Colorado Court of Appeals Rejects Retroactive Application of C.R.S. § 13-20-808.

In TCD, Inc. v. American Family Mutual Insurance Company, TCD appealed the district court’s summary judgment ruling in favor of American Family. TCD, Inc. v. American Family Mutual Insurance Company Colo. App. No. 11CA1046 (April 12, 2012). TCD was the general contractor on a project to construct a building for Frisco General Gateway Center, LLC (“Gateway”). TCD subcontracted with a roofer named Petra Roofing and Remodeling Company (“Petra”) to performing the roofing work for the building. The subcontract required Petra to defend and indemnify TCD and to name TCD as an additional insured under its CGL policy. American Family issued a CGL policy to Petra that named TCD as an additional insured from 2006-2007.

TCD filed suit against Gateway seeking payment for its work at the project. Gateway counterclaimed against TCD for breach of contract, negligence, and violation of the CCPA. TCD demanded that American Family defend it from the counterclaims pursuant to Petra’s policies. American Family denied coverage and a separate coverage suit ensued. At the trial court level, the court entered summary judgment for American Family because the counterclaims of Gateway did not trigger the duty to defend or indemnify TCD as an additional insured.

On appeal, TCD argued that: 1) the counterclaims raise a genuine issue of material fact regarding American Family’s duty to defend; 2) the court should hear evidence beyond the four corners of the complaint; and, 3) the court should apply C.R.S. § 13-20-808 retroactively.

Gateway’s counterclaims alleged that defective work was performed, but did not specify any resulting property damage from such work. Therefore, the Court of Appeals upheld the trial court’s ruling that the counterclaims do not constitute property damage caused by an occurrence.

TCD next argued that the court should allow it to bring in evidence beyond the counterclaims to determine if coverage exists for TCD. TCD cited two federal cases that interpreted Colorado’s “four corners of the complaint” rule liberally.[1] The Court of Appeals in this matter characterized these two cases as narrow exceptions, and found no reason to depart from the broad rule.

Finally, TCD argued that C.R.S. § 13-20-808(3) should be applied retroactively. This statute, if applied retroactively, would give TCD the benefit of a presumption for coverage. HB 10-1394, the legislation which gave rise to C.R.S. § 13-20-808, stated that the law “applies to all insurance policies currently in existence or issued on or after [May 21, 2010].” As this blog has previously covered, Colorado trial courts have held both for and against the retroactive applicability of this statute. Until this decision, no appellate court had weighed-in on whether the statute should be applied retroactively.

The Court of Appeals found the HB 10-1394 language to be unambiguous, and held that the statute should not be applied retroactively. The Court furthered its rationale with Colorado’s presumption that statutes are to be prospectively applied. The Court also heard TCD’s well-reasoned argument that this particular “occurrence” policy, like most CGL policies, would allow for claims after the prescribed policy period had ran. Under this premise, TCD argued that the CGL policy is still “in existence” on or after May 21, 2010. In rejecting this argument, the Court of Appeals concluded with “[a] plain reading of ‘currently in existence’ supports the conclusion that section 13-20-808 applies only to policies for which the policy period had not yet expired on May 21, 2010.” Therefore, as the law stands today, Colorado construction professionals will not gain the benefit of retroactive applications of C.R.S. § 13-20-808.