Construction Defect Coverage
Colorado Court Of Appeals Issues New Construction-Defect Coverage Decision
April 17, 2012
On April 12, 2012, the Colorado Court of Appeals decided TCD, Inc. v. American Family Mutual Insurance Co., 2012 WL 1231964 (Colo.App. 2012), an opinion that is favorable on several fronts to insurers in construction-defect actions.
The developer in TCD, counterclaimed against the insured, the general contractor, alleging that the insured’s subcontractor improperly installed a roof, which resulted in a defective roof and an inability to obtain a certificate of occupancy, and breached the insured’s contract with the developer. Various claims were asserted relating to negligence and breach of contract.
The court of appeals reached three primary conclusions in its decision:
1) There was no allegation of “property damage,” and therefore, the duty to defend was not triggered. The court reiterated that a claim for poor workmanship, standing alone, does not allege an “accident” that constitutes a covered “occurrence,” regardless how the underlying claim for relief is pled;
2) The court reaffirmed the “four-corners” rule and refused the insured’s invitation to look to Tenth Circuit authority and consider evidence outside the four corners of the complaint for facts that might trigger the duty to defend; and
3) Section 13-20-808, C.R.S., does not apply retroactively. It applies only to policies (a) for which the policy period had not yet expired at the time the statute went into effect on May 21, 2010, or (b) that were issued after the statute went into effect.
Although there is generally nothing groundbreaking or new in this decision, it does reinforce important existing concepts, especially in light of potential interpretations of C.R.S. 13-20-808.
SOURCE: www.gdnlaw.net