Hard hat Case Notes

• Pages: 51-55
• Date: 01 April 2025
• Published date: 01 April 2025
• Author: Hugh D. Brown,Catherine W. Delorey
• Subject Matter: Civil Law

Published in The Construction Lawyer Volume 44, Number 2, ©2025 by the American Bar Association. Reproduced with

permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any

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Forum on Construction Law The Construction Lawyer Spring 2025

51

HARD HAT CASE NOTES

By Hugh D. Brown and Catherine W. Delorey

Hugh D. Brown is a shareholder with Fabyanske Westra Hart & Thomson P.A. in Minneapolis,

Minnesota. Catherine W. Delorey is senior counsel in the San Francisco, California, office of Gordon Rees

Scully Mansukhani LLP.

Tenth Circuit Determines Colorado Law Bars Builder’s Risk Recovery Where the Insured

Incurs No Repair Costs

Builder’s risk insurance policies are a standard tool to mitigate the wide variety of risks that may occur

during construction. In Curtis Park Group v. Allied World Specialty Insurance Company, the Court of

Appeals for the Tenth Circuit held that a developer could not recover under a builder’s risk policy because

it did not bear any repair costs and would reap a windfall from any recovery under the policy in violation

of Colorado law. The case is an important reminder that contractors, particularly those who are not

named insureds, should carefully draft settlement agreements that are tied to potential recoveries under

builder’s risk policies to ensure such settlements do not preclude coverage under those very policies.

In the underlying dispute, a developer, Curtis Park Group, LLC (Curtis), sought to construct a five-

building development, four of which were supported by a single concrete slab. Curtis hired MW

Residential LLC (MW) as the general contractor and furnished designs. As part of their contract, Curtis

would not be required to reimburse MW for the cost of repairs arising out of MW’s negligence or failure

to fulfill a contractual obligation. Additionally, Curtis obtained a builder’s risk insurance policy (the

Policy) from Allied World Specialty Insurance Company (Allied World) covering “direct physical loss or

damage caused by a covered peril to ‘buildings or structures’ while in the course of construction, erection,

or fabrication.” Curtis, however, was the only named insured under the Policy, which also stated,

“[i]nsurance under this coverage will not directly or indirectly benefit anyone having custody of [the

named insured’s] property.”

After discovering excessive deflection, commonly known as sagging, in the slab during construction,

Curtis retained a consultant to conduct an investigation, resulting in a determination such defects arose

due to MW’s failure to adhere to the design documents provided by Curtis. This determination was not

shared with Allied World. MW then undertook the repairs at its own expense. Shortly thereafter, Curtis

gave notice to Allied World of a claim for repairing the slab, totaling $2,857,157.78 in “hard costs” for

direct repair costs and $986,391.59 in “soft costs” for the associated delay (the Claim). A few months

later, Curtis and MW entered into a project close-out agreement containing the following terms: (1) the

parties would work together to pursue the Claim; (2) the parties, if successful, would split the recovery

under the Claim, with MW receiving just over 60% of the total; and (3) Curtis would not have to

reimburse MW for repair costs if the Claim failed.

After Allied World denied coverage, Curtis brought suit for breach of contract, statutory bad faith, and

common law bad faith. In both mid- and post-trial instructions, the federal district court instructed the

jury that MW’s “payment of [the roughly $2.8 million in hard] costs does not preclude Curtis [] from

seeking coverage under the policy for reimbursement of these costs.” The jury decided in favor of Curtis

on its breach of contract and statutory bad faith claims. Allied World appealed. The Court of Appeals

for the Tenth Circuit reversed, holding that Curtis’s recovery constituted a windfall that was barred