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In Sierra Pacific Industries v. Bradbury, 2016 WL 4699116 (Colo. App. September 8, 2016), the Colorado Court of Civil Appeals, Division I, upheld the district court’s entry of summary judgement in favor of a subcontractor on an indemnification claim for damages, costs and expenses related to an underlying construction defect claim brought by the condominium association based on the statute of repose. The Colorado Court held the “substantial completion” date under the statute of repose is different for each subcontractor and is determined by the completion of that subcontractor’s own work, as opposed to the overall completion of the improvement to real property.
Sierra Pacific Industries, Inc. (“Sierra Pacific”) was hired by the general contractor, Weitz Company I, Inc. (“Weitz”), to supply windows and doors for the construction of condominiums for the Ajax Lofts Condominium Association, Inc. (the “Association”). Sierra Pacific then hired Bradbury Construction, Inc. (“Bradbury”) to install the windows and doors. Bradbury began and completed its work in 2002. The certificate of occupancy was issued in June, 2004 for all units. Due to complaints from the residents related to alleged leaks and water damage, Weitz and Sierra Pacific performed repair work between 2004 and March, 2011. Bradbury participated in repair work through January, 2005.
In November, 2011, the Association filed a lawsuit against Weitz for alleged defective construction, and Weitz filed an indemnification claim against Sierra Pacific. The district court consolidated the cases, and the Association, Weitz and Sierra reached a settlement in July, 2014.
On October 20, 2014, Sierra Pacific filed an indemnification action against Bradbury to recover any losses incurred in the settlement and damages for alleged contractual breaches. Bradbury filed a motion for summary judgment, arguing Sierra Pacific’s claim brought nearly ten (10) years after Bradbury ceased working on the project was time-barred by Colorado’s six-year statute of repose. Sierra Pacific argued its claims against Bradbury did not “arise” until the case was settled in 2014, and even if the statute of repose was not tolled by the settlement, the repose period did not commence until 2011, when the improvements to the property were substantially completed. The district court granted summary judgment, concluding the effective date of substantial completion for Bradbury’s work was January, 2005, and because Bradbury did not receive notice of the claims within the statute of repose period, the claims against Bradbury were time-barred.
The Court of Civil Appeals upheld summary judgment. Pursuant to Colorado’s statute of repose, no action against any architect, contractor, builder, vendor, engineer or inspector related to construction may be brought “more than six years after the substantial completion of the improvement to the real property . . . ." Section 13-80-104, C.R.S. 2015. The Court of Appeals held that "substantial completion" occurred with respect to Bradbury when it last performed work in 2005. In so holding, the Court of Appeals adopted the following rationale from the Texas Court of Appeals:
[W]here different subcontractors were responsible for the construction of different parts of a larger project, the statute of repose should be applied to each of those individual subcontractors when they have completed their respective improvements. . . .
Starting the statute of repose when each subcontractor finishes its improvement conforms with the legislative intent of preventing indefinite liability for those who construct or repair improvements to real property.
Gordon v. Western Steel Co., 950 S.W.2d 743, 748-49 (Tex. App. 1997).
This rationale may cause obvious problems for general contractors in both Texas and Colorado. For example, the statute of repose for claims related to alleged sub-standard concrete structural work would begin to run against the concrete subcontractors once their work is completed. The same statue of repose against the general contractor would not begin to run until the entire project is completed. The general contractor could be liable, therefore, for alleged defects caused by the concrete subcontractors, long after the concrete subcontractors are shielded by the statute of repose.