25 October 2012

Court of Appeals finds coverage for "rip and tear" damages associated with repairing construction defects

The Colorado Court of Appeals issued a significant ruling today concerning insurance coverage for construction defects. In Colorado Pool Systems, Inc. v. Scottsdale Insurance Co., 2012 COA 178, the court reversed summary judgment for a carrier that had initially approved, but later rejected, a claim by a swimming pool contractor for the cost of repairing work that the owner had refused to accept. Relying on the Tenth Circuit's decision in Greystone Construction, Inc. v. National Fire & Marine Insurance Co., 661 F.3d 1272 (10th Cir. 2011), the court held that the contractor's policy could provide coverage for the "rip and tear" damages that occurred during replacement of the defective components, even if the policy did not cover the components themselves.

Notably, the court declined to apply Colorado Revised Statute § 13-20-808; although the court held that the statute was intended to apply retroactively to existing insurance policies, it concluded that applying it to facts of this case would be unconstitutional.

The decision arguably creates a split of authority within the court of appeals, which may lead to further review by the Colorado Supreme Court.

The Witt Law Firm's Jesse Witt and Marci Achenbach filed a friend-of-the-court brief on behalf of the Colorado Trial Lawyers Association in support of the insured contractor.

The full opinion is available on the court's website.