The
Construction Defect Action Reform Act (codified at C.R.S. §§ 13-20-801
et seq.; 13-80-104(1)(b)(II); 38-33.3-303.5) became effective
on August 8, 2001. As its name suggests, the Act is meant to
change the law in Colorado regarding construction defect actions.
While
primarily meant to address multi-family residential construction
defects claims, portions of the Act also are applicable to
both commercial and residential construction defect cases.
First, the Act requires any claimant who files a construction
defect lawsuit or arbitration proceeding to also file a list
of construction defects. Second, the Act alters the statute
of limitations for filing a claim for contribution or indemnification.
I. Contractors
are Entitled to a List of Defects
Generally,
Colorado law does not require a person filing a lawsuit to
provide much detail about his or her claim in the complaint.
A complaint only needs to be detailed enough to put the defendant
on notice of the subject matter of the lawsuit:
A complaint
need not express a complete recitation of all facts that
support the claim, but need only serve notice of the claim
asserted. . . . Indeed, the chief function of a complaint
is to give notice to the defendant of the transaction or
occurrence that is the subject of plaintiff's claims. Fluid
Technology, Inc. v. CVJ Axles, Inc., 964 P.2d 614, 616
(Colo. App. 1998).
Under
this standard, a plaintiff suing for defective construction
does not have to specify the defects in the complaint. But
the Construction Defect Action Reform Act now requires such
a list. (C.R.S. §§ 13-20-801 et seq.) At least sixty
days after filing a lawsuit alleging a construction defect,
the plaintiff must file with the court a list describing the
construction defects, and send a copy of the list to the defendant.
Without this section, it could take months through the costly
pleading and discovery process for a defendant to compel the
plaintiff to produce such a list.
Since
the plaintiff is allowed to freely amend the list as new defects
are discovered, and the only penalty for failing to submit
the list is that the case cannot be set for trial until the
list is submitted, the true impact of this section will be
to aid in settlement, focus discovery, and allow the defendant
to determine early on what third-party defendants should be
added.
If
a third-party defendant (such as a subcontractor or supplier)
is added to the lawsuit, the party bringing the claim against
the third-party defendant must also file a list of construction
defects and serve it on the third-party defendant. The Act,
however, provides no penalty for failing to provide the initial
list when adding a third-party defendant.
II. Indemnity
Claims May Wait
The
list that the plaintiff is now required to furnish will help
defendants, such as general contractors, decide what other
parties involved in the construction project may be liable
for the defects. Another section of the Act will help defendants
decide when to pursue recovery against such parties.
The
statute of limitations applicable to construction defect claims
previously provided that all actions, including any and all
actions in tort, contract, indemnity or contribution, arise
at the same time. See Nelson, Haley, et al. v. Garney Companies,
781 P.2d 153, 155 (Colo. App. 1989). As a result, general contractors,
when sued by owners for construction defects, had to add any
other potentially responsible parties (subcontractors, suppliers,
manufacturers, designers, etc.) as parties to the lawsuit,
or risk having the statute of limitations for contribution
and indemnification claims run out during the course of the
lawsuit with the owner. This made defect cases larger and more
complex than they otherwise might be.
The
general assembly has now provided a ninety-day window of opportunity
to bring contribution and indemnity claims:
All
claims, including but not limited to indemnity or contribution,
by a claimant against a person who is or may be liable
to the claimant for all or part of the claimant's liability
to a third person:
(A)
Arise at the time the third person's claim against the
claimant is settled or at the time final judgment is entered
on the third person's claim against the claimant, whichever
comes first; and
(B)
Shall be brought within ninety days after the claims arise,
and not thereafter. (C.R.S. § 13-80-104(1)(b)(II))
With
this section, it will no longer be necessary for general contractors
sued for defective construction to immediately bring third-party
claims against subcontractors and suppliers. They now have
a ninety-day window of opportunity after final judgment or
settlement of a construction defect claim to seek recovery
from subcontractors and suppliers.
But
this section could create hardship for general contractors
who settle owner defect claims before a lawsuit is filed. In
such a case, the general contractor arguably has only ninety
days to seek recovery from any potentially culpable subcontractors
and suppliers.
III.
Conclusion
The
Construction Defect Action Reform Act is a step in the right
direction. The major advantage is the requirement that the
plaintiff in a construction defect case produce a list alleged
defects within sixty days of filing the lawsuit. This requirement,
it is hoped, will eliminate delays in learning what the defects
are, streamline discovery, allow defendants to determine what
other parties should be, or should not be, added as third-party
defendants, and help foster settlement of construction defect
claims. The change to the indemnification statute of limitations
should simplify defect claims if for no other reason than there
should be fewer peripheral parties in cases.
Timothy
W. Gordon, Esq. is an associate in Holland & Hart
LLP's Construction and Real Estate
Litigation Group.
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