Chapter 9 - § 9.4 • NON-PARTY LIABILITY

• Jurisdiction: Colorado

§ 9.4 • NON-PARTY LIABILITY

Following Colorado's 1986 tort reform legislation, which abolished joint tort liability under some circumstances, a party potentially liable for faulty home construction may designate potentially liable non-parties and, thereby, try to reduce, pro rata, that party's liability for damages.³⁶⁸ Designations under the non-party (or proportionate) liability statute are strictly construed, and the negligence or fault of a non-party may not be considered unless the issue has been properly raised and preserved by the defendant in a pleading that complies with the requirements of C.R.S. § 13-21-111.5(3).³⁶⁹

A party has 90 days from the commencement of the action to serve its non-party designations, and this time limit may be strictly enforced. However, a court may expand the deadline depending on the circumstances, and such extensions of time are customarily granted so long as they would not prejudice the plaintiff, such as where a statute of limitations might expire in the interim against a designated party.³⁷⁰

For the non-party liability statute to apply, the person or entity designated must have owed a duty recognized by law to the injured plaintiff.³⁷¹ A defendant must present evidence of a designated party's liability before a court will instruct the jury regarding apportionment of fault to the non-party.³⁷² In complicated, multiparty construction defect negligence disputes, a complaining party must establish not only the negligence of each other party whom it claims is liable, but also a causal connection between that party's negligence and the damages caused by such negligence.³⁷³ Where fault is attributed to a design or engineering professional, the designating party must prove all the elements of a professional liability action.³⁷⁴

Section 13-21-111.5, by its express terms, was intended solely to mitigate the harsh result of imposing complete liability on one of several joint tortfeasors.³⁷⁵ Joint tortfeasors do not include two parties, one of whose negligence is charged to the other, such as employer and employee or persons in other relationships giving rise to vicarious or imputed liability.³⁷⁶ For a fuller discussion of this issue, see "Non-Delegable Duties and the Pro Rata Liability Act" in § 5.1.2.³⁷⁷ With respect to C.R.S. § 13-21-111.5(4), which sets forth the exception to pro rata liability for joint tortfeasors who "consciously conspire and deliberately pursue a common plan or design to commit a tortious act" (i.e., act in concert), "[a] 'tortious act' under the statute includes any conduct other than a breach of contract that constitutes a civil wrong and causes injury or damages."³⁷⁸

C.R.S. § 13-21-111.5's pro rata liability reduction, which permits juries to apportion "negligence or fault," does not apply to contract claims³⁷⁹ (presumably including claims for breach of implied warranty) or claims for financial loss arising from breach of fiduciary duty,³⁸⁰ and probably does not apply to punitive damages.³⁸¹ One Colorado district court has held that a non-party defense could not be raised by a third-party defendant subcontractor to a builder's contractual indemnity claims because the pro rata liability statute is premised on fault or negligence and these concepts are not implicated by breach of contract claims; however, the court also held that the subcontractor could present evidence that the alleged damages were caused by another's conduct.³⁸² The U.S. District for the District of Colorado has held that C.R.S. § 13-21-111.5(1) applies to product liability claims, such as those arising from incorporating defective building products into homes, regardless of the specific legal theory alleged.³⁸³

There is no evidence that the legislature intended to overturn almost 50 years of decisional law recognizing a builder-vendor's strict liability for breach of its implied warranties by adopting C.R.S. § 13-21-111.5.³⁸⁴ Because contract liabilities do not implicate tort laws or fault or negligence principles, it would arguably be contradictory to recognize, on one hand, public policies imposing implied warranties, and, on the other hand, to limit these same warranties by allowing the builder-vendor to cast off responsibility for the consequences of its breach by designating its own subcontractors as potentially liable non-parties under § 13-21-111.5.³⁸⁵

It is an undecided question whether, in light of § 13-21-111.5's language limiting its application to "negligence or fault," and the public policy that parties not be relieved of responsibility for statutory violations, a defendant who violates a statute (such as the Consumer Protection Act (CCPA)) may properly allocate a portion of the resulting damages to the plaintiff or designated non-parties.³⁸⁶ Two Colorado district courts have refused to instruct a jury that the comparative negligence or pro rata liability statutes may reduce a defendant's liability for CCPA violations; doing so would permit a "blame the victim" defense, undermining the public policies underlying the statute.³⁸⁷

When judgment enters against a tortfeasor, but some liability is apportioned by the fact finder to a properly designated settling non-party, the judgment will be reduced by the percentage of fault allocated to the designated settling non-party, not by the settlement amount.³⁸⁸ If the settling non-party is not designated or no fault is allocated to that non-party, no set-off should be made.³⁸⁹ Thus, the fact finder may not consider non-party fault unless the issue has been properly raised by the defendant in a pleading compliant with C.R.S. § 13-21-111.5(3), and, as to settling non-parties, a defendant must invoke the statute after its co-defendant settles and before the court enters judgment.³⁹⁰ If the tortfeasor is found to have acted in concert with the settling non-party, then no percentage reduction is allowed, although it is an undecided question whether the settlement amount should be set off against the settling non-party's allocated percentage of liability for the plaintiff's damages.³⁹¹

As noted above, persons who are vicariously liable (or otherwise liable as a matter of law) for the tortious conduct of a co-defendant or non-party probably should not be allowed to reduce their liability pro rata based on the other's conduct. Nevertheless, instructing the jury to apportion liability may be necessary to determine appropriate offsets in the event one potentially liable co-defendant or non-party settles with the plaintiff.³⁹²

Practice Pointer: Risks of Designating Non-Parties
If grounds exist to impose legal liability on a builder-vendor or contractor for the conduct of its independent contractors, a construction professional who designates those independent contractors as potentially liable non-parties may create unanticipated problems, including rendering a "tacit" admission of liability by the builder-vendor under legal theories such as breach of implied warranty, or under circumstances where vicarious or strict liability may attach. In addition, such a designation may, depending on the facts, inadvertently compromise the builder's liability insurance coverage due to certain exclusions relating to work done by subcontractors.³⁹³

C.R.S. § 13-21-111.5(6) renders void as against public policy any construction agreement requiring a person to indemnify, insure, or defend another against liability caused by the negligence or fault of the indemnitee or any third party under the indemnitee's control or supervision. In adopting this law, the legislature expressly stated that nothing in it was intended to abrogate or affect the doctrine of respondeat superior, vicarious liability, or other non-delegable duties at common law or affect liability for the negligence of an at-fault party.³⁹⁴ Thus, C.R.S. § 13-21-111.5(6)(f) supports the conclusion that the legislature recognized the continuing vicarious liability of construction professionals for the acts and omissions of others, such as their subcontractors, but limits these others' liability to those damages that they or their agents caused.³⁹⁵

The Pro Rata Liability Act requires apportionment of liability between negligent defendants and intentional tortfeasor non-parties.³⁹⁶ The Colorado Court of Appeals has said that nothing in the statute suggests a plaintiff's fault should reduce a defendant's...