The Subrogation Strategist

In Sierra Pacific Industries v. Bradbury, 2016 Colo. App. Lexis 1274, 2016 COA 132 (September 8, 2016), Sierra Pacific Industries, Inc. (Sierra Pacific), a subcontractor hired to supply windows and doors on a condominium construction project, filed an indemnification action against Jason Bradbury, d/b/a Bradbury Construction, Inc. (Bradbury), a sub-subcontractor Sierra Pacific hired to install windows and doors. After the trial court granted summary judgment in Bradbury’s favor, the Court of Appeals of Colorado addressed whether Colorado’s six-year statute of repose for construction defect claims, C.R.S. § 13-8-104, barred Sierra Pacific’s claims against Bradbury. In particular, the court addressed the question of whether the tolling period for indemnification claims set forth in § 13-8-104(b)(1) tolls the repose period. The court also addressed how the phrase “substantial completion” should be interpreted in multi-contractor construction cases. Finally, the court considered whether Sierra Pacific could rely on the “repair doctrine” to extend the “substantial completion” date, the date on which the statute of repose begins to run. Sierra Pacific reminds us that, when a defendant invokes a construction defect statute of repose to defeat a plaintiff’s claims, it is important to analyze how the jurisdiction at issue defines the phrase “substantial completion” and how it applies tolling arguments to the statute of repose.

The underlying cause of action giving rise to Sierra Pacific’s claims against Bradbury involved alleged defects in the construction of a condominium building. The construction was completed in 2002. In 2004, the condominium’s residents complained about water infiltration from the windows and doors. Bradbury made repair efforts in 2004 but none thereafter. The general contractor, Weitz Company I, Inc. (Weitz) and Sierra Pacific attempted repairs in 2004, 2005 and 2011. In 2011, the condominium association, Ajax Lofts Condominium Association, Inc. (Ajax) sued Weitz for the defects and Weitz joined Sierra Pacific as a third-party defendant. Ajax, Sierra Pacific and Weitz reached a settlement in July 2014.

In October 2014, Sierra Pacific filed an indemnification action against Bradbury seeking to recover its losses from the underlying settlement and related damages. Bradbury filed a motion for summary judgment on the grounds that the action was barred by the six-year statute of repose for improvements to real property set forth in Colorado’s Construction Defect Action Reform Act (CDARA). The lower court granted Bradbury’s motion, finding that the statute of repose began to run when Bradbury substantially completed its work in 2004, when Bradbury stopped making repair efforts. Sierra Pacific filed an appeal, arguing that its claims against Bradbury did not “arise” until after it settled the underlying case in 2014 and that, after that time, it had ninety days in which to file its complaint. Sierra Pacific also argued that, even if the settlement did not toll the statute of limitations, the repose period did not start to run until 2011, when efforts to repair Bradbury’s defective work stopped and Bradbury’s work was substantially complete.

Section 13-80-104 contains both a two-year statute of limitations and a six-year statute of repose. The statute of repose expires six years “after the substantial completion of the improvement to the real property.” Under the statute, the repose period is extended two years if the cause of action arose during the fifth or sixth year after substantial completion.

Section 13-80-104(1)(b) states that indemnification claims can be filed within ninety days after the claim arises. Sierra Pacific argued that, based on § 13-80-104(1)(b), it had ninety days after it settled the underlying claim in 2014 to file its action and, thus, its action was timely-filed. The court rejected this argument, finding that, consistent with prior case law, the settlement tolling provision in § 13-18-104(1)(b) tolled the statute of limitations, but not the statute of repose.

Sierra Pacific also argued that the lower court erred when it granted summary judgment because genuine issues of fact remained on the question of when the statute of repose expired. According to Sierra Pacific, the “repair doctrine” applied and, thus, its work was not substantially complete until 2011, when Weitz’s and Sierra Pacific’s attempts to fix Bradbury’s work ended.

The court began its analysis by interpreting the phrase “substantial completion” in the CDARA and considering whether the “repair doctrine” impacts when an improvement is “substantially complete,” and, thus, the repose period begins to run. Discussing the statutory tolling period allowed by the CDARA for repairs, the court noted that the purpose of the statute of repose is to prevent defendants from being subjected to “potentially open-ended liability for an indefinite period of time” and explained that Sierra Pacific’s interpretation of the repair doctrine – applying the doctrine based on a different contractor’s attempted repairs - would subject every contractor on a project to open-ended liability for as long as any other contractor performed work on the project. Thus, the court found that Sierra Pacific’s interpretation would be contrary to the intent of the CDARA and held that the statute of repose begins to run with respect to a contractor when that contractor completes its work. As such, the repair doctrine only applies when the defendant, itself, attempts repairs. Since Bradbury abandoned its repair efforts in 2004, the statute of repose began to run then and expired by the time Sierra Pacific filed this indemnification action in 2014. Thus, the Court of Appeals affirmed the lower court’s order granting Bradbury’s motion for summary judgment.

The Sierra Pacific case establishes that, in Colorado, the repose period can be different for each contractor on a single construction project and that the period with respect to one contractor is not tolled by additional work by other contractors. It is important to consider the possibility of various repose periods when evaluating a construction defect subrogation case, as the time remaining to bring a lawsuit may vary for each contractor. This case also reminds us that, in Colorado, underlying settlement agreements giving rise to indemnification claims do not impact repose periods in Colorado.

Editor's Note: On February 27, 2017, the Supreme Court of Colorado issued a decision in Goodman v. Heritage Builders, Inc., 390 P.3d 398 (2017). In Goodman, the court discussed how to apply the statute of repose to an indemnification claim. The court overruled Sierra Pacific to the extent that it held that “claims brought outside the statute of repose timeframe, but brought within the timeframe outlined in [§] 13-80-104(1)(b)(II) are barred.” Pursuant to Goodman, third-party claims for contribution or indemnification are timely, irrespective of both the two-year statute of limitations in C.R.S. § 13-80-102 and the six-year statute of repose in § 13-80-104(1)(a), so long as they are brought any time before the ninety-day timeframe outlined in section 13-80-104(1)(b)(II). Please read our article, Applying the Statute of Repose for Construction Claims, Colorado's Supreme Court Finds Third-Party Claims Timely-Filed, for a more detailed discussion of the Goodman decision.