13 March 2014

Colorado Pool settlement leaves insurance question unanswered

In January, the Colorado Supreme Court quietly approved a settlement of the Colorado Pool Systems, Inc. v. Scottsdale Ins. Co. case, ending a long legal battle over the scope of the term “occurrence” in construction insurance policies. Although this likely came as a relief to the parties, it leaves a number of questions unanswered for future litigants.

The dispute arose from a contractor’s insurance claim relating to the construction of a swimming pool. The contractor's subcontractors had placed rebar in the pool’s shell too close to the concrete surface, and the owner had demanded that the contractor redo the work. The contractor’s insurance carrier initially stated that it would cover the loss but later reneged, and the contractor brought suit. After a district court granted summary judgment for the carrier, the court of appeals reversed in part. Relying on the Tenth Circuit’s decision in Greystone Construction Inc. v. National Fire & Marine Ins. Co., 661 F.3d 1272, 1280 (10th Cir. 2011), the state appellate court ruled that, although the policy's definition of occurrence did not extend to the cost of replacing defective work, the policy could cover “rip and tear” damages associated with the removal of nondefective property as needed to access and repair the defects.

Both sides sought certiorari review. The supreme court denied the carrier’s petition, but it granted the contractor’s petition and agreed to consider whether damage to an insured’s defective work product could be deemed an occurrence under Colorado statutory or common law. This is a question that has generated considerable debate, and observers were hopeful that the justices would finally decide the issue. Perhaps to avoid establishing such precedent, however, the carrier agreed to settle the contractor's claim shortly after opening briefs were filed. The settlement means that the question will remain unresolved for the foreseeable future.

The Witt Law Firm’s Jesse Witt and Marci Achenbach filed an amicus brief in support of the insured contractor on behalf of the Colorado Trial Lawyers Association.