SB25-157: Deceptive Trade Practice Significant Impact Standard
Bill status: Failed in Senate
AIA Colorado position: Oppose
Summary
Colorado’s consumer protection statute includes dozens of individual sections in addition to its general provisions. As a result, it’s difficult to make sweeping changes, even when they mean well, without unintended consequences. This bill could have made it easier to make a deceptive trade practice claim alongside a construction defect claim, which could open up defendants to trebel damages. A scary prospect given the dollar amounts that may be necessary to correct an issue. This situation is very different than the scale of harm for a typical consumer protection lawsuit. Appropriate damages that can be awarded exist in this act and bills targeting other sections of statute shouldn’t take precedence. Architects were one of many interest groups affected that believed this bill was too broad in its attempt to increase consumer protections and the bill failed on the senate floor.
Impact
AIA Colorado opposed this bill because consumer protection claims shouldn’t be used as a vehicle to increase judgements for construction defect lawsuits. Some trial lawyers already try to tack on consumer protection claims as a scare tactic and this bill would make this more common despite such claims not having merit. The existing Construction Defect Action Reform Act (CDARA), while not perfect, is a comprehensive statute design specifically for lawsuits against architects and other construction professionals.
SB25-185: Claims Against Construction Professionals
Bill status: Failed in House
AIA Colorado position: Oppose
Summary
Never has a bill so concise had so many negative implications for the architecture profession. SB25-185 simply stated that “Notwithstanding any provision of law to the contrary, a construction professional owes an independent tort duty to an original residential home purchaser and a subsequent residential home purchaser“. This single sentence would have effectively removed our ability to negotiate liability-related provisions in contracts with other construction professionals.
When a homeowner suffers from a construction defect and pursues a lawsuit to correct the issue, the Economic Loss Doctrine dictates that the proper course of action is to file a contract claim against the seller of the home. This doctrine is intended to guide parties in disputes with purely monetary losses (such as paying to have a defect corrected). Terms in the sales contract are relevant to how liability issues are handled. The world of construction is a complex web of contracts, so there may be multiple suits filed down the contract line depending on what party is at fault. A homeowner could sue a homebuilder, who would then sue an architect to be made whole if the architect was at fault and was hired by the homebuilder.
To the benefit of homeowners in general, courts have ruled that subsequent buyers, who only had a contract with the original homeowner, don’t have to file contract claims. They can file tort claims against construction professionals directly since suing the previous homeowner is an overly burdensome means to get to the party who caused the defect. We’ve been operating under this guidance for decades in Colorado.
This bill would have allowed original homeowners to sue anyone directly with a tort claim.
This effort specifically tried to reverse a recent court case decision (Appleby vs Dossey Sudik) where a structural engineer limited their liability to an agreed-upon dollar amount with the architect, who was under contract with a general contractor on a for-sale residential project. The original homeowners had a structural defect and tried to sue the structural engineer directly via tort claim because a contract claim would not have covered the repair costs. However, the courts (up to the Colorado Supreme Court) all agreed that the homeowners could only file contract claims, starting with the seller of their home.
While that might sound unfair to homeowners at first pass, the intent of contract liability provisions is that both parties agree to them. If one side reduces their liability risk, then the other side opts in to taking on that liability themselves. This isn’t always about dollar amounts. Dispute resolution processes (arbitration and mediation) are also common contract clauses that this bill would have undermined. Architects are hired long before a housing unit goes to market. We’re not privy to the terms of a final sales agreement to the homeowner. As such, we can only properly negotiate contracts with the clients who hire us. We rely on contract claims to provide guardrails on who can sue who and when it’s appropriate to do so.We believe that courts ruled correctly in favor of requiring contract claims in construction defect lawsuits so that negotiated liability-related provisions are respected by all parties and taken into consideration in court proceedings.
Impact
It took a lot of work to explain how bad this bill was to legislators given how little detail there was in the bill text itself. Thankfully, we were ultimately successful in defeating it despite the bill having bipartisan support. If it had passed, architects and professional engineers (who were great allies in our lobbying effort!) would have had more lawsuit exposure in for-sale residential projects resulting in greater insurance costs and risk. This would drive firms out of this market and/or raise costs to cover the new risk.
HB25-1261: Consumers Construction Defect Action
Bill status: Pulled by sponsor in House committee hearing
AIA Colorado position: Oppose
Summary
This bill is a long list of changes intended to benefit homeowners who file construction defect lawsuits against construction professionals, many of which are similar or returning provisions from last year’s failed HB24-1230. AIA Colorado opposed this bill not just because every section was bad for architects, but also because of the heavy-handed approach taken that would have raised costs for architects with no litigation history. The most significant changes included:
- Changing the statute of repose for filing lawsuits against construction professionals from 6 years to 10.
- Letting homeowners wait until they know the cause of a defect before informing construction professionals of an issue. Unlike current law that requires disclosures upon the manifestation of a potential defect, this makes it impossible for well-meaning construction professionals to offer to correct an issue or even try to determine if they do or do not have any culpability.
- Awarding prejudgment interest on a successful claim against a construction professional at 6% from the date the defective work was finished on top of damages resulting from the defect. Professional liability insurance won’t cover this interest.
Impact
In Colorado, there are already no real penalties against lawyers who threaten every construction professional involved in a project with a lawsuit. This bill only would have made this practice more egregious. Additionally, prejudgment interest would result in a strong disincentive for a defendant to argue their case in court because judgements will automatically be higher, and the longer a case takes to resolve (which we have no control over, the higher the interest total would be.
While there’s potentially room for improvement for homeowners trying to deal with a construction defect, solutions need to respect construction professionals’ right to plead our defense in court without additional penalties for doing so. Solutions also need to be careful they don’t raise insurance or out-of-pocket costs for all architects who do residential projects even when we’re not the party at fault in most construction defect cases.
