Construction Law

Indemnification statute of limitations does not apply to claims by developer against subcontractors for recovery of costs incurred in performing warranty work

By Tim Gordon

Richmond American Homes of Colorado, Inc. v. Steel Floors, LLC, et al. (Colo. App. 2008)

In a construction defects lawsuit, the Court of Appeals reversed the trial court's ruling that Richmond's claims against its subcontractors were time barred to the extent they involved repairs to homes made more than 90 days before the complaint was filed.

Richmond built several single-family homes in the front range, hiring subcontractors to perform the work.  Numerous homeowners complained to Richmond about water intrusion, but did not have to file lawsuits against Richmond.  Instead, Richmond repaired and remedied the defects in approximately 3,000 homes, and did so without requiring any release from the homeowners.  Richmond later sued several of its subcontractors, seeking damage based upon defective workmanship on the homes.

The subcontractors/defendants, relying on C.R.S. § 13-80-104(1)(b)(II), filed a motion with the trial court, seeking a determination that Richmond cannot recover any costs associated with repairs to  homes made more than 90 days before the complaint was filed.  Section 13-80-104(1)(b)(II) provides in relevant part as follows:

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.

The trial court granted the subcontractors' motion, determining that Richmond had 90 days to bring its lawsuit against the subcontractors after "settling" the homeowners' claims.  The Colorado Court of Appeals reversed, holding that the trial court wrongfully interpreted C.R.S. § 13-80-104(1)(b)(II).

The Court of Appeals "conclude[d] that the ninety-day period set forth in section 13-80-104(1)(b)(II) does not operate to bar Richmond's indemnity claims here because the homeowners neither 'settled' any claims nor filed a construction defect lawsuit against Richmond whereby a final judgment could be entered on such claims."  Furthermore:

repairing damages to an existing home in the absence of a formal complaint, arbitration proceeding, or settlement of a dispute where the homeowner has bargained for work in exchange for a release of a construction professional's liability does not involve the resolution of a "claim" for purposes of triggering the ninety-day period in section 13-80-104(1)(b)(II).  We view that provision as applying to either the resolution of disputes which has resulted in a final judgment or the settlement of an action or claim of liability which a third party could or actually did commence against the claimant.

According to the Court, Richmond "is not seeking to recover for liability to a third person as a result of a construction defect lawsuit, but instead is seeking to recover damages it suffered in performing warranty and repair work in the normal course of customer service."

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Full post as published by Colorado Construction Law on May 29, 2008 (boomark / email).