010, significantly affects negligence-based construction defect actions. For a summary of CDARA, see § 2.2.1. Under CDARA, a party may not bring a negligence claim arising solely from the failure to construct real property improvements in substantial compliance with an applicable building code or industry standard, unless such failure results in "(a) Actual damage to real or personal property; (b) Actual loss of the use of real or personal property; (c) Bodily injury or wrongful death; or (d) A risk of bodily injury or death to, or a threat to the life, health, or safety of, the occupants of the residential real property."⁶ This limitation on negligence claims expressly does not limit other tort claims, contract or warranty claims, or claims arising from the violation of any statute or ordinance besides a building code.⁷ Some home-rule cities have adopted local ordinances that may, if they are not preempted by state law, expand CDARA's limitations on negligence claims to all construction defect claims. See § 2.2.6, "Construction Defect Municipal Ordinances."

CDARA also provides, in pertinent part,

(1) In addition to the notice of claim required by section 13-20-803.5, in every action brought against a construction professional, the claimant shall file with the court or arbitrator and serve on the construction professional an initial list of construction defects in accordance with this section.
(2) The initial list of construction defects shall contain a description of the construction that the claimant alleges to be defective. The initial list of construction defects shall be filed with the court and served on the defendant within sixty days after the commencement of the action or within such longer period as the court in its discretion may allow.
(3) The initial list of construction defects may be amended by the claimant to identify additional construction defects as they become known to the claimant. In no event shall the court allow the case to be set for trial before the initial list of construction defects is filed and served.
(4) If a subcontractor or supplier is added as a party to an action under this section, the claimant making the claim against such subcontractor or supplier shall file with the court and serve on the defendant an initial list of construction defects in accordance with this section within sixty days after service of the complaint against the subcontractor or supplier or within such longer period as the court in its discretion may allow. In no event shall the filing of a defect list under this subsection (4) delay the setting of the trial.⁸

This statutory requirement of early disclosure was not intended as a trap for the unwary or to bar meritorious claims, but a failure to substantially comply with this law could have serious ramifications, including possible claim dismissal or an adverse inference instruction.⁹

For a contemporaneous discussion of CDARA's 2001 enactment and its 2003 revisions, see generally Sandgrund, Sullan & Achenbach, "The Construction Defect Action Reform Act," and Sandgrund & Sullan, "The Construction Defect Action Reform Act of 2003."¹⁰ For a more current discussion, see § 2.2.1, "Colorado's Construction Defect Action Reform Act."

§ 5.1.1—Duty and Breach

A builder owes purchasers of its homes a duty to construct those homes with reasonable care.¹¹ As the Colorado Supreme Court said in Cosmopolitan Homes, Inc. v. Weller,

An obligation to act without negligence in the construction of a home is independent of contractual obligations such as an implied warranty of habitability. . . . The fact that a contract may have existed between a builder and the original purchaser of the home does not transform the builder's contractual obligation into the measure of its tort liability arising out of its contractual performance. . . . The principle enunciated in [Metropolitan Gas Repair Service, Inc. v. Kulik and Lembke Plumbing & Heating v. Hayutin] — that a negligence claim, not limited by privity of contract, may lie against a contractor — requires a builder to use reasonable care in the construction of a home in light of the apparent risk. . . . Negligence, however, requires that a builder or contractor be held to a standard of reasonable care in the conduct of its duties to the foreseeable users of the property. Negligence in tort must establish defects in workmanship, supervision, or design as a responsibility of the individual defendant.¹²

Even if express and implied warranties are effectively disclaimed, an underlying contract for the construction and sale of a home still provides the matrix from which independent tort liabilities arise.¹³

In an unpublished opinion examining a builder's tort duties, the Colorado Court of Appeals held that a general contractor hired by a receiver to perform work on a partially completed common interest development owed the plaintiff homeowners' association independent tort duties of care despite the contractor's argument that it "never agreed to build the project."¹⁴ The court held that the undisputed record evidence showed that the defendant had agreed to serve as a general contractor during the receivership, complete certain construction work on the development, and correct any defective work it or its subcontractors performed. Thus, "[a]s a general contractor for a residential project, [the contractor] owed the homeowners' association a duty to ensure that the project was constructed non-negligently."¹⁵ The court also held that the contractor was the receiver's independent contractor, not the receiver's agent, and that the receivership court's discharge of and grant of immunity to the receiver did not immunize the contractor from its independent tort duties.¹⁶

In a different case, the Colorado Court of Appeals held the plain language of amendments to the Department of Public Health and Environment Regulations, adding the phrase "single-family residential dwellings" to the asbestos regulations, did not create a duty on the part of the contractor or the homeowner to inspect for asbestos before beginning construction.¹⁷

Negligent Design, Site Selection, Construction, Supervision. Quality Control, Coordination, and Hiring

Builders and contractors also owe duties of reasonable care to foreseeable users of the property.¹⁸ A successful negligence claim must establish errors or omissions in workmanship, supervision, quality control, or design as a responsibility of the particular defendant.¹⁹ A builder also may be liable for making a negligent site-selection decision.²⁰

The Independent Duty (Economic Loss) Rule

Recognizing that a home buyer "makes the biggest and most important investment in his or her life and, more times than not, on a limited budget," the Colorado Supreme Court declared in 1983 in Cosmopolitan Homes that homebuilders and contractors have an "obligation to act without negligence in the construction of a home," which is "independent of contractual obligations."²¹ In Town of Alma v. AZCO Construction, the Colorado Supreme Court expressly adopted the "economic loss" or "independent duty" rule, holding that a party suffering only economic loss (generally meaning "damages other than physical harm to persons or property") from the breach of an express or implied contractual duty may not assert a tort claim for such breach absent an independent tort duty of care.²² The court noted the continuing vitality of Cosmopolitan Homes, however, stating,

Relying heavily on policy concerns about protecting home buyers, we held [in Cosmopolitan Homes] that the plaintiffs could maintain a negligence action for latent defects in the home. We allowed the negligence claim for latent defects in the home because we determined that a builder has an independent duty to act without negligence in the construction of a home.²³

In Forest City v. Rogers, the Colorado Supreme Court reaffirmed that a negligence tort claim is not limited by contract, but that foreseeability determines its scope, and held that requiring privity of contract for breach of implied warranty claims is consistent with the boundary between tort and contract claims.²⁴

In Stiff v. BilDen Homes, Inc., the Colorado Court of Appeals made clear that the independent tort duty to build a home with reasonable care flowing to the fourth owner of a home in Cosmopolitan Homes also ran to the original purchaser of the home.²⁵ Because of this independent duty of care, a homeowner may simultaneously pursue both breach of contract and negligence claims against a homebuilder.²⁶ In A.C. Excavating v. Yacht Club II Homeowners Ass'n, the Colorado Supreme Court held that subcontractors also owe homeowners independent tort duties to use reasonable care in connection with their home construction activities.²⁷ The court found that the passage of several comprehensive bodies of law (including CCIOA and CDARA) expressly or impliedly "recogniz[ed] and accept[ed] subcontractors' independent duty to act without negligence in the construction of homes."²⁸

In Mid Valley Real Estate Solutions V, LLC v. Hepworth-Pawlak Geotechnical, Inc., the Colorado Court of Appeals held that a Colorado construction professional owes an independent duty to act without negligence in the construction of a home, regardless of whether the owner — a mortgage lender's single-purpose subsidiary — took title to the home as part of a commercial transaction solely for purposes of resale.²⁹ The court held that the economic loss rule does not bar such a claim, noting that an owner's attributes as lessor, speculative investor...