Colorado Supreme Court Decides Smith v. Executive Custom Homes, Inc.

On May 10, 2010, the Colorado Supreme Court released its opinion in Smith v. Executive Custom Homes, Inc. The decision settles two open questions - one relating to the running of the statute of limitations under the Construction Defect Action Reform Act ("CDARA"), and the second concerning whether Colorado recognizes the repair doctrine that equitably tolls the running of the statute of limitations while a contractor is attempting to repair a defect. The Court's ruling on both fronts demonstrates that CDARA will be interpreted literally and narrowly when it comes to the statute of limitations.

The Court first concluded that the statute of limitations under CDARA begins to run on the date the plaintiff discovered, or should have discovered, the construction defect, regardless of when the injury occurred. In Smith, the plaintiff slipped and was injured due to ice that had accumulated on her sidewalk as a result of a defective gutter system. She sued within two years of the injury. By that time, however, almost three years had passed since she first became aware of the leaking gutters. The Court determined the statute of limitations began running when the plaintiff identified the defect, even though she had not yet suffered any injury from the defect. The Court acknowledged that its ruling potentially could encourage "unripe" lawsuits, filed by property owners who have notice of minor construction defects, but have not yet suffered any personal injury. According to the Court, encouraging "timely" resolution of defective construction claims, even where those defects have not caused "collateral" damage to a person or property, meets CDARA's goal of "streamlining" construction defect litigation.

As to the repair doctrine, the Court concluded that the limitations period would be tolled during repairs only if those repairs were attempted as part of CDARA's notice of claim procedure. Under CDARA, a claimant must give the contractor both notice of a defect before filing suit and an opportunity to make a repair. If the contractor elects to attempt a repair, then CDARA tolls the plaintiff's statute of limitations for the period of the repairs. The Court concluded that a broader "equitable" repair doctrine, which would toll the limitations period when the repairs were attempted outside of the notice of claim process, was inconsistent with CDARA and would frustrate the aims of CDARA's notice procedure.

The Smith decision was 5-2, with two justices dissenting. The dissent did not believe CDARA's notice of claim process was intended to replace the repair doctrine, and further suggested that, in the case of "faulty repair", the two-year statute of limitations should only begin to run when the defect in the repair is or should have been discovered.

The effects of Smith remain to be seen. One possible result is that potential plaintiffs, who previously might only have filed suit if the defect caused collateral personal injury or property damage, might now be encouraged to file suit even without such injury, to avoid losing a claim. This outcome is unlikely, however, because incurring the cost of pursuing construction defect litigation only makes financial sense where the plaintiff has already suffered substantial economic damage. The rejection of the equitable repair doctrine is somewhat surprising, because it contradicts predictions made in Colorado Court of Appeals' decisions that the Supreme Court would recognize the doctrine because of the Court's propensity to forestall lawsuits. The Supreme Court has clearly indicated, however, that CDARA provides the final word on how the statute of limitations in the construction defect context will be applied.

Sherman & Howard has prepared this advisory to provide general information on recent legal developments that may be of interest. This advisory does not provide legal advice for any specific situation. This does not create an attorney-client relationship between any reader and the Firm. If you want legal advice on a specific situation, you must speak with one of our lawyers and reach an express agreement for legal representation.

	Contact Us Services Attorneys News and Events Publications About the Firm Inclusiveness Careers In the Media Events and Registration Press Releases Speaking Engagements Articles Client Advisories Subscriptions History Offices Pro Bono Interlaw Contact Us Culture Legal Opportunities Support Staff Publications Client Advisories Home > Publications > Client Advisories > View Colorado Supreme Court Decides Smith v. Executive Custom Homes, Inc. On May 10, 2010, the Colorado Supreme Court released its opinion in Smith v. Executive Custom Homes, Inc. The decision settles two open questions - one relating to the running of the statute of limitations under the Construction Defect Action Reform Act ("CDARA"), and the second concerning whether Colorado recognizes the repair doctrine that equitably tolls the running of the statute of limitations while a contractor is attempting to repair a defect. The Court's ruling on both fronts demonstrates that CDARA will be interpreted literally and narrowly when it comes to the statute of limitations. The Court first concluded that the statute of limitations under CDARA begins to run on the date the plaintiff discovered, or should have discovered, the construction defect, regardless of when the injury occurred. In Smith, the plaintiff slipped and was injured due to ice that had accumulated on her sidewalk as a result of a defective gutter system. She sued within two years of the injury. By that time, however, almost three years had passed since she first became aware of the leaking gutters. The Court determined the statute of limitations began running when the plaintiff identified the defect, even though she had not yet suffered any injury from the defect. The Court acknowledged that its ruling potentially could encourage "unripe" lawsuits, filed by property owners who have notice of minor construction defects, but have not yet suffered any personal injury. According to the Court, encouraging "timely" resolution of defective construction claims, even where those defects have not caused "collateral" damage to a person or property, meets CDARA's goal of "streamlining" construction defect litigation. As to the repair doctrine, the Court concluded that the limitations period would be tolled during repairs only if those repairs were attempted as part of CDARA's notice of claim procedure. Under CDARA, a claimant must give the contractor both notice of a defect before filing suit and an opportunity to make a repair. If the contractor elects to attempt a repair, then CDARA tolls the plaintiff's statute of limitations for the period of the repairs. The Court concluded that a broader "equitable" repair doctrine, which would toll the limitations period when the repairs were attempted outside of the notice of claim process, was inconsistent with CDARA and would frustrate the aims of CDARA's notice procedure. The Smith decision was 5-2, with two justices dissenting. The dissent did not believe CDARA's notice of claim process was intended to replace the repair doctrine, and further suggested that, in the case of "faulty repair", the two-year statute of limitations should only begin to run when the defect in the repair is or should have been discovered. The effects of Smith remain to be seen. One possible result is that potential plaintiffs, who previously might only have filed suit if the defect caused collateral personal injury or property damage, might now be encouraged to file suit even without such injury, to avoid losing a claim. This outcome is unlikely, however, because incurring the cost of pursuing construction defect litigation only makes financial sense where the plaintiff has already suffered substantial economic damage. The rejection of the equitable repair doctrine is somewhat surprising, because it contradicts predictions made in Colorado Court of Appeals' decisions that the Supreme Court would recognize the doctrine because of the Court's propensity to forestall lawsuits. The Supreme Court has clearly indicated, however, that CDARA provides the final word on how the statute of limitations in the construction defect context will be applied. Sherman & Howard has prepared this advisory to provide general information on recent legal developments that may be of interest. This advisory does not provide legal advice for any specific situation. This does not create an attorney-client relationship between any reader and the Firm. If you want legal advice on a specific situation, you must speak with one of our lawyers and reach an express agreement for legal representation. ©2010 Sherman & Howard L.L.C. May 14, 2010 Copyright 2000-2012 Sherman & Howard L.L.C. All rights reserved. Privacy Policy \| Terms of Use