Two members of the Colorado Senate’s leadership, Majority Leader Sen. Robert Rodriguez and Minority Caucus Chair Sen. Byron Pelton brought forth a bipartisan measure to address the consequences of Appleby v. Dossey Sudik Structural Engineers, an unpublished 2023 opinion from the Colorado Court of Appeals.
According to the opinion, the homeowners alleged that Dossey Sudik had negligently designed part of their houses, and that the defects required expensive remediation. Dossey Sudik moved for summary judgment, arguing that the economic loss rule barred the claims, and the district court agreed. The appeals court affirmed it, and the Colorado Supreme Court denied certiorari for the case in August 2024.
Pelton said that in Appleby v. Dossey Sudik, the appeals court held that the independent duty of care is owed to subsequent home purchasers but not the original owner. The bill, according to Pelton, was an effort to give protection to a home’s first buyer as well. He noted that the bill was the product of a coalition of legal professionals representing both homeowners and businesses.
“Senate Bill 185 restores the assumption that construction professionals owe an independent duty of care for original and subsequent homeowners,” Rodriguez said. “Absent an independent duty of care, initial purchasers cannot assert negligence claims, meaning initial purchasers will be limited to contractual claims.”
He explained that the bill both confirms the independent duty owed to the first purchaser of a home and guarantees that construction professionals can protect themselves with insurance.
“Without a change, construction professionals will have no insurance for claims asserted by initial home purchasers, thus exposing them and their assets to significant financial liability and risk,” Rodriguez said. In addition, he noted that the bill confirms affirmative defenses that construction professionals can use.
Sen. Lisa Frizell told the sponsors that she had been hearing from lobbyists that the bill creates a significant amount of liability for architects and engineers. Engineers and architects that testified at the committee hearing agreed.
Josh Erramouspe, a licensed engineer at Olsson, said that his company was opposed to the bill.
“We have several concerns regarding the implications of this bill,” Erramouspe said. “First and foremost, the bill’s provisions would significantly increase the liability for construction professionals. This heightened risk would lead to higher insurance premiums and overall project costs, which would be passed along to the homeowners, further impacting housing affordability.”
He added that a fear of litigation may stifle creativity and technology adoption in the design and construction profession, and he said the bill would likely increase the number of frivolous lawsuits, as homeowners would seek compensation for issues that arose from normal wear and tear or improper maintenance.
Daniel Woodward, a partner at Cardi & Schulte, appeared before the committee in opposition. He noted that he represented Dossey Sudik in the Appleby case.
“I think [the bill] is a knee jerk reaction that will have unintended consequences,” Woodward said. “I think that the import of the Appleby decision is being blown out of proportion by the plaintiff’s bar and by the home sellers interest groups. Because they’re aligned, because they have money to make if 185 is passed, and downstream contractors like consulting engineers don’t … They will be exposed to liability.”
Woodward said that the decision didn’t create new law or upend the status quo. He told the committee that engineers needed to be protected along with the homebuyers. He also noted that the reason the Appleby case went the way it did was because of the protection buyers had in contracts for the home.
“And then the developer could sue people downstream, and their contractual limitations on liability with their clients would define the extent and magnitude of each downstream contractor’s liability,” Woodward said. “That’s an efficient way to handle these disputes.”
Two construction attorneys, Shane Fleener, partner at Hearn & Fleener, and David McLain, a partner at Higgins, Hopkins, McLain & Roswell, testified in support of the bill.
Fleener said that the bill was a rare instance where homeowners and home builders were in agreement, for the most part.
“Senate Bill 185 essentially confirms the status quo. It protects homeowners, it protects home builders by confirming that home builders owe original homeowners a duty to construct homes with reasonable care, and in turn ensures that home builders have the ability to protect themselves with insurance when things don’t go as planned,” Fleener said.
Fleener said that the decision in Appleby disrupted the status quo when it concluded that home builders didn’t owe original home buyers an independent duty to act with reasonable care.
McLain said the he believed the bill, as amended by the strikethrough amendment presented at the committee hearing, was a necessary measure to restore clarity and fairness to the state’s construction defect law.
“The bill ensures that construction professionals owe an independent duty to both original and subsequent home buyers, correcting what I believe was the misapplication of the economic loss rule, as stated in the Appleby v. Dossey Sudik case,” McLain said. “The bill also aligns Colorado law with longstanding Colorado Supreme Court precedent and legislative intent, reaffirming that builders, design professionals and subcontractors must be financially responsible for the harm they cause to Colorado homebuyers.”
The strikethrough amendment, which replaced the regular bill, was passed without objection in the committee hearing. Rodriguez said that the amendment came after discussions with both trial lawyers and home builders.
The bill’s passage through committee came down to a 4-3 vote, with the measure splitting the parties. Democratic Sens. Lindsey Daugherty, Julie Gonzales and Mike Weissman, along with Republican Sen. Lisa Frizell, voted to advance the bill. Democratic Sens. Dylan Roberts and Matt Ball and Republican Sen. John Carson voted no.
The bill’s passage out of the Senate involved similar splits, including a familial one. While the bill passed its third reading on a 23-11 vote, Pelton’s cousin, Sen. Rod Pelton, registered as one of the nays in the chamber.