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Colorado Case Law Updates

Colorado Case Law Updates

Rooftop Restoration, Inc. v. American Family Mut. Ins. Co.[1]

In this recent Colorado Supreme Court decision, the Court issued an opinion interpreting and applying C.R.S. §§ 10-3-1115/1116, the statutes that provide a private right of action against an insurer for unreasonable delay or denial of insurance benefits. The Court held claims under the statute are not subject to the one-year statute of limitations applicable to penalties and insureds are entitled to recover two times the covered insurance benefit in addition to the covered benefit, for a total of three times the covered benefit. In order to reach this conclusion, the Court looked at the language of the accrual statute associated with Colorado’s statutory scheme for statutes of limitation. The accrual statute states that a cause of action for penalties accrues when the determination of overpayment or delinquency is no longer subject to appeal. The Court reasoned that an action for unreasonable delay/denial never leads to a determination of overpayment or delinquency. Thus, the Court reasoned, if a cause of action for unreasonable delay/denial is a penalty subject to the one-year statute of limitations, it would never accrue and the clock to bring the claim would never start ticking. The Court concluded the “penalty” actions referred to in the statute of limitations cannot include unreasonable delay/denial actions. Accordingly, the Court held claims under C.R.S. §§ 10-3-1115/1116 are not governed by the one-year statute of limitations in C.R.S. § 13-80-103(1)(d).

Ass’n Ins. Co. v. Carbondale Glen Lot E-8, LLC[2]

This recent case involved an insurer’s duty to defend or indemnify its insured for construction-related defects.  The Court granted an insurer’s motion for summary judgment against a construction subrogee. Mountainview Construction Services, LLC (“MCS”) served as the general contractor for the construction of a residence on a lot owned by Glen Lot E-8, LLC (“E-8”).  MCS took out a Commercial General Liability Policy (“Policy”) with Association Insurance Company (“AIC”) that provided coverage to MCS for the relevant time period for the construction of the residence.  E-8 then asserted a series of claims against MCS, based on the allegation that MCS and its subcontractors defectively constructed the home by, among other things, building the residence two feet too high in violation of applicable codes.  E-8 also argued MCS and its subcontractors made significant alterations and/or deviations from the original project specifications without obtaining E-8’s consent or approval from relevant authorities.   MCS tendered the claim to AIC for defense and indemnity.  In turn, AIC declined coverage on the argument the Policy precluded any coverage for defective work MCS may have performed on the project, absent damage to person or other property.  MCS and E-8 subsequently settled all of E-8’s claims against MCS.  As part of the settlement terms, however, MCS assigned all of its rights against AIC to E-8 related to AIC’s refusal to defend and indemnify MCS.  In the ensuing action by E-8 against AIC, AIC moved for summary judgment on its declaratory judgment claim.  In doing so, AIC argued the relevant Policy language prevented it from defending or indemnifying MCS for the allegations contained in E-8’s operative complaint against MCS in the underlying action.  The Court construed the language of the policy, which defined property damage as “physical injury to tangible property…” to mean that AIC did not have a duty to defend MCS against E-8’s claims because it did not allege physical injury to tangible property or loss of use of tangible property that is not physically injured. The holding reaffirmed the principle that the express terms of a policy are the benchmark with which courts determine an insurer’s duty to provide coverage.

M.A.K. Investment Group, LLC v. City of Glendale[3]

Plaintiff M.A.K. Investment Group, LLC (M.A.K.) owned property in the City of Glendale (Glendale). Glendale adopted a resolution declaring several of M.A.K.’s parcels blighted under state law, but never notified M.A.K. of its resolution or the legal consequences flowing from it. Consequently, M.A.K. failed to seek judicial review within the required 30 days. M.A.K. sued Glendale, claiming Colorado’s Urban Renewal statute was unconstitutional.  The district court granted Glendale’s motion to dismiss.  On appeal, M.A.K. argued Colorado’s Urban Renewal statute violates due process as applied to M.A.K. because (1) it does not provide for adequate notice when a city finds a landowner’s property blighted; and (2) it does not provide for notice of the 30-day review period, and (3) M.A.K. in fact did not know about the blight determination or the right of review within 30 days.  The Urban Renewal statute limits a city council’s discretion by providing 11 exclusive factors for its decision, and it provides property owners a right to judicial review for abuse of discretion. M.A.K. has a protected property interest in the statutory right to judicial review of the blight determination. M.A.K. did not otherwise learn about the blight determination and it violated due process for Glendale not to send M.A.K. direct notice of the adverse blight determination.  However, Glendale was not required to send specific notice of the 30-day time frame in which to seek review; if M.A.K. had been notified of the blight finding, it would have been up to M.A.K. to determine available remedies under state law. The grant of the motion to dismiss was reversed and the case was remanded.

Curry v. Zag Built LLC[4]

Defendants Zag Built LLC and its owner, Zagrzebski (collectively, Zag Built) built a house for the Currys.  Shortly after the Currys moved into the house in July 2013, they noticed signs of damage, such as cracks in the drywall and sagging doors. In late June-2015, the Currys filed a complaint naming Zag Built (among others) as defendants and citing the applicability of the Construction Defect Action Reform Act’s (the Act) notice of claim process, CRS § 13-20-803.5. After filing a status report and two updates, the Currys filed an amended complaint in mid-May 2016. In early July 2017, Zag Built filed a Motion for Summary Judgment, contending the trial court should dismiss the case. The trial court denied the motion. Zag Built then filed a C.A.R. 4.2 motion for interlocutor review.  On appeal, Zag Built asserted, pursuant to CRCP 4(m), the trial court erred when it did not dismiss the case when the Currys had not served it within 63 days of the filing of the original complaint. CRCP 4(m) does not require a trial court to dismiss a case if the plaintiff does not serve the defendant within 63 days of when the plaintiff filed a complaint. Instead, applying the plain language of Rule 4(m), if the court is contemplating dismissing the case within that 63-day period, it must provide the plaintiff with (1) notice it is contemplating dismissing the case, and (2) an opportunity to show good cause why the court should not dismiss the case. If the plaintiff shows good cause, the court must extend the deadline. If the plaintiff does not show good cause, the court has the discretion to dismiss the case without prejudice or order the plaintiff serve the defendant within a specified time.  Here, the trial court did not give the Currys notice.  Further, CRS § 13-20-803.5(9) stayed the case until mid-April 2016. Therefore, the trial court did not err in declining to dismiss the case.

Zag Built also contended the trial court should have dismissed this case because the Currys did not send it a notice of claim under the Act until after the statute of limitations had run. First, the statute of limitations stops running once a case is commenced by filing a complaint. Here, the Currys filed their complaint in mid-June 2015, before the statute of limitations had expired.  Second, the Act’s notice of claim process is not a prerequisite to filing a complaint or commencing an action.  If a plaintiff files a complaint before completing the notice-of-claim process, the case is stayed until the plaintiff completes the process. Therefore, the trial court did not err in declining to dismiss the case on this basis. The order was affirmed and the case was remanded.

Bell v. Land Title Guarantee Co.[5]

The Bells hired Orr Land Company LLC (Orr) and its employee Ellerman to represent them in selling their real property. Orr found a buyer and the Bells entered into a buy and sell contract with the buyer, which provided, as pertinent here, that the sale excluded all oil, gas, and mineral rights in the property. Orr then retained the Land Title Guarantee Company (Land Title) to draft closing documents, including the warranty deed.  In 2005, the Bells signed the warranty deed and sold the property to the buyer. The Bells did not know the warranty deed prepared by Land Title did not contain any language reserving the Bells’ mineral rights as provided in the buy and sell contract.  For over nine years, the Bells continued to receive the mineral owner’s royalty payments due under an oil and gas lease on the property.  In 2014, the lessee oil and gas company learned the Bells did not own the mineral rights, so it began sending the payments to the buyer. Thereafter, the Bells discovered the warranty deed did not reserve their mineral rights as provided in the buy and sell contract. In 2016, the Bells filed a negligence and breach of contract action against Defendants Land Title, Orr, and Ellerman. The Defendants all moved to dismiss arguing the Bells’ claims were untimely because the statute of limitations had run. The district court granted Defendants’ Motion to Dismiss.

On appeal, the Bells contended the district court erred in granting Defendants’ Motion to Dismiss because they sufficiently argued facts that, if true, established the statute of limitations did not begin to accrue on their claims until the oil and gas company ceased payment in September 2014, which is when they contended they discovered the warranty deed did not reserve their mineral rights.  A plaintiff must commence tort actions within two years from the date the cause of action accrues, and contract actions within 3 years from the date the cause of action accrues. Accrual is the date on which “both the injury and its cause are known or should have been known by the exercise of reasonable diligence.”  Here, the Court relied on the principle that one who signs a document is presumed to know its contents, so the Bells should have known on the day they signed the deed the mineral rights reservation language was not included, and thus their claims accrued on that date. However, the presumed-to-know principle applies conclusively only where a party seeks to avoid the legal effects of a deed in an action against another party to the conveyance, not where a party asserts claims against third parties who failed to conform the deed to an underlying agreement on that party’s behalf.

Here, the Bells’ claims against Defendants, who were not parties to the deed, did not seek to avoid the deed, but rather sought damages for negligent preparation of the deed. The purpose of the presumed-to-know principle therefore was not applicable. The trial court had erred in granting the motion to dismiss and the order was reversed.

 

[1] 2018 CO 44 (Colo. 2018)

[2] No. 15-cv-02025-RPM, 2016 WL 9735743, at *1 (D. Colo. Oct. 10. 2017).

[3] No. 16-1492 5/14/2018.D.Colo.

[4] 2018 COA 66. No. 18CA0018

[5] 2018 COA 70. No.16CA2230

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