The City of Aspen acted as the developer and declarant of the Burlingame Ranch II Condominiums. After the end of declarant control, the Association demanded arbitration against the City of Aspen, alleging claims of breach of express contract, express warranty, and implied warranty. The Association did not allege any tort claims, as tort claims would be barred by Colorado's governmental immunity statute.
Upon motion from Aspen, the trial court extended governmental immunities to the Association's contract claims, holding that Colorado law recognizes tort duties and available tort theories for residential construction defect cases. Because the Association's contract claims, “could lie in tort," the trial court dismissed the case.
The Association appealed this lower court decision and the court of appeals reversed, holding that the ELR makes tort claims unavailable, therefore ordering the lower court to hold a hearing to determine if the Association's claims sounded in tort or contract. In doing so the court of appeal stated that the ELR would limit the Association's claims to contractual remedies.
This appellate court's holding is inconsistent with prior Colorado Appellate Court Cases holding that the ELR applies only to commercial and not residential construction. In re Estate of Gattis, 318 P.3d 549 (Colo. App. 2013); Hoang v. Arbess, 80 P.3d 863, 867 (Colo. App. 2003).
The unique nature of the Burlingame case puts the City of Aspen in the unusual position of arguing that, as a residential developer, it does have an independent tort duty to construct homes without negligence. Because this duty lies in tort, as well as in contract, Aspen argues that it has governmental immunity. The Association, on the other hand, is in the unusual position of arguing that the City has no tort liability as a result of the ELR, and therefore the City would not have governmental immunity.
Construction Defects is an advocacy priority for CAI.2 The two issues in Burlingame fall squarely within the CAI's Public Policy “Protection of Association Claims in Construction Defect Legislation," which was adopted in its current form by CAI's Board of Trustees on May 4, 2016. This policy provides, “Builders that construct homes and common elements for purchase by consumers must be required to deliver a product that is free from material defects and exhibits good workmanship." With the expansion of governmental immunities and the ELR at issue in this case, Colorado common interest communities and their members may no longer have an adequate remedy against material defects and poor workmanship, especially if the poor workmanship was committed by a governmental entity or causes harm to an original purchaser. Without adequate remedies, associations and their members would have no right to be made whole. This “Right to be Made Whole" is a key tenent in CAI's policy which supports enabling “the association and its homeowners to be in the position they would enjoy if no defects had existed."
If the ELR is permitted to be applied to residential construction defect cases, common interest
communities and original purchasers will have their remedies limited to breach of contract and
implied warranty causes of action. These causes of action are not typically covered by a builder's
commercial general liability policy. This would significantly harm community associations when
the builder is dissolved, insolvent, or in bankruptcy. In all but cases brought against deep pocketed national builders, community associations will have no opportunity to recover damages
for construction defects--no opportunity to be made whole.
Amicus Brief
Court: Colorado Supreme Court
Topic: Economic loss rule
Brief Author: Jeffrey P. Kerrane, Kerrane Storz, Broomfield, Colorado; Mari Perczak, Craig Nuss, Jennifer Seidman, Burg Simpson; Shane Fleener, Hearn & Fleener
Filed: January 30, 2023
CAI Amicus Review Panel: Mr. Robert Diamond, Esq., CCAL, (VA) Co-Chair of Amicus Committee
Mr. Stephen Marcus, Esq., CCAL, (MA) Co-Chair of Amicus Committee
Mr. Ed Allcock, Esq., CCAL (MA)
Mr. Tom Moriarty, Esq., CCAL (MA)
Ms. Mary Howell, Esq., CCAL (CA)
Ms. Lydia Linsmeier, Esq. (AZ)