construction defect and general liability seminar...
TRANSCRIPT
CONSTRUCTION DEFECT and
GENERAL LIABILITY SEMINAR MATERIALS
BY
Mitchell J. Resnick
ARIZONA / CALIFORNIA / COLORADO / FLORIDA / NEVADA / NEW MEXICO /
SOUTH CAROLINA / UTAH and LONDON
Direct Number: (602) 456-7573 Mobile: (602) 292-6381
[email protected] www.rlattorneys.com
Mitchell J. Resnick, Esq.
Mitchell Resnick is co-founder and managing shareholder of Resnick & Louis, P.C. A
renowned name in insurance defense litigation, transportation, professional liability,
general liability, construction defect litigation, coverage, and first party property damage
claims. Mitch is an aggressive and solution oriented lawyer with over 20 years litigation
experience, of a mid-size national defense law firm in Arizona, California, Colorado,
Florida, Nevada, New Mexico, South Carolina, Utah, and London. Mitch has been
named as one of the top Arizona construction attorneys Southwest Super Lawyers and
Arizona’s Finest Lawyers. He has been a featured speaker at different seminars around
the country regarding construction and insurance defense related litigation. Albuquerque
3840 Masthead Street NE
Albuquerque, NM 87109
505.652.1339
Bakersfield
4900 California Ave, Tower B, 2nd Floor
Bakersfield, CA 93309
661.412.0530
Charleston
4000 South Faber Place Drive, Suite 300
Charleston, SC 29405
843.212.0435
Denver Peakview Center 6500 S. Quebec St., Ste. 300-32 Denver, CO 80111 303.872.6226
Las Vegas
5940 South Rainbow Blvd.
Las Vegas, NV 89118-2540
702.997.3800
Miami
80 S. W. 8th Street, Suite 2000
Miami, FL 33130
786.975.1999
Orange County
9891 Irvine Center Dr., Suite 200
Irvine, CA 92618
714.709.4400
Orlando
618 E. South Street, Suite 500
Orlando, FL 32801
407.901.1880
Phoenix
8111 E. Indian Bend Road
Scottsdale, AZ 85250
602.456.6776
Riverside
11801 Pierce Street, Suite 200
Riverside, CA 92505
909.458.0110
Sacramento
1215 K Street, 17th Floor
Sacramento, CA 95814
916.277.9030
Salt Lake City
222 Main Street, 5th Floor
Salt Lake City, UT 84101
801.679.4822
San Diego
717 Union Street, Suite J
San Diego, CA 92101
619.908.1096
Tampa
550 N. Reo Street, Suite 300
Tampa, FL 33609
813.381.5494
He focuses his practice on commercial and personal lines (casualty, property, and
specialty), representing the defense for professional liability, general liability,
construction defect, transportation (auto/trucking/rental car), first party property
(including appraisals), homeowners/renters/condos, environmental, product liability,
hospitality (hotel/resort/timeshare/casino), surety, premises, security, workers
compensation, public entity, personal and advertising injury, labor/employment, school,
governmental, life/disability, and healthcare. He also provides risk management
consultation. Mitch represents clients in Arizona, California, Nevada and Colorado.
Mitch has been the primary responsible attorney on multi-million dollar cases which
have been brought before state and federal trial courts, and through the alternative dispute
resolution process in mediation and arbitration. He has been designated as panel counsel
for several different insurance companies, self-insured entities, TPAs, and captive
companies for a variety of areas and private enterprise for a variety of lines of business.
He speaks at national and regional seminars, as well as provide training to claims
professionals, risk management, and counsel for different matters.
Education
J.D., Pace University Law School, cum laude, 1994
B.A., University of Arizona, with honors, 1990
Honors & Awards
- Selected, Southwest Super Lawyers for Construction
- Westfield Group’s Golden Gavel Award for Attorney Excellence
- Arizona’s Finest Lawyers
Professional Affiliations
State Bar of Arizona
State Bar of Nevada
State Bar of California
State Bar of Colorado
State Bar of New Jersey
State Bar of New York
Maricopa County Bar Association Orange County Bar Association
Arizona Association of Defense Counsel
RLATTORNEYS.COM
TABLE OF CONTENTS
A. Introduction………………………………………………………………………..…. 1
B.
Mediation Issues ……………………….……………………………….……………
1
C.
Strict Liability For Dog Bite, Product Liability, and Construction Defect
2
D.
Attorneys’ Fees / Costs and Settlement Related Offers ….………………………......
8
E.
Right to Repair Statutes .………………………………………………......................
24
F.
Joint & Several Liability / Several Liability & Comparative Fault ……………….…
82
G.
Statutes of Limitations ……………..………………………………………………...
89
H.
Statutes of Repose ……………………………………………………………….…..
97
I.
Indemnification and Duty to Defend ….……………………………….………….…
102
J.
Arizona Covenants Not to Execute and Assignment of Rights …………..……….…
127
K.
Implied and Express Warranty Claims ………………..…………………………..…
128
L.
Economic Loss Rule ...…………………………………………………………….…
131
M.
Standing By HOAs to Bring Claims on Their Own Behalf/Behalf of Unit Owners
137
N.
Self Insured Retentions…………………………………………………………….....
138
O.
Additional Insured Obligations (On-Going Operations Hot Item Issue) ……………
139
P.
Arizona and Colorado Definition of Occurrence and Coverage for Property Damage
With Duty to Defend ..........…………….……………………………….……………
143
Q.
Compulsory/Statutory Arbitration ……………………………………...……….…...
148
R.
Limitations on Damages ……………………………….….………………………....
152
S.
Consumer Protection Statutes .………………………………………….....................
154
T.
Punitive Damages………………………………………………………………….…
156
U.
Rules of Evidence for Reliability for Science Related Evidence..…………………...
162
V. Dram Shop Liability / Alcohol Issues …………….…………………………….….. 165
W.
Class Actions ……………………….….……………………………….………….…
168
X.
Premises Liability .……………………………………………………………………
170
Y.
Nevada Intermediate Appellate Court.………………………………………………
191
Z
Independent Counsel …………………………………………………………………
193
Conclusion……….……………………………………………………………………
195
PROPERTY OF RESNICK & LOUIS, P.C.
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Construction Defect and General Liability Seminar
Arizona/Colorado/California/Nevada/New Mexico/Utah
Presented by
Mitchell J. Resnick, Esq.
Admitted in AZ, CO, CA, NV, NY, NJ
A. Introduction
1. Mitchell J. Resnick Background as Construction Attorney and Working with
Insurance Companies and Third Party Claims Administrators.
2. What is presently “hot” in Western States including allegations of on-going
operations additional insured endorsements supposedly covering completed
operations; and increased use of Consumer Protection Statutes.
3. Current settlement atmosphere and risks in different jurisdictions.
(a.) Map
(b.) Conservative/Moderate/Liberal areas within each state
B. Mediation Issues
1. Arizona – ARS 12-2238 Courts can order mediation. Parties can stipulate away
confidentiality. Ariz.R.Civ.P. 80(d) requires that for a settlement to be binding
that it must be in writing or made in open court and entered in the minutes.
2. Colorado – CRCP 13-22-301et seq. Dispute Resolution Act and Program with
fees. Courts can refer cases to the Program.
3. California – California Evidence Code sections 703.5 and 1115 – 1128
4. If party sends a document to the mediator, and that document would be
discoverable in the absence of the mediation, the document remains discoverable.
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5. Nevada – NRS 48.105; Court Annexed Mediation program – fees applicable, and
15 day rule subject to sanctions. Also, NRS 38.300 – 38.360 Common Interest
Communities. Nevada foreclosure mediation program.
6. New Mexico – 44-7B-1 – 44-7B-6 (does not apply to judge who may make a
ruling on a case) Consumer-Business Dispute Meditation Program.
7. Utah – Utah has adopted the Uniform Mediation Act. Generally, unless otherwise
admissible and/or discoverable, a mediation communication is not admissible at
arbitration or trial and is not discoverable. See Utah Code Ann. § 78B-10-104.
C. Strict Liability For Dog Bite, Product Liability, and Construction Defect
1. Arizona
(a.) Dog Bite – Strict liability with no one free bite rule. Public place/lawfully
on private property (ARS 11-1025). Provocation defense (11-1027).
(b.) Product Liability
(1.) State of the Art Defense (ARS 12-683(1)).
(2.) Alteration/Modification Unforeseeable Defense (ARS 12-683(2)).
(3.) Misuse Defense (ARS 12-683(3)).
(4.) Reasonable Quantities Defense (ARS 12-683(3).
(5.) Tender of Defense/Indemnification by seller to manufacturer (ARS
12-684).
(6.) Government approval defense to punitive damages. (ARS 12-689).
(c.) Construction Defect Nastri v. Wood Brothers Homes, Inc. Strict liability
not typically applicable.
2. Colorado
(a.) Dog Bite – 13-21-124 This law makes a dog owner strictly liable for dog
bites only if the victim of the bite suffers “serious bodily injury” or
death from being bitten by a dog while lawfully on public or private
property regardless of the viciousness or dangerous propensities of the dog
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or the dog owner’s knowledge or lack of knowledge of the dog’s
viciousness or dangerous propensities. Further, the victim is entitled to
recover only economic damages (as opposed to noneconomic damages
like pain and suffering, inconvenience, etc.) in a civil suit against the dog
owner. Also, the statute provides that an owner is not liable where the
victim is unlawfully on public or private property; where the victim is on
the owner’s property and the property is clearly and conspicuously marked
with one or more posted signs stating “no trespassing” or “beware of dog”;
where the victim has clearly provoked the dog; where the victim is a
veterinary health care worker, dog groomer, humane agency staff person,
professional dog handler, trainer, or dog show judge acting in the
performance of his or her respective duties; or where the dog is working as
a hunting dog, herding dog, farm or ranch dog, or predator control dog on
the property of or under the control of the dog’s owner.
(b.) Product Liability Defenses
(1.) Innocent Seller Defense (must be manufacturer of at least a part;
manufacturer’s principal distributor or seller over whom
jurisdiction can be obtained shall be deemed).
(2.) Misuse Defense (product was used in a manner or for a purpose
other than that which was intended and which could not reasonably
have been expected, and such misuse of the product was a cause of
the injury, death, or property damage).
(c.) 13-21-403. Product Liability Presumptions
(d.) In any product liability action, it shall be rebuttably presumed that the
product which caused the injury, death, or property damage was not
defective and that the manufacturer or seller thereof was not negligent if
the product:
(1.) Prior to sale by the manufacturer, conformed to the state of the art,
as distinguished from industry standards, applicable to such
product in existence at the time of sale; or
(2.) Complied with, at the time of sale by the manufacturer, any
applicable code, standard, or regulation adopted or promulgated by
the United States or by this state, or by any agency of the United
States or of this state.
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(e.) In like manner, noncompliance with a government code, standard, or
regulation existing and in effect at the time of sale of the product by the
manufacturer which contributed to the claim or injury shall create a
rebuttable presumption that the product was defective or negligently
manufactured.
(f.) Ten years after a product is first sold for use or consumption, it shall be
rebuttably presumed that the product was not defective and that the
manufacturer or seller thereof was not negligent and that all warnings and
instructions were proper and adequate.
(g.) In a product liability action in which the court determines by a
preponderance of the evidence that the necessary facts giving rise to a
presumption have been established, the court shall instruct the jury
concerning the presumption.
3. California
(a.) Dog Bite (Calif. Civil Code § 3342) Strict liability if claimant in a public
place/lawfully on private property. No one free bite rule. Provocation can
be a defense, but maybe not for kids under 5 years old.
(b.) Product Liability Greenman v. Yuba Power Products, Inc case establishes
strict product liability in California. A manufacturer, distributor, or retailer
is liable in tort if a defect in the manufacture or design of its product
causes injury while the product is being used in a reasonably foreseeable
way.” Soule v. General Motors Corp. “Strict liability has been invoked for
three types of defects—manufacturing defects, design defects, and
‘warning defects,’ i.e., inadequate warnings or failures to warn.” Anderson
v. Owens-Corning Fiberglas Corp.
(1.) Defense: Ordinary knowledge of inherently unsafe defense for
consumer goods. California Civil Code 1714.45(a)(1.)
(2.) Defense: Common consumer product intended for personal
consumption defense. California Civil Code 1714.45(a)(2).
(3.) Defense: Product misuse is a defense to strict products liability
only when the defendant proves that an unforeseeable abuse or
alteration of the product after it left the manufacturer’s hands were
the sole reason that the product caused injury.” Campbell v.
Southern Pacific Co.
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(4.) Defense: Comparative fault applies to strict products liability
actions. “[A] petitioner’s recovery may accordingly be reduced,
but not barred, where his lack of reasonable care is shown to have
contributed to his injury.” Bradfield v. Trans World Airlines.
(5.) No warranty, express or implied, can be modified or disclaimed
unless a seller clearly limits his liability.
(6.) Commercial Code section 2316(3) provides:
a) Unless the circumstances indicate otherwise, all implied
warranties are excluded by expressions like “as is,” “with
all faults” or other language which in common
understanding calls the buyer’s attention to the exclusion of
warranties and makes plain that there is no implied
warranty; and
b) When the buyer before entering into the contract has
examined the goods or the sample or model as fully as he
desired or has refused to examine the goods there is no
implied warranty with regard to defects which an
examination ought in the circumstances to have revealed to
him; and
c) An implied warranty can also be excluded or modified by
course of dealing or course of performance or usage of
trade
(c.) Construction Defect The home builder for mass production is strictly
liable for the construction defects existing at a residential property.
Claimant need only show that a “mass-produced consumer item” is
defective and that the “defect” proximately caused injuries.
(d.) SB 800 also creates almost absolute liability because no resulting damages
required with statutory workmanship violations (see below).
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4. Nevada
(a.) Dog Bite – Does not have a dog bite statute. No strict liability, bur rather
negligence analysis. NRS 202.500 Criminal liability for vicious dogs
subject to defenses for lack of notice of viciousness and self-defense.
(b.) Product Liability NRS 695E.090 “Product liability” defined. “Product
liability” means liability for damages because of any personal injury,
death, emotional harm, consequential economic damage or damage to
property, including damages resulting from the loss of use of property,
arising out of the manufacture, design, importation, distribution,
packaging, labeling, lease or sale of a product, but does not include the
liability of any person for those damages if the product involved was in
the possession of that person when the incident giving rise to the claim
occurred.
(c.) Construction Defect – A building itself is not a “product” for the purposes
of strict liability in Nevada. See Calloway v. City of Reno.
5. New Mexico
(a.) Dog Bite – An owner of a dog is liable for damages proximately caused by
the dog if the owner knew, or should have known, that the dog was vicious
or had a tendency or natural inclination to be vicious. Perkins v. Drury.
This imposes strict liability on the dog owner. Smith v. Village of Ruidoso.
Provocation (with scienter on the victim) is a defense. The owner of a dog
is not liable to the person injured, if the injured person had knowledge of
the propensities of the dog and wantonly excited it or voluntarily and
unnecessarily put himself in the way of the dog.
(b.) Product Liability – The New Mexico courts have adopted the law of strict
products liability in tort, as set forth in the Restatement (Second) of Torts
section 402A. Under this doctrine, the Plaintiff has the burden of proving
the following elements: (1) the product was defective; (2) the product was
defective when it left the hands of the Defendant and was substantially
unchanged when it reached the user or consumer; (3) that because of the
defect the product was unreasonably dangerous to the user or consumer;
(4) the consumer was injured or was damaged; (5) the defective condition
of the product was the proximate cause of the injury or damage.
(c.) Construction Defect – Not applicable to traditional CD cases.
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6. Utah
(a.) Dog Bite – Owners and keepers of dogs are liable for all injuries caused
by their dogs, excepting only dogs trained to assist in law enforcement.
See Utah Code Ann. § 18-1-1. However, “comparative fault provisions
apply to Utah’s strict liability dog bite statute.” S.H. ex rel. Robinson v.
Bistryski, 923 P.2d 1376, 1381 (Utah 1996).
(b.) Product Liability – In order to prevailon a claim for strict products
liability, the plaintiff must show:
(1.) That the product was unreasonably dangerous due to a defect or
defective condition,
(2.) That the defect existed at the time the product was sold, and
(3.) That the defective condition was a cause of the plaintiff’s injuries.
Lamb v. B & B Amusements Corp., 869 P.2d 926, 929 (Utah 1993). See
also Utah Code Ann. § 78B-6-703(1) and Ernest W. Hahn, Inc. v. Armco
Steel Co., 601 P.2d 152, 156 (Utah 1979).
Under the plain language of the controlling statute, a cause of action for
strict liability cannot be maintained against a defendant, if it cannot be
shown that such defendant was in fact the initial seller or manufacturer of
the product. Utah Code Ann. § 78B-6-703(1) states:
In any action for damages for personal injury, death, or property
damage allegedly caused by a defect in a product, a product may
not be considered to have a defect or to be in a defective condition,
unless at the time the product was sold by the manufacturer or
other intial seller, there was a defect or defective condition in the
product which made the product unreasonably dangerous to the
user or consumer.
The Utah Supreme Court has twice interpreted this statute under its plain
language reading. See Alder v. Bayer Corp., 61 P.3d 1068 (Utah 2002)
and Slisze v. Stanley-Bostitch, 979 P.2d 317 (Utah 1999).
(1.) Defenses
The Supreme Court has held:
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[T]here are two defenses to strict products liability, namely,
(1) misuse of the product by the user or consumer (see
comment “g” to [Restatement (Second) of Torts] Sec.
402A; and (2) knowledge of the defect by the user or
consumer, who is aware of the danger and yet unreasonably
proceeds to make use of the product, i.e., assumption of
risk. (See comment “n” to Sec. 402A). And . . . the defenses
of misuse and assumption of risk must relate to the
defective product and cannot be extended to cover conduct
by the user or consumer unrelated to that product.
Ernest W. Hahn, Inc. at 158 (footnotes omitted).
(c.) Construction Defect – In Schafir v. Harrigan, the Utah Court of Appeals
rejected a claim for strict liability against the builder-developer as a seller
of defective products. 879 P.2d 1384, 1388 (Utah App. 1994), abrogated
on other grounds by Davencourt at Pilgrims Landing Homeowners Ass’n
v. Davencourt at Pilgrims Landing, LC, 221 P.3d 234 (Utah 2009). In
Schafir, the Utah Court of Appeals held that the builder is not a “seller” of
defective materials where the builder “merely utilized the defective
components, if any, in building the house.” Id. at 1388. The Court further
noted that a claim for strict liability requires a showing that the defective
products were “unreasonably dangerous to people occupying the”
building. Id.
D. Attorneys’ Fees/Costs and Settlement Related Offers
1. Arizona
(a.) 12-341.01 Contract based claims allow reasonable attorneys’ fees to the
“Successful Party.” If a party makes an offer and eventually beats said
offer in the judgment (includes the jury verdict, pre-judgment interest,
taxable costs, and possibly attorneys’ fees), then it will be the “Successful
Party” from the date of the offer forward.
Hall v. Read Dev., Inc. “Judgment finally obtained” is inclusive of
attorneys’ fees. Court Once the court determines the Successful Party,
the court weighs various factors to decide the amount of the attorneys’
fees, if any, to be awarded to the Successful Party. The court has a lot of
discretion in this process.
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(b.) Arizona – Rule 68 (Offer of Judgment) Post judgment sanctions
(reasonable expert witness fees and double taxable costs, and pre-
judgment interest on liquidated claims) if you do not beat the written
offer Joint, unapportioned offers can be made to single offeree. No
unapportioned offer to multiple offerees. Legal objections must be made
within ten (10) days. Offer is effective for thirty (30) days. If contract,
then reasonable attorneys’ fees may be awarded to the prevailing party if
you beat the offer from the date of the offer forward.
(c.) Arizona Revised Statute 12-341. The successful party to a civil action
shall recover from his adversary all costs expended or incurred therein
unless otherwise provided by law.
(1.) “Costs” in the superior court include: Fees of officers and
witnesses; Cost of taking depositions; Compensation of referees;
Cost of certified copies of papers or records; Sums paid a surety
company for executing any bond or other obligation therein, not
exceeding, however, one per cent on the amount of the liability on
the bond or other obligation during each year it was in force; Other
disbursements that are made or incurred pursuant to an order or
agreement of the parties; Jury Fees.
2. Colorado
(a.) Attorneys’ fees must be authorized by statute or contract or frivolous
lawsuit.
(b.) 13-16-104 Plaintiff recovers costs against defendant if obtains debt or
damages.
(c.) CRS 13-16-105. Defendant obtains costs if plaintiff is non-suited after
defendant appears or defense verdict.
(d.) CRS 13-16-122 Costs include:
(1.) Docket Fees; jury fees/expenses; sheriff fees; court reporter fees
for trial transcript; witness fees; deposition related fees; attorneys’
fees when authorized by statute or contract; anything authorized by
statute.
(e.) CRS 13-17-101 et seq. Consumer Protection Act relied upon by plaintiffs.
(f.) CRS 13-17-202 (Offer of Settlement).
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(1.) If the plaintiff serves an offer of settlement in writing at any time
more than fourteen days before the commencement of the trial that
is rejected by the defendant, and the plaintiff recovers a final
judgment in excess of the amount offered, then the plaintiff shall
be awarded actual costs accruing after the offer of settlement to be
paid by the defendant.
(2.) If the defendant serves an offer of settlement in writing at any
time more than fourteen days before the commencement of the trial
that is rejected by the plaintiff, and the plaintiff does not recover a
final judgment in excess of the amount offered, then the defendant
shall be awarded actual costs accruing after the offer of settlement
to be paid by the plaintiff. However, as provided in section 13-16-
104, if the plaintiff is the prevailing party in the action, the
plaintiff’s final judgment shall include the amount of the plaintiff’s
actual costs that accrued prior to the offer of settlement.
(3.) If an offer of settlement is accepted in writing within fourteen days
after service of the offer, the offer of settlement shall constitute a
binding settlement agreement, fully enforceable by the court in
which the civil action is pending.
(4.) An offer of settlement under this section shall remain open for at
least fourteen days from the date of service unless withdrawn by
service of withdrawal of the offer of settlement.
(5.) For purposes of this section, “actual costs” shall not include
attorney fees but shall mean costs actually paid or owed by the
party, or his or her attorneys or agents, in connection with the case,
including but not limited to filing fees, subpoena fees, reasonable
expert witness fees, copying costs, court reporter fees, reasonable
investigative expenses and fees, reasonable travel expenses, exhibit
or visual aid preparation or presentation expenses, legal research
expenses, and all other similar fees and expenses.
(6.) When comparing the amount of any offer of settlement to the
amount of a final judgment actually awarded, any amount of the
final judgment representing interest subsequent to the date of the
offer in settlement shall not be considered.
(7.) Although the statute does not explicitly address a summary
judgment order’s effect on a settlement offer, “[t]he general rule is
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that a settlement agreement supersedes a judgment and, so long as
the agreement exists, the judgment merges into it” and “is thereby
extinguished.” Carpenter v. Young, 773 P.2d 561, 568 (Colo.
1989). Consistent with this rule, the CO Supreme Court rejected
the argument that summary judgment terminates a settlement offer
in Centric-Jones Co. v. Hufnagel, 848 P.2d 942, 945 (Colo. 1993).
3. California
(a.) California Civil Code 1021 – Except as attorneys’ fees are specifically
provided for by statute, the measure and mode of compensation of
attorneys is left to the agreement, express or implied, of the parties; but
parties to actions or proceedings are entitled to their costs.
(b.) California Civil Code 1717 – Prevailing party entitled to reasonable
attorneys’ fees if specified in contract. Waiver of attorneys’ fees provision
in contract prohibited. Voluntary dismissal or dismissal pursuant to
settlement, there is no prevailing party.
(c.) California Rules of Civil Procedure 1032 – Except as otherwise expressly
provided by statute, a “prevailing party” is entitled as a matter of right to
recover costs in any action or proceeding.
(1.) “Prevailing party“ includes the party with a net monetary recovery,
a defendant in whose favor a dismissal is entered, a defendant
where neither plaintiff nor defendant obtains any relief, and a
defendant as against those plaintiffs who do not recover relief
against that defendant.
(d.) California Rules of Civil Procedure 998 – Section 998 of the Code of Civil
Procedure provides that, not less than 10 days before commencement of
trial, any party to an action may serve an offer in writing upon any other
party to the action to allow judgment to be taken in accordance with the
terms and conditions stated at the time. The offer is deemed withdrawn if
not accepted before trial commences or within 30 days, whichever occurs
first.
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If the offer is accepted, the accepted offer is filed with the court and
judgment entered accordingly. If the offer is not accepted, and the person
rejecting the offer does not obtain a trial result better than the offer, a
number of cost-shifting mechanisms kick in. The prospect of such cost-
shifting is designed to encourage settlement of lawsuits before trial. T.M.
Cobb Co. v. Superior Court.
The Offer Must Specifically Refer to Section 998. A letter merely stating,
“This letter is intended as an invitation to your clients to settle their
disputes with my clients,” while making no reference to Section 998, was
rejected as insufficient to trigger the statutory cost-shifting in Stell v. Jay
Hales Development Co.
(e.) Stearman v. Centex Homes – Expert witness fees and litigation related
costs are recoverable in a construction defect residential case.
(f) If a defendant makes an 998 offer which it subsequently beats, then
defendant still can get their costs “actually incurred” even if the defendant
enters into a joint defense agreement subsequent to the offer, and the co-
defendant actually agrees to pay for the costs. Prevailing party may
recover 998 expert fees from non-prevailing party even if the prevailing
party was not the actual payor of the fees pursuant to an indemnity
agreement. Litt v. Eisenhower Medical Center (2015).
(g) Pursuant to a 2015 change in the 998 Statute, the parties are only allowed
to recover expert witness costs after the offer is made, and not pre offer
costs.
4. Nevada
(a.) NRS 18.010 – Award of attorneys’ fees (generally)
(1.) The compensation of an attorney for his or her services is governed
by agreement, express or implied, which is not restrained by law.
(2.) In addition to the cases where an allowance is authorized by
specific statute, the court may make an allowance of attorneys’
fees to a prevailing party:
a) When the prevailing party has not recovered more than
$20,000 OR without regard to the recovery sought, when
the court finds that the claim, counterclaim, cross-claim or
PROPERTY OF RESNICK & LOUIS, P.C.
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third-party complaint or defense of the opposing party was
brought or maintained without reasonable ground or to
harass the prevailing party.
b) This does not apply to any action arising out of a written
instrument or agreement which entitles the prevailing party
to an award of reasonable attorneys’ fees.
(b.) NRS 18.020 – Cases in which costs allowed prevailing party. Costs must
be allowed to the prevailing party against any adverse party against whom
judgment is rendered, in the following cases:
(1.) In an action for the recovery of real property or a possessory right
thereto.
(2.) In an action to recover the possession of personal property, where
the value of the property amounts to more than $2,500.
(3.) In an action for the recovery of money or damages, where the
plaintiff seeks to recover more than $2,500.
(c.) NRS 18.050 – Discretion of court in allowing costs. Part or all of the
prevailing party’s costs may be allowed and may be apportioned between
the parties, or on the same or adverse sides. If, in the judgment of the
court, the plaintiff believes he or she was justified in bringing the action in
the district court, and the plaintiff recovers at least $700 in money or
damages, or personal property of that value, the court may allow the
plaintiff part or all of his or her costs.
(d.) NRS 18.080 – Effect of tender in action for recovery of money. When, in
an action for the recovery of money only, the defendant alleges in his or
her answer that before the commencement of the action the defendant
tendered to the plaintiff the full amount to which the plaintiff was entitled,
and thereupon deposits in court, for the plaintiff, the amount so tendered,
and the allegations be found to be true, the plaintiff shall not recover costs,
but shall pay costs to the defendant.
(e.) NRS 18.005 – “Costs” defined. For the purposes of NRS 18.010 to
18.150, inclusive, the term “costs” means:
(1.) Clerks’ fees.
PROPERTY OF RESNICK & LOUIS, P.C.
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(2.) Reporters’ fees for depositions, including a reporter’s fee for one
copy of each deposition.
(3.) Jurors’ fees and expenses.
(4.) Fees for witnesses at trial, pretrial hearings and deposing
witnesses, unless the court finds that the witness was called at the
instance of the prevailing party without reason or necessity.
(5.) Reasonable fees of not more than five expert witnesses in an
amount of not more than $1,500 for each witness, unless the court
allows a larger fee after determining that the circumstances
surrounding the expert’s testimony were of such necessity as to
require the larger fee.
(6.) Reasonable fees of necessary interpreters.
(7.) The fee of any sheriff or licensed process server for the delivery or
service of any summons or subpoena used in the action, unless the
court determines that the service was not necessary.
(8.) Compensation for the official reporter or reporter pro tempore.
(9.) Reasonable costs for any bond or undertaking required as part of
the action.
(10.) Fees of a court bailiff or deputy marshal who was required to work
overtime.
(11.) Reasonable costs for telecopies.
(12.) Reasonable costs for photocopies.
(13.) Reasonable costs for long distance telephone calls.
(14.) Reasonable costs for postage.
(15.) Reasonable costs for travel and lodging incurred taking depositions
and conducting discovery.
(16.) Any other reasonable and necessary expense incurred in
connection with the action, including reasonable and necessary
expenses for computerized services for legal research.
PROPERTY OF RESNICK & LOUIS, P.C.
15
(f.) NRS 40.655 – Construction Defect. The claimant or claimants may
recover:
(1.) Reasonable cost of necessary repairs.
(2.) Reduction in market value.
(3.) Loss of use.
(4.) Reasonable value of any personal property damaged by the
constructional defect.
(5.) Expert witness fees and costs that are reasonably incurred for
constructional defects actually proven by the claimant, not merely
alleged. See A.B. 125, § 15, 78th Regular Session (Nev. 2015),
enacted Feb. 24, 2015.
(6.) Interest provided by statute.
(7.) Claimant may not recover attorneys’ fees. See A.B. 125, § 15,
78th Regular Session (Nev. 2015), enacted Feb. 24, 2015.
(g.) NRS 17.115 – Offer of Judgment (REPEALED in 2015)
(h.) NRCP 68 – Offer of Judgment
(1.) The Offer. At any time more than 10 days before trial, any party
may serve a written offer.
(2.) Apportioned Conditional Offers. An apportioned offer of judgment
to more than one party may be conditioned upon the acceptance by
all parties to whom the offer is directed.
(3.) Joint Unapportioned Offers.
(4.) Multiple Offerors. A joint offer may be made by multiple offerors.
(5.) Offers to Multiple Defendants. An offer made to multiple
defendants will invoke the penalties of this rule only if:
a) There is a single common theory of liability against all the
offeree defendants, such as where the liability of some is
PROPERTY OF RESNICK & LOUIS, P.C.
16
entirely derivative of the others or where the liability of all
is derivative of common acts by another; and
b) The same entity, person or group is authorized to decide
whether to settle the claims against the offerees.
(6.) Offers to Multiple Plaintiffs. An offer made to multiple plaintiffs
will invoke the penalties of this rule only if:
a) The damages claimed by all the offeree plaintiffs are solely
derivative, such as that the damages claimed by some
offerees are entirely derivative of an injury to the others or
that the damages claimed by all offerees are derivative of
an injury to another; and
b) The same entity, person, or group is authorized to decide
whether to settle the claims of the offerees.
(7.) Judgment Entered Upon Acceptance. If within 10 days after the
service of the offer, the offeree serves written notice that the offer
is accepted, either party may then file the offer and notice of
acceptance together with proof of service. The clerk shall enter
judgment accordingly. The court shall
a) Allow costs in accordance with NRS 18.110 unless the
terms of the offer preclude a separate award of costs.
b) Any judgment entered pursuant to this section shall be
expressly designated a compromise settlement. At this
option, a defendant may within a reasonable time pay the
amount of the offer and obtain a dismissal of the claim,
rather than a judgment.
(8.) Failure to Accept Offer. If the offer is not accepted within 10 days
after service,
a) It shall be considered rejected by the offeree and deemed
withdrawn by the offeror.
b) Evidence of the offer is not admissible except in a
proceeding to determine costs and fees.
c) The fact that an offer is made but not accepted does not
preclude a subsequent offer.
PROPERTY OF RESNICK & LOUIS, P.C.
17
d) With offers to multiple offerees, each offeree may serve a
separate acceptance of the apportioned offer, but if the offer
is not accepted by all offerees, the action shall proceed as to
all.
e) Any offeree who fails to accept the offer may be subject to
the penalties of this rule.
(9.) Penalties for Rejection of Offer. If the offeree rejects an offer and
fails to obtain a more favorable judgment:
a) The offeree cannot recover any costs or attorneys’ fees and
shall not recover interest for the period after the service of
the offer and before the judgment.
b) The offeree shall pay the offeror’s post-offer costs,
applicable interest on the judgment from the time of the
offer to the time of entry of the judgment and reasonable
attorneys’ fees, if any is allowed, actually incurred by the
offeror from the time of the offer.
c) If the offeror’s attorney is collecting a contingent fee, the
amount of any attorneys’ fees awarded to the party for
whom the offer is made must be deducted from that
contingent fee.
(10.) How Costs Are Considered. To invoke the penalties of this rule,
the court must determine if the offeree failed to obtain a more
favorable judgment.
a) Where the offer provided that costs would be added by the
court, the court must compare the amount of the offer with
the principal amount of the judgment, without inclusion of
costs.
b) Where a defendant made an offer in a set amount which
precluded a separate award of costs, the court must
compare the amount of the offer together with the offeree’s
pre-offer taxable costs with the principal amount of the
judgment.
(11.) Offers After Determination of Liability. When the liability of one
party to another has been determined by verdict, order or
PROPERTY OF RESNICK & LOUIS, P.C.
18
judgment, but the amount or extent of the liability remains to be
determined by further proceedings, the party adjudged liable may
make an offer of judgment, which shall have the same effect as an
offer made before trial if it is served within a reasonable time not
less than 10 days prior to the commencement of hearings to
determine the amount or extent of liability.
(i.) With respect to private arbitrations, NRCP 68 contains no references to
arbitration, awards, or arbitrators. Therefore, NRCP 68 by its plain
language does not expressly require the award of attorneys’ fees and costs
in a private arbitration proceeding. The award of attorneys’ fees and costs
are within the discretion of an arbitrator. WHP Architecture v. Vegas VP
(2015)
(j.) Pre-Judgment Interest with Offer of Judgment (State Drywall Inc. v.
Rhodes Development).
(1.) Under NRCP 68(f), when a party makes an offer of judgment, and
the offeree rejects the offer and later fails to obtain a judgment
more favorable than the offer, then the offeree may pay certain
costs and attorney fees to the offeror. In order to determine
whether the offeree failed to obtain a more favorable judgment, the
court must compare the judgment to the offer of judgment.
(2.) Pre-offer prejudgment interest must be added to the judgment
when comparing it to the offer of judgment, unless the offeror
clearly intended to exclude prejudgment interest from its offer.
Further, the amount of the pre-offer prejudgment interest that must
be added to the judgment includes any interest calculated on pre-
offer contractual payments made by the offeror during the
pendency of the litigation.
(3.) If the offer of judgment is silent about whether it includes
prejudgment interest, or if the intent of the offeror cannot
otherwise be clearly determined, it should be presumed that the
offer includes prejudgment interest. Under this rule, an offeree
given a vague offer of judgment will be able to determine precisely
what he or she is forgoing by rejecting the offer. And, an offeror
that does not want prejudgment interest to be included in the
comparison should explicitly state in the offer of judgment that it
does not include prejudgment interest.
(k.) Construction Defect – Pre-Litigation Offer of Judgment. See A.B. 125, §
PROPERTY OF RESNICK & LOUIS, P.C.
19
3, 78th Regular Session (Nev. 2015), enacted Feb. 24, 2015.
(1.) After a claimant provides a Chapter 40 notice and before the
claimant files a complaint for construction defect, any party may
serve an offer of judgment on any other party or parties.
(2.) Multiple parties may make a joint offer of judgment. A party may
also make an apportioned offer of judgment to two or more other
parties that is conditioned upon acceptance by all parties to the
offer.
(3.) Failure to Accept Offer. If the offer is not accepted within ten (10)
days after service:
a) It shall be considered rejected by the offeree and deemed
withdrawn by the offeror.
b) Evidence of the offer is not admissible except in a
proceeding to determine costs and fees.
c) The fact that an offer is made but not accepted does not
preclude a subsequent offer.
d) With offers to multiple offerees, each offeree may serve a
separate acceptance of the apportioned offer, but if the offer
is not accepted by all offerees, the action shall proceed as to
all.
(4.) Penalties for Rejection of Offer. If the offeree rejects an offer and
fails to obtain a more favorable judgment:
a) The offeree cannot recover any costs or attorneys’ fees and
shall not recover interest for the period after the service of
the offer and before the judgment.
b) The offeree shall pay the offeror’s taxable costs.
c) The court may order the offeree to pay additional expert
witness costs, or for the period after the service of the offer
and before the judgment, any applicable interest on the
judgment or any reasonable attorneys’ fees incurred by the
offeror.
PROPERTY OF RESNICK & LOUIS, P.C.
20
(5.) Offers to Multiple Defendants. An offer made to multiple
defendants will invoke the penalties of this rule only if:
a) There is a single common theory of liability against all the
offeree defendants, such as where the liability of some is
entirely derivative of the others or where the liability of all
is derivative of common acts by another; and
b) The same entity, person or group is authorized to decide
whether to settle the claims against the offerees.
(6.) Offers to Multiple Plaintiffs. An offer made to multiple plaintiffs
will invoke the penalties of this rule only if:
a) The damages claimed by all the offeree plaintiffs are solely
derivative, such as that the damages claimed by some
offerees are entirely derivative of an injury to the others or
that the damages claimed by all offerees are derivative of
an injury to another; and
b) The same entity, person, or group is authorized to decide
whether to settle the claims of the offerees.
(7.) If a pre-litigation offer of judgment is accepted within the 10-day
period, either party may file the offer, the notice of acceptance, and
the proof of service with the clerk of the district court. The clerk
shall then enter judgment according to the terms of the offer.
5. New Mexico
(a.) NMSA 47-8-48. Prevailing party rights in law suit; civil penalties
(Landlord Tenant). If suit is brought by any party to the rental agreement
to enforce the terms and conditions of the rental agreement or to enforce
any provisions of the Uniform Owner-Resident Relations Act, the
prevailing party shall be entitled to reasonable attorneys’ fees and court
costs to be assessed by the court.
(b.) In general, the costs of litigation may be recovered by the prevailing party.
See Rule 1-054(E) NMRA (costs allowed as a matter of course to the
prevailing party unless court otherwise directs); Costs are considered to be
a statutory allowance for expenses incurred in litigation. See Dunleavy v.
Miller. The court has the discretion to award the prevailing party its
PROPERTY OF RESNICK & LOUIS, P.C.
21
necessary and reasonable costs incident to its prosecution or defense of the
action.
(c.) A party can only recover attorney fees when authorized by statute, court
rule, or agreement that expressly provides for such a recovery.
(d.) Rule 1-068 NMRA. Offer of settlement.
(1.) At any time more than ten (10) days before the trial begins.
(2.) A claimant may not make an offer of settlement until one hundred
twenty (120) days after the filing of a responsive pleading by the
party defending against that claim.
(3.) An offer not accepted within ten (10) days shall be deemed
withdrawn and evidence thereof is not admissible except in a
proceeding to determine costs.
(4.) If an offer of settlement made by a claimant is not accepted and the
judgment finally obtained by the claimant is more favorable than
the offer, the defending party must pay the claimant’s costs,
excluding attorneys’ fees, including double the amount of costs
incurred after the making of the offer.
(5.) If an offer of settlement made by a defending party is not accepted
and the judgment finally obtained by the claimant is not more
favorable than the offer, the claimant must pay the costs, excluding
attorneys’ fees, incurred by the defending party after the making of
the offer and shall not recover costs incurred thereafter.
(6.) Awards not cumulative. In those cases where a claimant would be
entitled to double costs under Rule 1-068 and also entitled to
interest pursuant to the statute, the court should award double costs
or interest plus the costs awarded to the prevailing party pursuant
to Rule 1-054(D)(2) MRSA, but not both statutory interest and
double costs.
(e.) Rule 1-054(D) NMRA– Costs.
(1.) The prevailing party gets costs, other than attorneys’ fees, unless
the court dictates otherwise.
(2.) “Costs” recoverable generally are:
PROPERTY OF RESNICK & LOUIS, P.C.
22
a) Filing fees.
b) Fees for service of summons, subpoenas, writs, and service
of process.
c) Jury fees.
d) Transcript fees for prior, during, and subsequent to trial.
e) Deposition costs if:
1) Any part is being used at trial; or
2) In successful support or defense of a motion for
Summary Judgment; or
3) When the Court determines it was reasonably
necessary to the litigation.
(i.) Witness mileage or travel fare and per diem
expenses, when the witness testifies at trial
or at a deposition which is deemed
reasonable and necessary.
(f.) Rule 1-070 NMRA– Attorneys’ Fees and Costs; Insured Prevailing.
(1.) The insured is to be paid their reasonable attorneys’ fees and costs
if he/she prevails in a first party coverage claim where the
insurance company was unreasonable in not paying the claim.
6. Utah
(a.) “The general rule in Utah…subject to certain exceptions, is that attorney
fees cannot be recovered by a prevailing party unless a statute or contract
authorizes such an award.” Stewart v. Utah Pub. Serv. Comm’n, 885 P.2d
759, 782 (Utah 1994)
(b.) In general, costs of litigation such as filing fees and deposition costs may
be recovered so long as the “‘trial court is persuaded that [the depositions]
were taken in good faith and, in the light of the circumstances, appeared to
be essential for the development and presentation of the case.’” Highland
Constr. Co. v. Union Pac. R.R., 683 P.2d 1042, 1051 (Utah 1984).
PROPERTY OF RESNICK & LOUIS, P.C.
23
(c.) Rule 68. Settlement offers.
(1.) Unless otherwise specified, an offer made under this rule is an
offer to resolve all claims in the action between the parties to the
date of the offer, including costs, interest and, if attorney fees are
permitted by law or contract, attorney fees.
(2.) If the adjusted award is not more favorable than the offer, the
offeror is not liable for costs, prejudgment interest or attorney fees
incurred by the offeree after the offer, and the offeree shall pay the
offeror’s costs incurred after the offer. The court may suspend the
application of this rule to prevent manifest injustice.
(3.) An offer made under this rule shall:
a) be in writing;
b) expressly refer to this rule;
c) be made more than 10 days before trial;
d) emain open for at least 10 days; and
e) be served on the offeree under Rule 5.
(4.) Acceptance of the offer shall be in writing and served on the
offeror under Rule 5. Upon acceptance, either party may file the
offer and acceptance with a proposed judgment under Rule 58A.
(5.) “Adjusted award” means the amount awarded by the finder of fact
and, unless excluded by the offer, the offeree’s costs and interest
incurred before the offer, and, if attorney fees are permitted by law
or contract and not excluded by the offer, the offeree’s reasonable
attorney fees incurred before the offer. If the offeree’s attorney
fees are subject to a contingency fee agreement, the court shall
determine a reasonable attorney fee for the period preceding the
offer.
PROPERTY OF RESNICK & LOUIS, P.C.
24
E. Right to Repair Statutes
1. Arizona.
(a.) Introduction.
(1). ARS § 12-1361 et seq. (“Purchaser Dwelling Act”).
Residential construction defect claims in Arizona are governed by
ARS § 12-1361 et seq., known as the Purchaser Dwelling Act.
Originally enacted in 2002, the Purchaser Dwelling Act provided
homeowners with significant rights to bring claims against
developers and general contractors. Perhaps most importantly,
ARS § 12-1364 required a court to award the successful party
reasonable attorneys’ fees and costs, including expert costs.
On March 23, 2015, Arizona amended the PDA with Governor
Doug Ducey’s signature on House Bill 2578 (“H.B. 2578”). Like
A.B. 125 in Nevada, Arizona’s H.B. 2578 levels the construction
defect playing field. The legislation includes the following changes
to Arizona’s construction defect scheme:
a) Repeals ARS § 12-1364 authorizing the award of attorneys’
fees (though original homeowners can still get attorneys’
fees from ARS § 12-341.01 for an action based on contract);
b) Establishes a builder’s right to repair and procedure for
conducting same (under the previous version of the PDA,
there is no right to repair; the homeowner is not required to
accept a repair offered Includes definitions for terms that
were previously undefined, most importantly “construction
defect”;
c) Expands the definition of “seller” to include “construction
professionals”;
d) Increases the complexity of the notice that the homeowner
is required to provide to the allegedly liable contractor;
e) The parties’ conduct during the repair or replacement
process may now be introduced as evidence in any
PROPERTY OF RESNICK & LOUIS, P.C.
25
subsequent PDA;
f) The statutes of limitations and repose are tolled during the notice and repair or replacement process and for thirty days
after substantial completion of any repair or replacement;
g) Imposes additional obligations on homeowners’
associations before filing a construction defect action.
The amended PDA becomes effective on July 2, 2015. It does not apply
to claims that were instituted prior to that date.
(b.) Definitions. ARS § 12-1361.
(1.) Construction Defect. “Construction defect” means a material
deficiency in the design, construction, manufacture, repair,
alteration, remodeling, or landscaping of a dwelling that is the
result of one of the following:
a) A violation of construction codes applicable to the
construction of the dwelling. “Construction codes” means
the building, plumbing, electrical, fire, mechanical, or other
codes or ordinances, including the international residential
code however denominated, as adopted, amended, and
enforced by the city, town, or county in which the dwelling
is located.
b) The use of defective materials, products, components, or
equipment in the design, construction, manufacture, repair,
alteration, remodeling or landscaping of the dwelling.
c) The failure to adhere to generally accepted workmanship
standards in the community.
“Material deficiency” means a deficiency that actually impairs the
structural integrity, the functionality, or the appearance of the dwelling at the time of the claim, or is reasonably likely to do so in the foreseeable future if not repaired or replaced.
(2.) Construction Professional. “Construction professional” means
an architect, contractor, subcontractor, developer, builder, builder
vendor, supplier, engineer, or inspector performing or furnishing
PROPERTY OF RESNICK & LOUIS, P.C.
26
the design, supervision, inspection, construction, or observation of
the construction of any improvement to real property.
(3.) Dwelling Action. “Dwelling action” means any action involving a
construction defect brought by a purchaser against the seller of a
dwelling arising out of or related to the design, construction,
condition, or sale of the dwelling.
(4.) Purchaser. “Purchaser” means any person or entity who files a
dwelling action.
(5.) Seller. “Seller” means any person, firm, partnership, corporation,
association, or other organization that is engaged in the business of
designing, constructing, or selling dwellings, including
construction professionals. Seller does not include a real estate
broker or real estate salesperson who provides services in
connection with the resale of a dwelling following its initial sale.
(c.) Attorneys’ Fees, Expert Fees, and Costs. ARS § 12-1364.
ARS § 12-1364, which required the court to award reasonable attorneys’
fees, reasonable expert witness fees, and taxable costs to the prevailing
party, is repealed. Attorneys’ fees may still be authorized for the
prevailing party on a contractual claim under ARS § 12-341.01, and expert
fees may be recoverable if a party makes an Offer of Judgment under Rule
68 of the Arizona Rules of Civil Procedure and beats that judgment at
trial.
(d.) Notice of Purchaser’s Claim. ARS § 12-1363.
(1.) Before filing a dwelling action, the purchaser shall give written
notice by certified mail, return receipt requested, to the seller
specifying in reasonable detail the basis of the dwelling action.
“Reasonable detail” includes (1) a detailed and itemized list that
describes each alleged construction defect, (2) the location that
each alleged construction defect has been observed by the
purchaser in each dwelling that is the subject of the notice, and (3)
the impairment to the dwelling that has occurred as a result of each
of the alleged construction defects or is reasonably likely to occur
if the alleged construction defects are not repaired or replaced.
PROPERTY OF RESNICK & LOUIS, P.C.
27
(2.) A purchaser may amend the notice to add alleged construction
defects identified in good faith after submission of the original
notice. Amended notices restart the time periods for seller’s
inspection and repair.
(3.) If the purchaser fails to comply with the requirements of this section
before bringing a dwelling action, the dwelling action shall be
dismissed.
(4.) If the dwelling action is dismissed after the statute of limitations
or statute of repose, any subsequent dwelling action brought by
the purchaser is time barred as to the seller and the seller’s
construction professionals involved in the construction or design of
the dwelling.
(e.) Purchaser’s Notice as “Notice of Claim” for Insurance. ARS § 12-
1362.
If a seller presents the purchaser’s ARS § 12-1363 notice to an insurer that
has issued an insurance policy to the seller that covers the seller’s liability
arising out of a construction defect or the design, construction, or sale of
the property that is the subject of the notice, the insurer must treat the
notice as a notice of a claim subject to the terms and conditions of the
policy of insurance.
(f.) Seller’s Right to Repair. ARS §§ 12-1362 and 12-1363.
(1.) A seller who receives a written notice of claim has a right to repair
or replace any alleged construction defects after sending or
delivering to the purchaser written notice of intent to repair or
replace.
(2.) The seller does not need to repair or replace all of the alleged
construction defects.
(3.) A purchaser may not file a dwelling action until the seller has
completed all intended repairs and replacements of the alleged
construction defects.
(4.) Seller’s Inspection. After receipt of the purchaser’s notice, the
seller may inspect the dwelling to determine the nature and cause
of the alleged construction defects and the nature and extent of any
PROPERTY OF RESNICK & LOUIS, P.C.
28
repairs or replacements necessary to remedy the alleged
construction defects. The purchaser shall ensure that the dwelling
is made available for inspection no later than ten (10) days after the
purchaser receives the seller’s request for an inspection. The seller
shall provide reasonable notice to the purchaser before conducting
the inspection. The seller may use reasonable measures, including
testing, to determine the nature and extent of any repairs or
replacements necessary to remedy the alleged construction defects.
If the seller conducts testing pursuant to this subsection, the seller
shall restore the dwelling to its condition before the testing.
(g.). Seller’s Response to Purchaser’s Notice.
(1.) Within sixty (60) days after receipt of the purchaser’s notice, the
seller shall send to the purchaser a good faith written response to
the purchaser’s notice by certified mail, return receipt requested.
This response may include:
(2.) The seller’s notice of intent to repair or replace any alleged
construction defects;
(3.) The seller’s notice of intent to have the alleged construction
defects repaired or replaced at the seller’s expense; or
(4.) The seller’s notice of intent to provide monetary compensation to
the purchaser.
The written notice of intent to repair or replace shall describe in
reasonable detail all repairs or replacements that the seller intends to make
or provide to the dwelling and a reasonable estimate of the date by which
the repairs or replacements will be made.
(h.) Coordination of Seller’s Repair. If the seller notifies the purchaser that it
elects to repair or replace pursuant to ARS § 12- 1363, the purchaser shall
allow the seller a reasonable opportunity to repair or replace the
construction defects or cause the construction defects to be repaired or
replaced pursuant to the following:
(1.) The purchaser and the seller or the seller’s construction
professionals shall coordinate repairs or replacements within thirty
(30) days after the seller’s notice of intent to repair or replace was
sent. If requested by the purchaser, repair or replacement of alleged
construction defects undertaken by the seller shall be performed by
PROPERTY OF RESNICK & LOUIS, P.C.
29
a construction professional selected by the seller and consented to
by the purchaser, whose consent shall not be unreasonably
withheld, that was not involved in the construction or design of the
dwelling.
(2.) Repairs or replacements shall begin as agreed with reasonable
efforts to begin repairs or replacements within thirty-five (35) days
after the seller’s notice of intent to repair or replace was sent. If a
permit is required, reasonable efforts shall be made to begin repairs
or replacements within ten (10) days after receipt of the permit or
thirty-five (35) days after the seller’s notice of intent.
(3.) All repairs or replacements shall be completed using reasonable
care under the circumstances and within a commercially
reasonable time frame considering the nature of the repair or
replacement.
(d.) The purchaser shall provide reasonable access for the repairs or
replacements.
(e.) The seller is not entitled to a release or waiver solely in exchange
for any repair or replacement. The purchaser and seller may
negotiate a release or waiver in exchange for monetary
compensation or other consideration.
(i.) Tolling During Notice and Repair Process. ARS § 12-1363.
The statute of limitations and the statute of repose applicable to a
purchaser’s causes of action are tolled during the notice and repair or
replacement process, and for thirty (30) days after substantial completion of
the repair or replacement.
(j.) Seller’s Offer of Monetary Compensation. ARS § 12-1363.
The seller shall not be prohibited from offering monetary compensation
or other consideration instead of or in addition to a repair or replacement.
The purchaser may accept or reject an offer of monetary compensation or
other consideration, other than repair or replacement and, if rejected, may
proceed with a dwelling action on completion of any repairs or
replacements the seller intends to make or provide. The parties may
negotiate for a release if an offer involving monetary compensation or
other consideration is accepted.
PROPERTY OF RESNICK & LOUIS, P.C.
30
(k.) Commencement of Dwelling Action. ARS § 12-1363.
The purchaser may commence a dwelling action, or alternative dispute
resolution procedure if authorized by contract, at the conclusion of any
repairs or replacements.
The purchaser may also commence a dwelling action, or any applicable
alternative dispute resolution procedure, if the seller does not comply with
the requirements of the PDA, provided the seller’s failure to comply is not
due to any fault of the purchaser or as the result of an unforeseen
condition, including an unforeseen weather condition or government
delay.
(l.) Parties’ Conduct Admissible. ARS § 12-1363.
Both parties conduct during the repair or replacement process may be
introduced in any subsequent dwelling action. Any repair or replacement
efforts undertaken by the seller are not considered settlement
communications or offers of settlement and are admissible in evidence.
(m.) Homeowners’ Association Dwelling Action. ARS § 33-2002.
A homeowners’ association may file a dwelling action only after all of the
following conditions have occurred:
(1.) The board of directors has provided full disclosure in writing to all
members of the association of all material information relating to
the filing of the action. The material information shall include a
statement that describes the nature of the action and the relief
sought including any demands, notices, offers to settle, or
responses to offers to settle made either by the association or the
seller and the expenses and fees that the association anticipates will
be incurred, directly or indirectly, in prosecuting the action
including attorneys’ fees, consultant fees, expert witness fees,
court costs, and impacts on the values of all dwellings in the
association.
(2.) The homeowners’ association has held a meeting of its members
and board of directors with notice.
(3.) The board of directors authorizes the filing of the action pursuant
to the procedures outlined in the community documents.
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(4.) The homeowners’ association has provided the seller with notice
of the alleged construction defects and the right to repair or replace
the alleged construction defects pursuant to ARS § 12- 1363.
In any contested dwelling action, a seller has standing to assert a failure
of the homeowners’ association to comply with the procedures prescribed
by the community documents and the requirements of ARS § 33-2002.
2. Colorado
(a.) Colorado Construction Defect Action Reform Act at § 13-20-801 et seq.
(1.) Applies to real property, personal property, and personal injury.
(2.) Applies also to architects.
(3.) Actual damages is fair market value of the real property without
the alleged defect, the replacement cost of the real property, or the
reasonable cost to repair the alleged defect, whichever is less,
together with relocation costs, and, with respect to residential
property, other economic costs related to loss of use, if any,
interest provided by law, and such costs of suit and reasonable
attorney fees and may be awarded pursuant to contract or
applicable law.
(4.) Initial list of defects filed with the court/arbitrator and served
within sixty (60) days.
(5.) Pre-filing notices to construction professionals: seventy-five (75)
days residential; ninety (90) days commercial.
(6.) The statute of limitations AND statute of repose ARE tolled until
sixty (60) days after completion of the notice of claim process.
(7.) Thirty (30) days inspection period after pre-filing service.
(8.) Thirty (30) days residential/forty-five (45) days commercial for
response by professional after inspections with offer to settle for
money and/or repairs. Claim can move forward if no response.
(9.) Offers to remedy must include expert reports with timetable for
repairs.
PROPERTY OF RESNICK & LOUIS, P.C.
32
(10.) CRS 13-20-806(2) – If a construction professional fails to respond
to the notice of claim OR does NOT comply with the terms of an
accepted offer to remedy or settle, TREBLE DAMAGES shall
apply IF claimant proves violation of the Consumer Protection Act.
a) Treble Damages limited to $250,000
(11) Fifteen (15) days for claimant to accept or deemed rejected.
(12) CRS 13-20-804 (Restriction on Construction Defect Negligence
Claims).
(13) No negligence claim based upon building code or industry
standard unless actual damage to real or personal property, actual
loss of use of real or personal property/bodily injury, risk of bodily
injury or death to or threat to life, health, or safety of the
occupants.
(14.) Can bring other tort, contract, and warranty Claims.
(15.) Can bring other negligence claims that arise from any statute or
ordinance other than for violation of building code.
(16.) CRS 13-20-806 – Limitation of Damages:
a) Construction professional NOT liable for more than actual
damages UNLESS and until claimant prevails on violation
of Consumer Protection Act, AND IF
1) Monetary offer to settle is less than 85% of the
amount awarded to the claimant as actual damages
EXCLUSIVE of costs, interest, and attorneys’ fees;
OR
2) Trier of fact determines that the reasonable cost to
complete the construction professional’s offer to
remedy the defect is less than 85% of the amount
awarded to the claimant as actual damages.
3) EXCLUSIVE of costs, interest, and attorneys’ fees.
4) Non-Economic loss personal injuries are limited to
$250,000, and are not subject to treble damages.
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33
(b.) Colorado Common Interest Ownership Act, C.R.S 38-33.3-302 (Powers of
Unit Owners’ Association)
(1.) The association may institute, defend, or intervene in litigation or
administrative proceedings in its own name on behalf of itself or
two or more unit owners on matters affecting the common interest
community.
(c.) Colorado Common Interest Ownership Act, C.R.S 38-33.3-303.5
(Construction Defect Actions—Disclosure)
(1.) Actions for five (5) or more units.
(2.) Prior to Service of Summons and Complaint on any Defendant,
Executive Board shall mail or deliver written notice of
commencement or anticipated commencement of such action to
each unit owner.
(3.) Must include expenses and nature of the action and relief sought.
3. California
(a.) California SB 800 (California Civil Code 895-944)
(1.) Introduction. It applies to residential construction post January 1,
2003. SB 800 is a pre-litigation right-to-repair scheme that
California requires for residential homeowners to comply with
before litigation is commenced. The defendants must comply with
the time constraint or the claimant is allowed to bypass SB 800 and
file a law suit.
(2.) Who is covered by the bill? The bill provides that any
construction defect action against a builder, subcontractor, product
manufacturer, or design professional groups will be governed by
the standards set forth in SB800 in new home construction.
(3.) Recoverable Damages. Section 944 identifies the various species
of damages which the Owner may recover for any construction
defect embraced by the statute. No other damages are recoverable
for a negligence or breach of contract claim brought by Owner for
the specified defects. Those various types of damages are as
follow:
PROPERTY OF RESNICK & LOUIS, P.C.
34
a) Cost of repair of the defect which has violated a
standard;
b) Cost of repair of damage caused by Builder’s repair of
the defect;
c) Cost of repair of damages resulting from the violated
standard;
d) Cost of removing & replacing improper Builder repairs;
e) Relocation and storage expenses made necessary by the
repair;
f) Lost revenue if subject property is the location of
licensed business;
g) Investigative costs for each established violation; and
h) Costs and fees recoverable by contract or other statute.
(4.) Code Violations/Performance Standards – SB 800 almost
creates strict liability in that Section 896 with specific construction
deficiencies for the following:
a) Water Intrusion Standards. Windows, doors, roofs,
chimney caps, vents, decks, balconies, exterior stairs,
foundations, hardscape, irrigation, landscaping, drainage,
stucco, siding, exterior walls, retaining walls, site walls,
plumbing , sewers, utilities, shower and tub enclosures, tile
walls, floors, decks, and countertops:
1) May not allow unintended water to pass into the
structure or to pass beyond the actual or intended
moisture barrier of the system. 896(a)(1-2, 4-5, 10,
12-13, 17);
2) May not allow excessive condensation to enter the
structure and damage another building component.
896(a)(3, 11);
3) Decks, balconies & exterior stairs may not allow
water to pass within the system itself and damage
the components of the system. 896(a)(6);
PROPERTY OF RESNICK & LOUIS, P.C.
35
4) Hardscape may not cause water or soil erosion or
damage to another building component. 896(a)(9);
5) Foundations may not allow water or vapor to enter
the structure and either damage another component,
or limit the installation of types of flooring
896(a)(7-8) Plumbing, sewer and utility lines shall
not leak and shall not corrode so as to impede the
useful life of the system 896(a)(14-15);
6) Sewer systems must allow the designated amount of
sewage to flow through the system;
7) Tile walls, decks, floors and countertops shall not
allow water intrusion to damage another component
896(a)(18).
b) Structural Standards. Foundations, slabs, and shear walls
shall not contain significant cracks or significant vertical
displacement, shall not cause the structure to be structurally
unsafe, and must materially comply with design criteria of
applicable building codes, regulations and ordinances for
chemical deterioration/corrosion resistance, earthquake,
and wind load resistance in effect at time of construction.
896(b).
c) Soils Standards. Soils shall not cause damage to the
structure, the structure to be structurally unsafe, or the land
to become unusable for intended purpose. 896(c).
d) Fire Protection Standards. Fire-rated assemblies,
fireplaces, chimneys, chimney caps, electrical &
mechanical systems must materially comply with design
criteria of applicable building codes, regulations and
ordinances for fire protection in effect at time of
construction; may not cause an unreasonable risk of fire.
896(d).
e) Plumbing, Sewer & Electrical Standards. Plumbing,
sewer and electrical systems must operate properly and
may not materially impair the structure’s intended use.
896(e)-(f)].
f) Miscellaneous Standards.
PROPERTY OF RESNICK & LOUIS, P.C.
36
1) Hardscape – no cracks with significant vertical
displacement or that are excessive. 896(g)(1);
2) Stucco & exterior wall finishes and fixtures – no
significant cracks or separations. 896(g)(2);
3) Manufactured products – installation may not
interfere with useful life. 896(g)(3);
4) Heating – maintain room temperature of 70° F at a
point three (3) feet above the floor in any living
space. 896(g)(4);
5) Air Conditioning – must comply with Title 24.
896(g)(5);
6) Sound transmission-attached units – must comply
with applicable code, ordinance or regulation in
place at time of construction. 896(g)(6);
7) Irrigation systems and drainage – may not cause
damage to landscaping or other external building
components. 896(g)(7);
8) Untreated wood posts – not installed in direct
contact with soil based upon finish grade causing
deterioration. 896(g)(8);
9) Steel fences – installed to prevent unreasonable
corrosion. 896(g)(9);
10) Paint & stains – deterioration of building surfaces
may not occur during manufacturer’s warranty
term. 896(g)(10);
11) Roofing materials – avoid materials falling from
roof. 896(g)(11);
12) Landscaping – must survive for at least one year.
896(g)(12);
13) Ceramic tile – may not detach. 896(g)(13);
14) Dryer ducts – install in compliance with
manufacturer’s requirements. 896(g)(14);
15) Catch-all Provision – may not impair occupant’s
safety due to public health hazard (e.g., excessive
mold, 896(g)(15)) and may not cause damage. 897.
g) Fit & Finish Warranty. Builder is deemed to provide each
Owner with a one-year warranty on “fit & finish” on
cabinets, mirrors, flooring, interior & exterior walls,
countertops, paint and trim. All manufactured parts are
deemed to have a useful life either of 1-year or whatever
term identified by the manufacturer, whichever term is
longer. 896(g)(3), 900.
PROPERTY OF RESNICK & LOUIS, P.C.
37
(5.) Builder’s Enhanced Protection Agreement. Builder may provide
a written guarantee, the Enhanced Protection Agreement (EPA), in
lieu of what is provided in Section 896, but the EPA must meet or
exceed those statutory standards. Builder may also have its own
ADR procedure, which, if found to be enforceable, would replace
the statutory procedure.
a). Within sixty (60) days of filing a response, Builder may
seek bifurcated hearing on the enforceability of the EPA
procedure. Failure to seek a hearing within that time period
operates as a waiver. 901-906.
(6.) Construction Defect Claims Procedures
a) Owner’s Notice of Claim. Written notice by Owner must
be provided to Builder’s designated agent, stating
claimant’s name, preferred method of contact, and
description of defect. 901(a).
b) Builder’s Acknowledgment of Receipt of Claim. Builder
must acknowledge receipt of the claim within 14 days from
date of receipt. 913.
c) Discovery Rules. Builder must allow Owner to observe
and record all inspections, testing, and repairs performed
916(a), 922. Builder has thirty (30) days from date of
Owner’s request to provide Owner, at Owner’s expense,
copies of the following:
1) Maintenance and preventative maintenance
instructions that were provided to the Owner at the
sale of the home 912(b);
2) Manufacturer’s maintenance and preventative
maintenance instructions and limited warranty
912(c);
3) Builder’s written warranty 912(d);
PROPERTY OF RESNICK & LOUIS, P.C.
38
4) If claim relates to structural, fire safety or soils
issues, copies of all relevant plans and
specifications 912(a); and
5) All photos and documents relating to a repair 923.
d) Initial Inspection by Builder. The initial inspection and
testing by Builder must occur within fourteen (14) days
from the date of Builder’s Acknowledgment. Builder must
restore the property to pre-inspection condition within
forty-eight (48) hours of testing completion. 916(a).
e) Second Inspection by Builder. Builder must request
second inspection within three (3) days following
completion of initial inspection, and must complete the
second inspection within forty (40) days of the initial
inspection. 916(c).
f) Builder’s Notice to Responsible Third Parties. Builder is
to put all potentially responsible third parties on notice of
the ongoing inspection. Builder’s own liability carrier is not
part of this group. 916(e).
g) Builder’s Offer to Owner. Within 30 days of completing
the inspection, Builder must provide Owner with an Offer
which must include the following 917- 919, 924, 929(a):
1) An offer to address all recoverable Section 944
damages;
2) An all-cash offer to compensate Owner for the
identified defect(s) or a repair proposal which
includes the specific violation being addressed,
detailed description of the proposed repairs,
completion date, name(s) of the contractor(s);
3) Notification of Owner’s right to request the names
of up to three (3) additional contractors to perform
the repairs;
4) An offer to submit the matter to mediation;
5) Identification of any part of the Owner’s claim not
being addressed;
PROPERTY OF RESNICK & LOUIS, P.C.
39
6) Builder’s Offer and the reason(s) for that position
being taken; and
7) Builder’s Offer may not be contingent on Owner
providing a release unless it is an all-cash offer.
h) Owner’s Response to Offer. Owner has thirty (30) days
from its receipt of Builder’s Offer to either: (1) authorize
the proposed repair; (2) request up to three alternate
contractors to perform the repairs; or (3) submit the matter
to Repair Mediation. If Owner requests alternate
contractors, an additional inspection is to be held within
twenty (20) days of the election to allow access by Builder
and alternate trades. Builder has thirty-five (35) days from
receipt of the request to provide the additional name(s).
Owner has twenty (20) days from receipt of the name(s) to
either authorize the proposed repairs or submit the matter to
Repair Mediation. 918.
i) Repair Mediation. Within fifteen (15) days of Owner’s
request, a 4-hour mediation is to be held regarding the
Builder’s Offer. The non-affiliated mediator is to be
selected and paid for by Builder, unless Owner agrees to
pay half, in which case both select the mediator. 919. If the
Repair Mediation does not resolve the dispute, Owner must
allow the repair proposed by Builder to go forward. 921.
j) Term of Repair Period. Repairs must begin within:
fourteen (14) days of Owner’s acceptance of Builder’s
Offer or Claimant’s acceptance of the alternate contractor;
seven (7) days from completion of the Repair Mediation; or
five (5) days from the issuance of any necessary building
permit. 921(a). Repairs must be completed within 120 days.
921(b).
k) Post- Repair Mediation. If there had been no prior Repair
Mediation, then Owner must request mediation prior to
filing suit in state court. The four-hour mediation is to be
held within fifteen (15) days of Owner’s request. The non-
affiliated mediator is to be selected and paid for by Builder,
unless Owner agrees to pay half, in which case both select.
928.
PROPERTY OF RESNICK & LOUIS, P.C.
40
l) Extensions of Time. All cutoff dates may be extended by
mutual written agreement including a knowing waiver by
Owner. 930(a).
m) Concurrent Claims in the Calderon Process. To the
extent the claim would be duplicative, this pre-litigation
procedure supersedes any claims being made in the 1375
Calderon Process. 935.
n) Owner’s Subsequent State Court Action. Once the ADR
process either is (1) completed, or (2) Builder fails to
timely complete the tasks required by the pre-litigation
ADR procedure, Owner may file its claim in a state court
action.
o) Admissibility of Builder’s Repair. Evidence of the nature,
extent, and reasons for Builder’s repair efforts is allowed
933, 935. Owner may offer the pre-repaired condition of
the property to show the repair provided was inappropriate,
inadequate, or incomplete, and does not have to show
further or continued damage being caused 933. In a claim
involving fraud, a limiting instruction is to be given to the
effect that the Owner did not voluntarily agree to the repair
provided by Builder. 931.
(7.) Affirmative Defenses by Builder. Section 945.5 limits Builder to
the following affirmative defenses in any subsequent state court
action based on the defect which was subject of the pre-litigation
claim:
a) Unforseen Act of God;
b) Owner’s Unreasonable Failure to Mitigate Damages;
c) Owner’s Failure to Maintain;
d) Ordinary Wear & Tear or Misuse/Abuse;
e) Statute of Limitations;
f) Release;
PROPERTY OF RESNICK & LOUIS, P.C.
41
g) Builder’s Repairs Were Successful;
(8.) Affirmative Defenses by Other Construction Professionals. All
other involved trades, design professionals, vendors and
manufacturers may also assert all common law and contractual
defenses which otherwise would be available. 936.
(9.) Related Claims Outside Scope of Procedure. An Owner’s fraud-
based claims against the Builder and products liability claims
against component part manufacturers can proceed concurrently in
state court. 896(g)(3), 931, 936.
(10.) What happens if the homeowner does not follow SB800? If a
Homeowner does not file a written claim with Builder in advance
of filing a petition, SB800 provides for a legal bar to the action and
a court would have no authority to hear the case. The case would
be dismissed though it could be re-opened at a later time.
(11.) How are subsequently discovered defects handled? All defects
discovered after the process is completed would require the
initiation of a new SB800 procedure and the Builder is not
responsible for repairs of defects, which it had no notice of or
opportunity to repair. If the statute of limitations has already run
when the defect is discovered, the process cannot commence and
no claim may be brought. If the process is initiated prior to the
running of the statute, the statute will be extended to allow
Homeowner and Builder to complete the process.
(12.) Are the SB800 proceedings admissible in proceedings? If a
legal action to enforce the bill’s standards is initiated by a
Homeowner, the fact that a repair effort was made may be
introduced in that proceeding, and evidence of the parties’ conduct
during the repair process may be introduced.
(13.) Is a Builder released after completing repairs? A Builder is not
released after completing repairs. The bill presumes that a Builder
warrants completely, in addition to any express warranties on the
original construction, that the repairs will be reasonably adequate
to restore the structure to the condition intended by its designers,
and that the home will be reasonably habitable by its occupants.
(14.) Does SB800 apply to subsequent purchasers? SB800 claimants
include the owners, whether original or subsequent, of a single-
PROPERTY OF RESNICK & LOUIS, P.C.
42
family home or attached dwelling and homeowners association.
All claims must be brought within the applicable statute of
limitations.
PROPERTY OF RESNICK & LOUIS, P.C.
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(b.) Belasco v. Wells (2015) - Belasco bought a new Manhattan Beach
residence in 2004 from the builder (Wells). In 2006, Belasco filed a
complaint with the Contractors State License Board, alleging construction
defects. Belasco and Wells settled the dispute in 2006, with Wells paying
$25,000 and Belasco executing a release and a Civil Code 15241 waiver
of all known or unknown claims. In 2012, Belasco sued, based on an
alleged roof defect discovered in 2011. The trial court entered summary
judgment, finding the action barred by the settlement. The court of appeal
affirmed, rejecting arguments that: the 2006 general release and waiver for
patent construction defects is not a “reasonable release” of a subsequent
claim for latent defects under section 929 and the Right to Repair Act
(section 895); a reasonable release can only apply to a “particular
violation” and not to a latent defect under section 945.5(f), and the 2006
settlement was too vague to be a valid; section 932 authorizes an action on
“[s]ubsequently discovered claims of unmet standards;” public policy
prohibits use of a general release and section 1542 waiver to bar a
subsequent claim for latent residential construction defects; and a genuine
issue of fact existed concerning fraud and negligence claims that would
void the settlement under section 1668.
(c.) Anders v. Superior Court – If the alternative dispute resolution
contractual (i.e., sales agreements/express warranties) procedures between
the builder and homeowners (which are allowed under CCC 914(a)) are
deemed unenforceable (such as because they are unconscionable) then the
builder cannot then require the homeowners to comply with SB-800. In
essence, the builder does not get two opportunities with the pre-litigation
requirements.
PROPERTY OF RESNICK & LOUIS, P.C.
46
(d.) McMillin v. Superior Ct. (5th 2015) –
(1.) This case contradicts the Liberty Mutual Ins. Co v. Brookfield
Crystal Cove case (4th) which held that a homeowner suffering
actual property damage is not bound by SB-800, and therefore
could allege other causes of action. On December 1, 2015, the
California Supreme Court, noting an irreconcilable conflict
between Liberty Mutual and McMillin Albany, ordered the 5th
District’s McMillin Albany decision de-published pending review
by the Supreme Court.
(2.) Plaintiffs filed a complaint for construction defects with common
law causes of action (negligence and strict products liability) as
well as a cause of action for violation of building standards under
the Right to Repair Act. Plaintiffs did not give the homebuilder
notice under SB-800. Plaintiffs later dismissed their cause of
action under the Act. McMillin filed a motion to stay the litigation
under Civil Code section 930 arguing that Plaintiffs failed to
comply with the Act’s prelitigation procedures by not giving the
builder notice of the alleged defects and an opportunity to inspect
and repair those defects.
(3.) SB-800 precludes any other cause of action for damages related to
or arising out of a dediciency in residential construction other than
one brought pursuant to Section 896 for violations of any of the
standards set out in Chapter 2, or one brought pursuant to Section
897, where the alleged deficiency involves a function or
component not covered in the standards set out in Section 896. No
other cause of action is allowed to recover for repair od the SB-800
listed defect itself or for repair of any damage caused by the said
defect that is listed in SB-800. The exceptions are for
condominium conversions, fraud, personal injury, or enforcement
of a contract.
(e). Anders v. Superior Court (2011) – The trial court found the builder's
contractual procedures unconscionable and unenforceable, butnevertheless
ordered the homeowners who sued the builder due to construction defects
to comply with the statutory procedures. The Appellate Court held that the
trial court erred in ordering compliance with Chapter 4, as section 914,
subdivision (a) provides that builder who elects or attempts to use its own
prelitigation procedures in lieu of the statutory ones is bound by that
decision and cannot enforce the statutory procedures. A builder who
elects to use alternative prelitigation procedures in lieu of those set out in
PROPERTY OF RESNICK & LOUIS, P.C.
47
the statute has the right to attempt repairs, so long as it does so pursuant to
procedures that are fair and enforceable. If, however, the builder imposes
procedures that are found to be unenforceable, it forfeits its absolute right
to attempt repairs. It may still offer to repair any defects, but the
homeowner is not bound to accept the offer or to permit the builder to
attempt the repairs prior to litigation. The builder thus has an incentive to
ensure its alternative procedures are proper and enforceable, and the
homeowner's protection against unnecessary delay is preserved.”
(f.) Baeza v. Superior Court (4th. 2011). the trial court ordered homeowners
who had sued the builder for construction defects to comply with the
builder's contractual procedure and judicial reference provisions. In a writ
petition, the homeowners argued they were not required to comply with
the contractual provisions because the builder failed to comply with the
statutory disclosure requirements contained in section 912. The
Appellate Court rejected this argument, holding that “a builder who opts
out of the Chapter 4 nonadversarial statutory prelitigation procedures in
favor of its own contractual procedures opts out of the entirety of Chapter
4, and the disclosure provisions of section 912 do not apply to such a
builder.” The Appellate Court did not address the proprietary of the Trial
Court’s Order requiring compliance with the contractual provisions for
mediation, arbitration, and judicial reference.
(g.) McCaffrey Group, Inc. v. Superior Ct (2014) –
(1.) This case addressed issue of what constitutes enforceable
contractual provisions for the homebulders own pre-litigation opt-
out procedures. If a a builder opts out of the statutory procedures
in favor of its own contractual procedures, the builder opts out of
all of Chapter 4. There is nothing in the Act that requires the
builder who elects to use contractual procedures to provide a
particular procedure or to comply with the deadlines contained in
Chapter 4. Instead, section 914, subdivision (a) simply provides
that “[a] builder may attempt to commence nonadversarial
contractual provisions other than the nonadversarial procedures
and remedies set forth in this chapter․ ” The statute does not
impose any requirement for the contents of those nonadversarial
contractual provisions.
(2.) Although there is no specific requirements that the contents have to
follow, the Court will examine if the provisions are
unconscionable. “Both procedural unconscionability and
substantive unconscionability must be shown, but ‘they need not
PROPERTY OF RESNICK & LOUIS, P.C.
48
be present in the same degree’ and are evaluated on ‘ “a sliding
scale.” The more substantively oppressive the contract term, the
less evidence of procedural unconscionability is required to come
to the conclusion that the term is unenforceable, and vice versa.
The party who prepared and submitted the contract has the burden
of showing the other party had notice of the contract terms at issue,
while the party asserting unconscionability has the burden of
establishing it.
(3.) Procedural unconscionability requires either oppression or
surprise. Oppression occurs where a contract involves lack of
negotiation and meaningful choice, surprise where the allegedly
unconscionable provision is hidden within a prolix printed form.
Procedural unconscionability, and in particular “ ‘oppression,’ ”
generally entails a contract of adhesion; that is, a standardized
contract, which, imposed and drafted by the party of superior
bargaining strength, relegates to the subscribing party only the
opportunity to adhere to the contract or reject it. The Court found
a low level of procedural unconscionability.
(4.) The substantive element of unconscionability “pertains to the
fairness of an agreement's actual terms and to assessments of
whether they are overly harsh or one-sided.” This includes
consideration of the extent to which the disputed term is outside
the reasonable expectation of the nondrafting party or is unduly
oppressive. “Substantively unconscionable terms may take various
forms, but may generally be described as unfairly one-sided.”
Unconscionability is measured as of the time the contract was
entered. The Court said that the contract was not substantively
unconscionable.
(h.). Darling v. Superior Court (4th 2012) – The Appellate court conclude that
a homeowner must serve notice of a construction defect claim under
section 910, subdivision (a) to commence the statutory prelitigation
procedure, and until such service the builder has no obligation to respond
to a request for documents under section 912, subdivision (a).
(i.) Boyko v. Terveno (Fed 2016) -
(1.) A “builder” for purposes of SB-800 is defined as a builder,
contractor or other entity that is also in the business of selling
residential units to the public. The plumbing supplier, supplied
PROPERTY OF RESNICK & LOUIS, P.C.
49
plumbing lines to the properties, and did not act as a contractor nor
is it in the business of selling residential real estate.
(2.) SB-800 claims cannot be brought as class action claims, but non
SB-800 claims can be brough as class actions.
(j.) California Calderon Process (CCC 1375 – 1378)
(1.) Introduction: Before an association files a complaint for damages
against a builder, developer, or general contractor (respondent) of a
common interest development community based upon a claim for
defects in the design or construction of the common interest
development, all of the requirements of Civil Code § 1375 must be
satisfied with respect to the builder, developer, or general
contractor. 1375(a).
(2.) Notice to Respondent: The association shall serve upon the
respondent a “Notice of Commencement of Legal Proceeding,”
pursuant to Civil Code § 1375(b). The notice shall be served by
certified mail to the registered agent of the respondent, or if there
is no registered agent, then to any officer of the respondent. If there
are no current officers of the respondent, service shall be upon the
person or entity otherwise authorized by law to receive service of
process. Service upon the general contractor shall be sufficient to
initiate the process set forth in this section with regard to any
builder or developer, if the builder or developer is not amenable to
service of process by the foregoing methods. This notice shall toll
all applicable statutes of limitation and repose, whether contractual
or statutory, by and against all potentially responsible parties,
regardless of whether they were named in the notice, including
claims for indemnity applicable to the claim for the period set forth
in subdivision (c).
The notice shall include all of the following:
a) The name and location of the project.
b) An initial list of defects sufficient to apprise the respondent
of the general nature of the defects at issue.
c) A description of the results of the defects, if known.
PROPERTY OF RESNICK & LOUIS, P.C.
50
d) A summary of the results of a survey or questionnaire
distributed to homeowners to determine the nature and
extent of defects, if a survey has been conducted or a
questionnaire has been distributed.
e) Either a summary of the results of testing conducted to
determine the nature and extent of defects or the actual test
results, if that testing has been conducted.
(3.) 180-Day Dispute Resolution Period
Service of the notice shall commence a period, not to exceed 180
days, during which the association, the respondent, and all other
participating parties shall try to resolve the dispute through the
processes set forth in 1375. This 180-day period may be extended
for one additional period, not to exceed 180 days, only upon the
mutual agreement of the association, the respondent, and any
parties not deemed peripheral pursuant to paragraph (3) of
subdivision (e). Any extensions beyond the first extension shall
require the agreement of all participating parties. Unless extended,
the dispute resolution process prescribed by this section shall be
deemed completed. All extensions shall continue the tolling period
described in subdivision (b). 1375(c).
(4.) Respondents Meet and Confer with Association
Within twenty-five (25) days of the date the association serves the
Notice of Commencement of Legal Proceedings, the respondent
may request in writing to meet and confer with the board of
directors of the association. Unless the respondent and the
association otherwise agree, there shall be not more than one
meeting, which shall take place no later than ten (10) days from the
date of the respondent’s written request, at a mutually agreeable
time and place. The meeting shall be subject to subdivision (b) of
Civil Code 1363.05. The discussions at the meeting are privileged
communications and are not admissible in evidence in any civil
action, unless the association and the respondent consent in writing
to their admission. 1375(d).
(5.) Parties’ Duties After Receipt of Notice
Upon receipt of the notice, the respondent shall, within sixty (60)
days, comply with the following:
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51
a) The respondent shall provide the association with access to,
for inspection and copying, all plans and specifications,
subcontracts, and other construction files for the project
that are reasonably calculated to lead to the discovery of
admissible evidence regarding the defects claimed. The
association shall provide the respondent with access to, for
inspection and copying, all files reasonably calculated to
lead to the discovery of admissible evidence regarding the
defects claimed, including all reserve studies, maintenance
records and any survey questionnaires, or results of testing
to determine the nature and extent of defects. To the extent
any of the above documents are withheld based on
privilege, a privilege log shall be prepared and submitted to
all other parties. All other potentially responsible parties
shall have the same rights as the respondent regarding the
production of documents upon receipt of written notice of
the claim, and shall produce all relevant documents within
sixty (60) days of receipt of the notice of the claim.
b) The respondent shall provide written notice by certified
mail to all subcontractors, design professionals, their
insurers, and the insurers of any additional insured whose
identity is known to the respondent or readily ascertainable
by review of the project files or other similar sources and
whose potential responsibility appears on the face of the
notice. This notice to subcontractors, design professionals
and insurers shall include a copy of the Notice of
Commencement of Legal Proceeding, and shall specify the
date and manner by which the parties shall meet and confer
to select a dispute resolution facilitator pursuant to
paragraph (1) of subdivision (f), advise the recipient of its
obligation to participate in the meet and confer or serve a
written acknowledgment of receipt regarding this notice,
advise the recipient that it will waive any challenge to
selection of the dispute resolution facilitator if it elects not
to participate in the meet and confer, advise the recipient
that it may be bound by any settlement reached pursuant to
subdivision (d) of § 1375.05, advise the recipient that it
may be deemed to have waived rights to conduct
inspections and testing pursuant to subdivision (c) of §
1375.05, advise the recipient that it may seek the assistance
of an attorney, and advise the recipient that it should
PROPERTY OF RESNICK & LOUIS, P.C.
52
contact its insurer, if any. Any subcontractor or design
professional, or insurer for that subcontractor, design
professional, or additional insured, who receives written
notice from the respondent regarding the meet and confer
shall, prior to the meet and confer, serve on the respondent
a written acknowledgment of receipt.
(6.) Duties of Subcontractors and Design Professionals
Each subcontractor or design professional shall, within ten (10)
days of service of the written acknowledgment of receipt, provide
to the association and the respondent a Statement of Insurance that
includes both of the following:
a) The names, addresses, and contact persons, if known, of all
insurance carriers, whether primary or excess and
regardless of whether a deductible or self-insured retention
applies, whose policies were in effect from the
commencement of construction of the subject project to the
present and potentially cover the subject claims.
b) The applicable policy numbers for each such policy of
insurance.
(7.) Request for Designation as Peripheral Party
Any subcontractor or design professional, or insurer for that
subcontractor, design professional, or additional insured, who so
chooses, may, at any time, make a written request to the dispute
resolution facility for designation as a peripheral party. That
request shall be served contemporaneously on the association and
the respondent. If no objection to that designation is received
within 15 days, or upon rejection of that objection, the dispute
resolution facilitator shall designate that subcontractor or design
professional as a peripheral party, and shall thereafter seek to limit
the attendance of that subcontractor or design professional only to
those dispute resolution sessions deemed peripheral party sessions
or to those sessions during which the dispute resolution facilitator
believes settlement as to peripheral parties may be finalized.
Nothing in this subdivision shall preclude a party who has been
designated a peripheral party from being reclassified as a
nonperipheral party, nor shall this subdivision preclude a party
designated as a nonperipheral party from being reclassified as a
PROPERTY OF RESNICK & LOUIS, P.C.
53
peripheral party after notice to all parties and an opportunity to
object. For purposes of this subdivision, a peripheral party is a
party having total claimed exposure of less than $25,000.
1375(e)(3).
(8.) Selection of Dispute Resolution Facilitator
Within twenty (20) days of sending the notice set forth in
paragraph (2) of subdivision (e), the association, respondent,
subcontractors, design professionals, and their insurers who have
been sent a notice as described in paragraph (2) of subdivision (e)
shall meet and confer in an effort to select a dispute resolution
facilitator (DRF) to preside over the mandatory dispute resolution
process prescribed by this section. Any subcontractor or design
professional who has been given timely notice of this meeting but
who does not participate waives any challenge he or she may have
as to the selection of the DRF. The role of the dispute resolution
facilitator is to attempt to resolve the conflict in a fair manner. The
DRF shall be sufficiently knowledgeable in the subject matter and
be able to devote sufficient time to the case. The DRF shall not be
required to reside in or have an office in the county in which the
project is located. 1375(f)(1).
(9.) Case Management Meeting
The dispute resolution facilitator and the participating parties shall
agree to a date, time, and location to hold a case management
meeting of all parties and the dispute resolution facilitator, to
discuss the claims being asserted and the scheduling of events
under this section. The case management meeting with the DRF
shall be held within 100 days of service of the Notice of
Commencement of Legal Proceedings at a location in the county
where the project is located. Written notice of the case
management meeting with the DRF shall be sent by the respondent
to the association, subcontractors and design professionals, and
their insurers who are known to the respondent to be on notice of
the claim, no later than ten (10) days prior to the case management
meeting, and shall specify its date, time, and location. The DRF in
consultation with the respondent shall maintain a contact list of the
participating parties. 1375(f)(1).
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54
(10.) Disclosure of Possible Conflicts by DRF
No later than ten (10) days prior to the case management meeting,
the DRF shall disclose to the parties all matters that could cause a
person aware of the facts to reasonably entertain a doubt that the
proposed DRF would be able to resolve the conflict in a fair
manner. The facilitator’s disclosure shall include the existence of
any ground specified in § 170.1 of the Code of Civil Procedure for
disqualification of a judge, any attorney-client relationship the
facilitator has or had with any party or lawyer for a party to the
dispute resolution process, and any professional or significant
personal relationship the facilitator or his or her spouse or minor
child living in the household has or had with any party to the
dispute resolution process. The disclosure shall also be provided to
any subsequently noticed subcontractor or design professional
within ten (10) days of the notice. 1375(f)(2).
(11.) Disqualification of DRF
A dispute resolution facilitator shall be disqualified by the court if
he or she fails to comply with this paragraph and any party to the
dispute resolution process serves a notice of disqualification prior
to the case management meeting. If the DRF complies with this
paragraph, he or she shall be disqualified by the court on the basis
of the disclosure if any party to the dispute resolution process
serves a notice of disqualification prior to the case management
meeting. 1375(f)(3).
(12.) Selection of DRF If Parties Cannot Agree
If the parties cannot mutually agree to a dispute resolution
facilitator, then each party shall submit a list of three dispute
resolution facilitators. Each party may then strike one nominee
from the other parties’ list, and petition the court, pursuant to the
procedure described in subdivisions (n) and (o), for final selection
of the DRF. The court may issue an order for final selection of the
DRF pursuant to this paragraph.
Any subcontractor or design professional that receives notice of
the association’s claim without having previously received timely
notice of the meet and confer to select the DRF shall be notified by
the respondent regarding the name, address, and telephone number
of the dispute resolution facilitator. Any such subcontractor or
PROPERTY OF RESNICK & LOUIS, P.C.
55
design professional may serve upon the parties and the dispute
resolution facilitator a written objection to the DRF within fifteen
(15) days of receiving notice of the claim. Within seven days after
service of this objection, the subcontractor or design professional
may petition the superior court to replace the DRF. The court may
replace the dispute resolution facilitator only upon a showing of
good cause, liberally construed. Failure to satisfy the deadlines set
forth in this subdivision shall constitute a waiver of the right to
challenge the dispute resolution facilitator. 1375(f)(4)-(5).
(13.) Apportionment of DRF Costs
The costs of the dispute resolution facilitator shall be apportioned
in the following manner: one-third to be paid by the association;
one-third to be paid by the respondent; and one-third to be paid by
the subcontractors and design professionals, as allocated among
them by the dispute resolution facilitator. The costs of the DRF
shall be recoverable by the prevailing party in any subsequent
litigation pursuant to § 1032 of the Code of Civil Procedure,
provided however that any nonsettling party may, prior to the
filing of the complaint, petition the facilitator to reallocate the
costs of the DRF as they apply to any nonsettling party. The
determination of the DRF with respect to the allocation of these
costs shall be binding in any subsequent litigation. The DRF shall
take into account all relevant factors and equities between all
parties in the dispute resolution process when reallocating costs.
1375(f)(6).
(14.) Replacement of DRF
In the event the dispute resolution facilitator is replaced at any
time, the case management statement created pursuant to
subdivision (h) shall remain in full force and effect. 1375(f)(7).
(15.) DRF’s Powers
The dispute resolution facilitator is empowered to enforce all
provisions of 1375. 1375(f)(8).
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56
(16.) Data Compilation by All Parties
No later than the case management meeting, the parties shall begin
to generate a data compilation showing the following information
regarding the alleged defects at issue:
a) The scope of the work performed by each potentially
responsible subcontractor.
b) The tract or phase number in which each subcontractor
provided goods or services, or both.
c) The units, either by address, unit number, or lot number, at
which each subcontractor provided goods or services, or
both.
This data compilation shall be updated as needed to reflect
additional information. Each party attending the case management
meeting, and any subsequent meeting pursuant to this section, shall
provide all information available to that party relevant to this data
compilation. 1375(g).
(17.) Conduct of Case Management Meeting
At the case management meeting, the parties shall, with the
assistance of the DRF, reach agreement on a case management
statement, which shall set forth all of the elements set forth in
paragraphs (1) to (8), inclusive, except that the parties may
dispense with one or more of these elements if they agree that it is
appropriate to do so. The case management statement shall provide
that the following elements shall take place in the following order:
a) Establishment of a document depository, located in the
county where the project is located, for deposit of
documents, defect lists, demands, and other information
provided for under this section. All documents exchanged
by the parties and all documents created pursuant to this
subdivision shall be deposited in the document depository,
which shall be available to all parties throughout the
prefiling dispute resolution process and in any subsequent
litigation. When any document is deposited in the
document depository, the party depositing the document
shall provide written notice identifying the document to all
PROPERTY OF RESNICK & LOUIS, P.C.
57
other parties. The costs of maintaining the document
depository shall be apportioned among the parties in the
same manner as the costs of the dispute resolution
facilitator.
b) Provision of a more detailed list of defects by the
association to the respondent after the association
completes a visual inspection of the project. This list of
defects shall provide sufficient detail for the respondent to
ensure that all potentially responsible subcontractors and
design professionals are provided with notice of the dispute
resolution process. If not already completed prior to the
case management meeting, the Notice of Commencement
of Legal Proceeding shall be served by the respondent on
all additional subcontractors and design professionals
whose potential responsibility appears on the face of the
more detailed list of defects within seven days of receipt of
the more detailed list. The respondent shall serve a copy of
the case management statement, including the name,
address, and telephone number of the dispute resolution
facilitator, to all the potentially responsible subcontractors
and design professionals at the same time.
c) Nonintrusive visual inspection of the project by the
respondent, subcontractors, and design professionals.
d) Invasive testing conducted by the association, as the
association deems appropriate. All parties may observe and
photograph any testing conducted by the association
pursuant to this paragraph, but may not take samples or
direct testing unless, by mutual agreement, costs of testing
are shared by the parties.
e) Preparation by the association of a comprehensive demand
that provides sufficient detail for the parties to engage in
meaningful dispute resolution as contemplated under this
section.
f) Invasive testing conducted by the respondent,
subcontractors, and design professionals, as they deem
appropriate.
PROPERTY OF RESNICK & LOUIS, P.C.
58
g) Allowance for modification of the demand by the
association if new issues arise during the testing conducted
by the respondent, subcontractor, or design professionals.
h) Facilitated dispute resolution of the claim, with all parties,
including peripheral parties, as appropriate, and insurers, if
any, present and having settlement authority. The dispute
resolution facilitators shall endeavor to set specific times
for the attendance of specific parties at dispute resolution
sessions. If the DRF does not set specific times for the
attendance of parties at dispute resolution sessions, the
dispute resolution facilitator shall permit those parties to
participate in dispute resolution sessions by telephone.
In addition to the foregoing elements of the case management
statement described in subdivision (h), upon mutual agreement of
the parties, the DRF may include any or all of the following
elements in a case management statement: the exchange of
consultant or expert photographs; expert presentations; expert
meetings; or any other mechanism deemed appropriate by the
parties in the interest of resolving the dispute. 1375(h)-(i).
(18.) Establishment of Deadlines for Case Management Events
The dispute resolution facilitator, with the guidance of the parties,
shall at the time the case management statement is established, set
deadlines for the occurrence of each event set forth in the case
management statement, taking into account such factors as the size
and complexity of the case, and the requirement of this section that
this dispute resolution process not exceed 180 days absent
agreement of the parties to an extension of time. 1375(j).
(19.) Respondent’s Submission to Association
At a time to be determined by the dispute resolution facilitator, the
respondent may submit to the association all of the following:
a) A request to meet with the board to discuss a written
settlement offer.
b) A written settlement offer, and a concise explanation of the
reasons for the terms of the offer.
PROPERTY OF RESNICK & LOUIS, P.C.
59
c) A statement that the respondent has access to sufficient
funds to satisfy the conditions of the settlement offer.
d) A summary of the results of testing conducted for the
purposes of determining the nature and extent of defects, if
this testing has been conducted, unless the association
provided the respondent with actual test results.
If the respondent does not timely submit the items required by this
subdivision, the association shall be relieved of any further
obligation to satisfy the requirements of this subdivision only.
1375(k)(1)(A)-(B).
(20.) Meet and Confer on Settlement Offer
No less than ten (10) days after the respondent submits the items
required by this paragraph, the respondent and the board of
directors of the association shall meet and confer about the
respondent’s settlement offer. 1375(k)(1)(C).
(21.) Membership Meeting If Respondent’s Offer Is Rejected
If the association’s board of directors rejects a settlement offer
presented at the meeting held pursuant to this subdivision, the
board shall hold a meeting open to each member of the association.
The meeting shall be held no less than fifteen (15) days before the
association commences an action for damages against the
respondent.
No less than fifteen (15) days before this meeting is held, a written
notice shall be sent to each member of the association specifying
all of the following:
a) That a meeting will take place to discuss problems that may
lead to the filing of a civil action, and the time and place of
this meeting.
b) The options that are available to address the problems,
including the filing of a civil action and a statement of the
various alternatives that are reasonably foreseeable by the
association to pay for those options and whether these
payments are expected to be made from the use of reserve
PROPERTY OF RESNICK & LOUIS, P.C.
60
account funds or the imposition of regular or special
assessments, or emergency assessment increases.
c) The complete text of any written settlement offer, and a
concise explanation of the specific reasons for the terms of
the offer submitted to the board at the meeting held
pursuant to subdivision (d) that was received from the
respondent.
The respondent shall pay all expenses attributable to sending the
settlement offer to all members of the association. The respondent
shall also pay the expense of holding the meeting, not to exceed
three dollars per association member.
The discussions at the meeting and the contents of the notice and
the items required to be specified in the notice pursuant to
paragraph (E) are privileged communications and are not
admissible in evidence in any civil action, unless the association
consents to their admission.
No more than one request to meet and discuss a written settlement
offer may be made by the respondent pursuant to this subdivision.
1375(k)(1)(D)-(H).
(22.) Inadmissibility of Documents and Communications
Except for the purpose of in camera review as provided in
subdivision (c) of Civil Code § 1375.05, all defect lists and
demands, communications, negotiations, and settlement offers
made in the course of the prelitigation dispute resolution process
provided by § 1375 shall be inadmissible pursuant to §§ 1119-
1124, inclusive, of the Evidence Code and all applicable decisional
law. This inadmissibility shall not be extended to any other
documents or communications, which would not otherwise be
deemed inadmissible. 1375(l).
(23.) Petition for Release from Dispute Resolution Process
Any subcontractor or design professional may, at any time, petition
the dispute resolution facilitator to release that party from the
dispute resolution process upon a showing that the subcontractor or
design professional is not potentially responsible for the defect
claims at issue. The petition shall be served contemporaneously on
PROPERTY OF RESNICK & LOUIS, P.C.
61
all other parties, who shall have fifteen (15) days from the date of
service to object. If a subcontractor or design professional is
released, and it later appears to the dispute resolution facilitator
that it may be a responsible party in light of the current defect list
or demand, the respondent shall renotice the party as provided by
paragraph (2) of subdivision (e), provide a copy of the current
defect list or demand, and direct the party to attend a dispute
resolution session at a stated time and location. A party who
subsequently appears after having been released by the dispute
resolution facilitator shall not be prejudiced by its absence from the
dispute resolution process as the result of having been previously
released by the dispute resolution facilitator. 1375(m).
(24.) Petition for Appointment of Referee
Any party may, at any time, petition the superior court in the
county where the project is located, upon a showing of good cause,
and the court may issue an order, for any of the following, or for
appointment of a referee to resolve a dispute regarding any of the
following:
a) To take a deposition of any party to the process, or
subpoena a third party for deposition or production of
documents, that is necessary to further prelitigation
resolution of the dispute.
b) To resolve any disputes concerning inspection, testing,
production of documents, or exchange of information
provided for under this section.
c) To resolve any disagreements relative to the timing or
contents of the case management statement.
d) To authorize internal extensions of timeframes set forth in
the case management statement.
e) To seek a determination that a settlement is a good faith
settlement pursuant to § 877.6 of the Code of Civil
Procedure and all related authorities. The page limitations
and meet and confer requirements specified in this section
shall not apply to these motions, which may be made on
shortened notice. Instead, these motions shall be subject to
other applicable state law, rules of court, and local rules. A
PROPERTY OF RESNICK & LOUIS, P.C.
62
determination made by the court pursuant to this motion
shall have the same force and effect as the determination of
a post-filing application or motion for good faith
settlement.
f) To ensure compliance, on shortened notice, with the
obligation to provide a Statement of Insurance pursuant to
paragraph (2) of subdivision (e).
g) For any other relief appropriate to the enforcement of the
provisions of this section, including the ordering of parties,
and insurers, if any, to the dispute resolution process with
settlement authority.
h) A petition filed pursuant to 1375(n) shall be filed in the
superior court in the county in which the project is located.
The court shall hear and decide the petition within ten (10)
days after filing. The petitioning party shall serve the
petition on all parties, including the date, time, and location
of the hearing no later than five business days prior to the
hearing. Any responsive papers shall be filed and served no
later than three business days prior to the hearing. Any
petition or response filed under this section shall be no
more than three pages in length.
i) All parties shall meet with the dispute resolution facilitator,
if one has been appointed and confer in person or by the
telephone prior to the filing of that petition to attempt to
resolve the matter without requiring court intervention.
1375(n).
(25.) Procedures for Filing Complaint Following Calderon Process
Section 1375.05 also has been added to the Civil Code, which
provides:
a) Upon the completion of the mandatory prefiling dispute
resolution process described in 1375, if the parties have not
settled the matter, the association or its assignee may file a
complaint in the superior court in the county in which the
project is located. Those matters shall be given trial
priority.
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63
b) In assigning trial priority, the court shall assign the earliest
possible trial date, taking into consideration the pretrial
preparation completed pursuant to 1375, and shall deem the
complaint to have been filed on the date of service of the
Notice of Commencement of Legal Proceeding described
under 1375.
c) Any respondent, subcontractor, or design professional who
received timely prior notice of the inspections and testing
conducted under 1375 shall be prohibited from engaging in
additional inspection or testing, except if all of the
following specific conditions are met, upon motion to the
court:
1) There is an insurer for a subcontractor or design
professional that did not have timely notice that
legal proceedings were commenced under 1375 at
least thirty (30) days prior to the commencement of
inspections or testing pursuant to paragraph (6) of
subdivision (h) of 1375.
2) The insurer’s insured did not participate in any
inspections or testing conducted under the
provisions of paragraph (6) of subdivision (h) of
1375.
3) The insurer has, after receiving notice of a
complaint filed in superior court under subdivision
(a), retained separate counsel, who did not
participate in the 1375 dispute resolution process, to
defend its insured as to the allegations in the
complaint.
4) It is reasonably likely that the insured would suffer
prejudice if additional inspections or testing are not
permitted.
5) The information obtainable through the proposed
additional inspections or testing is not available
through any reasonable alternative sources.
If the court permits additional inspections or testing upon
finding that these requirements are met, any additional
PROPERTY OF RESNICK & LOUIS, P.C.
64
inspections or testing shall be limited to the extent
reasonably necessary to avoid the likelihood of prejudice
and shall be coordinated among all similarly situated
parties to ensure that they occur without unnecessary
duplication. For purposes of providing notice to an insurer
prior to inspections or testing under paragraph (6) of
subdivision (h) of 1375, if notice of the proceedings was
not provided by the insurer’s insured, notice may be made
via certified mail either by the subcontractor, design
professional, association, or respondent to the address
specified in the Statement of Insurance provided under
paragraph (2) of subdivision (e) of 1375. Nothing herein
shall affect the rights of an intervenor who files a complaint
in intervention. If the association alleges defects that were
not specified in the prefiling dispute resolution process
under 1375, the respondent, subcontractor, and design
professionals shall be permitted to engage in testing or
inspection necessary to respond to the additional claims. A
party who seeks additional inspections or testing based
upon the amendment of claims shall apply to the court for
leave to conduct those inspections or that testing. If the
court determines that it must review the defect claims
alleged by the association in the prefiling dispute resolution
process in order to determine whether the association
alleges new or additional defects, this review shall be
conducted in camera. Upon objection of any party, the
court shall refer the matter to a judge other than the
assigned trial judge to determine if the claim has been
amended in such a way as to require additional testing or
inspection.
d) Any subcontractor or design professional who had notice of
the facilitated dispute resolution conducted under 1375 but
failed to attend, or attended without settlement authority,
shall be bound by the amount of any settlement reached in
the facilitated dispute resolution in any subsequent trial,
although the affected party may introduce evidence as to
the allocation of the settlement. Any party who failed to
participate in the facilitated dispute resolution because the
party did not receive timely notice of the mediation shall be
relieved of any obligation to participate in the settlement.
Notwithstanding any privilege applicable to the prefiling
dispute resolution process provided by 1375, evidence may
PROPERTY OF RESNICK & LOUIS, P.C.
65
be introduced by any party to show whether a subcontractor
or design professional failed to attend or attended without
settlement authority. The binding effect of this subdivision
shall in no way diminish or reduce a nonsettling
subcontractor or design professional’s right to defend itself
or assert all available defenses relevant to its liability in any
subsequent trial. For purposes of this subdivision, a
subcontractor or design professional shall not be deemed to
have attended without settlement authority because it
asserted defenses to its potential liability.
e) Notice of the facilitated dispute resolution conducted under
1375 must be mailed by the respondent no later than 20
days prior to the date of the first facilitated dispute
resolution session to all parties. Notice shall also be mailed
to each of these parties’ known insurance carriers. Mailing
of this notice shall be by certified mail. Any subsequent
facilitated dispute resolution notices shall be served by any
mean reasonably calculated to provide those parties actual
notice.
f) As to the complaint, the order of discovery shall, at the
request of any defendant, except upon a showing of good
cause, permit the association’s expert witnesses to be
deposed prior to any percipient party depositions. The
depositions shall, at the request of the association, be
followed immediately by the defendant’s experts and then
by the subcontractors’ and design professionals’ experts,
except on a showing of good cause. For purposes of this
section, in determining what constitutes “good cause,“ the
court shall consider, among other things, the goal of early
disclosure of defects and whether the expert is prepared to
render a final opinion, except that the court may modify the
scope of any expert’s deposition to address those concerns.
g) (1) The only method of seeking judicial relief for the failure
of the association or the respondent to complete the dispute
resolution process under 1375 shall be the assertion, as
provided for in this subdivision, of a procedural deficiency
to an action for damages by the association against the
respondent after that action has been filed. A verified
application asserting a procedural deficiency shall be filed
with the court no later than 90 days after the answer to the
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66
plaintiff’s complaint has been served, unless the court finds
that extraordinary conditions exist. (2) Upon the verified
application of the association or the respondent alleging
substantial noncompliance with 1375, the court shall
schedule a hearing within twenty-one (21) days of the
application to determine whether the association or
respondent has substantially complied with this section.
The issue may be determined upon affidavits or upon oral
testimony, in the discretion of the court. (3)(A) If the court
finds that the association or the respondent did not
substantially comply with this paragraph, the court shall
stay the action for up to ninety (90) days to allow the
noncomplying party to establish substantial compliance.
The court shall set a hearing within ninety (90) days to
determine substantial compliance. At any time, the court
may, for good cause shown, extend the period of the stay
upon application of the noncomplying party. 3(B) If, within
the time set by the court pursuant to this paragraph, the
association or the respondent has not established that it has
substantially complied with this section, the court shall
determine if, in the interest of justice, the action should be
dismissed without prejudice, or if another remedy should
be fashioned. Under no circumstances shall the court
dismiss the action with prejudice as a result of the
association’s failure to substantially comply with this
section. In determining the appropriate remedy, the court
shall consider the extent to which the respondent has
complied with this section.
h) This section shall become operative on July 1, 2002;
however, it shall not apply to any pending action or
proceeding.
i) This section shall become inoperative on July 1, 2010, and,
as of January 1, 2011, is repealed, unless a later enacted
statute that is enacted before January 1, 2011, deletes or
extends the dates on which it becomes inoperative and is
repealed.
(26.) The Calderon Process is a “Suit” For a CGL Policy. The Calderon
process triggers the duty to defend. Clarendon America Insurance
Company v. StarNet Insurance Company.
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4. Nevada (Chapter 40)
(a.) Introduction. Residential construction defect claims in Nevada are
governed by Nevada Revised Statutes 40.600-40.695, often referred to as
“Chapter 40.” This statutory scheme has enabled plaintiffs to enjoy a very
friendly construction defect jurisdiction. Many insurance companies have
paid premiums in Nevada out of fear that the Chapter 40 “entitlements”
(damages) could explode the exposure well in excess of what it would cost
to repair the home.
Nevada passed the Homeowner Protections Act of 2015, A.B. 125, 78th
Regular Session (Nev. 2015), enacted Feb. 24, 2015, which marks a
dramatic shift toward a more level construction defect playing field.
Incorporated into the existing Chapter 40 laws and related statutes, this
legislation includes the following changes to Nevada’s construction defect
scheme:
(1.) Voids indemnity provisions in which a subcontractor would be
required to indemnify a general contractor for the general
contractor’s fault;
(2.) Prohibits the award of attorneys’ fees as damages;
(3.) Costs are only recoverable if incurred for construction defects
actually proven by the homeowner, not merely alleged;
(4.) Prohibits homeowners’ associations from bringing construction
defect claims that are not related to the common elements of the
community;
(5.) Creates a single 6-year statute of repose for all construction
defects, eliminating the tiered and lengthy statutes of repose for
known defects, latent defects, and patent defects;
(6.) Mandates a warranty claim and denial before presenting a Chapter
40 notice or filing a construction defect claim;
(7.) Eliminates the ability of a homeowner or homeowners to present a
single Chapter 40 notice on behalf of all similarly situated (and
unnamed) homeowners in a single development for common
construction defects;
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(8.) Requires each homeowner presenting a claim in a Chapter 40
notice to sign a verified statement confirming the truth of the
allegations contained therein;
(9.) Mandates that homeowners (and their experts) specifically identify
each defect and damage and its location, rather than simply
describing the defect in reasonable detail;
(10.) Mandates that homeowners (and their experts) be present at any
inspection, and specifically identify each defect and damage and its
location;
(11.) Requires general contractors covered as an additional insured
under a subcontradctor’s CGL insurance policy to seek coverage
under that AI policy prior to pursuing a claim against the
subcontractor;
(12.) Establishes disclosure requirements for WRAP/OCIP policies;
(13.) Clarifies that pre-litigation offers of judgment are allowed, and
their procedure.
It is important to note that the provisions of A.B. 125 generally only apply
to residential construction contracts, claims, notices, and inspections that
arise or take place on or after the effective date, Feb. 24, 2015. The only
exception is that the time period within the new statute of repose applies
retroactively to actions in which the substantial completion of the
improvement to the real property occurred before the effective date.
(b.) Who is a “claimant”? NRS 40.610 “Claimant” defined. “Claimant”
means:
(1.) An owner of a residence or appurtenance;
(2.) A representative of a homeowner’s acting within the scope of the
representative’s duties pursuant to chapter 116 or 117 of NRS.
(c.) What is a “constructional defect”? NRS 40.615 “Constructional
defect” defined. “Constructional defect” means a defect in the design,
construction, manufacture, repair or landscaping of a new residence, of an
alteration of or addition to an existing residence, or of an appurtenance
and includes, without limitation, the design, construction, manufacture,
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69
repair or landscaping of a new residence, of an alteration of or addition to
an existing residence, or of an appurtenance:
(1.) Which presents an unreasonable risk of injury to a person or
property; or
(2.) Which is not completed in a good and workmanlike manner and
proximately causes physical damage to the residence, an
appurtenance or the real property to which the residence or
appurtenance is affixed.
(d.) What Defenses Can The Contractor Raise to a Constructional Defect
Claim? NRS 40.640 Liability of contractor. A contractor/subcontractor
is not liable for any damages caused by:
(1.) The acts or omissions of a person other than the contractor or the
contractor’s agent, employee or subcontractor;
(2.) The failure of a person other than the contractor or the contractor’s
agent, employee or subcontractor to take reasonable action to
reduce the damages or maintain the residence;
(3.) Normal wear, tear or deterioration;
(4.) Normal shrinkage, swelling, expansion or settlement; or
(5.) Any constructional defect disclosed to an owner before the
owner’s purchase of the residence, if the disclosure was provided
in language that is understandable and was written in underlined
and boldfaced type with capital letters.
(e.) What Potential Defendant Does Chapter 40 Apply To? Chapter 40
applies to contractors, subcontractors, suppliers and design professionals
as potential defendants. These potential defendants may be named as a
defendant in a direct claim brought by the claimant or in a third-party
claim or complaint brought by a “controlling party.”
(1.) What is a “controlling party”? A “controlling party” means a
person who owns real property involved in residential
construction, a contractor, or any other person who is to be
indemnified by a provision in a contract entered into for residential
construction. “Controlling party” includes developers and general
contractors, among others.
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(f.) Pre-Notice Warranty Requirement. NRS 40.650.
(1.) A claimant may not send a notice to a
contractor/subcontractor/supplier/design professional unless the
claimant has first submitted a claim under the homeowner’s
warranty and the insurer has denied the claim. See A.B. 125, § 14,
78th Regular Session (Nev. 2015), enacted Feb. 24, 2015.
(2.) Following the warranty procedure, the claimant’s notice may only
include claims for the constructional defects that were denied by
the homeowner’s warranty insurer. See A.B. 125, § 14, 78th
Regular Session (Nev. 2015), enacted Feb. 24, 2015.
(3.) If coverage under a homeowner’s warranty is denied by an insurer
in bad faith, the homeowner and the contractor, subcontractor,
supplier or design professional have a right of action for the sums
that would have been paid if coverage had been provided, plus
reasonable attorney’s fees and costs.
(g.) What Does The Notice from Claimants to the Potential Defendant
Need to Contain? NRS 40.645.
(1.) Include a statement that the notice is being given to satisfy the
requirements of this section;
(2.) Identify in specific detail each defect, damage and injury to each
residence or appurtenance that is the subject of the claim,
including, without limitation, the exact location of each such
defect, damage and injury;
(3.) Describe in reasonable detail the cause of the defects if the cause is
known and the nature and extent that is known of the damage or
injury resulting from the defects; and
(4.) Include a signed statement, by each named owner of a residence or
appurtenance in the notice, that each such owner verifies that each
such defect, damage and injury specified in the notice exists in the
residence or appurtenance owned by him or her. If a notice is sent
on behalf of a homeowners’ association, the statement required by
this paragraph must be signed under penalty of perjury by a
member of the executive board or an officer of the homeowners’
association.
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(h.) When is Notice NOT Required? A claimant is not required to give
notice:
(1.) When the claimant is first sued by the contractor, subcontractor,
supplier, or design professional. NRS 40.645.
(2.) When the claimant has filed a formal complaint with a law
enforcement agency against the contractor, subcontractor, supplier
or design professional for threatening to commit or committing an
act of violence or criminal offense against the claimant or the
claimant’s property. NRS 40.645.
(3.) For any party who intervenes after action is commenced. NRS
40.692.
(i.) What are the Contractor’s Responsibilities After Receipt of a Chapter
40 Notice? NRS 40.646, 40.6472.
(1.) Within thirty (30) days from when a contractor receives notice of a
constructional defect pursuant to NRS 40.645, the contractor shall
forward a copy of the notice by certified mail, return receipt
requested, to the last known address of each subcontractor,
supplier or design professional whom the contractor reasonably
believes is responsible for a defect specified in the notice.
(2.) If a contractor does not provide notice as required pursuant to
subsection 1, the contractor may not commence an action against
the subcontractor, supplier or design professional related to the
constructional defect unless the contractor demonstrates that, after
making a good faith effort, the contractor was unable to identify
the subcontractor, supplier or design professional whom the
contractor believes is responsible for the defect within the time
provided pursuant to subsection 1.
(3.) The contractor must respond to the claimant’s notice by certified
mail, return receipt requested, within ninety (90) days of receipt.
(4.) The contractor’s written response sent to the claimant must
respond to each constructional defect in the notice and:
a) Must state whether the contractor has elected to repair the
defect or cause the defect to be repaired. If an election to
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72
repair is included in the response and the repair will cause
the claimant to move from the claimant’s home during the
repair, the election must also include monetary
compensation in an amount reasonably necessary for
temporary housing or for storage of household items, or for
both, if necessary.
b) May include a proposal for monetary compensation, which
may include contribution from a subcontractor, supplier or
design professional.
c) May disclaim liability for the constructional defect and
state the reasons for such a disclaimer.
(5.) If the contractor has elected not to repair the constructional defect,
the claimant may bring a cause of action for the constructional
defect or amend a complaint to add a cause of action for the
constructional defect.
(6.) If the contractor has elected to repair the constructional defect, the
claimant must provide the contractor with a reasonable opportunity
to repair the constructional defect.
(j.) What Are the Responsibilities of a Subcontractor/Supplier/Design
Professional When They Receive the Chapter 40 Notice From the
Contractor?
(1.) Within thirty (30) days after receiving notice from the contractor
pursuant to this section, the subcontractor, supplier or design
professional shall inspect the alleged constructional defect in
accordance with NRS 40.6462 and provide the contractor with a
written statement indicating:
a) Whether the subcontractor, supplier or design professional
has elected to repair the defect for which the contractor
believes the subcontractor, supplier or design professional
is responsible; and
b) If the subcontractor, supplier or design professional elects
to repair the defect, an estimate of the length of time
required for the repair, and at least two proposed dates on
and times at which the subcontractor, supplier or design
professional is able to begin making the repair.
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(2.) If a subcontractor, supplier or design professional elects to repair
the constructional defect, the contractor or claimant may hold the
subcontractor liable for any repair which does not eliminate the
defect.
(k.) Does the Claimant Have to Allow An Inspection? NRS 40.6462.
(1.) Yes, reasonable access, upon reasonable notice, if they are the
subject of the Chapter 40 notices. The inspections must be
conducted in a manner which minimizes the inconvenience to the
claimant. NRS 40.647.
(2.) The claimant—and if the claimant’s Chapter 40 notice includes an
expert opinion, the claimant’s expert as well—must:
a) Be present at the inspection; and
b) Identify the exact location of each constructional defect
alleged in the notice.
(l.) Does the Claimant Have to Allow a Contractor, Subcontractor,
Supplier or Design Professional to Make Repairs? NRS 40.647.
(1.) Yes, if an election to repair is made pursuant to NRS 40.6472.
(m.) What Happens If the Claimant Does Not Allow Inspections and/or
Repairs? NRS 40.647.
(1.) If a claimant does not allow inspections and/or repairs, the court
shall:
a) Dismiss the action without prejudice and compel the
claimant to comply with those provisions before filing
another action; or
b) If dismissal of the action would prevent the claimant from
filing another action because the action would be
procedurally barred by the statute of limitations or statute
of repose, the court shall stay the proceeding pending
compliance with those provisions by the claimant.
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(n.) What Does the Claimant Do Once the Contractor/Subcontractor/
Supplier and/or Design Professional Responds to the Chapter 40
Notice?
(1.) If the claimant is a homeowners’ association, the association shall
send a copy of the response to each member of the association not
later than thirty (30) days after receiving the response.
(2.) If the contractor, subcontractor, supplier or design professional has
elected not to repair the constructional defect, the claimant or
contractor may bring a cause of action for the constructional defect
or amend a complaint to add a cause of action for the
constructional defect.
(o.) What Happens If the Defect Presents An Imminent Threat to Health
or Safety? NRS 40.670.
(1.) A contractor, subcontractor, supplier or design professional who
receives written notice of a constructional defect resulting from
work performed by the contractor, subcontractor, supplier or
design professional which creates an imminent threat to the health
or safety of the inhabitants of the residence shall take reasonable
steps to cure the defect as soon as practicable. The contractor,
subcontractor, supplier or design professional shall not cure the
defect by making any repairs for which such person is not licensed
or by causing any repairs to be made by a person who is not
licensed to make those repairs. If the contractor, subcontractor,
supplier or design professional fails to cure the defect in a
reasonable time, the owner of the residence may have the defect
cured and may recover from the contractor, subcontractor, supplier
or design professional the reasonable cost of the repairs plus
reasonable attorneys’ fees and costs in addition to any other
damages recoverable under any other law.
(2.) A contractor, subcontractor, supplier or design professional who
does not cure a defect pursuant to this section because such person
has determined, in good faith and after a reasonable inspection,
that there is not an imminent threat to the health or safety of the
inhabitants is not liable for attorneys’ fees and costs pursuant to
this section, except that if a building inspector, building official or
other similar authority employed by a governmental body with
jurisdiction certifies that there is an imminent threat to the health
and safety of the inhabitants of the residence, the contractor,
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subcontractor, supplier or design professional is subject to the
provisions of subsection 1.
(p.) What Happens If There Is a Defect In a New Residence? NRS 40.672.
(1.) Except as otherwise provided in NRS 40.670, if a contractor,
subcontractor, supplier or design professional receives written
notice of a constructional defect not more than 1 year after the
close of escrow of the initial purchase of the residence, the
contractor, subcontractor, supplier or design professional shall
make the repairs within 45 days after receiving the written notice
unless completion is delayed by the claimant or by other events
beyond the control of the contractor, subcontractor, supplier or
design professional, or timely completion of repairs is not
reasonably possible.
(2.) The contractor, subcontractor, supplier or design professional and
claimant may agree in writing to extend the period prescribed by
this section.
(3.) If a contractor or subcontractor fails to comply with this section,
the contractor or subcontractor is immediately subject to
disciplinary action pursuant to NRS 624.300, including license
suspension or revocation.
(q.) What Happens If the Contractor/Subcontractor/Supplier/Design
Professional Elects to Repair? NRS 40.648.
They must be bonded and insured to perform the repairs and, if such
person is not, the repairs may be performed by another person who meets
those qualifications.
(1.) The repairs must be performed:
a) On reasonable dates and at reasonable times agreed to in
advance with the claimant;
(2.) In compliance with any applicable building code and in a good and
workmanlike manner in accordance with the generally accepted
standard of care in the industry for that type of repair; and
(3.) In a manner which will not increase the cost of maintaining the
residence or appurtenance than otherwise would have been
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required if the residence or appurtenance had been constructed
without the constructional defect, unless the contractor and the
claimant agree in writing that the contractor will compensate the
claimant for the increased cost incurred as a result of the repair.
(4.) Any part of the residence or appurtenance that is not defective but
which must be removed to correct the constructional defect must
be replaced.
(5.) The contractor, subcontractor, supplier or design professional shall
prevent, remove and indemnify the claimant against any
mechanics’ liens and materialmen’s liens.
Not later than 30 days after the repairs are completed, the contractor,
subcontractor, supplier or design professional who repaired or caused the
repair of a constructional defect shall provide the claimant with a written
statement describing the nature and extent of the repair, the method used
to repair the constructional defect and the extent of any materials or parts
that were replaced during the repair.
(r.) Can the Contractor/Subcontractor/Supplier/Design Professional
Obtain a Release for Repairs? NRS 40.648.
Any election to repair made pursuant to NRS 40.6472 may not be made
conditional upon a release of liability.
(s.) Subsequent Law Suit Based Upon Repairs (Not Applicable to 40.648
and 60.6472 Elections of Repairs). NRS 40.667.
A written waiver or settlement agreement executed by a claimant after a
contractor has corrected or otherwise repaired a constructional defect does
not bar a claim for the constructional defect if it is determined that the
contractor failed to correct or repair the defect properly. However, the
claimant must also: obtain the opinion of an expert concerning the
constructional defect; have provided the contractor with a written notice of
the defect pursuant to NRS 40.645 and a copy of the expert’s opinion; and
claimant and the contractor have complied with the requirements for
inspection and repair as provided in NRS 40.600 to 40.695, inclusive.
The provisions of this section do not apply to repairs which are made
pursuant to an election to repair pursuant to NRS 40.6472.
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If a claimant does not prevail in any action which is not barred pursuant to
this section, the court may: (a) Deny the claimant’s attorneys’ fees, fees
for an expert witness or costs; and (b) Award attorneys’ fees and costs to
the contractor.
(t.) What Happens If the Claimant Rejects a Financial Offer to Settle?
NRS 40.650.
(1.) If a claimant unreasonably rejects a reasonable written offer of
settlement, the court may:
a) Deny the claimant’s attorneys’ fees and costs; and
b) Award attorneys’ fees and costs to the contractor.
1) Any sums paid under a homeowner’s warranty, other
than sums paid in satisfaction of claims that are
collateral to any coverage issued to or by the contractor,
must be deducted from any recovery.
Written Offers of Settlement. NRS 40.660. A written financial offer of
settlement made that is not accepted within 35 days after the offer is
received by the claimant is considered rejected if the offer contains a clear
and understandable statement notifying the claimant of the consequences
of the claimant’s failure to respond or otherwise accept or reject the offer
of settlement. An affidavit certifying rejection of an offer of settlement
under this section may be filed with the court.
(u.) What Happens if the Contractor, Subcontractor, Supplier or Design
Professional Does Not Comply with Chapter 40, Including Timely
Responses ? NRS 40.650.
If a contractor, subcontractor, supplier or design professional fails to:
(1.) Comply with the provisions of NRS 40.6472;
(2.) Make an offer of settlement;
(3.) Make a good faith response to the claim asserting no liability;
(4.) Agree to a mediator or accept the appointment of a mediator
pursuant to NRS 40.680; or
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(5.) Participate in mediation,
THEN the limitations on damages and defenses to liability provided in
NRS 40.600 to 40.695, inclusive, and sections 2 and 3 of A.B. 125, 78th
Regular Session (Nev. 2015), enacted Feb. 24, 2015, do not apply and the
claimant may commence an action or amend a complaint to add a cause of
action for a constructional defect without satisfying any other requirement
of NRS 40.600 to 40.695, inclusive).
(v.) Can The Contractor/Subcontractor/Supplier/Design Professional
Make an Offer of Judgment After Chapter 40 Timeframe Within
Litigation? NRS 40.650.
(1.) Yes.
(w.) What Are the Insurance Company’s Responsibilities During the
Chapter 40 Notice Phase? NRS 40.649.
If the contractor, subcontractor, supplier or design professional presents
the claim to the insurer pursuant to this section, the insurer:
(1.) Must treat the claim as if a civil action has been brought against
the contractor, subcontractor, supplier or design professional; and
(2.) Must provide coverage to the extent available under the policy of
insurance as if a civil action has been brought against the
contractor, subcontractor, supplier or design professional.
(3.) A contractor, subcontractor, supplier or design professional is not
required to present a claim to the insurer pursuant to this section,
and the failure to present such a claim to the insurer does not
relieve the insurer of any duty under the policy of insurance to the
contractor, subcontractor, supplier or design professional.
(x.) What Damages Are the Claimants Entitled To? NRS 40.655.
(1.) Reasonable cost of necessary repairs.
(2.) Reduction in market value, to the extent caused by structural
failure. “Structural failure” means physical damage to the load-
bearing portion of a residence or appurtenance caused by a failure
of the load-bearing portion of the residence or appurtenance.
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(3.) Loss of use.
(4.) Reasonable value of any personal property damaged by the
constructional defect.
(5.) Any additional costs, including expert witness fees and costs that
are reasonably incurred for constructional defects actually proven
by the claimant, not merely alleged. See A.B. 125, § 15, 78th
Regular Session (Nev. 2015), enacted Feb. 24, 2015.
(6.) Interest provided by statute.
(7.) Claimant may not recover attorneys’ fees. See A.B. 125, § 15,
78th Regular Session (Nev. 2015), enacted Feb. 24, 2015.
If a contractor complies with the provisions of NRS 40.600 to 40.695,
inclusive, and sections 2 and 3 of A.B. 125, 78th Regular Session (Nev.
2015), enacted Feb. 24, 2015, the claimant may not recover from the
contractor, as a result of the constructional defect, anything other than the
damages authorized above.
(y.) Is Mediation Required Before Claimant Files a Construction Defect
Law Suit? NRS 40.680.
(1.) Yes, the matter must be submitted to mediation, unless mediation
is waived in writing by the contractor, subcontractor, supplier or
design professional and the claimant. Claimant and Respondent
must agree on the mediator within twenty (20) days of plaintiff’s
designation of a mediator.
(2.) A report issued by a mediator or special master that indicates that a
party has failed to appear before the mediator or special master or
to mediate in good faith is admissible in the action, but a statement
or admission made by a party in the course of mediation is not
admissible.
(3.) Not later than fifteen (15) days before the commencement of
mediation required pursuant to NRS 40.680 and upon providing
fifteen (15) days’ notice, each party shall provide to the other
party, or shall make a reasonable effort to assist the other party to
obtain, all relevant reports, photos, correspondence, plans,
specifications, warranties, contracts, subcontracts, work orders for
repair, videotapes, technical reports, soil and other engineering
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reports and other documents or materials relating to the claim that
are not privileged.
(z.) Does Chapter 40 Require Insurance Company Claims Professionals
To Attend Settlement Conferences? Yes, but only on order from special
master or judge presiding over claim. NRS 40.684.
(1.) If a settlement conference is held concerning a claim for a
constructional defect, the special master, if any, or the judge
presiding over the claim may order a representative of an insurer
of a party to attend the settlement conference.
(2.) Any insurance company that conducts business in Nevada and that
insures a party against liability for the claim shall be deemed to
have consented to the jurisdiction of the special master or the
judge.
(3.) If a representative of an insurer is ordered to attend the settlement
conference, the insurer shall ensure that the representative is
authorized, on behalf of the insurer, to:
a) Bind the insurer to any settlement agreement relating to the
claim;
b) Enter into any agreement relating to coverage that may be
available under the party’s policy of insurance which is
required to carry out any settlement relating to the claim;
and
c) Commit for expenditure money or other assets available
under the party’s policy or insurance.
(aa.) What Happens If the Insurance Company Fails to Attend the
Settlement Conference and/or Attends Not In Good Faith? NRS
40.684.
(1.) If a representative of an insurer who is ordered to attend a
settlement conference pursuant to subsection 1 fails to attend the
settlement conference or attends but is substantially unprepared to
participate, or fails to participate in good faith, the special master
or the judge may, on the special master’s or the judge’s own
motion or that of a party, issue any order with regard thereto that is
just under the circumstances.
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(2.) In lieu of or in addition to any other sanction, the special master or
the judge may require the insurer to pay any reasonable expenses
or attorneys’ fees incurred by a party because of the failure of the
insurer or its representative to comply with the provisions of this
section or any order issued pursuant to this section, unless the
special master or the judge finds that the failure to comply was
substantially justified or that any other circumstances make the
award of such expenses or fees unjust.
(bb.) Are Respondents Required to Disclose The Insurance Policies? Yes.
NRS 40.687.
(1.) The contractor shall, no later than ten (10) days after a response to
a notice is made pursuant to Chapter 40, disclose to the claimant
any information about insurance agreements that may be
obtained by discovery pursuant to Rule 26(b)(2) of the Nevada
Rules of Civil Procedure. Such disclosure does not affect the
admissibility at trial of the information disclosed. Failure to
produce can lead to sanctions, including attorneys’ fees and costs.
The parties may agree to an extension of time to produce the
information required pursuant to this section.
(2.) “Information about insurance agreements” is limited to any
declaration sheets, endorsements and contracts of insurance issued to the contractor from the commencement of construction of
the residence of the claimant to the date on which the request for
the information is made and does not include information
concerning any disputes between the contractor and an insurer or
information concerning any reservation of rights by an insurer.
(cc.). Does a Chapter 40 Notice Toll The Statutes of Limitations and
Repose? Yes. NRS 40.695.
(1.) Statutes of limitation or repose are tolled from the time notice of
the claim is given until the earlier of:
a) One year after notice of the claim is given, see A.B. 125, §
16, 78th Regular Session (Nev. 2015), enacted Feb. 24,
2015; or
b) Thirty (30) days after mediation is concluded or waived in
writing pursuant to NRS 40.680.
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(2.) Statutes of limitation and repose may be tolled under this section
for a period longer than one year after notice of the claim is given
only if, when the applicable statute of limitation or repose has
expired, the claimant demonstrates to the court’s satisfaction that
good cause exists to toll the statutes of limitation and repose for a
longer period.
(3.) Tolling under this section applies to a third party regardless of
whether the party is required to appear in the proceeding.
(dd.) Can a Claimant Send a Single Notice On Behalf Of/Relating To All
Similarly Situated Homeowners in a Single Development for Common
Constructional Defects? No. See A.B. 125, 78th Regular Session (Nev.
2015), enacted Feb. 24, 2015, repealing NRS 40.6452.
A claimant may not send a single notice on behalf of or relating to all
similarly situated homeowners in a single development for common
constructional defects. Previously, Nevada used to allow this practice
under NRS 40.6452, but that statute was repealed in February 2015 under
Assembly Bill 125.
To satisfy the requirements of Chapter 40, each homeowner wishing to
bring a claim for constructional defects must send a notice with a signed
verification statement, identifying in specific detail each defect, damage,
and injury and the exact location of same, pursuant to NRS 40.645.
5. New Mexico – Inapplicable.
6. Utah – Inapplicable.
F. Joint & Several Liability/Several Liability & Comparative Fault
1. What are the differences between Joint, Joint and Several, and Several?
(a.) Joint liability. If parties have joint liability, then they are each liable up to
the full amount of the relevant obligation. So if a married couple take a
loan from a bank, the loan agreement will normally provide that they are
to be “jointly liable“ for the full amount. If one party dies, disappears or is
declared bankrupt, the other remains fully liable. Accordingly, the bank
must sue all living co-promisors, for the full amount. However, in suing,
the creditor has only one course of action, i.e., the creditor can sue for
each debt only once. If, for example, there are three partners, and the
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creditor sues all of them for the outstanding loan amount and one of them
pays the liability, the creditor cannot recover further amounts from the
partners who did not contribute to the liability.
(b.) Several liability. The converse is several or proportionate liability, where
the parties are liable for only their respective obligations. A common
example of several liability is in syndicated loan agreements, which will
normally provide that each bank is severally liable for its own part of the
loan. If one bank fails to advance its agreed part of the loan to the
borrower, then the borrower can sue only that bank, and the other banks in
the syndicate have no liability.
(c.) Joint and several liability. Under joint and several liability or all sums, a
claimant may pursue an obligation against any one party as if they were
jointly liable and it becomes the responsibility of the defendants to sort out
their respective proportions of liability and payment. This means that if the
claimant pursues one defendant and receives payment, that defendant must
then pursue the other obligors for a contribution to their share of the
liability.
2. Arizona
(a.) ARS 12-2506 – Joint and Several Liability is mostly abolished in Arizona.
Arizona is a several liability state except with respect to limited
circumstances such as acting in concert. Contribution is rare because only
applicable to joint obligations, not several. Contribution does not exist for
intentional acts.
(b.) Pure Comparative – Arizona is a pure comparative fault jurisdiction. This
means that the plaintiff can be 99% at fault, and still collect damages for
1% of the defendant’s fault.
(c.) Non Parties At Fault Liability Considered By Trier of Fact – In assessing
percentages of fault the trier of fact shall consider the fault of all persons
who contributed to the alleged injury, death or damage to property,
regardless of whether the person was, or could have been, named as a
party to the suit. Negligence or fault of a nonparty may be considered if
the plaintiff entered into a settlement agreement with the nonparty or if the
defending party gives notice before trial, in accordance with requirements
established by court rule, that a nonparty was wholly or partially at fault.
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(1.) Assessment of fault against nonparties does not subject any
nonparty to liability in this or any other action and it may
not be introduced as evidence of liability in any action.
(2.) Non-Party Designations must be set forth within 150 Days
of the Answer unless good cause shown.
(1.) ARS 12-2602 certification necessary if a non-party
licensed professional is designated.
(d.) Several Liability Applies in Strict Liability Claims. In State Farm
Insurance Cos. v. Premier Manufactured Systems Inc., the Arizona
Supreme Court recently held that the legislature’s abolishment of joint and
several liability extends to strict product liability actions and to each
separate defendant in the chain of manufacture and distribution of a
product. Consequently plaintiffs, not defendants, also bear the risk of
insolvent joint tortfeasors in strict liability actions.
3. Colorado
(a.) Several Liability – CRS 12-21-111.5. Colorado is mostly a several liability
jurisdiction. Joint and several liability is limited by statute. Section 13-21-
111.5(4), C.R.S. imposes joint liability on “two or more persons who
consciously conspire and deliberately pursue a common plan or design to
commit a tortious act.” Those held jointly liable have a right of
contribution from other defendants “acting in concert.” Section 13-21-
111.5(4). Those held jointly liable are liable only for the percentage of
fault assigned to those persons who are held to be jointly liable. Section
13-21-111.5(4).
(b.) Modified Comparative Fault – Colorado has adopted a system of modified
comparative fault. Generally, in an action brought as a result of a death or
injury to person or property, no defendant is liable for an amount greater
than that represented by the percentage of fault attributable to that
defendant. CRS 13-21-111.5(1).
(1.) When there is evidence credited by the fact finder that the plaintiff
is also at fault, the plaintiff will be barred from recovery if the
plaintiff’s fault is equal to or greater than that of the defendant or
the combined fault of the defendants and designated non-parties at
fault. CRS13-21-111(1) & 13-21-111.5(3)(a), Therefore, if the trier
of fact assigns 50% or greater fault to the plaintiff, the plaintiff
may not recover. When the fact finder assigns less than 50% fault
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to the plaintiff, the plaintiff may recover. CRS 13-21-111(1). This
means that a 50/50 verdict is a defense verdict, and the plaintiff
cannot recover. When a plaintiff assigned less than 50% of fault,
the amount of the plaintiff’s recovery is reduced by the percentage
of his or her fault. CRS 13-21-111(1).
(c.) Non Parties at Fault – Parties that are immune from liability may
nevertheless be designated as non-parties at fault and assigned a
percentage of fault.
(1.) Must designate non parties at fault “within ninety days following
commencement of the action unless the court determines that a
longer period necessary.”
(2.) Must provide a “brief statement of the basis for believing such
non-party to beat at fault.”
(3.) Must ensure that your brief statement “would satisfy all the
elements of a negligence claim.” Redden v. SCI Colo. Funeral
Servs., Inc.
(4.) If the non-party designated is a licensed professional or a company
that employs licensed professionals where proof of fault will
require establishing professional negligence through expert
testimony, then you must also file a certificate of review. CRS 13-
20-602.
4. California
(a.) Joint and Several for Economic Loss; Several Liability for Non-Economic
Loss.
(1.) 1430. An obligation imposed upon several persons, or a right
created in favor of several persons, may be: (1) joint; (2) several;
or 3. joint and several.
(2.) 1431. Joint Liability: An obligation imposed upon several persons,
or a right created in favor of several persons, is presumed to be
joint, and not several, except as provided in Section 1431.2, and
except in the special cases mentioned in the title on the
interpretation of contracts. This presumption, in the case of a right,
can be overcome only by express words to the contrary.
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(3.) 1431.2. Several Liability for Non-economic Damages
In any action for personal injury, property damage, or wrongful
death, based upon principles of comparative fault, the liability of
each defendant for non-economic damages shall be several only
and shall not be joint. Each defendant shall be liable only for the
amount of non-economic damages allocated to that defendant in
direct proportion to that defendant’s percentage of fault, and a
separate judgment shall be rendered against that defendant for that
amount.
For purposes of this section, the term “economic damages” means
objectively verifiable monetary losses including medical expenses,
loss of earnings, burial costs, loss of use of property, costs of repair
or replacement, costs of obtaining substitute domestic services,
loss of employment and loss of business or employment
opportunities.
For the purposes of this section, the term “non-economic damages”
means subjective, non-monetary losses including, but not limited
to, pain, suffering, inconvenience, mental suffering, emotional
distress, loss of society and companionship, loss of consortium,
injury to reputation and humiliation.
(4.) 1432. Except as provided in Section 877 of the Code of Civil
Procedure, a party to a joint, or joint and several obligations, who
satisfies more than his share of the claim against all, may require
proportionate contribution from all the parties joined with him.
(5.) Leung v. Verdugo Hills Hospital. The California Supreme Court in
August, 2012, abandoned the common law “release rule,“ which
holds that a plaintiff who settles with one joint tortfeasor releases
all the others from liability. For good measure, the court went on to
hold that even when a plaintiff settles with one defendant for a
disproportionately small amount, he can recover the full amount of
any subsequent judgment against other defendants, minus only a
setoff for the settlement. Holding otherwise would be inconsistent
with California’s joint and several liability laws and could lead to
harsh results for plaintiffs, Justice Joyce Kennard wrote for a
unanimous Court.
(f.) Pure Comparative Fault – California has adopted a pure comparative
negligence system.
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5. Nevada.
(a.) Nevada has adopted modified comparative fault. There is no recovery if
the Plaintiff’s liability is greater than the liability of the defendant. NRS
41.141. On a 50/50 split of liability between Plaintiff and Defendant,
Plaintiff will recover but the damages will be reduced by 50%.
(b.) When comparative fault is asserted as a defense, defendants are severally
liable….only liable for their own percentages of fault/negligence.
Exceptions to this general rule include actions based upon: (1) strict
liability, (2) intentional torts, (3) discharge of toxic or hazardous
substances, (4) the concerted acts of the defendants, or (5) an injury
resulting from a product which is manufactured, distributed, sold or used
in the state for which joint and several liability applies. NRS 41.141(5)
(c.) Cafe Moda v. Palma: The Nevada Supreme Court held that a negligent
defendant in a tort action is only severally liable for a plaintiff’s damages,
even when other defendants committed intentional torts.
(d.) Humphreys v. Eighth Judicial Dist. Court
(1.) Humphreys v. Eighth Judicial Dist. Court
a) Negligent defendant tortfeasor cannot compel plaintiff
under Nev. R. Civ. P. 19 (Necessary and Indispensible
Parties) to join an intentional tortfeasor in the litigation
who is absent from the litigation.
b) Negligent defendant tortfeasor can implead intentional
tortfeasor.
6. New Mexico
(a.) Several Liability – 41-3A-1. Several Liability.
(1.) In any cause of action to which the doctrine of comparative fault
applies, the liability of any such defendants shall be several.
a) In causes of action to which several liability applies, any
defendant who establishes that the fault of another is a
proximate cause of a plaintiff’s injury shall be liable only
for that portion of the total dollar amount awarded as
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damages to the plaintiff that is equal to the ratio of such
defendant’s fault to the total fault attributed to all persons,
including plaintiffs, defendants and persons not party to the
action.
b) No defendant who is severally liable shall be entitled to
contribution from any other person.
c) Nothing in this section shall be construed to affect or
impair any right of indemnity or contribution arising out of
any contract of agreement or any right of indemnity
otherwise provided by law.
(2.) Joint and Several Exceptions:
a) To any person or persons who acted with the intention of
inflicting injury or damage;
b) to any persons whose relationship to each other would
make one person vicariously liable for the acts of the other,
but only to that portion of the total liability attributed to
those persons;
c) to any persons strictly liable for the manufacture and sale of
a defective product, but only to that portion of the total
liability attributed to those persons; or
d) to situations not covered by any of the foregoing and
having a sound basis in public policy.
(3.) Pure Comparative Fault – In Scott v. Rizzo, the Supreme Court of
New Mexico adopted the pure form of comparative negligence.
Thus, a claimant’s negligence will never bar recovery but, instead,
will only reduce the claimant’s recovery in proportion to his fault.
7. Utah
(a.) Utah has eliminated joint and several liability. Utah Code Ann. § 78B-5-
818. Utah Code Ann. §§ 78B-5-818 and 820 provides that a defendant can
only be liable for its own fault and not for the fault of any other party.
Fault is to be assigned to responsible persons, even if they are not
defendants. Utah Code Ann. § 78B-5-819.
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(b.) Modified Comparative Fault:
A person seeking recovery may recover from any defendant or
group of defendants whose fault, combined with the fault of
persons immune from suit and nonparties to whom fault is
allocated, exceeds the fault of the person seeking recovery.
Utah Code Ann. § 78B-5-818(2)
G. Statutes of Limitations
1. Negligence/Property Damage
(a.) Arizona – Two years ARS 12-542
(b.) Colorado – Two years CRS 13-80-102(1) and Three Years for Automobile
Cases 13-80-101(n).
(1.) Two years construction professionals CRS 13-80-104
(2.) Repair Doctrine inapplicable for tolling. Smith v. Executive
Custom Home Inc.
(c.) California – Two years. CCCP 339.
(1.) See SB-800 for Residential CD claims pertaining to specific
construction deficiencies.
(d.) Nevada – Two years. NRS 11.190(4)(e).
(e.) New Mexico – Four years for property damage (NMSA 37-1-4) and three
years for personal injury (NMSA 37-1-8).
(f.) Utah – Four years for personal injury. Utah Code Ann. 78B-2-307. Three
years for property damage. Utah Code Ann. 78B-2-305. The statute of
limitations for damages “caused by wildland fire” is six years. Utah Code
Ann. 78B-2-309. Unless “based in contract or warranty,” an “action
related to improvements in real property . . . shall be commenced within
two years from the earlier date of discovery of a cause of action or the date
upon which a cause of action should have been discovered through
reasonable diligence.” See Utah Code Ann. 78B-2-225(3). However, the
cause of action does not accrue until the improvement is completed or
abandoned. See Utah Code Ann. 78B-2-225(3)(b).
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2. Product Liability
(a.) Arizona – Two years personal injury/property damage 12-542
(b.) Colorado – Two Years CRS 13-80-102
(1.) Claimant discovers or should have discovered physical
manifestation of a defect.
(2.) 13-80-106. Limitation of actions against manufacturers or sellers
of products is two years.
(3.) 13-80-107. Limitation of actions against manufacturers, sellers, or
lessors of new manufacturing equipment is two years.
(c.) California – Two years. CCCP 339.
(d.) Nevada – Four years. NRS 11.190(2)(a).
(e.) New Mexico – Three years. NMSA 37-1-8
(f.) Utah –Two years. Utah Code Ann. § 78B-6-706.
3. Breach of Oral Contract
(a.) Arizona – Three years ARS 12-543
(b.) Colorado – Three years CRS 13-80-101(1)(a)
(c.) California – Two years. CCCP 339
(d.) Nevada – Four years. NRS 11.190(2)(c)
(e.) New Mexico – Four years NMSA 37-1-4
(f.) Utah – Four years. Utah Code Ann. 78B-2-307.
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4. Common Law Fraud
(a.) Arizona – Three years ARS 12-543
(b.) Colorado – Three years. CRS13-80-101(1)(c)
(c.) California – Three years. CCCP 338(b).
(d.) Nevada – Three years. NRS 11.190(3)(d).
(e.) New Mexico – Four years. NMSA 37-1-4
(f.) Utah – Three years. Utah Code Ann. 78B-2-305. Unless “based in contract
or warranty,” an “action related to improvements in real property . . . shall
be commenced within two years from the earlier date of discovery of a
cause of action or the date upon which a cause of action should have been
discovered through reasonable diligence.” See Utah Code Ann. 78B-2-
225(3). However, the cause of action does not accrue until the
improvement is completed or abandoned. See Utah Code Ann. 78B-2-
225(3)(b).
5. Breach of Written Contract
(a.) Arizona – Six years ARS 12-546
(b.) Colorado – Three years CRS 13-80-101(1)(a)
(c.) Six years for recovery of liquidated debt CRS 13-80-103.5
(d.) California – Four years. CCCP 337.
(e.) Nevada – Six years. NRS 11.190(1)(b)
(f.) New Mexico – Six years. NMSA 37-1-3
(g.) Utah – Six years. Utah Code Ann. 78B-2-309. Unless a contract or
warranty states otherwise, an “action related to improvements in real
property . . . based in contract . . . shall be commenced within six years of
the date of completion of the improvement or abandonment of
construction.” See Utah Code Ann. 78B-2-225(3)(a)
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(1.) Willis v. DeWitt (2015) – By its plain language, this Statute “bars
all actions after a specified period of time has run from the
occurrence of some event other thn the occurrence of an injury.”
Therefore, this is a Statute of Repose, and not subject to a
discovery rule.
6. Uniform Commercial Code Breach of Contract for Sale of Goods (Some states the
time limitations can be shortened in the contract).
(a.) Arizona – Four years ARS 12-544; ARS. 47-2725
(b.) Colorado – Three years CRS 13-80-101(1)(a)
(c.) California – Four years. California Commercial Code Section 2725
(d.) Nevada – Four years. NRS 104.2725
(e.) New Mexico – Four Years NMSA § 55-2-725
(f.) Utah – Four years. Utah Code Ann. 70A-2-725(1).
7. Indemnification/Contribution
(a.) Arizona – Could be 6 years if contractual indemnity, but no case law
directly on point. 4 years is catch-all Statute of Limitations. 3 years is oral
contract. We recommend using 3 years for implied indemnity or oral
agreement. If contractual indemnity, we recommend that 4 years be used.
With respect to equitable indemnity, we recommend no more than 3 years,
but 2 years if really equitable subrogation for property damage/bodily
injury.
(1.) Contribution. The statute of limitations for contribution actions is
governed by ARS § 12-2503 (2008).
a) After judgment. Where a judgment has been issued for the
injury or wrongful death against a tortfeasor seeking
contribution, any separate action by him to enforce
contribution must commence within one (1) year after the
judgment has become final by lapse of time for appeal or
after appellate review. A.R.S. § 12-2503(C) (2008).
b) Before judgment. Where a judgment has not been issued
for the injury or wrongful death against the tortfeasor
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seeking contribution, his right to contribution is barred
unless he has either: (1) discharged by payment the
common liability within the applicable statute of limitations
applicable to the claimant’s right of action against him and
has commenced his contribution action within one (1) year
after payment; or (2) agreed during a pending action to
discharge the common liability and has within one (1) year
after the agreement paid the liability and commenced his
action for contribution. A.R.S. § 12-2503(D) (2008).
(b.) Colorado
(1.) Construction Defect Cases – (Not indemnification) Subsection
CRS 13-80-104(1)(a) imposes a two-year statute of limitations,
which runs from the date on which a “claimant” discovers or
should have discovered a construction defect, on “all actions
against any architect, contractor, builder or builder vendor,
engineer, or inspector performing or furnishing the design,
planning, supervision, inspection, construction, or observation of
construction of any improvement to real property.”
(2.) Construction Defect Cases – (Indemnification/Contribution)
However, 13-80-104(1)(b) provides for a ninety day statute of
limitations for all claims, including, but not limited to indemnity or
contribution, by a claimant against a person who is or may be
liable to the claimant for all or part of the claimant’s liability to a
third person:
a) Arise at the time the third person’s claim against the
claimant is settled or at the time final judgment is entered
on the third person’s claim against the claimant, whichever
comes first; and
b) Shall be broug ht within ninety days after the claims arise,
and not thereafter.
(3.) 13-80-102(1)(i) Catch-all Statute of Limitations is 2 years.
(4.) Contribution (Non-Construction Defect) 13-50.5-104.
(5.) Enforcement
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a) Whether or not judgment has been entered in an action
against two or more tortfeasors for the same injury or
wrongful death, contribution may be enforced by separate
action.
b) Where a judgment has been entered in an action against
two or more tortfeasors for the same injury or wrongful
death, contribution may be enforced in that action by
judgment in favor of one against other judgment defendants
by motion upon notice to all parties to the action.
c) If there is a judgment for the injury or wrongful death
against the tortfeasor seeking contribution, any separate
action by him to enforce contribution must be commenced
within one year after the judgment has become final by
lapse of time for appeal or after appellate review.
d) If there is no judgment for the injury or wrongful death
against the tortfeasor seeking contribution, his right of
contribution is barred unless he has either:
1) Discharged by payment the common liability within
the statute of limitations period applicable to
claimant’s right of action against him and has
commenced his action for contribution within one
year after payment; or
2) Agreed while action is pending against him to
discharge the common liability and has within one
year after the agreement paid the liability and
commenced his action for contribution.
(c.) California – 4 Years for Contractual Indemnification CCC 337(1).
Equitable Indemnification is probably 2 years, but file within one year to
be safe. Amen v. Merced County Title Company; Pacific Employers
Insurance Company v. Hartford Accident & Indemnity Company.
(1.) Equitable Contribution between insurance companies is 2
years. In reviewing the equitable contribution claim, the
court relied upon precedent set forth in Century Indemnity
Co. v. Superior Court, which held that an action among
coinsurers for equitable contribution is subject to a two-
year statute of limitations because it is an action not
founded on a writing. The court concluded the action was
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not founded on a writing because there was no contractual
relationship between the insurers. Instead, the action was
brought on equitable principles.
(2.) Valley Crest Landscape v. Mission Pools (4th 2015) – The
statute of limitations of Section 337.1 is inapplicable to
claims for express contractual indemnity and for equitable
subrogation. The statute of limitations for breach of
contract is four years. A cause of action for breach of an
express contractual indemnity agreement accrues when the
indemnitee sustains the loss by paying the money sought to
be indemnified from the indemnitor.
(d.) Nevada – Equitable Indemnity is 4 years. NRS 11.190(2)(c); Equitable
Indemnity is related to quasi contract. Saylor v. Arcotta. Contribution is
one year statute of limitations. 4 years probably applies for contractual
indemnification. The catch-all is 4 years. NRS 11.220.
(e.) New Mexico – Probably apply 6 years to contractual indemnification.
With respect to equitable indemnification, probably apply 4 years for
property damage and 3 years for personal injury.
(f.) Utah
(1.) Contractual Indemnification – Utah Code Ann. § 78B-2-309 states,
“An action may be brought within six years . . . upon any contract,
obligation, or liability founded upon an instrument in writing . . . .”
Thus, presumably, the statute of limitations on a cause of action
based upon contractual indemnification is six years. Unless a
contract or warranty states otherwise, an “action related to
improvements in real property . . . based in contract . . . shall be
commenced within six years of the date of completion of the
improvement or abandomnet of construction.” See Utah Code Ann.
78B-2-225(3)(a).
(2.) Equitable Indemnification – The statute of limitations is four years
for personal injury, three years for property damage, and six years
for damages “caused by wildland fire.” See Utah Code Ann. 78B-
2-305, 307 and 309. Unless “based in contract or warranty,” an
“action related to improvements in real property . . . shall be
commenced within two years from the earlier date of discovery of
a cause of action or the date upon which a cause of action should
have been discovered through reasonable diligence.” See Utah
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Code Ann. 78B-2-225(3). However, the cause of action does not
accrue until the improvement is completed or abandoned. See Utah
Code Ann. 78B-2-225(3)(b).
(3.) Contribution – A defendant is not entitled to contribution from any
other person. See Utah Code Ann. 78B-5-820(2).
8. California SB-800 Limitations for Residential Construction Defect Cases.
(a.) 1 year (1.) Noise (from original occupancy of adjacent unit)
(2.) Fit and finish warranty
(3.) Irrigation and drainage
(4.) Manufacture products
(b.) 2 years
(1.) Decay of untreated wood posts
(2.) Landscaping systems
(3.) Dryer ducts
(c.) 4 years
(1.) Plumbing and sewer
(2.) Electrical
(3.) Cracks in exterior hardscape, pathways, driveways, landscape,
sidewalls, sidewalks, patios
(4.) Corrosion of steel fences
(d.) 5 years
(1.) Deterioration of building surfaces due to paint or stain
(e.) 10 years
(1.) All other defects or violation of building standards
(2.) Air Conditioning in living spaces
(3.) Balconies and balcony systems
(4.) Ceramic tile and tile backing, Ceramic tile and tile countertops
(5.) Decks and deck systems
(6.) Doors
(7.) Exterior stairs and stair systems
(8.) Exterior stucco, siding, walls, framing, finishes and fixtures
(9.) Fire Protection
(10.) Foundation systems and slabs
(11.) Foundations, load bearing components, slabs and underlying soils
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(12.) Hardscape, paths, patios, irrigation systems, landscape systems and
drainage systems
(13.) Heating
(14.) Plumbing lines, sewer lines and utility lines
(15.) Retaining and site walls, associated drainage systems
(16.) Roofing materials
(17.) Roofs, roofing systems, chimney caps and ventilation
(18.) Shower and bath enclosures
(19.) Soils and engineered retaining walls
(20.) Structure
(21.) Windows, patio doors, deck doors and related systems
(f.) Tolling of Statutes If applicable statutes of limitations have otherwise run,
the time period for filing a complaint is extended by 100 days after repair
is completed or forty-five (45) days after the time for responding to the
notice of claim has expired.
H. Statutes of Repose
1. Arizona – ARS 12-552.
(a.) Only applies to contract based claims (including breach of express and
implied warranty) NOT tort claims.
(b.) Eight plus one rule from date of “substantial completion.”
(c.) Possibility of need for suing subcontractors before general contractors is
sued.
(d.) Contractual indemnification claims do NOT have extension of time.
(e.) Evans Withycombe, Inc. v. Western Innovations, Inc. – Statute of Repose
not applicable to common law indemnification.
(f.) Albano v. Shea Homes – Class action complaint tolls the statute of
limitations as to putative class members, but NOT the Statute of Repose.
2. Colorado – CRS 13-80-104
(a.) Applies to all actions against architect, contractor, builder, builder vendor,
engineer, or inspector.
(b.) Six years from substantial completion of the improvement to real property.
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(1.) Two extra years if action accrues within the 5th or 6th year.
a) Improvement can be a discrete component of an entire
project such as separate buildings in a multi-unit project.
Shaw Construction, Ltd v. United Builder Services, Inc.
b) Statute of Repose is applicable to contribution and
indemnification, and is not tolled or extended by the 90
statute of limitations. Thermo Development, Inc. v. Central
Masonry Corp.
c) Smith v. Executive Custom Homes, Inc. 230 P.3d 1186
(2010) - The Colorado Supreme Court rejected the "repair
doctrine" or "equitable tolling" for claims falling within
the purview of the Colorado Construction Right to Repair
Statute since the Statute already provides for statutory
tolling under specific conditions, including the time when
repairs are being conducted.
3. California
(a.) California Construction Defect for Patent Defects – 4 years. CCC 337.1
(1.) As used in this section, “patent deficiency” means deficiency
which is apparent by reasonable inspection.
(2.) four years after the substantial completion of such improvement
for any of the following: (1) Any patent deficiency in the design,
specifications, surveying, planning, supervision or observation of
construction or construction of an improvement to, or survey of,
real property; (2) Injury to property, real or personal, arising out of
any such patent deficiency; or (3) Injury to the person or for
wrongful death arising out of any such patent deficiency.
(3.) If, by reason of such patent deficiency, an injury to property or the
person or an injury causing wrongful death occurs during the
fourth year after such substantial completion, an action in tort to
recover damages for such an injury or wrongful death may be
brought within one year after the date on which such injury
occurred, irrespective of the date of death, but in no event may
such an action be brought more than five years after the substantial
completion of construction of such improvement.
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(b.) California Construction Defect for Latent Defects – 10 Years. CCC 337.15
337.15. (a) No action may be brought to recover damages from any
person, or the surety of a person, who develops real property or performs
or furnishes the design, specifications, surveying, planning, supervision,
testing, or observation of construction or construction of an improvement
to real property more than 10 years after the substantial completion of
the development or improvement for any of the following:
(1.) As used in this section, “latent deficiency” means a deficiency
which is not apparent by reasonable inspection.
(2.) As used in this section, “action” includes an action for indemnity
brought against a person arising out of that person’s performance
or furnishing of services or materials referred to in this section,
except that a cross-complaint for indemnity may be filed in the
underlying action which has been brought within the 10 year time
frame set forth above.
(3.) This section shall not apply to actions based on willful misconduct
or fraudulent concealment.
(4.) The 10-year period specified in subdivision (a) shall commence
upon substantial completion of the improvement, but not later than
the date of one of the following, whichever first occurs:
a) The date of final inspection by the applicable public
agency.
b) The date of recordation of a valid notice of completion.
c) The date of use or occupation of the improvement.
d) One year after termination or cessation of work on the
improvement.
1) The date of substantial completion shall relate
specifically to the performance or furnishing design,
specifications, surveying, planning, supervision, testing,
and observation of construction or construction services
by each profession or trade rendering services to the
improvement.
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4. Nevada
(a.) Statute of Repose – NRS 11.202: Six (6) Years
Assembly Bill 125, 78th Regular Session (Nev. 2015), enacted Feb. 24,
2015 established a 6-year statute of repose for all claims based on
“constructional defects,” abolishing previous statute of repose distinctions
between known defects, latent defects, and patent defects.
(1.) No action may be commenced against the owner, occupier or any
person performing or furnishing the design, planning, supervision
or observation of construction, or the construction of an
improvement to real property more than 6 years after the
substantial completion of such an improvement, for the recovery of
damages for:
a) Any deficienty in the design, planning, supervision or
observation of construction or the construction of such an
improvement;
b) Injury to real or personal property caused by any such
deficiency; or
c) Injury to or the wrongful death of a person caused by any
such deficiency.
(2.) The provisions of this section do not apply:
a) To a claim for indemnity or contribution.
b) In an action brought against (1) an innkeeper on account of
his or her liability as an innkeeper or (2) any person on
account of a defect in a product.
(b.) Substantial Completion Defined – NRS 11.2055
(1.) The date of substantial completion of an improvement to real
property shall be deemed to be the date on which:
a) The final building inspection of the improvement is
conducted;
b) A notice of completion is issued for the improvement; or
PROPERTY OF RESNICK & LOUIS, P.C.
101
c) A certificate of occupancy is issued for the improvement,
whichever occurs later.
(2.) If none of the events described in subsection 1 occurs, the date of
substantial completion of an improvement to real property must be
determined by the rules of the common law.
5. New Mexico
(a.) 10 Years – 37-1-27. Construction projects; limitation on actions for
defective or unsafe conditions. No action to recover damages for any
injury to property, real or personal, or for injury to the person, or for
bodily injury or wrongful death, arising out of the defective or unsafe
condition of a physical improvement to real property, nor any action for
contribution or indemnity for damages so sustained, against any person
performing or furnishing the construction or the design, planning,
supervision, inspection or administration of construction of such
improvement to real property, and on account of such activity, shall be
brought after ten years from the date of substantial completion of such
improvement; provided this limitation shall not apply to any action based
on a contract, warranty or guarantee which contains express terms
inconsistent herewith.
(1.) The date of “substantial completion” shall mean the date when
construction is sufficiently completed so that the owner can occupy
or use the improvement for the purpose for which it was intended,
or the date on which the owner does so occupy or use the
improvement, or the date established by the contractor as the date
of substantial completion, whichever date occurs last.
(2.) Section 37-1-27 does not protect continuing owners of property
who build the property and own it after 10 years against claims
arising from unsafe conditions of that property. Jacobo v. City of
Albuquerque.
6. Utah - Nine years –
(a.) Utah Code Ann. 78B-2-225(4). An “action related to improvments in real
property…may not be commenced…more than nine years after
completion of the improvement or abandonment of construction. In the
event the cause of action is discovered or discoverable in the eigth or ninth
year of the nine-year period, the injured person shall have two additional
PROPERTY OF RESNICK & LOUIS, P.C.
102
years from that date to commence an action.” Id. However, there is no
statute of repose, if the defendant committed fraudulent concealment or
willfully or intentionally committed an “act, error, omission, or breach of
duty.” Utah Code Ann. 78B-2-225(5).
I. Indemnification and Duty to Defend
1. Arizona.
(a.) ARS 32-1159 – Against public policy to be indemnified for one’s sole
negligence/fault.
(b.) Contractual Indemnification – Indemnification provisions strictly
construed. Indemnitee does NOT get indemnified for its own negligence
unless intent is directly or implicitly evident from the terms of the
contract. Washington School District No. 6 v. Baglino Corp. A “specific”
indemnity agreement addresses what effect the indemnitee’s negligence
has on the indemnitor for an obligation to indemnify for any type of
damage, even though also caused by the negligence of the indemnitee. A
contract clause that does NOT specifically address what effect the
indemnitee’s negligence has on the indemnitor’s obligation to indemnify
is a “general” provision. Grubb & Ellis Management Services v. 407417
B.C., LLC. If the indemnity provision intent remains uncertain, the
provision is construed against the drafter. MT Builders, L.L.C v. Fisher
Roofing, Inc.
(1.) “Specific” – The indemnitee will be indemnified when it is up to
99% at fault. Look for reference of the indemnitee or indemnitor
being partially at fault.
(2.) “General” – Indemnitee is entitled to indemnification for a loss
resulting in part from an indemnitee’s passive negligence, BUT
NOT active negligence. Indemnification claim barred if indemnitee
is 1% actively at fault.
a) Active negligence is when the indemnitee has personally
participated in an affirmative act of negligence; was
connected with negligent acts or omissions by knowledge
or acquiescence; or has failed to perform a precise duty
which the indemnitee has agreed to perform. There must be
some active participation in the wrong which is the
immediate cause of the injury.
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b) Passive negligence is mere nonfeasance, such as the failure
to discover a dangerous condition; perform a duty imposed
by law; or take adequate precautions against certain
hazards.
(c.) MT Builders Analysis:
(1.) Indemnification against liability applies once a cause of action is
established; indemnitee is not required to make actual payment.
(2.) Indemnification against loss or damages applies when the
indemnitee has actually paid the obligation for which he was found
liable.
(3.) Potential Contention of Comparative Indemnification. Indemnity
provisions arising out of or resulting from the performance or non-
performance of the subcontractor’s work to the extent caused in
whole or in part by any negligent act or omission of the
subcontractor REQUIRES that the indemnitee PROVE the
subcontractor’s FAULT. This is “narrow form” of
indemnification—the indemnitor’s obligation only covers
indemnitee’s losses to the extent caused by the indemnitor or a
person the indemnitor supervises or is responsible for.
“Although the parties have not cited, nor have we
found, any reported Arizona case construing the
indemnity language at issue here, other courts have
construed this or virtually identical language as
creating a comparative fault or negligence
arrangement whereby the indemnitor’s liability is
limited “to the extent” it and its supervisees were at
fault.”
(4.) The Duty to defend cannot exist before a determination of fault of
the indemnification provision does not address a duty to defend
and there “to the extent of” language requiring negligence/fault to
first be determined. Parties are free to contract, and they can agree
that indemnitor will only be under a duty to reimburse the
indemnitee’s defense costs, and only to the extent of the
indemnitor’s fault.
(5.) The Court will need to allocate or apportion the fees, expenses, and
costs accordingly.
PROPERTY OF RESNICK & LOUIS, P.C.
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(6.) A contractual promise to “hold harmless” by itself does NOT
create an up-front duty to defend. rather, it allows the indemnitee
to recover its defense costs IF a claim was made against it that
entitled indemnitee to indemnification.
(d.) Common Law Indemnification – Indemnitee plaintiff must show it has
discharged a legal obligation owed to a third person; the indemnitor is also
liable to a third party; and as between the indemnitee and indemnitor, the
obligation should have been discharged by the defendant. Absent consent
or fault of the defendant, the plaintiff must demonstrate how it has
extinguished its own AND the defendant’s liability to prove it has
discharged the obligation to the third party.
(1.). The party seeking indemnification must be proven free from
negligence. Herstam v. Deloitte & Touche, LLP.
(2.). When there is an express indemnity contract, the extent of the duty
to indemnify must be determined from the contract and not implied
indemnity.
(e.) Vouching In – Applying the Restatement (Second) of Judgments Section
57, The Arizona Supreme Court held that when an indemnity obligation
exists, an indemnitor will be barred from disputing the existence and
extent of its indemnitee’s liability to a third person if the indemnitor had
reasonable notice of the third person’s action, refused to assume or
participate in the indemnitee’s defense, and the indemnitee defended the
action with due diligence and reasonable prudence. The indemnitor will
also be BARRED from re-litigating issues determined in the action against
the indemnitee. Cunningham v. Goettl Air Conditioning, Inc.
A Judgment/Settlement does NOT bar the indemnitor from contesting its
own liability to its indemnitee. MT Builders. When an indemnitee settles a
law suit covered by an indemnity agreement, it may obtain indemnity from
its indemnitor if it gave the indemnitor notice of the action AND an
opportunity to defend and demonstrates that the decision to settle was,
under the circumstances, reasonable and prudent. IF the indemnitee does
this, then it may obtain indemnity without having to show it was actually
liable to the third person. Indemnity can then show its potential liability.
The burden is on the indemnitee to show the settlement was reasonable
and prudent.
PROPERTY OF RESNICK & LOUIS, P.C.
105
Factors demonstrating a reasonable and prudent settlement are reviewing:
The releasing person’s damages; the merits of the releasing person’s
liability theory; the merits of the released person’s defense theory; the
released person’s relative faults; the risks and expenses of continued
litigation; any evidence of bad faith, collusion, or fraud; the extent of the
releasing person’s investigation and preparation of the case; and the
interests of the parties in not being released.
2. Colorado
(a.) Anti-Contractual Indemnity CRS 12-21-111.5(6) – Indemnity provisions
void that require person to indemnify/defend another person against
liability for damage caused by the negligence/fault of the indemnitee or
any third person under control or supervision of the indemnitee. Indemnity
is limited to the extent caused by the negligence/fault of the indemnitor.
The same applies to a contractual provision requiring additional insured
coverage.
(b.) A Contractual duty to defend is triggered when the injured party alleges
facts which potentially trigger the obligation to indemnify. La Forge
North America, Inc., v. KECI Colorado, Inc.
(c.) Pre-Judgment Interest: When the damages are based upon repair or
replacement costs, pre-judgment interest does NOT begin to accrue until
the property is repaired or replaced and costs for such are incurred.
(d.) Ambiguities in indemnity provisions are resolved against the party seeking
indemnity. Williams v. White Mountain Constr. Co.
(e.) Common Law Indemnification exists for principles who are at fault but
may be vicariously liable for the agent’s torts. Unigard Mut. Ins. Co v.
Mission Ins. Co. Indemnity based upon primary and secondary fault is not
applicable to joint tortfeasors. The doctrine of indemnity insofar as it
requires one of two joint tortfeasors to reimburse the other for the entire
amount paid by the other fir the entire amount paid by the other as
damages to a party injured as the result of the negligence of both joint
tortfeasors, is no longer viable and is abolished. The sole remedy is
contribution. Brochner v. Western Ins. Co.
3. California
(a.) Introduction
PROPERTY OF RESNICK & LOUIS, P.C.
106
Indemnity may be defined as the obligation resting on one party to make
good a loss or damage another party has incurred. This obligation may be
expressly provided for by contract, it may be implied from a contract not
specifically mentioning indemnity, or it may arise from the equities of
particular circumstances.
(1) Where the parties have expressly contracted with respect to the
duty to indemnify, the extent of that duty must be determined from
the contract and not by reliance on the independent doctrine of
equitable indemnity.
(2.) Some California courts have interpreted indemnification provisions
to be Type I, II, or III. However, the question whether an
indemnity agreement covers a given case turns primarily on
contractual interpretation, and it is the intent of the parties as
expressed in the agreement that should control. When the parties
knowingly bargain for the protection at issue, the protection should
be afforded not necessarily worrying about the classifications.
(b.) Implied Contractual Indemnification – The right to implied contractual
indemnity is predicated upon the indemnitor’s breach of contract, ‘the
rationale . . . being that a contract under which the indemnitor undertook
to do work or perform services necessarily implied an obligation to do the
work involved in a proper manner and to discharge foreseeable damages
resulting from improper performance absent any participation by the
indemnitee in the wrongful act precluding recovery.’ . . . ‘An action for
implied contractual indemnity is not a claim for contribution from a joint
tortfeasor; it is not founded upon a tort or upon any duty which the
indemnitor owes to the injured third party. It is grounded upon the
indemnitor’s breach of duty owing to the indemnitee to properly perform
its contractual duties.’ West v. Superior Court.
(c.) Equitable Indemnification – Equitable indemnity requires no contractual
relationship between an indemnitor and an indemnitee and is instead
premised on a joint legal obligation to another for damages, which “does
not invariably follow fault.” The doctrine is subject to allocation of fault
principles and comparative equitable apportionment of loss. In other
words, a party’s liability for equitable indemnity is based on its
proportional share of responsibility for the damages to the injured party,
regardless of the underlying legal theory.
(1.) A party sued only in contract cannot recover from a third party
under equitable indemnification.
PROPERTY OF RESNICK & LOUIS, P.C.
107
(2.) Moreover, if the defendant is also sued in tort, the defendant may
not seek equitable indemnity from a third party unless the plaintiff
sued (or could have sued) that third party in tort.
(3.) California recognizes Comparative Equitable Indemnification
where the faults of parties are evaluated so that the indemnification
is not an all or nothing as in other jurisdictions where the
indemnity claim is barred when the indemnitee is at fault. In
essence, California recognizes a right of partial indemnity, under
which liability among multiple tortfeasors may be apportioned on a
comparative negligence basis. the failure of injured parties to sue
all those responsible for their damages or losses does not bar a
claim for equitable indemnity, as plaintiffs “no longer have the
unilateral right to determine which defendant or defendants should
be included in an action” under the comparative equitable
indemnity doctrine. Comparative equitable indemnity includes the
entire range of possible apportionments, from no right to any
indemnity to a right of complete indemnity.
(4.) Implied contractual indemnity arising out of a contract between the
indemnitor and indemnitee can provide a basis for equitable
indemnity. California’s comparative fault doctrine is a flexible,
commonsense concept, under which a jury may properly consider
and evaluate the relative responsibility of various parties for an
injury whether their responsibility for the injury rests on negli-
gence, strict liability, or other theories of responsibility, to arrive at
an equitable apportionment or allocation of loss.
(d.) General Contractual (Express) Indemnification – If an indemnity
clause does not address itself to the issue of an indemnitee’s negligence, it
is referred to as a ‘general’ indemnity clause. While such clauses may be
construed to provide indemnity for a loss resulting in part from an
indemnitee’s passive negligence, they will not be interpreted to provide
indemnity if an indemnitee has been actively negligent. Provisions
purporting to hold an owner harmless “in any suit at law,” “from all claims
for damages to persons,” and “from any cause whatsoever,” without
expressly mentioning an indemnitee’s negligence, have been deemed to be
‘general’ clauses.”
(1.) Some courts in California have indicated that a general indemnity
clause has the same limitations as Type II and III indemnification
provisions.
PROPERTY OF RESNICK & LOUIS, P.C.
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(e.) Preliminary California Civil Code Indemnification Statutes
(1.) 2772. Indemnity is a contract by which one engages to save
another from a legal consequence of the conduct of one of the
parties, or of some other person.
(2.) 2775. An agreement to indemnify against the acts of a certain
person, applies not only to his acts and their consequences, but also
to those of his agents.
(3.) 2776. An agreement to indemnify several persons applies to each,
unless a contrary intention appears.
(4.) 2777. One who indemnifies another against an act to be done by
the latter, is liable jointly with the person indemnified, and
separately, to every person injured by such act.
(f.) Indemnification Language Interpretation. CCC 2788 In the
interpretation of a contract of indemnity, the following rules are to be
applied, unless contrary intention appears:
(1.) Upon an indemnity against liability, expressly, or in other
equivalent terms, the person indemnified is entitled to recover
upon becoming liable;
(2.) Upon an indemnity against claims, or demands, or damages, or
costs, expressly, or in other equivalent terms, the person
indemnified is not entitled to recover without payment thereof;
(3.) An indemnity against claims, or demands, or liability, expressly, or
in other equivalent terms, embraces the costs of defense against
such claims, demands, or liability incurred in good faith, and in the
exercise of a reasonable discretion;
(4.) The person indemnifying is bound, on request of the person
indemnified, to defend actions or proceedings brought against the
latter in respect to the matters embraced by the indemnity, but the
person indemnified has the right to conduct such defenses, if he
chooses to do so;
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(5.) If, after request, the person indemnifying neglects to defend the
person indemnified, a recovery against the latter suffered by him in
good faith, is conclusive in his favor against the former;
(6.) If the person indemnifying, whether he is a principal or a surety in
the agreement, has not reasonable notice of the action or
proceeding against the person indemnified, or is not allowed to
control its defense, judgment against the latter is only presumptive
evidence against the former;
(7.) A stipulation that a judgment against the person indemnified shall
be conclusive upon the person indemnifying, is inapplicable if he
had a good defense upon the merits, which by want of ordinary
care he failed to establish in the action.
(g.) Type I Construction Contractual Indemnification Void – CCC 2782(a)
Except as provided in Sections 2782.1, 2782.2, 2782.5, and 2782.6,
provisions, clauses, covenants, or agreements contained in, collateral to, or
affecting any construction contract and that purport to indemnify the
promisee against liability for damages for death or bodily injury to
persons, injury to property, or any other loss, damage or expense arising
from the sole negligence or willful misconduct of the promisee or the
promisee’s agents, servants, or independent contractors who are directly
responsible to the promisee, or for defects in design furnished by those
persons, are against public policy and are void and unenforceable;
provided, however, that this section shall not affect the validity of any
insurance contract, workers’ compensation, or agreement issued by an
admitted insurer as defined by the Insurance Code.
(h.) Type III Indemnification Only for Post January 1, 2009 Residential
Contracts From Subcontractors to Developers/General Contractors
(Subcontractors Only Indemnify For Their Acts/Omissions) – CCC
2782(d)
For all construction contracts, and amendments thereto, entered into after
January 1, 2009, for residential construction, as used in Title 7
(commencing with Section 895) of Part 2 of Division 2, all provisions,
clauses, covenants, and agreements contained in, collateral to, or affecting
any construction contract, and amendments thereto, that purport to insure
or indemnify, including the cost to defend, the builder, as defined in
Section 911, or the general contractor or contractor not affiliated with the
builder, as described in subdivision (b) of Section 911, by a subcontractor
PROPERTY OF RESNICK & LOUIS, P.C.
110
against liability for claims of construction defects are unenforceable to the
extent the claims arise out of, pertain to, or relate to the negligence of the
builder or contractor or the builder’ s or contractor’s other agents, other
servants, or other independent contractors who are directly responsible to
the builder, or for defects in design furnished by those persons, or to the
extent the claims do not arise out of, pertain to, or relate to the scope of
work in the written agreement between the parties.
(1.) This shall not be waived or modified by contractual agreement, act,
or omission of the parties.
(2.) This shall not affect the obligations of an insurance company for
additional insured obligations.
(3.) This does not prohibit a subcontractor and builder or general
contractor from mutually agreeing to the timing or immediacy of
the defense and provisions for reimbursement of defense fees and
costs. CCC 2782(e).
(i.) Proper Tender of Defense Required By General
Contractor/Developer to Subcontractor Before Any Defense or
Indemnity Obligation Arises (Residential). CCC2782(e) A
subcontractor shall owe no defense or indemnity obligation to a builder or
general contractor for a construction defect claim unless and until the
builder or general contractor provides a written tender of the claim, or
portion thereof, to the subcontractor which includes all of the information
provided to the builder or general contractor by the claimant or claimants,
including, but not limited to, information in the SB-800 requirements,
relating to claims caused by that subcontractor’s scope of work.
(1.) Insurance companies must treat the tender as a notice of
commencement of a legal proceeding.
(j.) Subcontractors Have 2 Options When Properly Tendered Defense
and a Defense Obligation Exists: Pay A Share of GC Counsel (Subject
to Reallocation) or Hire Their Own Counsel. CCC2782(e) the
subcontractor shall elect to perform either of the following, the
performance of which shall be deemed to satisfy the subcontractor’s
defense obligation to the builder or general contractor:
(1.) Defend the claim with counsel of its choice, and the subcontractor
shall maintain control of the defense for any claim or portion of
claim to which the defense obligation applies.
PROPERTY OF RESNICK & LOUIS, P.C.
111
a) The subcontractor shall provide written notice of the
election to the builder or general contractor within a
reasonable time period following receipt of the written
tender, and in no event later than 90 days following that
receipt.
b) The defense by the subcontractor shall be a complete
defense of the builder or general contractor of all claims or
portions thereof to the extent alleged to be caused by the
subcontractor, including any vicarious liability claims
against the builder or general contractor resulting from the
subcontractor’s scope of work, but not including claims
resulting from the scope of work, actions, or omissions of
the builder, general contractor, or any other party. Any
vicarious liability imposed upon a builder or general
contractor for claims caused by the subcontractor electing
to defend under this paragraph shall be directly enforceable
against the subcontractor by the builder, general contractor,
or claimant.
c) If a subcontractor fails to timely and adequately perform its
obligations the builder or general contractor shall have the
right to pursue a claim against the subcontractor for any
resulting compensatory damages, consequential damages,
and reasonable attorneys’ fees.
(2.) Pay, within 30 days of receipt of an invoice from the builder or
general contractor, no more than a reasonable allocated share of
the builder’s or general contractor’s defense fees and costs, on an
ongoing basis during the pendency of the claim, subject to
reallocation (including any amounts reallocated upon final
resolution of the claim either by settlement or judgment).
a) The builder or general contractor shall allocate a share to
itself to the extent a claim or claims are alleged to be
caused by its work, actions, or omissions, and a share to
each subcontractor to the extent a claim or claims are
alleged to be caused by the subcontractor’s work, actions,
or omissions, regardless of whether the builder or general
contractor actually tenders the claim to any particular
subcontractor, and regardless of whether that subcontractor
is participating in the defense.
PROPERTY OF RESNICK & LOUIS, P.C.
112
1) Any amounts not collected from any particular
subcontractor may not be collected from any other
subcontractor.
b) If, upon request by subcontractor, a builder or general
contractor does not reallocate defense fees to
subcontractors within 30 days following final resolution of
the claim, the subcontractor shall have the right to pursue a
claim against the builder or general contractor for any
resulting compensatory and consequential damages, as well
as for interest on the fees, from the date of final resolution
of the claim, and the subcontractor’s reasonable attorneys’
fees incurred in connection therewith.
c) If a subcontractor fails to timely perform its obligations, the
builder or general contractor shall have the right to pursue a
claim against the subcontractor for any resulting
compensatory and consequential damages, as well as for
interest on defense and indemnity costs, and for the
builder’s or general contractor’s reasonable attorneys’ fees
incurred to recover these amounts.
(k) Type II Indemnification Only for Post January 1, 2013 Commercial
Contracts From Subcontractors to Developers/General Contractors
(Subcontractors Indemnify For Their Acts/Omissions, And Passive
Acts/Omissions of Others). CCC 2782.5(a)
(1.) Any construction contract and amendments thereto entered into on
or after January 1, 2013, that purport to insure or indemnify,
including the cost to defend, a general contractor, construction
manager, or other subcontractor, by a subcontractor against
liability for claims of death or bodily injury to persons, injury to
property, or any other loss, damage, or expense are void and
unenforceable to the extent the claims arise out of, pertain to, or
relate to the active negligence or willful misconduct of that general
contractor, construction manager, or other subcontractor, or their
other agents, other servants, or other independent contractors who
are responsible to the general contractor, construction manager, or
other subcontractor, or for defects in design furnished by those
persons, or to the extent the claims do not arise out of the scope of
work of the subcontractor pursuant to the construction contract.
PROPERTY OF RESNICK & LOUIS, P.C.
113
a) This section shall not be waived or modified by contractual
agreement, act, or omission of the parties.
b) This section does not affect Additional Insured Obligations.
c) This does not apply to a WRAP-UP policy/program.
d) This does not apply to a cause of action for breach of
contract or warranty that exists independently of an
indemnity obligation.
e) This does not apply to design professionals.
f) Notwithstanding any choice-of-law rules that would apply
the laws of another jurisdiction, the law of California shall
apply to every contract to which this section applies.
g) Waiver language is void.
h) Subdivision (a) does not prohibit a subcontractor and a
general contractor or construction manager from mutually
agreeing to the timing or immediacy of the defense and
provisions for reimbursement of defense fees and costs.
(l.) Proper Tender of Defense and Indemnification Required for
Commercial Construction Contracts January 1, 2013 and later before
any Defense or Indemnification May Be Owed. CCC 2782.5(e)
(1.) The tender must include information provided by the claimant or
claimants relating to claims caused by that subcontractor’s scope
of work.
(2.) The general contractor or construction manager shall provide a
written statement regarding how the reasonable allocated share of
fees and costs was determined.
(3.) The written tender shall have the same force and effect as a notice
of commencement of a legal proceeding.
(m.) Subcontractors Have 2 Options When Properly Tendered Defense
and a Defense Obligation Exists For Commercial Post January 1,
2013 Claims: Pay A Share of GC Counsel (Subject to Reallocation) or
Hire Their Own Counsel. CCC2782.05(e)
PROPERTY OF RESNICK & LOUIS, P.C.
114
The subcontractor shall elect to perform either of the following, the
performance of which shall be deemed to satisfy the subcontractor’s
defense obligation to the builder or general contractor:
(1.) Defend the claim with counsel of its choice, and the subcontractor
shall maintain control of the defense for any claim or portion of
claim to which the defense obligation applies.
a) The subcontractor shall provide written notice of the
election to the general contractor/construction manager
within a reasonable time period following receipt of the
written tender, and in no event later than 30 days following
that receipt.
b) The defense by the subcontractor shall be a complete
defense of the general contractor/construction manager of
all claims or portions thereof to the extent alleged to be
caused by the subcontractor, including any vicarious
liability claims against the general contractor/construction
manager resulting from the subcontractor’s scope of work,
but not including claims resulting from the scope of work,
actions, or omissions of the general contractor/ construction
manager, or any other party. Any vicarious liability
imposed upon a builder or general contractor for claims
caused by the subcontractor electing to defend under this
paragraph shall be directly enforceable against the
subcontractor by the general contractor/construction
manager, or claimant.
c) All information, documentation, or evidence, if any,
relating to a subcontractor’s assertion that another party is
responsible for the claim shall be provided by that
subcontractor to the general contractor or construction
manager that tendered the claim.
d) If a subcontractor fails to timely and adequately perform its
obligations the general contractor/construction manager
shall have the right to pursue a claim against the
subcontractor for any resulting compensatory damages,
consequential damages, and reasonable attorneys’ fees.
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(2.) Pay, within 30 days of receipt of an invoice from the general
contractor/construction manager, no more than a reasonable
allocated share of the builder’s or general contractor’s defense fees
and costs, on an ongoing basis during the pendency of the claim,
subject to reallocation (including any amounts reallocated upon
final resolution of the claim either by settlement or judgment).
a) The general contractor/construction manager shall allocate
a share to itself to the extent a claim or claims are alleged
to be caused by its work, actions, or omissions, and a share
to each subcontractor to the extent a claim or claims are
alleged to be caused by the subcontractor’s work, actions,
or omissions, regardless of whether the general
contractor/builder actually tenders the claim to any
particular subcontractor, and regardless of whether that
subcontractor is participating in the defense.
b) Any amounts not collected from any particular
subcontractor may not be collected from any other
subcontractor.
c) If, upon request by subcontractor, a builder or general
contractor does not reallocate defense fees to
subcontractors within 30 days following final resolution of
the claim, the subcontractor shall have the right to pursue a
claim against the builder or general contractor for any
resulting compensatory and consequential damages, as well
as for interest on the fees, from the date of final resolution
of the claim, and the subcontractor’s reasonable attorneys’
fees incurred in connection therewith.
d) If a subcontractor fails to timely perform its obligations, the
builder or general contractor shall have the right to pursue a
claim against the subcontractor for any resulting
compensatory and consequential damages, as well as for
interest on defense and indemnity costs, and for the
builder’s or general contractor’s reasonable attorneys’ fees
incurred to recover these amounts.
(n.) Wrap-Up/Consolidated Insurance Program Post January 1, 2009
Residential Have No Contractual Indemnification and Defense
Obligations for Subcontractors to General Contractors/Developers.
CCC 2782.9 All contracts, provisions, clauses, amendments, or
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agreements contained therein entered into after January 1, 2009, for a
residential construction project on which a wrap-up insurance policy or
other consolidated insurance program, is applicable, that require an
enrolled and participating subcontractor or other participant to indemnify,
hold harmless, or defend another for any claim or action covered by that
program, arising out of that project are unenforceable.
(1.) Equitable Indemnification is PRESERVED to the extent that the
indemnity/hold-harmless/defense obligation is unenforceable.
(o.) Subcontractors Entitled to Important Disclosure Information About
Wrap-Up/Consolidated Insurance Program Post January 1, 2009
Residential Projects. CCC 2782.95
(1.) The contract documents shall disclose, if and to the extent known:
(1) The policy limits; (2) The scope of policy coverage; (3) The
policy term; (4) The basis upon which the deductible or occurrence
is triggered by the insurance company; (5) If the policy covers
more than one work of improvement, the number of units, if any,
indicated on the application for the insurance policy.
(2.) A good faith estimate of the amount of available limits remaining
under the policy as of a date indicated in the disclosure obtained
from the insurer.
(p). California Types I, II, and III Contractual Indemnification
Classifications (McCrary Construction v. Metal Deck Specialties, Inc.).
(1.) Type I. (Now void in California). Type I provides ‘expressly and
unequivocally’ that the indemnitor is to indemnify the indemnitee
for, among other things, the negligence of the indemnitee,” and the
indemnitee is indemnified whether its liability arises from its sole
or concurrent negligence.
(2.) Type II. The indemnitee would be indemnified for his or her own
passive negligence, but not for active negligence.
a) Examples – A clause providing for indemnity for the
indemnitee’s liability “howsoever same may be caused” or
“regardless of responsibility for negligence” or “arising
from the use of the premises, facilities or services of [the
indemnitee]” or “which might arise in connection with the
agreed work” or “caused by or happening in connection
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with the equipment or the condition, maintenance,
possession, operation or use thereof” or “from any and all
claims for damages to any person or property by reason of
the use of said leased property.”
(3.) Type III. Is that which provides that the indemnitor is to indemnify
the indemnitee for the indemnitee’s liabilities caused by the
indemnitor, but which does not provide that the indemnitor is to
indemnify the indemnitee for the indemnitee’s liabilities that were
caused by other than the indemnitor. Under this type of provision,
any negligence on the part of the indemnitee, either active or
passive, will bar indemnification against the indemnitor
irrespective of whether the indemnitor may also have been a cause
of the indemnitee’s liability.
4. Nevada
(a.) Equitable Indemnification
(1.) Equitable indemnity, which “allows a defendant to seek recovery
from other potential tortfeasors,” is generally available to remedy
the situation in which the defendant, “who has committed no
independent wrong, is held liable for the loss of a plaintiff caused
by another party.” Rodriguez v. Primadonna Company, Nevada’s
equitable indemnity law has long drawn a distinction between
secondary and primary liability. “‘[I]n order for one tortfeasor to
be in a position of secondary responsibility vis-a-vis another
tortfeasor, and thus be entitled to indemnification, there must be a
preexisting legal relation between them, or some duty on the part
of the primary tortfeasor to protect the secondary tortfeasor.’”
Doctors Company v. Vincent. Additionally, where a party has
committed an “independent wrong,” and is thus actively negligent,
that party has no right to indemnity from other tortfeasors.
(2.) The elements of proof for one seeking equitable indemnity are:
a) Indemnitee has discharged a legal obligation owed to a
third party;
b) The party from whom it seeks liability also was liable to
the third party; and
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c) As between the claimant and the party from whom it seeks
indemnity, the obligation ought to be discharged by the
latter.
d) The indemnitee cannot be “actively” at fault.
e) When a matter is settled in good faith, NRS 17.245 protects
the settling party from both claims for contribution and
equitable indemnity.
(3.) A right to contribution exists “where two or more persons become
jointly or severally liable in tort for the same injury to [a] person
even though judgment has not been recovered against all or any of
them. There are two methods for enforcing a claim of contribution:
either by a separate action following entry of judgment or in the
same action in which [the] judgment is entered against two or more
tortfeasors.
(b.) Contractual Indemnification – Contractual indemnity is where, pursuant to
a contractual provision, two parties agree that one party will reimburse the
other party for liability resulting from the former’s work. Medallion Dev.
v. Converse Consultants. The scope of a contractual indemnity clause is
determined by the contract.
(1.) Type I Indemnity Provision: Obligating an indemnitor to
indemnify and defend an indemnitee for the indemnitee’s own
negligence.
In late 2010, the Nevada Supreme Court held that a Type I
indemnity provision (obligating an indemnitor to indemnify and
defend an indemnitee for the indemnitee’s own negligence) must
expressly or explicitly state that it does so. A general reference to
“any and all claims” will not be sufficient to encompass the sole
negligence of an indemnitee under Nevada law. “Contracts
purporting to indemnify a party against its own negligence will
only be enforced if they clearly express such an intent and a
general provision indemnifying the indemnitee ‘against any and all
claims,’ standing alone, is not sufficient.” A contract of indemnity
will not be construed to indemnify a party against loss or damage
resulting from its own negligent acts unless such intention is
expressed in clear and unequivocal terms.” George Brown
Insurance Agency, Inc. v. Start Insurance Company.
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(2.) Type II Indemnity Provision: Obligating an indemnitor to
completely indemnify the indemnitee when the indemnitor and
indemnitee are both partially at fault.
In 2011, the Nevada Supreme Court extended same analysis that it
used in 2010 for Type I indemnity provisions to Type II indemnity
provisions, that the intent to indemnify the indemnitee must be
expressly or explicitly contained in the contract. Reyburn Lawn v.
Plaster Development.
(3.) Construction Defect Claims – Anti-Indemnity Statute. A.B.
125, § 2(1), 78th Regular Session (Nev. 1995), enacted Feb. 24,
2015.
NOTE: Nevada’s anti-indemnity statute—Section 2(1) of Nevada
Assembly Bill 125, enacted on February 24—only applies to
provisions in a contract for residential construction that is entered
into on or after February 24, 2015.
In a constructional defect action asserted by a claimant and
governed by Chapter 40:
a) Indemnity Based on Controlling Party’s
Negligence/Intentional Act or Omission. Except as
otherwise provided in paragraph (b), any provision in a
contract for residential construction that requires a
subcontractor to indemnify, defend or otherwise hold
harmless a controlling party from any liability, claim,
action or cause of action resulting from a constructional
defect caused by the negligence, whether active or passive,
or intentional act or omission of the controlling party is
against public policy and is void and unenforceable.
b) Indemnity Based on Subcontractor’s Scope of
Work/Negligence/Intentional Act or Omission. Except as
otherwise provided in paragraph (c), a provision in a
contract for residential construction is not against public
policy and is not void and unenforceable under paragraph
(a) to the extent that the provision requires a subcontractor
to indemnify, defend or otherwise hold harmless a
controlling party from any liability, claim, action or cause
of action resulting from a constructional defect arising out
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of, related to or connected with the subcontractor’s scope
of work, negligence, or intentional act or omission.
c) Indemnity for CD Claim Related to Portion of
Subcontractor’s Work Altered or Modified by
Controlling Party or Other Trade. A provision in a
contract for residential construction is against public policy
and is void and unenforceable under paragraph (a) to the
extent that it requires a subcontractor to defend, indemnify
or otherwise hold harmless a controlling party from any
liability, claim, action or cause of action, resulting from a
constructional defect arising out of, related to or
connected with that portion of the subcontractor’s work
which has been altered or modified by another trade or
controlling party.
d) When Does the Duty to Defend Arise—NO
ADDITIONAL INSURED PROVISION? Except as
otherwise provided in paragraph (e), if an indemnification
provision is not against public policy and is not void and
unenforceable, then the subcontractor’s duty to defend the
controlling party arises upon presentment of the Chapter
40 notice containing a particular claim, action or cause of
action from which it can be reasonably inferred that an
alleged constructional defect was caused by or attributable
to the subcontractor’s work, negligence, or wrongful act or
omission.
e) When Does the Duty to Defend Arise—WITH
ADDITIONAL INSURED PROVISION? IF: (i) a
controlling party presents the subcontractor with a Chapter
40 notice from which it can be reasonably inferred that an
alleged constructional defect was caused by or attributable
to the subcontractor’s work, negligence, or wrongful act or
omission; (ii) the claim or action is covered by the
subcontractor’s CGL insurance policy; AND (iii) the
controlling party is named as an additional insured under
that subcontractor’s CGL policy, THEN:
1) The controlling party, as an additional insured, must
pursue available means of recovery of its defense
fees and costs under the policy before the
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controlling party is entitled to pursue a claim
against the subcontractor.
2) Upon the final settlement of or issuance of a final
judgment in an action involving a claim for a
constructional defect, if the insurer has not assumed
the controlling party’s defense and reimbursed the
controlling party for the defense obligation of the
subcontractor, or if the defense obligation is not
otherwise resolved by the settlement or final
judgment, the controlling party has the right to
pursue a claim against the subcontractor for
reimbursement of that portion of attorneys’ fees and
costs incurred by the controlling party which are
attributable to the claims, actions or causes of action
arising out of, related to or connected with the
subcontractor’s scope of work, negligence, or
intentional act or omission.
3) The provisions of subparagraphs (1) and (2) do not
prohibit a controlling party from:
(i.) Following the requirements of Chapter 40
relating to providing notice, or any other
Chapter 40 procedures; or
(ii.) Filing a third-party complaint against the
subcontractor if a claimant commences an
action or amends a complaint to add a cause
of action for a constructional defect against
a controlling party which arises out of,
relates to or is otherwise connected with the
subcontractor’s scope of work, negligence,
or wrongful act or omission.
(4.) Construction Defect Claims – WRAP/OCIP. A.B. 125, § 2(2),
78th Regular Session (Nev. 1995), enacted Feb. 24, 2015.
NOTE: Nevada’s construction defect WRAP/OCIP statute—
Section 2(1) of Nevada Assembly Bill 125, enacted on February
24—only applies to provisions in a contract for residential
construction that is entered into on or after February 24, 2015.
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For any wrap-up insurance policy or other consolidated insurance
program that covers a subcontractor who performs work on
residential construction for claims, actions or causes of action for a
constructional defect:
a) Disclosure. The controlling party obtaining the
WRAP/OCIP shall disclose:
1) The total amount or method of calculation of any
credit or compensation for the premium required
from a subcontractor or other participant in the
contract documents;
2) The policy limits (may be satisfied by providing the
participant with a copy of the binder or declaration);
3) The scope of policy coverage (may be satisfied by
providing the participant with a copy of the binder
or declaration);
4) The policy term (may be satisfied by providing the
participant with a copy of the binder or declaration);
5) The basis upon which the deductible or
occurrence is triggered by the insurer (may be
satisfied by providing the participant with a copy of
the binder or declaration);
6) If the policy covers more than one improvement,
the number of units, if any, indicated on the
application for the insurance policy; and
7) A good faith estimate of the amount of available
limits remaining under the policyas of a date
indicated in the disclosure obtained from the
insurer.
For the disclosures in paragraphs 6) and 7) above relating
to the number of units and the good faith estimate of the
amount of available limits remaining, those disclosures:
May be based upon good faith information available
at the time the disclosure is made;
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Are not inaccurate or made in bad faith solely
because they do not accurately reflect the actual
information when a later claim is made;
Are presumptively made in good faith if the number
of units is the same as that contained in the
application to the WRAP insurer the estimate of the
amount of available limits remaining was obtained
from the WRAP insurer or broker.
These presumptions may be overcome only by a showing
that the insurer, broker, or controlling party intentionally
misrepresented the facts in any disclosure.
b) Requesting a Copy of WRAP/OCIP and Disclosures.
Upon the written request of any participant in the
WRAP/OCIP, a copy of the insurance policy must be
provided, if available, that shows the coverage terms and
the following disclosures: policy limits, scope of policy
coverage; policy term; basis upon which deductible or
occurrence is triggered by insurer; and the number of units,
if applicable. If the policy is not available at the time of the
request, a copy of the insurance binder or declaration of
coverage may be provided in lieu of the actual policy.
c) Disclosure of WRAP/OCIP Policy/Binder/Declaration
to Third Parties. Any party receiving a copy of the policy,
binder, or declaration shall not disclose it to third parties
other than the participant’s insurance broker or attorney
unless required to do so by law. The participant’s insurance
broker or attorney may not disclose the policy, binder, or
declaration to any third party unless required to do so by
law.
d) Penalties Against Controlling Party for Specific Non-
Disclosure. IF the controlling party does not disclose the
total amount or method of calculation of the premium
credit or compensation to be charged to the participant
before the time the participant submits its bid, THEN the
participant is not legally bound by and may withdraw the
bid...
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UNLESS:
That participant has the right to increase the bid up to the
amount equal to the difference between the amount the
participant included, if any, for insurance in the original bid
and the amount of the actual bid credit required by the
controlling party.
NOTE: this paragraph does not apply if the controlling
party did not require the subcontractor to offset the original
bid amount with a deduction for the WRAP/OCIP.
e) Subcontractor’s Monetary Obligation for Enrollment.
The subcontractor’s monetary obligation for enrollment in
the WRAP/OCIP ceases upon the subcontractor’s
satisfaction of its agreed contribution percentage. The
subcontractor’s agreed contribution percentage may be paid
either as a lump sum or on a pro rata basis throughout the
subcontractor’s performance of the work.
f) Deductible/SIR Paid for Occurrence. In the event of an
occurrence, the dollar amount required to be paid by a
subcontractor as a self-insured retention or deductible must
not be greater than the amount that the subcontractor would
have otherwise been required to pay as a self-insured
retention or deductible under a CGL policy of comparable
insurance in force during the relevant period for that
particular subcontractor and within the specific market at
the time the subcontract is entered into.
5. New Mexico
(a.) New Mexico Anti-Indemnification/Defense Statute (NMRA 56-7-1)
(1.) A provision in a construction contract that requires one party to the
contract to indemnify, hold harmless, insure or defend the other
party to the contract, including the other party’s employees or
agents, against liability, claims, damages, losses or expenses,
including attorney fees, arising out of bodily injury to persons or
damage to property caused by or resulting from, in whole or in
part, the negligence, act or omission of the indemnitee, its officers,
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employees or agents, is void, unenforceable and against the public
policy of the state.
(2.) “Indemnify” and “hold harmless” includes any requirement to
name the indemnified party as an additional insured in the
indemnitor’s insurance coverage for the purpose of providing
indemnification for any liability not otherwise allowed in this
section.
(b.) Equitable Indemnification (Traditional).
(1.) There has to be some independent, preexisting legal relationship
between the indemnitee and indemnitor.
(2.) The indemnitee and the indemnitor must be liable to the injured
party.
(3.) Economic Loss Rule does not bar traditional indemnification.
(4.) The purpose of traditional indemnification is to allow a party who
has been held liable without active fault to seek recovery from one
who is actively at fault. Thus the right to indemnification involves
whether the conduct of the party seeking indemnification was
passive and not active or in pari delicto with the indemnitor.
a) “Active conduct” is found if an indemnitee has personally
participated in an affirmative act of negligence, was
connected with negligent acts or omissions by knowledge
or acquiescence, or has failed to perform a precise duty
which the indemnitee had agreed to perform. The conduct
of the party who does nothing after discovering a
dangerous condition is active.
b) Passive conduct occurs when the party seeking
indemnification fails to discover and remedy a dangerous
situation created by the negligence or wrongdoing of
another. The conduct of the party not discovering a
dangerous condition is passive.
(c.) Equitable Indemnification (Proportional)
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(1.). This is comparative equitable indemnification where the
negligence/fault of the parties are analyzed so that there is not an
all or nothing result as with traditional indemnification.
(2.) Proportional indemnification applies only when contribution or
some other form of proration of fault among tortfeasors is not
available. For example, if two defendants are sued for different
legal theories such as negligence and the other under contract, then
they would not be joint tortfeasors under the Uniform Contribution
Among Joint Tortfeasors Act, and therefore, proration of fault is
not available, but Proportional indemnification is.
(d.) Equitable Indemnification (Derivative Liability)
(1.) New Mexico allows indemnification in actions for vicarious or
derivative liability, “as when an employer must pay for the
negligent conduct of its employee under the doctrine of respondeat
superior or when a person is directed by another to do something
that appears innocent but is in fact wrongful.” For example, “a
blameless employer [as indemnitee] recovers from a negligent
employee [as indemnitor], after the employer has been held liable
to the injured third person upon the theory of respondeat superior.”
Dessauer v. Mem’l Gen. Hosp.
6. Utah
(a.) Utah Anti-Indemnification/Defense Statute (Utah Code Ann. § 13-8-1)
(1.) For construction contracts entered into after May 5, 1997, all
“indemnification provisions” are void, when such agreements were
made by those involved in the construction of an improvement to
real property. See Utah Code Ann. § 13-8-1. Pursuant to Utah
Code Ann. § 13-8-1(1)(b), an “indemnification provision” is any
“covenant, promise, agreement or understanding in, in connection
with, or collateral to a construction contract requiring the promisor
to insure, hold harmless, indemnify, or defend the promisee or
others against liability if…the damages are caused by or resulting
from the fault of the promisee, indemnitee, others, or their agents
or employees.” Utah Code Ann. § 13-8-1 voids all indemnification
provisions to the extent that such indemnification provisions are
interpreted to provide indemnification for the indemnitees’ own
fault. See Jacobsen Constr. Co. v. Blaine Constr. Co., 863 P.2d
1329, 1331 (Utah Ct. App. 1993) (where the scope of the
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indemnfiication provision includes prohibited indemnity, the entire
provision is unenforceable).
(2.) The Utah Court of Appeals has found that Utah Code Ann. § 13-8-
1 does not void agreements to name the indemnified party as an
additional insured in the indemnitor’s insurance coverage. See
Meadow Valley Contrs., Inc. v. Transcon. Ins. Co., 27 P.3d 594,
598 (Utah App. 2001).
J. Arizona Covenants Not To Execute and Assignment of Rights.
1. Duty to defend is broad.
(a.) No breach of duty to cooperate.
2. Management involvement.
(a.) Potential for faith claim.
(b.) Involvement of coverage counsel and coverage issues.
(c.) Impact on insured.
3. United Services Auto. Ass’n v. Morris – Reservation of Rights
(a.) Must be properly and timely communicated to insured so that no prejudice
exists on insured. The ROR should be sent before the insurance company
assumes the defense to avoid the insured reasonably relying on the lack of
a coverage defenses. Equity General Insurance Co. v. C&A Realty Co.
(b.) Inform the reader of average intelligence of the fact that the insurance
company is providing a defense without waiving its rights to later contest
coverage. Equity General Insurance Co. v. C&A Realty Co.
(1) Inform the insured of the concerns the insurance company has with
coverage. Globe Indemnity Co. v. Blomfield.
(2) Covenant not to execute/ assignment/stipulated judgment or
withdrawal of answer and judgment entered against insured.
(c.) Defenses:
(1.) Settlement not fair and reasonable under circumstances;
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(2.) Judgment COLLUSIVE OR FRAUDULENT.
(d.) Trump Card: Withdraw Reservation of Rights.
(1.) Insured must give notice to allow the insurance company to defend
without ROR.
(e.) Insurance company preserves coverage defenses.
4. Damron v. Sledge – Failure to Defend; No Reservation of Rights.
(a.) Insured can settle with third party without insurance company consent.
(1.) Must be fair and reasonable.
(b.) Covenant not to execute/ assignment/stipulated judgment or withdrawal of
answer and judgment entered against insured.
(c.) Insured not required to provide notice to the insurance company.
(d.) Insurance company preserves coverage defenses.
5. Colorado Casualty Company v. Safety Control Company. The Arizona Court of
Appeals held that a Damron agreement between an insured and its excess insurer
assigning the insured’s rights against the primary insurer was enforceable.
I.
K. K. Implied and Express Warranty Claims
1. Arizona.
(a.) Warranty claims sound in contract. Colberg v. Rellinger.
(b.) The law implies a warranty on a contractor to perform the agreed upon
work in a good and workmanlike manner and in a manner befitting a
skilled contractor. Columbia Western Corp. v. Vela.
(c.) The standard is whether the work performed is comparable to work
ordinarily done by a worker of average skill and intelligence.
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(d.) In an Arizona construction defect case, there is no warranty for fitness for
particular purpose. There is a determination of whether the home is
reasonably suited for its intended use. Richards v. Powercraft Homes.
(e.) Privity is not required between the purchaser and the builder for
residential construction. Subsequent residential homeowners can bring a
claim against the original developer/builder.
(f.) However, the implied warranty of good workmanship does NOT apply to
subsequent purchasers of commercial property. Hayden Business Center
Condominium Assn. v. Pegasus Development Corp. A residential
purchaser can now bring a claim for Breach of Warranty against a
Contractor who is not the builder/vendor without the need of privity.
Lofts at Fillmore Condominium Ass’n v. Reliance Commercial Const., Inc.
(g.) The Statute of Repose applies to implied warranty claims. Sullivan v.
Pulte Home Corp., 231 Ariz. 53, 290 P.3d 446 (App. 2012). Economic
tolling does not apply to the Statute of Repose.
(h.) ARS 12–341.01(A) is not applicable to a breach of implied warranty of
workmanship or habitability claim. Although the implied warranty claim
sounds in contract, it is an implied in contract law theory, not an implied
in fact contract theory.
2. Colorado
(a.) Implied Warranty of Habitability: House must not be built in a
workmanlike manner and suited for habitation. Roger v. Spring Lake Dev
Co. Proof of Defect Due to Improper Construction, Design, or
Preparations us sufficient to establish liability in the builder/vendor. Wall
v. Foster Petroleum Corp. No liability if the home becomes uninhabitable
for reasons other than workmanship such as soils expansion, but can arise
in selection of the location of the home.
(b.) Implied Warranty of Workmanlike Construction: Not a guarantee of
perfect construction. Rather, there is no requirement of perfection; the test
is reasonableness in terms of what the workmen of average skill and
intelligence would ordinarily do. Shiffers v. Cunningham Shepherd
Builders Co. The warranty applies to subsequent homeowners. Duncan v.
Schuster-Graham Homes.
(c.) Implied Warranty for Fitness for Particular Purpose.
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3. California
(a.) Breach of Express Warranties – An express warranty is an affirmation of
fact or promise made by the seller to a buyer that relates to the items sold
and becomes part of the basis of the bargain. California Uniform
Commercial Code 2313.
(b.) Breach of Implied Warranty of Workmanlike Manner – Implied
warranties are based on implied representations rather than express
statements. Homebuilders and sellers of new construction are bound by an
implied warranty that the completed structure was designed and
constructed in a reasonably workmanlike manner. With respect to
subsequent purchasers, California has stubbornly refused to disregard the
privity requirement and has held the warranty of workmanlike
construction arises under contract, not tort. However, as mentioned above,
SB 800 has been enacted for residential construction, for homes built in
2003 and later, and does apply to subsequent purchasers. Section 945 says
“The provisions, standards, rights, and obligations set forth in this title are
binding upon all original purchasers and their successors-in-interest.”
4. Nevada
(a.) A vendor/homebuilder may be liable for breach of implied warranty. See
Radaker v. Scott. Implied warranty case law (not habitability case law)
suggests that Nevada will protect subsequent purchasers with the implied
warranty of habitability. See Hiles Co. v. Johnson Pump.
5. Utah
(a.) Davencourt at Pilgrims Landing Homeowners Ass’n v. Davencourt at
Pilgrims Landing, L.C. (2009) An implied warranty of workmanlike manner
or habitability for residential construction exists. In every contract for the sale
of a new residence, a vendor in the business of building or selling such
residences makes an implied warranty to the vendee that the residence is
constructed in a workmanlike manner and fit for habitation. To establish
a breach of the implied warranty of workmanlike manner or habitability, a
plaintiff must show (1) the purchase of a new residence from a defendant
builder-vendor/developer-vendor; (2) the residence contained a latent
defect; (3) the defect manifested itself after purchase; (4) the defect was
caused by improper design, material, or workmanship; and (5) the defect
created a question of safety or made the house unfit for human habitation.
There is also no independent duty to comply with the building code.
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(1.) The implied warranty arises under contract law. Privity of contract
is required to bring a claim for breach of the implied warranty.
(2.) The implied warranty does not require perfection by a builder-
vendor / developer-vendor; or make them an insurer against any
and all defects in a home.
(3.) The implied warranty does not protect against mere defects in
workmanship, minor or procedural violations of the building
codes, or defects that are trivial or asthetic.
(4.) The implied warranty does not alleviate purchasers of their home
due diligence and opportunity to inspect a residential construction
or the incentive to negotiate for express warranties.
L. Economic Loss Rule
1. Arizona –
(a.) Flagstaff Affordable Housing v. Design. A Property owner is limited to its
contractual remedies when a design professional’s negligent design causes
economic loss but no physical injury to persons or property economic loss
rule applies to a construction defect case against a developer/contractor/
subcontractor.
(1.) Definition – Economic Loss refers to pecuniary or commercial
damage, including any decreased/diminished value or repair costs
for a product or property that is itself a subject of a contract
between the plaintiff and defendant, and consequential damages
such as lost profits.
(2.) A contracting party is limited to contractual remedies for the
recovery of economic losses if there is no physical injury to
persons or OTHER property.
(3.) When a construction defect causes only damage to the building
itself or other economic loss, common law contract remedies are
sufficient.
(4.) Subsequent purchasers can bring contractual implied warranty
claims without privity so as to avoid tort claims.
(5.) Parties can agree in a contract to preserve tort remedies.
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(b.) Sulllivan v. Pulte Home Corp II (2015) – Subsequent homeowner cannot
bring purely economic loss negligence claims. Now, subsequent
purchasers are limited to implied warranty claims which are subject to the
Statute of Repose.
2. Colorado
(a.) CRS 13-20-804 (Restriction on Construction Defect Negligence Claims)
(1.) No negligence claim based upon building code or industry
standard unless actual damage to real or personal property, actual
loss of use of real or personal property/bodily injury, risk of bodily
injury or death to or threat to life, health, or safety of the
occupants.
a) Can bring other tort, contract, and warranty claims.
b) Can bring other negligence claims that arise from any
statute or ordinance other than for violation of building
code.
(b). Town of Alma v. Azco Construction, Inc.;
(1.) Economic loss is defined as damages other than physical harm to
persons or property.
(2.) A party suffering only economic loss from a breach of an express
or implied contract may NOT assert a tort claim UNLESS an
independent duty of care under tort law. If a breach of a duty arises
independently of any contract duties, then tort claim may exist.
a) Builders owe an independent duty of care to act without
negligence in construction of a home.
b) Subcontractors owe an independent duty to homeowners to
act without negligence in construction of a home. A.C.
Excavating v. Yacht Club II Homeowners Association.
c) Engineer and inspector do NOT owe an independent duty
to subcontractor on a public works construction job. BRW,
Inc. v. Duffy & Sons, Inc.
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3. California
(a.) Residential Construction – SB 800 has superseded the Aas v. Sup. Ct
case which had required there to be resulting separate property. SB 800
allows for construction defect claims for technical code violations with no
resulting property damage.
(b.) Non-Construction – Economic Loss Rule applies in California. Seeley v.
White Motor Co., The California Supreme Court distinguished between
tort recovery for physical injury and warranty recovery for economic loss.
The court held that a buyer should not bear the risk that a product will
cause physical injury, but the buyer should bear the risk that the “product
will not match his economic expectations.” The case involved a consumer
transaction, the purchase of a defective truck. The court rejected the notion
that the law of warranty should be “limited to parties in a somewhat equal
bargaining position.”
(c.) Special Relationship Exception to the Economic Loss Rule: Allows
limited exception where there is a “special relationship” between the
plaintiff and the defendant. Biakanja v. Irvine; J’Aire v. Gregory. A
“special relationship” exists between the plaintiff and the defendant
where: (1) the plaintiff was an intended beneficiary of the defendant’s
obligations under a contract; (2) the plaintiff’s loss was foreseeable; (3)
there is a high degree of certainty that the plaintiff would suffer the loss
from the defendant’s conduct; (4) there is a close connection between the
defendant’s conduct and the plaintiff’s loss; (5) the defendant’s conduct is
morally blameworthy; and (6) the public policy favors holding the
defendant responsible for plaintiff’s economic loss.
(d.) Fraud Exception to the Economic Loss Rule: Robinson Helicopter Co.,
Inc. v. Dana Corp., A tortious breach of contract may be found when (1)
the breach is accompanied by a traditional common law tort, such as fraud
or conversion; (2) the means used to breach the contract are tortious,
involving deceit or undue coercion; or (3) one party intentionally breaches
the contract intending or knowing that such a breach will cause severe,
unmitigable harm in the form of mental anguish, personal hardship, or
substantial consequential damages.”
4. Nevada
(a.) Construction: As Chapter 40 claims, Nevada has been reluctant to bar
claims by residential owners against design professionals or contractors
for purely economic damages. Olson v. Richard. Chapter 40 allows for
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negligence claims by homeowners. We do sometimes still pursue the
economic loss rule defense in cases, depending upon the judge.
Subcontractors will also sometimes raise it with respect to defending third
party residential and commercial claims
(b.) Design Professionals: Nevada has prohibited professional negligence
claims against design professionals on commercial projects who did not
perform any physical construction activities. Terracon Consultants
Western, Inc. v. Mandalay Resort Group. The economic loss doctrine
prohibits unintentional tort actions in which the plaintiff seeks to recover
purely economic losses. Terracon Consultants W., Inc. v. Mandalay
Resort Group. The Nevada Supreme Court has applied the economic loss
doctrine in product liability cases as well as negligence actions. See Giles
v. Gen. Motors Acceptance Corp.
(c.) Other Tort Claims: It is true that a plaintiff may not recover economic loss
under theories of strict products liability or negligence. Local Joint Exec.
Bd. v. Stern; Central Bit Supply v. Waldrop Drilling & Pump. However,
purely economic loss may be recovered under a breach of warranty theory.
Hiles Co. v. Johnston Pump Co.
5. New Mexico
(a.) New Mexico adopted the economic-loss rule in Utah International, Inc. v.
Caterpillar Tractor, Co. When there is no great disparity in bargaining
power of the parties, economic losses from injury of a product to itself are
not recoverable in tort actions; damages for such economic losses in
commercial settings in New Mexico may only be recovered in contract
actions.
(1.) In AIG Aviation Insurance v. Avco Corporation, the New Mexico
Federal District Court relied upon the decision from the New
Mexico Court of Appeals in Spectron Dev. Lab., a Div. of Titan
Corp. v. Am. Hollow Boring Co., and listed three factors to
determine if there is great disparity in the parties’ bargaining
power: “1) [W]hether any real opportunities for bargaining existed,
2) whether both parties had an incentive to reach an agreement,
and 3) whether the parties’ sophistication level, both generally and
with regard to the specific product, was comparable.”
(b.) The purpose of the economic loss rule is to preserve the bedrock principle
that contract damages be limited to those within the contemplation and
control of the parties in framing their agreement.” In re Consol. Vista Hills
PROPERTY OF RESNICK & LOUIS, P.C.
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Retaining Wall Litigation. The Supreme Court in that case went on to hold
that the economic-loss rule is inapplicable to indemnity claims. The
Supreme Court held that the rule was not meant to prevent recovery, but to
prevent recovery in tort, and “it would be unjust not to allow
indemnification.
(c.) In 2006, The Federal District Court in New Mexico (Farmers Alliance
Mut. Ins. Co. v. Naylor) also addressed the applicability of the economic
loss rule for service contracts. That court said that Legal precedent in
New Mexico indicates that the economic loss rule extends beyond the
limited context of products liability law and applies to service contracts.
The legal and policy considerations that motivated New Mexico courts to
adopt the economic loss rule in the products liability context apply equally
to service contracts. However, that Federal District Court also held that
negligence claims which arise out of professional service contracts will
not be barred by the economic loss rule. In fact, the Court said “Similarly,
the New Mexico Supreme Court has observed that “[w]hen professional
services arising from contract are substandard, a plaintiff may bring a
cause of action for malpractice based on negligence or for breach of
contract arising from the breach of the implied warranty to use reasonable
skill.” Adobe Masters, Inc. v. Downey. Because I am bound by state law, I
conclude that although the economic loss rule applies to service contracts,
the rule does not bar tort claims arising from an independent duty of care.”
6. Utah
(a.) The economic loss rule provides generally that one “may not recover
economic losses under a theory of non-intentional tort” absent physical
damage to other property or bodily injury. Am. Towers Owners Ass’n v.
CCI Mech., Inc., 930 P.2d 1182, 1189 (Utah 1996). Economic losses, of
course, represent costs of repair, lost profits, lost business opportunities,
and lost wages. Under this rule, economic losses may not be recovered
under a negligence claim unless there are bodily injuries or property
damage. In a construction context, this rule was applied in Am. Towers
Owners Ass’n, where a condominium association brought suit against the
defendants who designed, developed and constructed the condominium
complex. 930 P.2d 1182. In part, the association alleged that the
defendants negligently failed to design, construct, supervise and inspect
the construction of the property. As a result, the association alleged that it
incurred substantial and ongoing reparation costs, the substantial
diminution of the value of the property and other special and
consequential damages. The trial court granted the defendant’s motion for
summary judgment on the basis that the claim failed as a matter of law
PROPERTY OF RESNICK & LOUIS, P.C.
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because “the alleged damages are for economic loss, not for injury to
persons or other property.” Id. On appeal the Utah Supreme Court
affirmed. In doing so, the court explained the above principles of law and
held:
The Association contends that the complex’s plumbing and
mechanical systems do not meet their expectations, resulting in a
diminution in value of their purchase measured by the cost of
repair. This deterioration of the complex does not qualify for the
“damage to other property” exception to the economic loss
doctrine. This interpretation is consistent with the court of appeals’
decisions applying the economic loss rule . . . where the plaintiff’s
claimed that construction defects caused water leakage into other
parts of their homes.
Am. Towers Owners Ass’n, 930 P.2d at 1191 (citations omitted).
(b.) In 2008, the Utah legislature enacted Utah Code Ann. § 78B-4-513, which
addresses issues presented by the economic loss doctrine. The statute
provides:
§ 78B-4-513. Cause of action for defective construction (1) Except
as provided in Subsection (2), an action for defective design or
construction is limited to breach of the contract, whether written or
otherwise, including both express and implied warranties. (2) An
action for defective design or construction may include damage to
other property or physical personal injury if the damage or injury is
caused by the defective design or construction. (3) For purposes of
Subsection (2), property damage does not include: (a) the failure of
construction to function as designed; or (b) diminution of the value
of the constructed property because of the defective design or
construction. (4) Except as provided in Subsections (2) and (6), an
action for defective design or construction may be brought only by
a person in privity of contract with the original contractor,
architect, engineer, or the real estate developer. (5) If a person in
privity of contract sues for defective design or construction under
this section, nothing in this section precludes the person from
bringing, in the same suit, another cause of action to which the
person is entitled based on an intentional or willful breach of a
duty existing in law. (6) Nothing in this section precludes a person
from assigning a right under a contract to another person, including
to a subsequent owner or a homeowners association.
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(c.) Davencourt at Pilgrims Landing Homeowners Association v. Davencourt
at Pilgrims Landing LC 30) (2009)
(1.) Until the developer relinquishes control of the association to the
members, the developer owes the following durties to the
association and its members: (1) reasonable care / prudence in
managing and maintaining the common property; (2) establish a
sound fiscal basis for the association by imposing and collecting
assessments and establishing reserves for the maintenance and
replacement of common property; (3) disclose the amount the
developer is providing or subsidizing services; (4) maintain records
and to account; (5) comply with and enforce the terms of the
governing documents, including design controls, land-use
restrictions, and the payment of assessments; (6) disclose all
material facts and circumstances affecting the condition of the
property that the association is responsible for maintaining; and (7)
disclose all material facts and circumstances affecting the financial
condition of the association, including the interest of the developer
and the developer’s affiliates in any contract, lease, or other
agreement entered into by the association.
(2.) Tort claims brough under this limited fiduciary duty fall outside of
the Economic Loss Rule. Only tort claims which extent from this
independent, limited fiduciary duty, are permitted, not all torts.
M. Standing By HOAs to Bring Claims On Their Own Behalf/Behalf of Unit Owners
1. Arizona – ARS 33-1242 and 33-1247; and Continental Townhomes East v.
Bockbank.
2. Colorado – CRS 38-33.3-302(d)
3. California – Civil Code § 1368.3 (formerly CCP § 383) – express statutory
standing; areas of damage that association is obligated to maintain or repair. Also,
HOA has standing to bring implied warranty claim for defects to common areas.
Windham at Carmel Mountain Ranch Association v. Superior Court. CCP § 382 –
representative standing; areas of damage that association is not obligated to
maintain or repair Raven’s Cove Townhomes v. Knuppe Development.
4. Nevada
(a.) NRS 116.3102 (Powers of Unit Owners Associations)
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(1.) Generally, a homeowners’ association has standing under NRS
116.3102(1)(d) to assert causes of action for constructional defects
on behalf of its members. See Horton Inc. RCR v. Eighth Judicial
District Court.
(2.) However, a homeowners’ association may not institute, defend, or
intervene in litigation, arbitration, mediation, or administrative
proceedings in its own name on behalf of itself or unit owners with
respect to a constructional defect action unless the action pertains
exclusively to common elements. See A.B. 125, § 20, 78th Regular
Session (Nev. 2015), enacted Feb. 24, 2015.
5. New Mexico – NMRA 47-7-26 (Actions); NMRA 47-7C-2
6. Utah – A homeowners’ association has standing to maintain an action against a
developer, regarding common areas. Brickyard Homeowners’ Ass’n Mgmt.
Comm. V. Gibbons Realty Co., 668 P.2d 535 (Utah 1983).
N. Self Insured Retentions
1. California
(a.) SIR Estoppel (Executive Risk Indemnity v. Jones) – Beginning with
Clemmer v. Hartford Insurance Co., the California courts have held that
where an insurer breaches its duty to defend its insured, the insurer is
bound in a subsequent coverage action by all material findings of fact in
the underlying action essential to the judgment of liability and damages. In
Executive Risk Indemnity the California Court of Appeal, First Appellate
District, Division Four, held that if, despite the entreaties of its insured, an
insurer denies a defense, it is bound by the material findings in the action
against the insured even if the policy does not include a defense
obligation, but only requires the insurer to indemnify the insured once
judgment is entered. The Court of Appeal stated: “[W]e conclude that
when an insurer (1) is duly notified of the underlying claim against its
insured; and (2) is given a full opportunity to protect its interests, the
resulting judgment-if obtained without fraud or collusion-is binding
against the insurer in any later coverage litigation on the claim involving
its insured. This rule applies regardless of whether the insurer has a
contractual duty to defend, or whether or not its refusal to participate in
the underlying proceedings is legally justified.”
(b.) SIR Payment (Forecast Homes, Inc. v. Steadfast); If the insurance policy
requires the named insured to satisfy the SIR, only a named insured, not
PROPERTY OF RESNICK & LOUIS, P.C.
139
an additional insured, can satisfy a general liability policy’s self-insured
retention to trigger coverage
(c.) SIR Payment (National Fire Ins. Co. of Hartford v. Federal Ins. Co)
Citing to the 2010 California state court decision in Forecast Homes, Inc.
v. Steadfast Ins. Co., Federal argued that this policy language required the
hotel to pay the retention with its own funds, and that the retention could
not be insured. The court rejected this argument, however, noting that in
Forecast Homes, the provision concerning payment of the self-insured
retention expressly stated that “Payment by others, including but not
limited to additional insureds or insurers, do not serve to satisfy the self-
insured retention.” By contrast, the Federal policy contained a
“Bankruptcy Within the Self-Insured Retention” provision stating that the
bankruptcy of any insurer, or any other person, would not relieve the hotel
of its obligation to satisfy the retention. This language, explained the
court, implied that the retention could be paid by other insurers, or other
persons, and at the very least, did not “clearly require the hotel to satisfy
the SIR out of its own pocket.” In other words, the bankruptcy provision
negated the otherwise clear policy provision stating that the retention must
be paid by “you.
O. Additional Insured Obligations (On-Going Operations Hot Item Issue)
1. Arizona
Colorado Cas. Ins. Co. v.
Safety Co.
Arizona Court of Appeals
228 Ariz. 517 (2012)
Factual Background: General
contractor was sued by an injured
motorist as a result of defects in
concrete safety walls that were
put in place by a subcontractor for
purposes of providing a barrier
during a road work construction
project. Pursuant to contract, the
subcontractor was required to
install and maintain the concrete
barriers until completion and final
acceptance of the entire project.
The general contractor tendered to
the subcontractor’s insurance
company under an additional
insured endorsement providing
coverage for liability arising out
of the subcontractor’s operations.
Holding: In finding coverage
under the subject additional
insurance endorsement, the
Arizona Appellate Court
indicated that the reference to
“ongoing operations” in this
context was not ambiguous.
The Court indicated that
ongoing operations means
“liability arising while the
work is still progress.”
Applying this definition, the
Court held that the
subcontractor’s ongoing
operations continued from
the time the subcontractor
installed the barriers until the
barriers were removed.
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140
Tri-Star Theme Builders,
Inc./PCL Construction v.
OneBeacon Ins. Co.
United States Court of
Appeal, 9th Cir., (2011) 426
Fed.Appx. 506 (not for
publication)
Factual Background: General
contractor sought AI coverage
under subcontractor’s insurance
policy in relation to a construction
defect lawsuit. The subcontractor
performed work on the project
during the pertinent policy
periods. The AI endorsement at
issue indicated that AI coverage
applied for “liability arising out of
your ongoing operations.”
Holding: The Ninth Circuit
Court of Appeals found that
the reference to “ongoing
operations” with no temporal
limitation or definition was
ambiguous. The Court found
that the additional insured
coverage could be triggered
as long as there was work
during the policy period.
2. California
McMillin Construction
Services, LP v. Arch Specialty
Ins. Co.
United States District Court for
the Southern District of
California
2012 WL 243321
Factual Background: General
contractor claimed to be an
additional insured under
multiple subcontractors’
insurance policies that provided
coverage with respect to
liability arising out of the
subcontractors’ “ongoing
operations.” The insurers
argued that they had no duty to
defend the general contractor
because the additional insured
coverage ended when the
subcontractors’ work for the
general contractor was
complete.
Holding: The Federal District
Court followed the holding in
Tri-Star and found that the
reference to “ongoing
operations” was ambiguous.
The Court also found that
Exclusions (j)5 and (j)6 did
not preclude the potential for
coverage.
Pardee Construction Co. v.
Insurance Co. of the West
California Court of Appeal
4th District (2000)
77 Cal.App.4th 1340
Factual Background: General
contractor brought suit against
insurers for multiple
subcontractors, claiming that
such insurers owed an
obligation to defend the general
contractor as an AI under the
subcontractor policies. The
main policies at issue had ISO
CG 20 10 11/85 AI
endorsements (or similar forms)
which provide AI coverage for
Holding: The court found
that the ISO CG 20 10 11/85
endorsement language
provided for completed
operations coverage. The
court noted that the carriers
could have eliminated
completed operations
coverage by adding policy
language limiting the AI
coverage to a specific time
frame or project. In reaching
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141
“liability arising out of [the
named insured’s] work.” The
carriers argued that there could
be no coverage under their
policies because their policies
were issued after completion of
the construction project for
which additional coverage was
sought.
this conclusion, the court
recognized that the carriers
could have used an updated
version of the ISO CG 20 10
AI form [such as the 1993 or
1997 version] which limited
AI coverage to liability
arising out of [the named
insured’s] “ongoing
operations.” The court stated
that the post-1993 version of
the 20 10 form “effectively
precludes application of the
endorsement’s coverage to
completed operations
losses.”
St. Paul Fire and Marine Insurance Company v. ACE American Insurance (2014 WL 4078660,
August 14, 2014)
The court found “ongoing operations” and “completed operations” are temporal concepts, with
“ongoing operations” referring to work in progress and “completed operations” referring to work
that has been completed. Because they are temporal concepts, property damage that arises from
ongoing operations must occur while the operations are ongoing. Furthermore, the ongoing
operations temporal element places emphasis on when the damage occurred, as opposed to
when the damage was discovered. Because the homeowners discovered the damage after the
sub-contractors completed their work, but the damage initially occurred during their operations,
the insurance company for the subcontractor was required to defend homebuilder as an
additional insured.
3. Colorado
United Fire & Cas. Co. v.
Boulder Plaza Residential
LLC
United States Court of
Appeals,
10th Cir. (2011) 633 F.3d
951; (2011 WL 240520)
Factual Background: Insurance
company sought declaratory
judgment that it did not owe an
AI obligation to a developer in
relation to an underlying
construction defect case. The AI
endorsement at issue provided
coverage for the subcontractor’s
“ongoing operations.” The
endorsement provided that “a
Holding: Following the
Colorado Court of Appeals
decision in Weitz the Tenth
Circuit found that the
complaint only alleged
damage to completed
operations rather than
ongoing operations. Thus, the
Court found that the insurer
had no AI obligation.
PROPERTY OF RESNICK & LOUIS, P.C.
142
person’s or organization’s status
as an AI under this endorsement
ends when your operations for
that insured are completed.” This
endorsement appears similar to
the ISO CG 20 33 form.
Royal Indemnity Co. v.
American Family Mutual Ins.
Co.
United States District Court,
D. Colo.
2008 WL 4378737 (not
published in Federal Reporter)
Factual Background: Direct
carrier for developer sued
subcontractor carriers claiming
AI coverage for the underlying
construction defect case. The
subject AI endorsement was an
ISO CG 20 10 10/93 form which
provided AI coverage “but only
with respect to liability arising
out of your ongoing operations
performed for that insured.” The
subcontractors at issue
performed work during the
policy periods under which AI
coverage was being sought. The
developer’s direct carrier sought
to differentiate the instant matter
from the Colorado Court of
Appeals decision in Weitz by
noting the fact that work
performed during these policy
periods created a potential for
damage during the policy period.
Holding: The District Court
followed Weitz and ruled that
because the claimant in the
construction defects lawsuit
did not notice or sustain
damages until after the work
of the subcontractors was
completed (based on
certificate of occupancy
dates), the AI coverage did
not apply. The District Court
noted that the operative
complaint in the underlying
construction defect case
alleged that property damage
was first observed after the
buildings were substantially
completed following transfer
of title to the homeowner
control.
Weitz Company, LLC v. Mid-
Century Ins. Co. Colorado
Court of Appeals, 181 P.3d
309 (2007)
(cert. denied 2008)
Factual Background: General
contractor, who was sued by
homeowner, brought action
against insurer that issued CGL
policy to subcontractor, claiming
that general contractor was an
AI. AI endorsement provided
coverage “only with respect to
liability arising out of your [the
subcontractor’s] ongoing
operations.” (ISO CG 20 10
Holding: The court held that
under the plain and ordinary
meaning of “arising out of
your ongoing operations,” the
AI endorsement does not
cover “completed
operations,” and the insurer
has no duty to defend or
indemnify the general
contractor under the
circumstances at issue in the
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143
10/93). The project at issue was
certified for occupancy before
the subcontractor’s CGL policy
at issue incepted, but
construction defect lawsuit was
filed after inception of the
policy.
case. Note: The court does
not address whether the result
would be different if there
was evidence of work
performed during the policy
period.
P. Arizona and Colorado Definition of Occurrence and Coverage for Property Damage
With Duty to Defend
1. Arizona (Lennar Corp v. Auto Owners Ins. Co)
(a.) Faulty workmanship by itself does not constitute an “occurrence” under a
CGL policy. The cost of repairing such faulty workmanship is not
“property damage.”
(b.) If faulty workmanship allegedly causes damage to other portions of a
building (such as the wall and floor cracks that resulted from soil
expansion), then there is an occurrence. Property damage” resulting from
faulty workmanship is covered even though it might be considered a
natural consequence of faulty workmanship.
(c.) Faulty construction may constitute a “general harmful condition,” and
when accidental property damage results from continued exposure to
faulty construction, that property damage is an “occurrence” as defined by
the involved policies.
(d.) Continuous Trigger applies in Arizona. Associated Aviation Underwriters
v. Wood.
(e.) Breach of Contract Claims Can Be Occurrences. The proper inquiry is
whether an occurrence has caused property damage, not whether then
ultimate remedy for that claim is tort or contract. However, the conclusion
that the standard CGL policy contains no implied absolute bar of
contractual liabilities does not preclude application of express exclusions
of such liability. A contractual liability exclusion in the CGL policy does
not apply to damages arising out of the named insured’s contractual
liability so as to preclude coverage for a breach of contract claim. Desert
Mountain Properties v. Liberty Mutual Ins. Co.
(f.) The Broad Form Property Damage Exclusion does NOT bar coverage of
damage to non-defective property resulting from faulty workmanship.
Desert Mountain Properties v. Liberty Mutual Ins. Co.
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144
(g.) Voluntary payments by an insured to repair “property damage” are
covered under a CGL policy. Desert Mountain Properties v. Liberty
Mutual Ins. Co.
(h.) Expenses incurred to prevent future property damage that would have
occurred during a policy period can be covered under a CGL policy if
there has been some property damage before preventative measures are
taken and some of the property damage has been repaired. Desert
Mountain Properties v. Liberty Mutual Ins. Co.
(i.) An insurance company is required to defend an Insured at the Earliest
Stages of Litigation, even if the claims are groundless, and regardless if
the insured is found liable. INA Insurance Co. v. Valley Forge Ins. Co.
(j.) If any claim alleged in the complaint is within the policy’s coverage, the
insurance company has a duty to defend the entire suit, because it is
impossible to determine the basis upon which the plaintiff will recover, if
at all, until the action is completed. The insured can make a factual
showing outside of the Complaint such as with Affidavits which then
requires the insurance company to investigate and defend if there is a
potential for coverage under the policy. The insurance company can rely
upon facts outside of the Complaint to establish that there is no duty to
defend. Kepner v. Western Fire Insurance Co.
(k.) The duty to defend extends to covered and non-covered claims. Western
Casualty & Surety Co v. International Spas of Arizona, Inc.
(l.) Regal Homes, Inc. v. C.N.A. Insurance. In the context of an additional
insured claim, the insurance company must defend the entire law suit, not
just the issues applicable to the insured. The additional insured obligation
which is “arising out of” the subcontractor’s work only requires some
causal relationship between the injury and the risk for which coverage is
provided which is determined at the time the relevant pleadings are filed.
Id. There only needs to be some causal connection between the
subcontractor’s scope of work and the claims against the additional
insured. Id. It is irrelevant to the duty to defend whether the subcontractor
is ultimately found not to be liable. The Additional Insured defense
obligation could exist even with no duty to indemnify on behalf of the
subcontractor.
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145
2. Colorado – CRS 13-20-808
(a.) The general assembly finds and determines that:
(1.) The interpretation of insurance policies issued to construction
professionals is of vital importance to the economic and social
welfare of the citizens of Colorado and in furthering the purposes
of this part 8.
(2.) Insurance policies issued to construction professionals have
become increasingly complex, often containing multiple, lengthy
endorsements and exclusions conflicting with the reasonable
expectations of the insured.
(3.) The correct interpretation of coverage for damages arising out of
construction defects is in the best interest of insurers, construction
professionals, and property owners.
(b.) The general assembly declares that:
(1.) The policy of Colorado favors the interpretation of insurance
coverage broadly for the insured.
(2.) The long-standing and continuing policy of Colorado favors a
broad interpretation of an insurer’s duty to defend the insured
under liability insurance policies and that these duties is a first-
party benefit to and claim on behalf of the insured.
(3.) The decision of the Colorado court of appeals in General Security
Indemnity Company of Arizona v. Mountain States Mutual
Casualty Company, 205 P.3d 529 (Colo. App. 2009) does not
properly consider a construction professional’s reasonable
expectation that an insurer would defend the construction
professional against an action or notice of claim contemplated by
this part 8.
(4.) For the purposes of guiding pending and future actions interpreting
liability insurance policies issued to construction professionals,
what has been and continues to be the policy of Colorado is hereby
clarified and confirmed in the interpretation of insurance policies
that have been and may be issued to construction professionals.
(c.) For the purposes of this section:
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(1.) “Insurance” has the same meaning as set forth in section 10-1-102,
C.R.S.
(2.) “Insurance policy” means a contract of insurance.
(3.) “Insurer” has the same meaning as set forth in section 10-1-102,
C.R.S.
(4.) “Liability insurance policy” means a contract of insurance that
covers occurrences of damage or injury during the policy period
and insures a construction professional for liability arising from
construction-related work.
(d.) In interpreting a liability insurance policy issued to a construction
professional, a court shall presume that the work of a construction
professional that results in property damage, including damage to the
work itself or other work, is an accident unless the property damage is
intended and expected by the insured. Nothing in this subsection (d.):
(1.) Requires coverage for damage to an insured’s own work unless
otherwise provided in the insurance policy; or
(2.) Creates insurance coverage that is not included in the
insurance policy.
(e.) (1.) Upon a finding of ambiguity in an insurance policy, a court may
consider a construction professional’s objective, reasonable
expectations in the interpretation of an insurance policy issued to a
construction professional.
(2.) In construing an insurance policy to meet a construction
professional’s objective, reasonable expectations, the court may
consider the following:
a) The object sought to be obtained by the construction
professional in the purchase of the insurance policy; and
b) Whether a construction defect has resulted, directly or
indirectly, in bodily injury, property damage, or loss of the
use of property.
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(3.) In construing an insurance policy to meet a construction
professional’s objective, reasonable expectations, a court may
consider and give weight to any writing concerning the insurance
policy provision in dispute that is not protected from disclosure by
the attorney-client privilege, work-product privilege, or article 72
of title 24, C.R.S., and that is generated, approved, adopted, or
relied on by the insurer or its parent or subsidiary company; or an
insurance rating or policy drafting organization, such as the
insurance services office, Inc., or its predecessor or successor
organization; except that such writing shall not be used to restrict,
limit, exclude, or condition coverage or the insurer’s obligation
beyond that which is reasonably inferred from the words used in
the insurance policy.
(4.) If an insurance policy provision that appears to grant or restore
coverage conflicts with an insurance policy provision that appears
to exclude or limit coverage, the court shall construe the insurance
policy to favor coverage if reasonably and objectively possible.
(5.) If an insurer disclaims or limits coverage under a liability
insurance policy issued to a construction professional, the insurer
shall bear the burden of proving by a preponderance of the
evidence that:
a) Any policy’s limitation, exclusion, or condition in the
insurance policy bars or limits coverage for the insured’s
legal liability in an action or notice of claim made pursuant
to section 13-20-803.5 concerning a construction defect;
and
b) Any exception to the limitation, exclusion, or condition in
the insurance policy does not restore coverage under the
policy.
(6.) a) An insurer’s duty to defend a construction professional or
other insured under a liability insurance policy issued to a
construction professional shall be triggered by a
potentially covered liability described in:
1) A notice of claim made pursuant to section 13-20-
803.5; or
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2) A complaint, cross-claim, counterclaim, or third-
party claim filed in an action against the
construction professional concerning a construction
defect.
b) An insurer shall defend a construction professional who has
received a notice of claim made pursuant to section 13-20-
803.5 regardless of whether another insurer may also owe
the insured a duty to defend the notice of claim unless
authorized by law. In defending the claim, the insurer
shall:
(7.) a) Reasonably investigate the claim; and
b) Reasonably cooperate with the insured in the notice of
claims process.
1) This paragraph (b) does not require the insurer to
retain legal counsel for the insured or to pay any
sums toward settlement of the notice of claim that
are not covered by the insurance policy.
2) An insurer shall not withdraw its defense of an
insured construction professional or commence an
action seeking reimbursement from an insured for
expended defense cost unless authorized by law and
unless the insurer has reserved such right in writing
when accepting or assuming the defense obligation.
(f.) 10th Circuit Greystone Construction v. National Fire and Marine
Insurance Co: The 10th Circuit unanticipated damage to the insured’s
OWN work constitutes an occurrence. Therefore, if the work at issue were
performed by a subcontractor and the policy contained a subcontractor
exception to our work exclusion, allegations of property damage to the
insured’s own work would constitute an occurrence and therefore trigger a
duty to defend.
Q. Compulsory/Statutory Arbitration
1. Arizona
(a.) Amount Triggering Arbitration
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Under ARS 12-133, the Arizona statute governing arbitration, the Arizona
Superior Court is required to 1) establish jurisdictional limits not
exceeding $65,000, for submission of disputes to arbitration and 2) require
arbitration in all cases which are filed in superior court in which the court
finds or the parties agree that the amount in controversy does not exceed
the jurisdictional limit.
Pursuant to ARS 12-133, ARCP 72(b) requires arbitration for civil cases
in which no party seeks affirmative relief other than a money judgment,
and no party seeks an amount in excess of the jurisdictional limit for
arbitration. This amount includes punitive damages, but it does not include
interest, attorneys’ fees or costs. Although the jurisdictional limit for
arbitration varies across the counties from $50,000 to as low as $10,000,
the two largest counties, Maricopa and Pima, have set their jurisdictional
limit at $50,000. Jarostchuk v. Aricol Communs., Local Rules of Practice
of Maricopa County Superior Court, Rule 3.10; Local Rules of Practice
Pima County Superior Court.
(b.) Appeal Risk to De Novo Trial
Under ARS 12-133(H), “[a]ny party to the arbitration proceeding may
appeal from the arbitration award to the court in which the award is
entered by filing, within the time limited by rule of court, a demand for
trial de novo on law and fact.” The time for filing an appeal is typically
either 20 days after filing of the award, or 20 days after the notice of
decision becomes an award, whichever occurs first. ARCP 77. The
Arizona Court of Appeals, while recognizing the strong policy favoring
expeditious handling of cases through arbitration, has also noted that “[d]e
novo appeals are an integral part of [the] arbitration system.” Liberty Mut.
Fire Ins. Co. v. Mandile, although the ability to file for a de novo appeal is
part of the arbitration system in Arizona, § 12-133(I) sets forth procedural
requirements for filing a de novo trial demand that are designed to deter
frivolous demands.
Pursuant to 12-133(I), if a party decides to file a demand for trial de novo,
the appellant must deposit with the county an amount equal to the
arbitrator’s compensation, but not exceeding ten per cent of the amount in
controversy. Furthermore, while the appellant may motion the court to
refund the deposit after judgment at the trial de novo, the court must only
grant the motion if the judgment on the trial de novo is at least twenty-
three per cent more favorable than the relief granted by the arbitration
award. Otherwise, the deposit will be used to pay to the arbitrator, the
appellee’s reasonable attorney fees necessitated by the appeal, and
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reasonable expert witness fees that are incurred by the appellee in
connection with the appeal.
2. California
(a.) Amount Triggering Arbitration
CCCP 1141.11, the California rule governing arbitration, requires each
superior court with 18 or more judges to submit all nonexempt cases in
which the amount in controversy is less than $50,000 to arbitration. In
each superior court that has fewer than 18 judges, the court may require,
through its local rules, that all nonexempt cases in which the amount in
controversy is less than $50,000 be submitted to arbitration if “it is in the
best interests of justice.” CCCP 1141.16, “[t]he determination [of the
amount in controversy] shall be based on the total amount of damages, and
the judge may not consider questions of liability or comparative
negligence or any other defense.”
(b.) Appeal Risk to De Novo Trial
CCCP 1141.20, any party to the arbitration may file a request for a de
novo trial within 60 days after the arbitrator files the award with the court.
However, if the judgment upon the trial de novo is not more favorable in
either the amount of damages awarded or the type of relief granted for the
appellant than the arbitration award, 1141.21 provides that the court shall
order that the appellant pay the arbitrator’s fee including the compensation
paid by the other party or parties to the arbitrator and pay to the other
party or parties, all reasonable costs and attorneys’ fees incurred as a result
of the trial de novo.
The Supreme Court of California has recognized that, although the
statutory language does not expressly discourage trials de novo, the
implied intent is such. Phelps v. Stostad. The court in Phelps observed that
the purpose of this rule is to encourage settlement by providing a strong
financial disincentive to a party who fails to achieve a better result than
the party would have been awarded in arbitration.
3. Colorado
(a.) Amount Triggering Arbitration
Despite surviving constitutional attacks, Colorado has repealed its
Mandatory Arbitration Act. CRS 13-22-401 et seq. (covering certain civil
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actions seeking damages of $50,000 or less). See Firelock v. District
Court., 729 P.2d 1090 (Colo. 1989) (denying a challenge under the
Colorado Constitution). Colorado has adopted the CRS 13-22-201 et seq.,
which applies to all agreements to arbitrate made on or after August 4,
2004 and to all agreements to arbitrate made before August 4, 2004 if all
parties to the agreement or arbitration proceeding agree in a record.
(b.) Appeal Risk to De Novo Trial
An appeal may be taken from an order denying a motion to compel
arbitration; granting a motion to stay arbitration; order confirming or
denying confirmation of an award; modifying or correcting an award;
vacating an award without directing a rehearing; or a final judgment
entered pursuant to Colorado’s Uniform Arbitration Act. CRS 13-22-228.
All such appeals are handled in the same manner as an appeal of an order
or judgment in a civil action. Id. Because there is no mandatory arbitration
statute in Colorado, its arbitration system does not need to allow for trial
de novo. The purpose of allowing a de novo appeal in jurisdictions that
have mandatory arbitration statutes is to protect the constitutional right to
a jury.
4. Nevada
(a) Amount Triggering Arbitration
Under NRS 38.250, all civil actions filed in district court for damages
must be submitted to nonbinding arbitration, if 1) the cause of action
arises in the State of Nevada, and 2) the amount in controversy does not
exceed $50,000 per plaintiff, exclusive of attorneys’ fees, interest and
court costs. However, under NRS 38.258, the parties are allowed to agree
to choose an alternative method of resolving the dispute, such as,
mediation or a settlement conference.
(b.) Appeal Risk to De Novo Trial
Nevada’s “[d]isincentives to appeal” non-binding arbitration include
admission of arbitrators’ findings in any trial de novo. NRS 38.250-259.
Nevada Arbitration Rules also impose a strict thirty-day limit on filing any
request for trial de novo, deem failure to pay arbitrators as a waiver of
such trial, and entitle the prevailing party at any trial de novo to recover
arbitration fees, costs, and interest. Nev. Arb. R. 18, 19. In addition, a
party challenging an award of $20,000 or less who fails to obtain a
judgment that exceeds (if claimant) or lowers (if respondent) the award by
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at least twenty percent must pay the other party attorneys’ fees and costs
following the request for trial de novo. Nev. Arb. R. 24. For awards over
$20,000, similar rules apply if the challenging party fails to obtain a ten
percent better result in the trial de novo than the party obtained in
arbitration. Id.
5. New Mexico
(a.) Amount Triggering Arbitration
Under N.M. L.D.R. Dist. 2 § LR2-603, almost all civil cases, jury and
non-jury, shall be referred to arbitration where 1) no party seeks relief
other than a money judgment, and 2) no party seeks an amount in excess
of $25,000.00, exclusive of punitive damages, interest, costs and attorney
fees. This requirement does not apply to cases involving appeals, the
Uniform Arbitration Act (which applies to agreed-to arbitration
provisions), extraordinary writs, adoption, commitment, conservatorship,
guardianship, probate, children’s code, domestic relations, workers
compensation, student loans, driver’s license, election, and tax.
(b.) Appeal Risk to De Novo Trial
To exercise the right to appeal, a party must file a “notice of appeal from
arbitration” with the clerk within fifteen (15) days after the award or an
amended award, is filed. Id. If, however, the court makes a decision on the
merits which is the same as or less favorable to the appellant than the
arbitrator’s award, the court shall order that the appellant pay all other
parties’ expenses incurred during the appeal including but not limited to
reasonable attorney fees, costs and pre-judgment interest dating from the
arbitration award. Id.
R. Limitations on Damages
1. Arizona
(a.) Limitations on tort damages are unconstitutional pursuant to Article 2,
Section 31 (damages for death or personal injuries) and Article 18, Section
6 (recovery of damages for injuries) of the Arizona Constitution.
2. Colorado
(a.) In medical malpractice cases, there is a $300,000 cap for pain and
suffering, within the Health Care Availability Act.
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(b.) Non-economic damages are capped by Colorado law, but the amount can
be doubled if the court finds justification to increase the award based clear
and convincing evidence. CRS 13-21-102.5. The caps are follows: For
accidents before January 1, 1998: $250,000 which may be increased to
$500,000 by the court upon a showing of clear and convincing evidence
for the increase. For accidents between January 1, 1998 and January 1,
2008: $366,250 which may be increased to $732,500 000 by the court
upon a showing of clear and convincing evidence for the increase.
Accident after January 1, 2008: $468,010 which may be increased to
$936,030 by the court upon a showing of clear and convincing evidence
for the increase.
(c.) Pursuant to the Colorado Wrongful Death Act CRS 13-21-201 et seq.,
caps for non-economic damages on wrongful death claims are as follows:
For claims that accrue before January 1, 1998: $250,000. For claims that
accrue between January 1, 1998 and January 1, 2008: $341,250. Claims
that accrue after January 1, 2008: $468,010 which may be increased to
$436,070. CRS 13-21-102.5. CRS 13-21-203.7, which was amended in
2007, provides for an inflationary adjustment of wrongful death award
amounts effective January 1, 2008.
(d.) To collect exemplary damages in Colorado one must prove “fraud, malice,
or willful and wanton conduct,” and then, “the award for exemplary
damages cannot exceed the amount of the actual damages awarded to the
injured party.” CRS 13-21-102.
(e.) Colorado’s Dram Shop Act, CRS 12-47-801, sets out the following caps in
dram shop cases: Prior to January 1, 1998: $150,000.00 Between January
1, 1998 and January 1, 2008: $219,750 After January 1, 2008:
$280,810.00
3. California
(a.) The only tort reform which California currently has is the Medical Injury
Compensation Reform Act (Codified in various California statutes:
Business & Professions Code Section 6146, Civil Code Sections 3333.1
and 3333.2, and Code of Civil Procedure Section 667.7) which caps
medical malpractice noneconomic damages to $250,000. This was upheld
in 2011 by California’s 5th Appellate District.
4. Nevada
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(a.) In 2004, voters approved the Keep Our Doctors in Nevada Initiative,
modifying Assembly Bill No. 1 which was enacted in 2002. This means
that in Nevada medical malpractice cases, a $350,000 noneconomic
damages cap is imposed on damages from each defendant to each plaintiff.
The law also puts a $50,000 limit on damages for hospitals and physicians
who treat trauma patients. This law is considered to be very similar to
California’s Medical Injury Compensation Reform Act.
5. New Mexico
(a.) $600,000 cap on total medical malpractice noneconomic damages,
excluding punitive damages and past and future medical care. Health care
providers’ personal liability shall not exceed $200,000; any award in
excess of this amount shall be paid by the patient compensation fund. Fed.
Express Corp. v. United States.
6. Utah
(a.) Utah Code Ann. 78B-3-410(1) establishes a cap on non-economic losses
in malpractice actions against health care providers. The amount of
damages awarded for nonecominic loss may not exceed:
(1.) for a cause of action arising before July 1, 2001, $250,000.00;
(2.) for a cause of action arising on or after July 1, 2001 and before
July 1, 2002, the limitation is adjusted for inflation to $400,000.00;
(3.) for a cause of action arising on or after July 1, 2002, and before
May 15, 2010 the $400,000.00 limitation described in Subsection
(1)(b) shall be adjusted for inflation as rovided in Subsection (2);
and
(4.) for a cause of action arising on or after May 15, 2010,
$450,000.00.
S. Consumer Protection Statutes
1. Arizona – ARS 44-1521 et seq.
(a.) Scope: Deceptive practices.
Civil Remedies: Injunction against further deceptive practices and/or
prohibition of person found to have engaged in deceptive practices from
continued engagement in said trade; compensatory damages for any
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“person in interest”; if willful, a fine of up to $10,000/per violation;
attorney general can collect reasonable fees/costs on behalf of State.
2. California – CCC 1770, 1780
(a.) Scope: Unfair and deceptive practices.
Civil Remedy: Greater of actual damages or $1000; attorneys’ fees;
injunction; restitution of property; punitive damages; any other relief
Court deems proper.
3. Colorado – CRS 6-1-101 et seq.
(a.) Scope: Unfair and deceptive practices.
Civil Remedy: Greater of actual damages sustained, $500, or three times
the amount actual damages sustained if bad faith conduct is established by
clear and convincing evidence; attorneys’ fees and costs.
4. Nevada – NRS – assorted
(a.) Scope: NRS 119.330 – Real Estate related deceptive practices; NRS
482.351, 36655-36667 related to automobiles; and NRS 598.0195-0925
related to “deceptive trade practices.”
Civil Remedy: NRS 41.600 authorizes private actions for consumer fraud
for recovery of actual damages, costs and attorneys’ fees; NRS 598.
Authorizes the attorney general to take action against deceptive trade
practices and allows injured parties to share in recover up to actual
damages. Private actions are available under Section 598 for elderly and
disabled victims only.
5 New Mexico – NMRS 57-12-1 et seq.
(a.) Scope: Unfair and deceptive practices.
Civil Remedy: Injunctions available for any person “likely to be damaged
by an unfair or deceptive trade practice” such that proof of monetary
damage is not required to bring a claim; generally, the greater of actual
damages or $100 are available; treble damages of greater of 3x actual
damages or $300 available where proof of willful engagement in deceptive
practices is shown; prevailing party entitled to attorneys’ fees and costs.
6. Utah – Utah Code Ann. § 13-11a-1 et seq.
(a.) Scope: Deceptive practices.
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Civil Remedy: Utah Code Ann. § 13-11a-4 provides:
(2) (a) Any person or the state may maintain an action to enjoin a
continuance of any act in violation of this chapter and, if injured by the
act, for the recovery of damages. If, in such action, the court finds that the
defendant is violating or has violated any of the provisions of this chapter
(Utah Code Ann. § 13-11a-1 et seq.), it shall enjoin the defendant from
continuance of the violation. It is not necessary that actual damages be
proven.
(b) In addition to injunctive relief, the plaintiff is entitled to recover
from the defendant the amount of actual damages sustained or $2,000,
whichever is greater.
(c) Costs shall be allowed to the prevailing party unless the court
otherwise directs. The court shall award attorneys’ fees to the prevailing
party.
(3) The court may order the defendant to promulgate corrective
advertising by the same media and with the same distribution and
frequency as the advertising found to violate this chapter.
[. . .]
(5) No action for injunctive relief may be brought for a violation of
this chapter unless the complaining person first gives notice of the alleged
violation to the prospective defendant and provides the prospective
defendant an opportunity to promulgate a correction notice by the same
media as the allegedly violating advertisement. If the prospective
defendant does not promulgate a correction notice within 10 days of
receipt of the notice, the complaining person may file a lawsuit under this
chapter.
T. Punitive Damages
1. Arizona – ARS 44-1521 et seq.
(a.) Standard of Conduct. Punitive damages are appropriate only where the
defendant’s wrongful conduct was guided by evil motives or willful or
wanton disregard of the interests of others. An “evil mind” may be shown
by evidence that defendant pursued a course of conduct knowing that it
created a substantial risk of significant harm to others. Rawlings v.
Apodaca
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(b.) Standard of Proof. The standard of proof is one of clear and convincing
evidence. Hyatt Regency Phoenix Hotel Co. v. Winston & Strawn.
(c.) Caps: None.
2. Colorado
(a.) Standard of Conduct. Punitive damages are recoverable in civil cases
when it is established that the injury was inflicted through force or with
malice, insult or a wanton and reckless disregard for the victim’s rights
and feelings. See White v. Brock; CRS13-21-102. An award of punitive
damages is justified under section 13-21-102 “when the act causing the
plaintiff’s injuries was performed ‘with an evil intent, and with the
purpose of injuring the plaintiff, or with such a wanton and reckless
disregard of his rights as evidence [sic] a wrongful motive.’” Tri-Aspen
Constr. Co. v. Johnson, Wanton and reckless disregard in the context of
punitive damages involves “conduct that creates a substantial risk of harm
to another and is purposefully performed with an awareness of the risk in
disregard of the consequences.” Id., quoting Palmer v. A. H. Robins Co.
(b.) Standard of Proof. Colorado requires proof beyond a reasonable doubt to
support a punitive damages award. CRS 13-25-127(2) (2010); see Frick v.
Abell.
(c.) Caps CRS 13-21-102 provides under subsection (1)(a) that reasonable
exemplary damages are limited to an amount that is equal to the amount of
the actual damages awarded to the injured party. Under subsection (3),
notwithstanding the provisions of subsection (1), the court may increase
any award of exemplary damages to a sum not to exceed three times the
amount of actual damages if certain conduct can be shown on the part of
the defendant. Subsection (6) provides that evidence of the income or net
worth of a party shall not be considered in determining the appropriateness
or amount of punitive damages.
3. California:
(a.) Standard of Conduct. In an action for breach of an obligation, not arising
from a contract, where the defendant has been guilty of fraud, oppression
or malice, punitive damages can be awarded. CCC 3294 and 3295. There
must be substantial evidence of: (a) an intent to vex, annoy and injure; or
(b) a conscious disregard of the plaintiff’s rights, before punitive damages
may be awarded. Betts v. Allstate Ins. Malice includes manufacturer’s
conscious disregard for public safety. Grimshaw v. Ford Motor Co. Mere
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negligence, even gross negligence, is not sufficient to justify an award of
punitive damages. Jackson v. Johnson.
(b.) California has defined malice, oppression and fraud as follows:
(1.) “Malice” means conduct that is intended by the defendant to cause
injury to the plaintiff, or despicable conduct that is carried on by
the defendant with a willful and conscious disregard of the rights
or safety of others.
(2.) “Oppression” means despicable conduct that subjects a person to
cruel and unjust hardship in conscious disregard of that person’s
rights.
(3.) “Fraud” means an intentional misrepresentation, deceit, or
concealment of a material fact known to the defendant with the
intention on the part of the defendant of thereby depriving a person
of property or legal rights, or otherwise causing injury. CCC
3294(c) (2010).
(c.) Standard of Proof. At trial, the plaintiff must present proof of the
defendant’s fraudulent, oppressive or malicious conduct by a standard of
“clear and convincing evidence” in order to recover punitive damages.
CCC 3294(a); Tomaselli v. Transamerica Ins. Co. On appeal, the
reviewing court will not disturb the trial court’s imposition of punitive
damages if there is “substantial evidence” of malice, fraud or oppression.
Patrick v. Md. Cas. Co. Evidence of a defendant’s financial condition is a
condition precedent to an award of punitive damages. An appellate court
cannot make a fully informed determination of whether an award of
punitive damages is excessive unless the record contains evidence of
defendant’s financial condition as an element of punitive damages. Adams
v. Murakami. The plaintiff must produce evidence of a prima facie case
for punitive damages before the plaintiff may conduct discovery or
introduce evidence of the defendant’s profits or financial condition. CCC
3295. Trial courts shall, on application of any defendant, preclude the
admission of evidence of that defendant’s financial condition until after
the trier of fact finds that punitive damages are warranted because the
defendant is guilty of malice, oppression or fraud in accordance with CCC
3294. CCC 3295(d); City of El Monte v. Sup. Ct.
(d.) Caps: A litigant may not seek punitive damages from either a health care
provider or religious corporation without a prior court order, upon proof of
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a substantial probability that the applicant will prevail on his or her claim
for punitive damages. CCC 425.13, 425.14.
4. Nevada:
(a.) Standard of Conduct. Nevada permits punitive damages for breach of
obligations not arising from contract if the wrongdoer is guilty of
expressed or implied oppression, fraud or malice. NRS 42.005 (1).
“Malice, express or implied” means conduct that is intended to injure a
person or despicable conduct that one engages in with a conscious
disregard of the rights or safety of others. NRS 42.001(3). These damages
are designed not to reward the victim but to punish the wrongdoer and
deter fraudulent, malicious or oppressive conduct. Turnbow v. State Dept.
of Human Res.; Coughlin v. Tailhook Ass’n, 818 F. Supp. 1366 (D. Nev.
1993), aff’d, 112 F.3d 1052 (9th. Cir. 1997) (claim for punitive damages
may proceed where plaintiff alleges that defendant acted with conscious
disregard for known safety standards and measures); Miller v. Schnitzer
(“Punitive damages are recoverable in a malicious prosecution case.”).
Allen v. Anderson (punitive damage claims survive the aggrieved party’s
death against a living tortfeasor; however punitive damage claims do not
survive the death of the tortfeasor and cannot be sought from the deceased
tortfeasor’s estate). Bergerud v. Progressive Cas. Ins (Punitive damages
are available when an insurer breaches the implied covenant of good
faith.).
(b.) Standard of Proof. Punitive damages may be awarded when it is proven
by clear and convincing evidence that the defendant has been guilty of
oppression, fraud or malice. NRS 42.005(1) (2010).
(c.) NRS 42.007 Exemplary and punitive damages: Limitations on
liability by employer for wrongful act of employee; exception.
(1.) Except as otherwise provided in subsection 2, in an action for the
breach of an obligation in which exemplary or punitive damages
are sought pursuant to subsection 1 of NRS 42.005 from an
employer for the wrongful act of his or her employee, the
employer is not liable for the exemplary or punitive damages
unless:
a) The employer had advance knowledge that the
employee was unfit for the purposes of the employment
and employed the employee with a conscious disregard
of the rights or safety of others;
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b) The employer expressly authorized or ratified the
wrongful act of the employee for which the damages are
awarded; or
c) The employer is personally guilty of oppression, fraud
or malice, express or implied.
d) If the employer is a corporation, the employer is not
liable for exemplary or punitive damages unless the
elements of paragraph (a), (b) or (c) are met by an
officer, director or managing agent of the corporation
who was expressly authorized to direct or ratify the
employee’s conduct on behalf of the corporation.
(2.) The limitations on liability set forth in subsection 1 do not apply to
an action brought against an insurer who acts in bad faith regarding
its obligations to provide insurance coverage.
(d.) Caps: NRS 42.005 provides that an award of exemplary or punitive
damages may not exceed: (a) Three times the amount of compensatory
damages awarded to the plaintiff if the amount of compensatory damages
is $100,000 or more; or (b) Three hundred thousand dollars if the amount
of compensatory damages awarded to the plaintiff is less than $100,000.
These limitations, however, do not apply to an action brought against:
(1.) A manufacturer, distributor or seller of a defective product;
(2.) An insurer who acts in bad faith regarding its obligations to
provide insurance coverage;
(3.) A person for violating a state or federal law prohibiting
discriminatory housing practices, if the law provides for a remedy
of exemplary or punitive damages in excess of the limitations
prescribed in subsection 1 (of § 42.005);
(4.) A person for damages or an injury caused by the emission, disposal
or spilling of a toxic, radioactive or hazardous material or waste; or
(5.) Excessive Awards.
In determining whether a punitive damages award is excessive,
Nevada courts consider the financial position of the defendant,
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culpability and blameworthiness of the tortfeasor, vulnerability and
injury suffered by the offended party, the extent to which the
punished conduct offends the public’s sense of justice and
propriety, and the means that are judged necessary to deter future
misconduct of this kind. Albert H. Wohlers & Co. v. Bartgis.
Punitive damages are legally excessive when the amount of
damages awarded is clearly disproportionate to the degree of
blameworthiness and harmfulness inherent in the oppressive,
fraudulent or malicious misconduct of the tortfeasor under the
circumstance of a given case. If the awarding jury or judge
assesses more in punitive damages than is reasonably necessary
and fairly deserved in order to punish the offenders and deter
others from similar conduct, then the award must be set aside as
unreasonable. Ace Truck & Equip. Rentals v. Kahn.
5. New Mexico:
(a.) Standard of Conduct. Punitive damages may be awarded only when the
wrongdoer’s conduct may be said to be maliciously intentional,
fraudulent, oppressive, or committed recklessly or with a wanton disregard
of the plaintiff’s rights. Gonzalez v. Surgidev Corp. Mere negligence is
inadequate to establish liability for punitive damages. Paiz v. State Farm
Fire & Cas. Co. Gross negligence may, however, serve as a basis for
punitive damages. Jessen v. Nat’l Excess Ins. Co. The imposition of
punitive damages rests with the discretion of the trier of fact. New Mexico
Hosp. Assoc. v. A.T. & S.F. Mem’l Hosp., Inc.
(b.) Standard of Proof. Preponderance of the evidence. Gallegos v. Citizens
Ins. Agency.
(c.) Caps: None.
6. Utah:
(a.) Standard of Conduct. “Except as otherwise provided by statute, punitive
damages may be awarded only if compensatory or general damages are
awarded and it is established by clear and convincing evidence that the
acts or omissions of the tortfeasor are the result of willful and malicious or
intentionally fraudulent conduct, or conduct that manifests a knowing and
reckless indifference toward, and a disregard of, the rights of others.” Utah
Code Ann. § 78B-8-201(1)(a). Utah Code Ann. § 78-8-201(1)(a) does not
apply to accidents caused by voluntary intoxication, deaths caused by the
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provision or administration of illegal controlled substances, and
shoplifting. See Utah Code Ann. § 78-8-201(1).
(b.) Standard of Proof. “Clear and convincing evidence.” Id.
(c.) Caps: None.
U. Rules of Evidence for Reliability for Science Related Evidence.
1. Frye Test: It provides that expert opinion based on a scientific technique is
admissible only where the technique is generally accepted as reliable in the
relevant scientific community. Frye v. United States, 293 F. 1013 (D.C. Cir.
1923). Frye involved the admissibility of opinion evidence based upon the use of
an early version of the Polygraph. The D.C. Circuit Court held that scientific
evidence was admissible if it was based on a scientific technique generally
accepted as reliable in the scientific community. Thus, Expert Testimony was
admitted based on the expert’s credentials, experience, skill, and reputation. The
theory was that deficiencies or flaws in the expert’s conclusions would be
exposed through cross-examination. This decision became known as the Frye test
or the general-acceptance test.
2. Daubert Test: In Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993),
the Supreme Court held that the Federal Rules of Evidence superseded Frye as the
standard for admissibility of expert evidence in federal courts. Under Daubert, a
trial judge has a duty to scrutinize evidence more rigorously to determine whether
it meets the requirements of Federal Rule of Evidence 702. This rule states, “If
scientific, technical, or other specialized knowledge will assist the trier of fact to
understand the evidence or to determine a fact in issue, a witness qualified as an
expert by knowledge, skill, experience, training, or education, may testify thereto
in the form of an opinion or otherwise, if (1) the testimony is based upon
sufficient facts or data, (2) the testimony is the product of reliable principles and
methods, and (3) the witness has applied the principles and methods reliably to
the facts of the case.” In Daubert, the Court stated that evidence based on
innovative or unusual scientific knowledge may be admitted only after it has been
established that the evidence is reliable and scientifically valid. The Court also
imposed a gatekeeping function on trial judges by charging them with preventing
“junk science” from entering the courtroom as evidence. To that end, Daubert
outlined four considerations: testing, peer review, error rates, and acceptability in
the relevant scientific community. These four tests for reliability are known as the
Daubert factors or the Daubert test. In 1999, the U.S. Supreme Court significantly
broadened the Daubert test and the trial court’s gatekeeping role to include expert
testimony based on technical and other specialized knowledge. Kumho Tire Co.,
Ltd. v. Carmichael.
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3. Arizona
(a.) Logerquist v. McVey, 1 P.3d—utilized Frye Test, superseded by statute,
changes to AZ Rules of Evidence 702 effective 1/1/2012. No published
decisions as of yet. State v. Burke, 2012 Ariz. App. Unpub. LEXIS 527
State v. Burke, 2012 Ariz. App. Unpub. LEXIS 527 (Ariz. Ct. App. 2012)
NOT CITABLE but references that Logerquist was superseded by statute
and applies a standard more similar to Daubert. The new language of Rule
702 marks a notable departure from Arizona’s former test for the
admissibility of expert testimony that was detailed in Logerquist v. McVey,
196 Ariz. 470, 1 P.3d 113 (2000). The comment to the new Arizona Rule
702 notes that the change from Logerquist and the former Rule 702
“recognizes that trial courts should serve as gatekeepers in assuring that
proposed expert testimony is reliable and thus helpful to the jury’s
determination of facts at issue.”
(1.) The current Arizona Rule of Evidence 702, effective January 1,
2012, adopts Federal Rule of Evidence 702 and states:
a) A witness who is qualified as an expert by knowledge,
skill, experience, training, or education may testify in the
form of an opinion or otherwise if:
1) the expert’s scientific, technical, or other
specialized knowledge will help the trier of fact to
understand the evidence or to determine a fact in
issue;
2) the testimony is based on sufficient facts or data;
3) the testimony is the product of reliable principles
and methods; and
4) the expert has reliably applied the principles and
methods to the facts of the case.
4. California
(a.) Rejects Daubert approach and retains Kelly-Frye test in California.
California’s slightly modified version of the Frye test, known as the
“Kelly/Frye test,” was adopted in People v. Kelly. Under the Kelly
standard, evidence based upon application of a new scientific technique
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may be admitted only after the reliability of the method has been
foundationally established, usually by the testimony of an expert witness
who first has been properly qualified. The proponent of the evidence must
also demonstrate that correct scientific procedures were used and that the
scientific technique concerning which the evidence is being offered has
gained general acceptance in the particular field to which it belongs.
General acceptance, not just reasonable reliance, is the test.
5. Colorado
(a.) People v. Shreck. Shreck holds that trial court may, but need not, consider
Daubert reliability factors. The Court held that “CRE 702, rather than
Frye, governs a trial court’s determination as to whether scientific or other
expert testimony should be admitted. Such an inquiry should focus on the
reliability and relevance of the proffered evidence and requires a
determination as to (1) the reliability of the scientific principles, (2) the
qualifications of the witness, and (3) the usefulness of the testimony to the
jury. We also hold that when a trial court applies CRE 702 to determine
the reliability of scientific evidence, its inquiry should be broad in nature
and consider the totality of the circumstances of each specific case. In
doing so, a trial court may consider a wide range of factors pertinent to the
case at bar. The factors mentioned in Daubert v. Merrell Dow
Pharmaceuticals, Inc., and by other courts may or may not be pertinent,
and thus are not necessary to every CRE 702 inquiry. In light of this
liberal inquiry, a trial court should also apply its discretionary authority
under CRE 403 to ensure that the probative value of the evidence is not
substantially outweighed by unfair prejudice. Finally, we hold that under
CRE 702, a trial court must issue specific findings as it applies the CRE
702 and 403 analyses.”
(1.) CRE 702 Provides: If scientific, technical, or other specialized
knowledge will assist the trier of fact to understand the evidence or
to determine a fact in issue, a witness qualified as an expert by
knowledge, skill, experience, training, or education, may testify
thereto in the form of an opinion or otherwise.
6. Nevada
(a.) Krause Inc. v. Little; Higgs v. State (expressly rejecting t but finding the
factors to be useful in considerations). The Court identified “the three
overarching requirements for admissibility of expert witness testimony
pursuant to NRS 50.275 as (1) qualification, (2) assistance, and (3) limited
scope requirements.”
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7. New Mexico
(a.) State v. Alberico identifies factors for determining admissibility of expert
testimony generally following Daubert criteria.
8. Utah
(a.) Utah applies a more rigorous standard than Daubert to the admission of
scientific evidence that is “based on newly discovered principles” or
“based upon ‘novel scientific methods and techniques.’” Alder v. Bayer
Corp., 61 P.3d 1068, 1083-1084 (Utah 1989). Utah R. Evid. 702 states:
(b.) Subject to the limitations in paragraph (b), a witness who is qualified as an
expert by knowledge, skill, experience, training, or education may testify
in the form of an opinion or otherwise if the expert’s scientific, technical,
or other specialized knowledge will help the trier of fact to understand the
evidence or to determine a fact in issue.
(c.) Scientific, technical, or other specialized knowledge may serve as the
basis for expert testimony only if there is a threshold showing that the
principles or methods that are underlying in the testimony
(1.) are reliable,
(2.) are based upon sufficient facts or data, and
(3.) have been reliably applied to the facts.
(d.) The threshold showing required by paragraph (b) is satisfied if the
underlying principles or methods, including the sufficiency of facts or data
and the manner of their application ot the facts of the case, are generally
accepted by the relevant expert community.
V. Dram Shop Liability/Alcohol Issues
1. Arizona
ARS 4-311(A) provides that a licensee is liable for property damage and personal
injuries if a court or jury finds that: (1) the licensee sold spirituous liquor to a
purchaser who was obviously intoxicated, or to a purchaser under the legal
drinking age without requesting identification containing proof of age or with
knowledge that the person was under the legal drinking age; (2) the purchaser
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consumed the spirituous liquor sold by the licensee; and (3) the consumption of
the spirituous liquor was a proximate cause of the injury or property damage.
“‘[O]bviously intoxicated’ means inebriated to such an extent that a person’s
physical faculties are substantially impaired and the impairment is shown by
significantly uncoordinated physical action or significant physical dysfunction
that would have been obvious to a reasonable person.” ARS 4-311(D). ARS 4-
312(A) provides that a licensee is not liable to a purchaser over the legal drinking
age, who is injured or whose property is damaged, or his or her survivors.
Additionally, a licensee is not liable to an adult person who is injured or whose
property is damaged, or to survivors of such a person, who was present with the
person who consumed the spirituous liquor at the time the spirituous liquor was
consumed and who knew of the impaired condition of the person. Id. ARS 4-301
provides that social hosts cannot liable for furnishing or serving spirituous liquor
to a person of the legal drinking age.
2. California
Liability for serving alcoholic beverages to minors obviously intoxicated. Cal.
Bus. & Prof. Code §§ 25602 and 25602.1 and Civil Code § 1714. In order to be
“obviously intoxicated,” an individual must exhibit outward manifestations of
intoxication that are “plain” and “easily seen or discovered.” Coulter v. Superior
Court.
3. Colorado
A licensee is liable for the injuries caused by a patron, if the sale or service of
alcoholic beverages was “willfully and knowingly” made to a patron who was a
minor, was visibly intoxicated, or was a known habitual drunkard. CRS 12-47-
801 and 13-21-102.5. No civil action may be brought by the person to whom the
alcohol beverage was sold or served or by his or her estate, legal guardian, or
dependent. CRS 12-47-801(3)(b). The total liability in any such action shall not
exceed $150,000.00, adjusted each decade for inflation. CRS 12-47-801. In order
to recover from a social host, plaintiff must prove that the social host knowingly
served alcohol beverage to a minor or knowingly provided such minor a place to
consume an alcoholic beverage. 12-47-801(4)(a)(I).
4. Nevada
Persons who serve or sell alcoholic beverages are not liable for injuries (1) caused
by the individuals who consumed such beverages, or (2) sustained by such
individuals. NRS 41.1305. This includes survivors of a minor, who is served
alcoholic beverages by a vendor. Snyder v. Viani. Additionally, this includes
liability by a host to a minor, who consumes alcoholic beverages at a party given
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by the host. Bell v. Alpha Tau Omega Fraternity.
5. New Mexico
A licensee is subject to civil liability if such licensee: (1) sold or served alcohol to
a person who was intoxicated, (2) it was reasonably apparent to the licensee that
the person buying or apparently receiving service of alcoholic beverages was
intoxicated, and (3) the licensee knew from the circumstances that the person
buying or receiving service of alcoholic beverages was intoxicated. NMRA 41-
11-1(A). In order for the person who was sold or served alcoholic beverages while
intoxicated to recover any damages or obtain any other relief against the licensee
who sold or served the alcoholic beverages, the licensee must be found to have
acted with gross negligence and reckless disregard for the safety of the person
who purchased or was served the alcoholic beverages. NMRA 41-11-1(B). No
person who has gratuitously provided alcoholic beverages to a guest in a social
setting may be held liable in damages to any person for bodily injury, death, or
property damage arising from the intoxication of the social guest unless the
alcoholic beverages were provided recklessly in disregard of the rights of others.
NMA 41-11-1(E). A licensee shall not be held civilly liable for selling or giving
alcohol to a minor, except when it is demonstrated that the licensee knew, or that
a reasonable person in the same circumstances would have known, that the person
who received the alcoholic beverages was a minor. NMRA41-11-1(G). Liability
arising under § 41-11-1 shall not exceed $50,000.00 for bodily injury or death of
one person in each transaction or occurrence or, subject to such limitation,
$100,000.00 for bodily injury to or death of two or more persons in each
transaction or occurrence, and $20,000.00 for property damage in each transaction
or occurrence. NMRA41-11-1(I). The New Mexico Supreme Court has held that
NMRA 41-11-1(I) violates the equal protection clause of the New Mexico
Constitution. Richardson v. Carnegie Library Rest., Inc. However, the Supreme
Court’s legal basis in the Richardson decision was subsequently overruled.
Trujillo v. City of Albuquerque. In light of the Trujillo ruling, it is difficult to
determine whether § 41-11-1(I) is constitutional.
6. Utah
Persons who serve or sell alcoholic beverages are not liable for injuries (1) caused
by the individuals who consumed such beverages, or (2) sustained by such
individuals. NRS 41.1305. This includes survivors of a minor, who is served
alcoholic beverages by a vendor. Snyder v. Viani. Additionally, this includes
liability by a host to a minor, who consumes alcoholic beverages at a party given
by the host. Bell v. Alpha Tau Omega Fraternity.
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W. Class Actions
1. The Current Federal Rule 23 Prerequisites.
(a) One or more members of a class may sue or be sued as representative
parties on behalf of all members only if:
(1.) the class is so numerous that joinder of all members is
impracticable;
(2.) there are questions of law or fact common to the class;
(3.) the claims or defenses of the representative parties are typical of the
claims or defenses of the class;
(4.) the representative parties will fairly and adequately protect the
interests of the class.
2. Types of Class Actions. A class action may be maintained if Rule 23(a) is
satisfied and if:
(a.) Prosecuting separate actions by or against individual class members would
create a risk of:
(1.) inconsistent or varying adjudications with respect to individual
class member that would establish incompatible standards of
conduct for the party opposing the class; or
(2.) adjudications with respect to individual class members that, as a
practical matter, would be dispositive of the interests of the other
members not parties to the individual adjudications or would
substantially impair or impede their ability to protect their
interests;
a) the party opposing the class has acted or refused to act on
grounds that apply generally to the class, so that final
injunctive relief or corresponding declaratory relief is
appropriate respecting the class as a whole; or
b) the court finds that the questions of law or fact common to
class members predominate over any questions affecting
only individual members, and that a class action is superior
to other available methods for fairly and efficiently
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adjudicating the controversy. The matters pertinent to these
findings include:
1) the class members’ interests in individually
controlling the prosecution or defense of separate
actions;
2) the extent and nature of any litigation concerning
the controversy already begun by or against class
members;
3) the desirability or undesirability of concentrating
the litigation of the claims in the particular forum;
and
4) the likely difficulties in managing a class action.
(b.) Arizona Rule 23, Colorado Rule 23, New Mexico Rule 1-023, and Utah
Rule 23 are all virtually identical to Federal Rule 23 and courts in these
states will give considerable deference to federal cases interpreting the
state class action rules. However, California does not statutorily follow the
Federal Rule 23. See CCCP 382.
3. California
(a.) If the consent of any one who should have been joined as plaintiff cannot
be obtained, he may be made a defendant, the reason thereof being stated
in the complaint; and when the question is one of a common or general
interest, of many persons, or when the parties are numerous, and it is
impracticable to bring them all before the court, one or more may sue or
defend for the benefit of all.
(b.) In California, class certification requirements are found in the case law.
Sav-On Drug Stores v. Superior Court. The plaintiff must establish the
existence of “an ascertainable class” and a “well-defined community of
interest among class members.” The “community of interest” criteria is
comprised of three factors, mirroring some Rule 23 requirements: (1)
predominant common questions of law or fact; (2) class representatives
with claims or defenses typical of the class; and (3) class representatives
who can adequately represent the class. Id.
(c.) California law has not expressly adopted the federal law requirement that
a class action satisfy one of three types of class actions defined in FRCP
23(b). However, plaintiffs are required to show that class treatment would
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“provide substantial benefits” to both the courts and the litigants, a
showing that California courts have recognized is akin to the ‘superiority’
prong of Rule 23(b)(3). Bell v. Farmers Ins. Exchange. In addition, trial
courts are permitted to look to federal class action law in the absence of
relevant state law precedent; Rule 23(b) h.
X. Premises Liability
1. Arizona
(a.) Notice Liability. An owner of a business is required to use reasonable care
to warn of or safeguard/remedy an unreasonably dangerous condition
which the defendant had “notice” of. The law construes the defendant to
have notice of the unreasonablhy dangerous condition when any of the
following exists:
(1.) defendant created the condition;
(2.) defendant actually knew of the condition in time to provide a
remedy or warning;
(3.) the condition existed for a sufficient length of time that the
defendant knew or should have known about it.
(b.) Open and Obvious Defense. Normally, a person need not safeguard or
warn of a condition, which is sufficiently open and obvious, that it may
reasonably be expected that persons will see and avoid it. Nevertheless, if
under all of the circumstances it should reasonably have been anticipated
that the condition could cause harm, then a person must use reasonable
care to safeguard/warn of the condition, even if the condition was open
and obvious.”
(c.) Mode of Operation Liability. Even if the defemdant had no notice of the
unreasonably dangerous condition, a plaintiff can still prove a defendant is
is negligent if all of the following exist:
(1.) defendant adopted a method of operation from which it could
reasonably be anticipated that unreasonably dangerous conditions would
regularly arise; and
(2.) defendant failed to exercise reasonable care to prevent harm under
those circumstances.
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This instruction is for cases involving business invitees; it is not
appropriate for cases involving licensees, trespassers, or persons acting in
ways not permitted by the owner. See, e.g., Nicoletti v. Westcor, Inc.
2. California
(a.) Reasonableness Standard.
As a general rule, “everyone is responsible, not only for the result of his or
her willful acts, but also for an injury occasioned to another by his or her
want of ordinary care or skill in the management of his or her property or
person, except so far as the latter has, willfully or by want of ordinary
care, brought the injury upon himself or herself.” (Civ. Code 1714(a),
italics added.) “Since Rowland v. Christian, the liability of landowners for
injuries to people on their property has been governed by general
negligence principles.” Pineda v. Ennabe. Premises liability is a “form of
negligence” in which the owner has a duty to exercise ordinary care in the
management of the premises to avoid exposing persons to an unreasonable
risk of harm. Brooks v. Eugene Burger Management Corp. A landowner
owes a duty to exercise reasonable care to maintain his or her property in
such a manner as to avoid exposing others to an unreasonable risk of
injury. Alcaraz v. Vece; Scott v. Chevron U.S.A. (1992. The failure to
fulfill the duty is negligence. Sprecher v. Adamson Companies. The
existence of a duty of care is an issue of law for the court. The proper test
to be applied to the liability of the possessor of land . . . is whether in the
management of his property he has acted as a reasonable man in view of
the probability of injury to others . . . .” Rowland v.Christian.
A visitor’s status on the property—as a trespasser, a licensee, or an
invitee—no longer establishes the extent of the owner’s duties to the
visitor, although status may be relevant to the specific nature or scope of
those duties or to the foreseeability that the visitor might be harmed. “As
stated in Beauchamp v. Los Gatos Golf, ‘[t]he term “invitee” has not been
abandoned, nor have “trespasser” and “licensee.” In the minds of the jury,
whether a possessor of the premises has acted as a reasonable man toward
a plaintiff, in view of the probability of injury to him, will tend to involve
the circumstances under which he came upon defendant’s land; and the
probability of exposure of plaintiff and others of his class to the risk of
injury; as well as whether the condition itself presented an unreasonable
risk of harm, in view of the foreseeable use of the property.’ Rowland does
not generally abrogate the decisions declaring the substantive duties of the
possessor of land to invitees nor those establishing the correlative rights
and duties of invitees.’
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(b.) Open and Obvious Defense.
Generally, if a danger is so obvious that a person could reasonably be
expected to see it, the condition itself serves as a warning, and the
landowner is under no further duty to remedy or warn of the condition.
However, this is not true in all cases. It is foreseeable that even an obvious
danger may cause injury, if the practical necessity of encountering the
danger, when weighed against the apparent risk involved, is such that
under the circumstances, a person might choose to encounter the danger.
The foreseeability of injury, in turn, when considered along with various
other policy considerations such as the extent of the burden to the
defendant and consequences to the community of imposing a duty to
remedy such danger may lead to the legal conclusion that the defendant
owes a duty of due care to the person injured.
(c.) Recreation Immunity Defense.
Civil Code section 846 provides: An owner of any estate or any other
interest in real property, whether possessory or nonpossessory, owes no
duty of care to keep the premises safe for entry or use by others for any
recreational purpose or to give any warning of hazardous conditions, uses
of, structures, or activities on such premises to persons entering for such
purpose, except as provided in this section.
A “recreational purpose,” as used in this section, includes such activities
as fishing, hunting, camping, water sports, hiking, spelunking, sport
parachuting, riding, including animal riding, snowmobiling, and all other
types of vehicular riding, rock collecting, sightseeing, picnicking, nature
study, nature contacting, recreational gardening, gleaning, hang gliding,
winter sports, and viewing or enjoying historical, archaeological, scenic,
natural, or scientific sites.
An owner of any estate or any other interest in real property, whether
possessory or nonpossessory, who gives permission to another for entry or
use for the above purpose upon the premises does not thereby (a) extend
any assurance that the premises are safe for such purpose, or (b) constitute
the person to whom permission has been granted the legal status of an
invitee or licensee to whom a duty of care is owed, or (c) assume
responsibility for or incur liability for any injury to person or property
caused by any act of such person to whom permission has been granted
except as provided in this section.
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This section does not limit the liability which otherwise exists (a) for
willful or malicious failure to guard or warn against a dangerous
condition, use, structure or activity; or (b) for injury suffered in any case
where permission to enter for the above purpose was granted for a
consideration other than the consideration, if any, paid to said landowner
by the state, or where consideration has been received from others for the
same purpose; or (c) to any persons who are expressly invited rather han
merely permitted to come upon the premises by the landowner.
3. Nevada:
(a.) Reassonable Standard of Care.
(1.) Duty
a) The Nevada Supreme Court has adopted a doctrine of
landowner liability independent of the status (invitee,
licensee, and trespasser) of the person injured upon the land
and “free from the antiquated categorization which had
been a remnant of the common law.” In enumerating the
rule, the Nevada Supreme Court has stated:
“Landlords as other persons must exercise reasonable care
not to subject others to an unreasonable risk of harm. A
landlord must act as a reasonable person under all of the
circumstances including the likelihood of injury to others,
the probable seriousness of such injuries, and the burden of
reducing or avoiding the risk. We think this basic principle
of responsibility for landlords as for others ‘best expresses
the principles of justice and reasonableness upon which our
law of torts is founded.’”
Thus, succinctly stated, “an owner . . . of land must
exercise ordinary care and prudence to render the premises
reasonably safe for the visit of a person invited on the
premises for business purposes.’”
(2.) Duty to Inspect, Maintain, and Warn
a) In general, in order to show that a land or business owner
failed to protect the public from a hazard, the Plaintiff must
show: (1) That the Defendant failed to make a reasonable
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inspection of the premises; and (2) that a reasonable
inspection would have revealed the hazard.
The Nevada Supreme Court has stated that “‘an owner or
occupant of lands or buildings who knows, or in the
exercise of reasonable care should know, of their dangerous
and unsafe condition and who invites others to enter upon
the property owes to such invitees a duty to warn them of
the danger, where the peril is hidden, latent, or concealed or
the invitees are without knowledge thereof.’”
Therefore, the owner or occupier of land has a duty to an
invitee to inspect the premises to discover dangerous
conditions not known to him and to “take reasonable
precautions to protect the invitee from dangers which are
foreseeable from the arrangement or use.
(3.) Hidden and Obvious Dangers
a) The Nevada Supreme Court has stated, “If a peril is hidden,
latent or concealed, ordinary care requires an owner, with
actual or constructive knowledge of the peril, to warn the
invited guest who is without such knowledge. . . . On the
other hand, if the danger is ‘obvious,’ ordinary care does
not require a warning from the owner because
‘obviousness’ serves the same purpose.” Thus, where the
danger is obvious, a plaintiff is barred from recovery, but
“an invitee’s knowledge of a dangerous condition may not
bar recovery if his mission justifies encounter of it.”
(b.) Recreational Use.
NRS 41.510 Limitation of liability; exceptions for malicious acts if
consideration is given or other duty exists.
(1.) Except as otherwise provided in subsection 3, an owner of any
estate or interest in any premises, or a lessee or an occupant of any
premises, owes no duty to keep the premises safe for entry or use
by others for participating in any recreational activity, or to give
warning of any hazardous condition, activity or use of any
structure on the premises to persons entering for those purposes.
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(2.) Except as otherwise provided in subsection 3, if an owner, lessee
or occupant of premises gives permission to another person to
participate in recreational activities, upon his premises:
a) He does not thereby extend any assurance that the premises
are safe for that purpose or assume responsibility for or
incur liability for any injury to person or property caused
by any act of persons to whom the permission is granted.
b) That person does not thereby acquire any property rights in
or rights of easement to the premises.
(3.) This section does not thereby acquire any property rigfhts in or
rights of easement to the premises:
a) Limit the liability which would otherwise exist for:
1) Willful or malicious failure to guard, or to warn
against, a dangerous condition, use, structure or
activity.
2) Injury suffered in any case where permission to
participate in recreational activities, was granted for
a consideration other than the consideration, if any,
paid to the landowner by the state or any
subdivision thereof. For the purposes of this
subparagraph, the price paid for a game tag sold
pursuant to NRS 502.145 by an owner, lessee or
manager of the premises shall not be deemed
consideration given for permission to hunt on the
premises.
3) Injury caused by acts of persons to whom
permission to participate in recreational activities
was granted, to other persons as to whom the person
granting permission, or the owner, lessee or
occupant of the premises, owed a duty to keep the
premises safe or to warn of danger.
b) Create a duty of care or ground of liability for injury to
person or property.
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(4.) As used in this section, “recreational activity” includes, but is not
limited to:
a) Hunting, fishing or trapping;
b) Camping, hiking or picnicking;
c) Sightseeing or viewing or enjoying archaeological, scenic,
natural or scientific sites;
d) Hang gliding or para-gliding;
e) Spelunking;
f) Collecting rocks;
g) Participation in winter sports, including riding a
snowmobile, or water sports;
h) Riding animals or in vehicles;
i) Studying nature;
j) Gleaning;
k) Recreational gardening; and
l) Crossing over to public land or land dedicated for public
use.
(c.) Sidewalk in Public Right-A-Way.
NRS 41.1315 Limitation on liability of property owner for injury or
damage on sidewalk in public right-of-way. No person who owns
property is liable in a civil action for any injury or damage that occurs as a
result of the use of a sidewalk in a public right-of-way that abuts the
person’s property, unless the person:
(1.) Failed to comply with an ordinance adopted pursuant to paragraph
(d) of subsection 2 of NRS 278.02313; or
(2.) Created a dangerous condition that caused the injury or damage.
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(d.) Trespassers.
NRS 41.1393 Discharge of duty to warn trespasser against dangerous
condition. In any case where there is a duty to warn a trespasser against a
dangerous condition of the premises, that duty is discharged by painting,
at intervals of not more than 200 feet on each side of the premises, upon or
near the boundary, a post, structure or natural object with not less than 50
square inches of fluorescent orange paint or, if the post is a metal fence
post, painting the entire post with such paint.
(f.) Hotels.
NRS 651.005 “Premises” defined. As used in NRS 651.005 to 651.040,
inclusive, “premises” includes, but is not limited to, all buildings,
improvements, equipment and facilities, including any parking lot,
recreational facility or other land, used or maintained in connection with a
hotel, inn, motel, motor court, boardinghouse or lodging house.
NRS 651.015 Civil liability of innkeepers for death or injury of person
on premises caused by person who is not employee.
(1.) An owner or keeper of any hotel, inn, motel, motor court,
boardinghouse or lodging house is not civilly liable for the death or
injury of a patron or other person on the premises caused by
another person who is not an employee under the control or
supervision of the owner or keeper unless:
a) The wrongful act which caused the death or injury was
foreseeable; and
b) There is a preponderance of evidence that the owner or
keeper did not exercise due care for the safety of the patron
or other person on the premises.
(2.) An owner or keeper of any hotel, inn, motel, motor court,
boardinghouse or lodging house is civilly liable for the death or
injury of a patron or other person on the premises caused by
another person who is not an employee under the control or
supervision of the owner or keeper if:
a) The wrongful act which caused the death or injury was
foreseeable; and
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b) The owner or keeper failed to take reasonable precautions
against the foreseeable wrongful act.
The court shall determine as a matter of law whether the wrongful
act was foreseeable and whether the owner or keeper had a duty to
take reasonable precautions against the foreseeable wrongful act of
the person who caused the death or injury.
(3.) For the purposes of this section, a wrongful act is not foreseeable
unless:
a) The owner or keeper failed to exercise due care for the
safety of the patron or other person on the premises; or
b) Prior incidents of similar wrongful acts occurred on the
premises and the owner or keeper had notice or knowledge
of those incidents.
(f.) Mode of Operation
(1.) Applies to “self serve” context and not sit-down restaurants. FGA,
Inc. v. Giglio (2012)
(2.) Notice not an issue.
(3.) Focus is on the nature of the business.
(4.) Where an owner has chosen mode of operation makes it reasonably
forseeable that a dangerous condition will occur, a store owner
could be held liable for injuries to an invitee if the plaintiff proves
that the store owner failed to take reasonable precautions necessary
to protect the invitee from these forseeable dangerous conditions.
(g.) NRS 41.1393. Discharge of duty to warn trespasser against dangerous
condition. In any case where there is a duty to warn a trespasser against a
dangerous condition of the premises, that duty is discharged by painting,
at intervals of not more than 200 feet on each side of the premises, upon or
near the boundary, a post, structure or natural object with not less than 50
square inches of fluorescent orange paint or, if the post is a metal fence
post, painting the entire post with such paint.
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(h.) Duties and Liabilities of Innkeepers in Nevada
(1.) NRS 651.005. Premises” defined. As used in NRS 651.005 to
651.040, inclusive, “premises” includes, but is not limited to, all
buildings, improvements, equipment and facilities, including any
parking lot, recreational facility or other land, used or maintained
in connection with a hotel, inn, motel, motor court, boardinghouse
or lodging house.
(2.) NRS 651.010. Civil liability of innkeepers limited.
a) An owner or keeper of any hotel, inn, motel, motor court,
boardinghouse or lodging house in this State is not civilly
liable for the theft, loss, damage or destruction of any
property brought by a patron upon the premises or left in a
motor vehicle upon the premises because of theft, burglary,
fire or otherwise, in the absence of gross neglect by the
owner or keeper.
b) An owner or keeper of any hotel, inn, motel, motor court,
boardinghouse or lodging house in this State is not civilly
liable for the theft, loss, damage or destruction of any
property of a guest left in a guest room if:
1) The owner or keeper provides a fireproof safe or
vault in which guests may deposit property for
safekeeping;
2) Notice of this service is personally given to a guest
or posted in the office and the guest’s room; and
3) The property is not offered for deposit in the safe or
vault by a guest.
c) Unless the owner or keeper is grossly negligent.
1) An owner or keeper is not obligated to receive
property to deposit for safekeeping which exceeds
$750 in value or is of a size which cannot easily fit
within the safe or vault.
2) The liability of the owner or keeper does not exceed
the sum of $750 for any property, including, but not
limited to, property which is not deposited in a safe
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or vault because it cannot easily fit within the safe
or vault, of an individual patron or guest, unless the
owner or keeper receives the property for deposit
for safekeeping and consents to assume a liability
greater than $750 for its theft, loss, damage or
destruction in a written agreement in which the
patron or guest specifies the value of the property.
(3.) NRS 651.015. Civil liability of innkeepers for death or injury of
person on premises caused by person who is not employee.
a) An owner or keeper of any hotel, inn, motel, motor court,
boardinghouse or lodging house is not civilly liable for the
death or injury of a patron or other person on the premises
caused by another person who is not an employee under
the control or supervision of the owner or keeper unless:
1) The wrongful act which caused the death or injury
was foreseeable; [AND]
2) Preponderance of evidence that the owner or
keeper did not exercise due care for the safety of
the patron or other person on the premises.
b) An owner or keeper of any hotel, inn, motel, motor court,
boardinghouse or lodging house is civilly liable for the
death or injury of a patron or other person on the premises
caused by another person who is not an employee under the
control or supervision of the owner or keeper if:
1) The wrongful act which caused the death or injury
was foreseeable; [AND]
2) The owner or keeper failed to take reasonable
precautions against the foreseeable wrongful act.
c) The court shall determine as a matter of law whether the
wrongful act was foreseeable and whether the owner or
keeper had a duty to take reasonable precautions against the
foreseeable wrongful act of the person who caused the
death or injury.
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d) For the purposes of this section, a wrongful act is not
foreseeable unless:
1) The owner or keeper failed to exercise due care for
the safety of the patron or other person on the
premises; [OR]
2) Prior incidents of similar wrongful acts occurred
on the premises and the owner or keeper had
notice or knowledge of those incidents.
4. Colorado:
(a.) Premises Liability Statute (13-21-115. Actions against landowners)
(1.) For the purposes of this section, “landowner” includes, without
limitation, an authorized agent or a person in possession of real
property and a person legally responsible for the condition of real
property or for the activities conducted or circumstances existing
on real property.
(2.) In any civil action brought against a landowner by a person who
alleges injury occurring while on the real property of another and
by reason of the condition of such property, or activities conducted
or circumstances existing on such property, the landowner shall be
liable only as provided in subsection (3) of this section. Sections
13-21-111, 13-21-111.5, and 13-21-111.7 shall apply to an action
to which this section applies. This subsection (2) shall not be
construed to abrogate the doctrine of attractive nuisance as applied
to persons under fourteen years of age. A person who is at least
fourteen years of age but is less than eighteen years of age shall be
presumed competent for purposes of the application of this section.
(3.) a) A trespasser may recover only for damages willfully or
deliberately caused by the landowner.
b) A licensee may recover only for damages caused:
1) By the landowner’s unreasonable failure to exercise
reasonable care with respect to dangers created by
the landowner of which the landowner actually
knew; or
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2) By the landowner’s unreasonable failure to warn of
dangers not created by the landowner which are not
ordinarily present on property of the type involved
and of which the landowner actually knew.
c) Except as otherwise provided in subparagraph (II) of this
paragraph (c), an invitee may recover for damages caused
by the landowner’s unreasonable failure to exercise
reasonable care to protect against dangers of which he
actually knew or should have known:
If the landowner’s real property is classified for property
tax purposes as agricultural land or vacant land, an invitee
may recover for damages caused by the landowner’s
unreasonable failure to exercise reasonable care to protect
against dangers of which he actually knew.
It is the intent of the general assembly in enacting the
provisions of subsection (3) of this section that the
circumstances under which a licensee may recover include
all of the circumstances under which a trespasser could
recover and that the circumstances under which an invitee
may recover include all of the circumstances under which a
trespasser or a licensee could recover.
1) By the landowner’s unreasonable failure to exercise
reasonable care with respect to dangers created by
the landowner of which the landowner actually
knew; or
2) By the landowner’s unreasonable failure to warn of
dangers not created by the landowner which are not
ordinarily present on property of the type involved
and of which the landowner actually knew.
In any action to which this section applies, the judge shall determine
whether the plaintiff is a trespasser, a licensee, or an invitee, in
accordance with the definitions set forth in subsection (5) of this
section. If two or more landowners are parties defendant to the
action, the judge shall determine the application of this section to
each such landowner. The issues of liability and damages in any
such action shall be determined by the jury or, if there is no jury,
by the judge.
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(5.) As used in this section:
a) “Invitee” means a person who enters or remains on the land
of another to transact business in which the parties are
mutually interested or who enters or remains on such land
in response to the landowner’s express or implied
representation that the public is requested, expected, or
intended to enter or remain
b) “Licensee” means a person who enters or remains on the
land of another for the licensee’s own convenience or to
advance his own interests, pursuant to the landowner’s
permission or consent. “Licensee” includes a social guest.
c) “Trespasser” means a person who enters or remains on the
land of another without the landowner’s consent.
(6.) If any provision of this section is found by a court of competent
jurisdiction to be unconstitutional, the remaining provisions of the
section shall be deemed valid.
(b.) Premises Liability for Tavern Owners Requires Foreseeability Analysis
If a tavern proprietor does not have “actual or constructive notice that the
tavern patron causing the injury to the plaintiff constituted an
unreasonable risk of harm to others legitimately on the tavern premises”
then the tavern proprietor has no legal duty to protect the injured plaintiff
from bodily harm. Observatory Corp. v. Daly. “The Court must also
consider, “the social utility of the proprietor’s conduct, the magnitude of
the burden of guarding against the injury, the consequences of placing that
burden upon the defendant, and any other relevant factors implicated by
the facts of the case. However, the Colorado Supreme Court issued a
decision in Build It and They Will Drink, Inc. v. Strauch in which the
Court found that there is no foreseeability element in tavern owner
liability. This case was a Dram Shop Act, not a premises liability case.
The Strauch Court acknowledged explicitly that it was “not presented with
an issue of general premises liability in the present case” such that the
foreseeability element necessary for the imposition of premises liability
was “irrelevant to our discussion of dram-shop liability.”
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(c.) Affirmative Defenses
In 2004 Colorado’s Court of Appeals issued the Vigil v. Franklin decision,
holding that common law affirmative defenses such as “open and obvious
danger” were not available to landowners under the Premises Liability
Statute. However, that Court did not specifically analyze whether
affirmative defenses otherwise available to landowners by statute (as
opposed to by common law) were abrogated by the Statute. In June, 2009,
the Colorado Supreme Court ruled in Union Pacific Railroad Company v.
Martin that the Statute did not preclude the application of other statutory
defenses. This did not change the holding in Vigil that non-statutory
defenses which would have been available at common law (ie, “open and
obvious danger”) are not available under the Statute. Therfore, it appears
that the only defenses available to landowner defendants are statutory.
(d.) Adjancent Land Such as Sidewalks
The owner or occupant of premises abutting a public sidewalk does not
have a common law duty to pedestrians to keep the public sidewalks
abutting its property clear of naturally accumulated snow and ice. Woods
v. Delgar, Ltd. Although municipalities have the primary duty to keep
sidewalks in a reasonably safe condition for pedestrians, owners and
occupants of property abutting sidewalks do not have the right to create
obstructions or hazards on the sidewalks. Woods.
5. New Mexico:
(a.) Case Law Regarding Duty of Reasonable Care and Knowledge.
(1.) The owner of a premises is not the insurer of the safety of its
visitors. See Brooks v. K-Mart Corp. Neither the doctrine of res
ipsa loquitur nor the concept of strict liability applies in
slip-and-fall cases. See id. (stating that strict liability does not
apply); Holguin v. Smith’s Food King Properties, Inc. (stating that
res ipsa loquitur does not apply. Rather, a plaintiff seeking to hold
a premises owner liable for a slip-and-fall accident must show that
the owner “failed to exercise ordinary care by rendering safe an
unreasonably dangerous condition on the premises.” Brooks, 964
P.2d at 101. There are two ways of establishing this element of
plaintiff’s case. First, he may prove that the owner or his
employees or agents caused the dangerous condition to exist,
resulting in his injury. See Holguin, 737 P.2d at 98. Second,
plaintiff may prove that the owner knew, or should reasonably
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185
have known, of the condition yet failed to rectify it. See Brooks,
964 P.2d at 101.
(2.) A landowner owes visitors (including former designations of
licensees and invitees) a uniform duty of ordinary care to protect
the visitor against conditions that foreseeably pose an unreasonable
risk of injury. Ford v. Board of County. This duty applies even
where a dangerous condition is known to the visitor or is open and
obvious, because in the exercise of ordinary care a landowner must
generally anticipate some degree of negligence on the part of
others encountering even a known or obvious danger. Klopp v.
Wackenhut Corp. There may be circumstances, however, in which
a visitor’s own negligence, resulting in injury from an obviously
dangerous condition, is unforeseeable. See id.
(3.) New Mexico cases have explored the question of knowledge of a
dangerous condition in some detail. The general rule is that the
owner of a premises is charged with knowledge of conditions of
which he would be aware upon reasonable inspection of the
premises. See Brooks, 964 P.2d at 99 (quoting New Mexico
Uniform Jury Instruction 13-1318 (1998)). An exception to this
rule arises where there is a recurring, dangerous condition on the
premises; in that case, the owner need not have actual or
constructive knowledge of the particular hazard which caused the
accident. See Mahoney v. J.C. Penney Co.. Otherwise, the owner is
responsible if the condition has existed long enough to allow him
sufficient opportunity to discover it. See id.; De Baca v. Kahn.
(b). Some New Mexico Jury Instructions For Liability of Owners and
Occupiers
(1.) 13-1302. Visitor; definition.
A visitor is a person who enters or remains upon the premises with
the [express] [or] [implied] permission of the [owner] [occupant]
of the premises.
Committee Commentary. — In Ford v. Board of County
Commissioners, 118 N.M. 134, 879 P.2d 766 (1994), the Supreme
Court eliminated the distinction, for purposes of defining the
landowner’s duty of care, between licensees and business visitors
or invitees while retaining a different standard for the duty owed to
trespassers. The Court referred to both licensees and business
PROPERTY OF RESNICK & LOUIS, P.C.
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visitors as “visitors” and held that a duty of ordinary care applied
to them
(2.) 13-1301. Trespasser; definition.
A trespasser is a person who enters or remains upon the premises
of another without the [express] [or] [implied] permission of the
[owner] [occupant] of the premises.
[A person who is on the premises of another with the permission of
the [owner] [occupant] is a trespasser to the extent the person goes
outside the area in which the [owner] [occupant] might reasonably
expect the person to be.]
[A person who is on the premises of another with the permission of
the [owner] [occupant] is a trespasser to the extent the person uses
the premises in a manner different from that which the [owner]
[occupant] might reasonably expect.]
(3.) 13-1305. Duty to trespasser; artificial condition on premises.
If the [owner] [occupant] creates or maintains an artificial
condition on the land, then [he] [she] has a duty to a trespasser to
use ordinary care to warn of the condition and of the risk involved
if:
(a.) The condition involves an unreasonable risk of death or
bodily harm to persons coming onto the land;
(b.) [He] [She] knows or reasonably should know [that there are
constant intrusions by persons in the dangerous area] [that
there are persons on the land in dangerous proximity to the
condition]; and
(c.) [He] [She] has reason to believe that the trespasser will not
discover the condition or realize the risk involved.
The [owner] [occupant] owes no duty to make [his] [her] land safe
for a trespasser, unless and until [he] [she] knows or reasonably
should know that the trespasser is on [his] [her] land.
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(4.) 13-1306. Duty to trespasser; activity of owner.
If the owner is engaged in activities on [his] [her] land, [he] [she]
has a duty to use ordinary care to avoid injury to a trespasser, if:
(a.) The activity involves an unreasonable risk of death or great
bodily harm to persons coming onto the land;
(b.) [He] [She] knows or should reasonably know that [there are
constant intrusions by trespassers onto the area in which the
activity is permitted] [there are trespassers on the land in
dangerous proximity to the activity]; and
(c.) [He] [She] has reason to believe that the trespasser will not
realize the risk of harm involved.
[If the activity involves a controllable force, the owner has a duty
either to use reasonable care to control the force to avoid injury or
to give adequate warning.] The [owner] [occupant] of the land has
no duty to regulate [his] [her] activities so as to avoid injury to a
trespasser, unless and until [he] [she] knows or should know that
the trespasser is on [his] [her] land.
(5.) 13-1307. Duty to trespasser; natural conditions.
An [owner] [occupant] of land has no liability to a trespasser
injured on [his] [her] land from a natural condition of that land.
(6.) 13-1309. Duty to visitor.
An [owner] [occupant] owes a visitor the duty to use ordinary care
to keep the premises safe for use by the visitor [, whether or not a
dangerous condition is obvious].
USE NOTE
This instruction is to be used to define the duty of care owed to a
visitor. It applies in all cases in which a visitor claims to have been
injured as a result of an unreasonably dangerous condition of the
premises, including those in which the condition was open and
obvious. For an instruction specifically applicable to typical slip
and fall cases, see UJI 13-1318.
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Committee Commentary. — A landowner owes visitors
(formerly categorized as either licensees or business visitors) a
uniform duty of ordinary care to protect the visitor against
conditions that foreseeably pose an unreasonable risk of injury.
Ford v. Board of County Comm’rs, 118 N.M. 134, 879 P.2d 766
(1994). This duty applies even where a dangerous condition is
known to the visitor or is open and obvious, because in the
exercise of ordinary care a landowner must generally anticipate
some degree of negligence on the part of others encountering even
a known or obvious danger. Klopp v. Wackenhut Corp., 113 N.M.
153, 157, 824 P.2d 293, 297 (1992). There may be circumstances,
however, in which a visitor’s own negligence, resulting in injury
from an obviously dangerous condition, is unforeseeable. See id. at
158, 824 P.2d at 298. Because no duty exists if the landowner
lacks reason to know that an obviously dangerous condition poses
an unreasonable risk of injury to a visitor, this instruction should
not be given if the trial court determines that the negligence of the
visitor was unforeseeable as a matter of law. Id. at 158-59, 824
P.2d at 298-99. Generally in a case involving injury from an
obviously dangerous condition where the plaintiff may have been
contributorily negligent, it is for counsel in argument to address
how legal concepts of unreasonable risk, foreseeability, and
ordinary care apply to the evidence at hand. See id. at 159, 824
P.2d at 299.
(7.) 13-1312. Trespassing children (attractive nuisance).
An [owner] [occupant] has a duty to prevent injury to a trespassing
child resulting from __________________ (describe structure or
artificial condition) artificial condition of the land if:
(a.) The place where the condition is maintained is one upon
which the [owner] [occupant] knows or has reason to know
that children are likely to trespass;
(b.) The condition is one which involves an unreasonable risk
of injury to trespassing children and the [owner] [occupant]
knows or has reason to know of such risk; and
(c.) The child because of [his] [her] youth does not discover the
condition or realize the risk involved by intermeddling with
it or coming into the area made dangerous by it.
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In such a case, the [owner] [occupant] has a duty to exercise
ordinary care, considering the youth of the child, to prevent injury
to the child.
Committee Commentary. — A line of New Mexico cases
recognizes and applies the attractive nuisance doctrine.
(8.) 13-1316. Duty where property abuts sidewalk.
The [owner] [occupant] of property abutting a public sidewalk is
under a duty to exercise ordinary care not to create an unsafe
condition which would interfere with the customary and regular
use of the sidewalk.
(9.) 13-1317. Sidewalks and streets; duty of city.
A city has a duty to use ordinary care to maintain [streets]
[sidewalks] in a safe condition
(10.) 13-1318. Slip and fall.
An [owner] [occupant] owes a visitor the duty to exercise ordinary
care to keep the premises safe for the visitor’s use. [This duty
applies whether or not a dangerous condition is obvious.] [In
performing this duty, the [owner] [occupant] is charged with
knowledge of any condition on the premises [of which the [owner]
[occupant] would have had knowledge had [he] [she] [it] made a
reasonable inspection of the premises] [or] [which was caused by
the [owner] [occupant] or [his] [her] [its] employees].]
(b). 17-4-7. Liability of landowner permitting persons to hunt, fish
or use lands for recreation; duty of care; exceptions.
(Recreational Use)
(1.). Any owner, lessee or person in control of lands who,
without charge or other consideration, other than a
consideration paid to the landowner by the state, the federal
government or any other governmental agency, grants
permission to any person or group to use the owner’s,
lessee’s or land controller’s lands for the purpose of
hunting, fishing, trapping, camping, hiking, sightseeing, the
operation of aircraft or any other recreational use does not
thereby:
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a) extend any assurance that the premises are safe for
such purpose;
b) assume any duty of care to keep such lands safe for
entry or use;
c) assume responsibility or liability for any injury or
damage to or caused by such person or group; or
d) assume any greater responsibility, duty of care or
liability to such person or group than if permission
had not been granted and the person or group were
trespassers.
(2.) This section shall not limit the liability of any landowner,
lessee or person in control of lands that may otherwise exist
by law for injuries to any person granted permission to
hunt, fish, trap, camp, hike, sightsee, operate aircraft or use
the land for recreation in exchange for a consideration,
other than a consideration paid to the landowner by the
state, the federal government or any other governmental
agency.
Under New Mexico law governing premises liability for
slip and fall accidents, the plaintiff must prove not only that
there was a dangerous condition in a defendant’s premises,
but also that the defendant knew or had reason to know of
the condition. Gutierrez v. Albertsons.
6. Utah:
(a.) There are two classes of unsafe conditions that may result in liability. The
first “involves some unsafe condition of a temporary nature,” where the
origin of the condition is generally unknown. Allen v. Federated Dairy
Farms, Inc., 538 P.2d 175, 176 (Utah 1975) (emphasis omitted). To hold a
landowner liable for a temporary condition, a plaintiff must show “(A) that
[the landowner] had knowledge of the condition, that is, either actual
knowledge, or constructive knowledge because the condition had existed
long enough that he should have discovered it; and (B) that after such
knowledge, sufficient time elapsed that in the exercise of reasonable care
he should have remedied it.” Goebel v. Salt Lake City S. R.R., 104 P.3d
1185 (Utah 2004).
The second class of unsafe conditions involves a permanent condition,
meaning that the unsafe condition is “in the structure of a building, . . . or
in equipment or machinery, or its manner of use, which was created or
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191
chosen by the defendant (or his agents), or for which he is responsible.”
Allen at 176. When an unsafe condition is permanent, the landowner is
deemed to have knowledge of the condition and a plaintiff need not
independently establish notice before liability can be imposed. See Goebel
at 1185.
(b.) Open and Obvious Defense. The “open and obvious danger rule . . . is a
duty-defining rule that simply states that, under appropriate circumstances,
a landowner’s duty of care might not include warning or otherwise
protecting visitors from obvious dangers.” Id. at 268. The open and
obvious danger rule . . . simply defines the reasonable care that possessors
of land must show toward invitees. Under that definition, a possessor of
land must protect invitees against dangers of which they are unaware, may
forget, or may reasonably encounter despite the obviousness of the
danger.” Id. at 269. The open and obvious defense may diminish
plaintiff’s recovery, through comparative fault principles, but is not
always a complete bar to recovery. See id.
(c.) Recreational Use. “[A]n owner of land who either directly or indirectly
invites or permits without charge or for a nominal fee of not more than $1
per year any person to use the land for any recreational purpose, or an
owner of a public access area open to public recreational access does not
thereby assume responsibility for or incur liability for any injury to
persons or property caused by an act or omission of the person or any
other person who enters upon the land.”
Utah Code Ann. § 57-14-4(1). This includes owners “of land leased to the
state or any subdivision of the state for recreational purposes.” Utah Code
Ann. § 57-14-5.
Liability is not limited where willful or malicious conduct is involved or
an admission fee is charged. See Utah Code Ann. § 57-14-6(1). Fees paid
by hunters at wildlife management units are not “fees,” under §57-14-6(1).
See Utah Code Ann. § 57-14-6(2). Additionally, fees paid by recreational
users of dams and reservoirs to the Division of Parks and Recreation are
not “fees,” under § 57-14-6(1). See Utah Code Ann. § 57-14-6(3).
Y. Nevada Intermediate Appellate Court
1. Nevada Court of Appeals
(a.) 11/4/14 Voters Approved Amending NV Constitution.
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(b.) 1/3 of All Cases Submitted to NV Supreme Court will be sent to NV Court
of Appeals by the NV Supreme Court in a “Deflective Model” as used in a
limited number of other states.
(c.) Judges Michael Gibbons, Jerome Tao, and Abbi Silver.
(d.) Initial Two Terms then re-election in 2016, and then 6 year terms.
(e.) Appeals are filed with the Supreme Court (basically similar to pre Court of
Appeals).
(f.) Certain Cases will remain with Supreme Court.
(1.) Death Penalty.
(2.) Judicial Discipline.
(3.) Attorney Discipline.
(4.) Orders denying Motions to Compel Arbitration.
(5.) Matters raising as a principal issue a question of first impression
involving US Constitution, NV Constitution, or Common Law.
(6.) Matters raising as a principal issue a question of statewide public
importance, or an issue upon which there is an inconsistency in the
published decisions of the Court of Appeals or of the Supreme
Court, or a conflict between published decisions of the two Courts.
(g.) Presumptive (Not Certain) Assignments to Court of Appeals
(1.) $250,000 or less Tort Claims.
(2.) Family Law other than termination of parental rights.
(3.) Venue.
(4.) Injunctive Relief.
(5.) Pre-Trial Writ Proceedings challenging discovery orders and
motions in limine.
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(h.) Review from Court of Appeals: Petition for review to the Supreme Court
within 18 days after the Court of Appeals decision.
(i.) Supreme Court has discretion whether to hear a case from the Court of
Appeals – majority of Justices have to approve.
Z. Independent Counsel
1. California Civil Code 2860 (Codification of “Cumis” Case)
(a.) Section 2860 provides, in pertinent part: “(a) If the provisions of a policy
of insurance impose a duty to defend upon an insurer and a conflict of
interest arises which creates a duty on the part of the insurer to provide
independent counsel to the insured, the insurer shall provide independent
counsel to represent the insured . . . . [¶] (b) For purposes of this section, a
conflict of interest does not exist as to allegations or facts in the litigation
for which the insurer denies coverage; however, when an insurer reserves
its rights on a given issue and the outcome of that coverage issue can be
controlled by counsel first retained by the insurer for the defense of the
claim, a conflict of interest may exist. No conflict of interest shall be
deemed to exist as to allegations of punitive damages or be deemed to
exist solely because an insured is sued for an amount in excess of the
insurance policy limits.”
(b.) Not every conflict of interest triggers an obligation on the part of the
insurer to provide the insured with independent counsel at the insurer‟s
expense. the mere fact the insurer disputes coverage does not entitle the
insured to Cumis counsel; nor does the fact the complaint seeks punitive
damages or damages in excess of policy limits. The insurer owes no duty
to provide independent counsel in these situations because the Cumis rule
is not based on insurance law but on the ethical duty of an attorney to
avoid representing conflicting interests. Federal Ins. Co. v. MBL, Inc. (4th
2013)
(c.) For independent counsel to be required, the conflict of interest must be
“significant, not merely theoretical, actual, not merely potential.”
(Dynamic Concepts, Inc. v. Truck Ins. Exchange (1998) 61 Cal.App.4th
999, 1007 (Dynamic Concepts).) The insured‟s right to independent
counsel “depends upon the nature of the coverage issue, as it relates to the
issues in the underlying case.” (Blanchard v. State Farm Fire & Casualty
Co. (1991) 2 Cal.App.4th 345, 350 (Blanchard).) “[W]here the reservation
of rights is based on coverage issues which have nothing to do with the
issues being litigated in the underlying action, there is no conflict of
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interest requiring independent counsel.” Federal Ins. Co. v. MBL, Inc. (4th
2013)
(d.) Nor does “every reservation of rights entitles an insured to select Cumis
counsel. There is no such entitlement, for example, where the coverage
issue is independent of, or extrinsic to, the issues in the underlying action
[citation] or where the damages are only partially covered by the policy.”
(Dynamic Concepts, supra, 61 Cal.App.4th at p. 1006.) However,
independent counsel is required where there is a reservation of rights “and
the outcome of that coverage issue can be controlled by counsel first
retained by the insurer for the defense of the claim.” Federal Ins. Co. v.
MBL, Inc. (4th 2013).
2. Nevada
(a.) Nevada HAS Adopted Independent Counsel Requirement When
“Actual Conflict” Exists Between Defense Counsel and Insurance
Company (Cumis Scenerio)
(1.) Nevada Supreme Court 131 Nev. Advance Opinion 74 (September
24, 2015)
(2.) “We conclude that Nevada law requires an insurer to provide
independent counsel for its insured when a conflict of interest
arises between the insurer and the insured. Nevada recognizes that
the insurer and the insured are dual clients of insurer-appointed
counsel. When the insured and the insurer have opposing legal
interests, Nevada law requires insurers to fulfill their contractual
duty to defend their insureds by allowing insureds to select their
own independent counsel and paying for such representation. We
further conclude that an insurer is only obligated to provide
independent counsel when the insured's and the insurer's legal
interests actually conflict.
a) A reservation of rights letter does not create a per se
conflict of interest.
(3.) Nevada Supreme Court (Yellow Cab Corp. v. Eighth Judicial Dist.
Court ex. rel., 152 P.3d 737 (2007) has held that a lawyer
previously retained to defend an insured cannot then represent the
policyholder in a bad faith action against the insurance company.
Hansen Federal Court says that the Yellow Cab case supports the
concept that when there is a conflict between the insurance
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company and the insured, the lawyer cannot represent both, and
independent counsel is appropriate.
a) Dual representation is appropriate when the conflict
remains speculative and not actual. This means that joint
representation is impermissible when a conflict is real.
This is when the insured must have independent counsel.
CONCLUSION
Questions/Answers