The Case Behind Colorado HB 10-1394?

If you have followed the events in Colorado’s legislature this year related to the construction industry, then you’re most likely familiar with the recent passage of HB 10-1394. HB 10-1394, now codified at C.R.S. § 10-4-110.4 and C.R.S. § 13-20-808, provides courts guidance when interpreting commercial general liability policies issued to construction professionals. Interestingly, although the bill may be inextricably linked with General Security Indemnity Co. of Arizona v. Mountain States Mutual Casualty Co., 205 P.3d 529 (Colo. App. 2009) and Greystone Construction, Inc. v. National Fire & Marine Ins. Co., 649 F. Supp. 2d 1213 (D. Colo. 2009), it may very well be that the lesser known United States Fire Insurance Company v. Pinkard Construction Company, Civil Action No. 09-CV-01854-MSK-MJW, and its underlying dispute, Legacy Apartments v. Pinkard Construction Company, Case No. 2003 CV 703, Boulder County Dist. Ct., was the driving force behind the bill.

The Pinkard cases arise from allegations of defective construction of an apartment complex in Longmont, Colorado. Pinkard, as the builder of the apartment complex, demanded that its general liability insurers, including United States Fire Insurance, defend and indemnify it against the claims brought against it by the apartment owners. United States Fire moved for summary judgment against Pinkard, arguing that Colorado law does not construe property damage caused by poor workmanship to constitute an occurrence under the standard language in general liability policies—the same substantive argument that we’ve become familiar with via the General Security and Greystone cases. Along with responding to United States Fire’s summary judgment argument, Pinkard implored the United States District Court to certify the issue to the Colorado Supreme Court.

The United States District Court denied Pinkard’s motion to certify because the same substantive question, “Is damage to nondefective portions of a structure caused by conditions resulting from a subcontractor’s defective work product a covered ‘occurrence’ under Colorado law?” had already been certified by the 10th Circuit Court of Appeals. The Court also denied United States Fire’s motion for summary judgment on the basis that the Colorado Supreme Court’s answer to the certified question would most likely resolve the parties’ dispute. Unfortunately, the Colorado Supreme Court has since declined to accept the certified question, thereby leaving the resolution of this issue unsettled to this day. Even so, given that the issue remains on appeal in Greystone, as well as in United Fire & Casualty Co. v. Boulder Plaza Residential, No. 06-cv-0037-PAB-CBS, a resolution to the question may not be that far off.

For additional information regarding Colorado construction litigation, please contact David M. McLain at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.