In D.R. Horton, Inc., et al. v. Assurance Company of America, et al., Judge Valeria N. Spencer applied HB 10-1394 retroactively in a coverage case. The case arose out of the construction of a multi-family condominium complex, on which DRH hired Campbell Beard as the roofer on the project. Pursuant to the requirements of the subcontract, Campbell Beard named DRH as an additional insured on its CGL policy issued by Mountain States Mutual Casualty Company. After settling the underlying construction defect suit, DRH brought suit against the subcontractors’ insurance carriers to seek reimbursement for costs expended in defending the underlying case.
Under the terms of the policy issued to Campbell Beard, Mountain States was obligated to defend its insureds, including DRH, and to pay for damages if they were caused by an occurrence that resulted in property damage during the policy period. While there was no dispute regarding the fact that DRH was named as an additional insured on the policy, there was a dispute about whether the facts set forth in the underlying complaint were sufficient to trigger Mountain States’ obligations to defend and indemnify DRH under the policy. Citing General Security, Mountain States filed a motion to dismiss arguing that it was entitled to dismissal on the grounds that the underlying complaint merely alleged poor workmanship by Campbell Beard and did not implicate Campbell Beard’s work as the cause for the consequential damages suffered.
In a December 30, 2010 order denying Mountain States’ motion, Judge Valeria N. Spencer stated:
In order for plaintiff to defeat Defendant’s motion to dismiss in this case, the allegations contained in the operative liability complaint in the Underlying Action must implicate Defendant as a possible source of defective workmanship on the Sterling Commons II Project. Upon careful review of the underlying complaint, in the light most favorable to Plaintiff, the Court finds that Defendant is not entitled to a dismissal. In support of this conclusion, the Court looks to paragraph 77.2 of the underlying complaint where it states that “work performed on, but not limited to, the roofs was defective and improper resulting in damaged and defective structures and real property of the Common Interest Community.” Because Campbell was contracted to perform roofing services for the Sterling Commons Project, this paragraph implicates Campbell as the source of defective workmanship that resulted in property damage. In accordance with C.R.S. §13-20-808(1)(b)(IV)(3), Plaintiff’s claim that Campbell provided defective workmanship in constructing the roofs constitutes an occurrence that would trigger Defendant’s obligations under the terms of the general commercial liability policy issued to Campbell. . .
Despite the clear language of the C.R.S. §13-20-808 that establishes defective workmanship alone is an occurrence, Defendant submits that this statute cannot be used retroactively to evaluate the merits of this case. Again, Defendant’s assertion is without merit. The plain language states that this statute is to be used “for the purposes of guiding pending and future actions interpreting liability insurance policies issued to construction professionals.” C.R.S. §13-20-808(1)(b)(IV) (emphasis added). Because the current matter before this Court is a pending action based upon the interpretation of a liability insurance policy under the plain and ordinary understanding of those words, the statue is controlling. . .
Now that I have seen at least one trial court buck the trend and apply C.R.S. § 13-20-808 retroactively, I feel even stronger that this issue will ultimately be taken up by the Colorado appellate courts. Until the issue is resolved there, I will remain very interested in any and all trial court orders interpreting or applying C.R.S. § 13-20-808. If you would like a copy of the order discussed in this entry, please send me an e-mail at mclain@hhmrlaw.com. Also, if you have any additional orders on point, I would very much like to see them. Please send them my way.
— David M. McLain
For additional information regarding Colorado construction litigation, please contact David M. McLain at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.
