July 17, 2019

Colorado Court of Appeals: Statute of Limitations in Construction Defect Case Triggered by Fire

The Colorado Court of Appeals issued its opinion in United Fire Group v. Powers Electric, Inc. on June 25, 2010.

Summary Judgment—Statute of Limitations—Construction Defect Action Reform Act.

Plaintiff United Fire Group (insurer) appealed the trial court’s summary judgment in favor of defendants Powers Electric, Inc. and Gary J. Powers (collectively, electrician). The judgment was affirmed.

On March 6, 2006, a fire damaged property owned by Metamorphosis Salon (salon). Neither the salon nor its insurer knew what caused the fire. Three weeks later, a fire investigator gave the insurer a report stating that the cause was faulty wiring in an electrical exit sign. The electrician had installed the sign.

Insurer made a series of payments to the salon to compensate for its losses. On March 11, 2008, insurer filed a subrogation claim against the electrician, alleging negligent installation of the exit sign that caused the fire. The electrician moved for summary judgment, alleging that the case was barred by the statute of limitations and that the time began to run on the date of the fire. Insurer replied that the statute began to run either on the date insurer received the investigator’s report or the date the salon cashed the insurance payments. The trial court granted the electrician’s motion for summary judgment. Insurer appealed.

This is a construction defect case brought under the Construction Defect Action Reform Act. The parties agreed such cases are governed by a two-year statute of limitations. They also agreed that the two-year period begins to run when a claimant “discovers or in the exercise of reasonable diligence should have discovered the physical manifestations of a defect in the improvement which ultimately causes the injury.” They also agreed that the improvement in this case was the electrician’s installation of the exit sign.

Insurer argued it could not determine the cause of the fire until the investigator provided his report and, therefore, could not have discovered in the exercise of reasonable diligence the physical manifestation of the defect in the exit sign installation. The electrician countered that the fire was the physical manifestation of the defect; thus, insurer could have discovered in the exercise of reasonable diligence that there had been a fire on the day it occurred. The Court of Appeals agreed with the electrician and affirmed the summary judgment.

The Court also rejected the insurer’s argument that, as a subrogee, it did not suffer any injury until the salon cashed the insurance payments. The Court held that case law is clear that the insurer stands in the shoes of its insured and has no greater rights than the insured.

This summary is published here courtesy of The Colorado Lawyer. Other summaries by the Colorado Court of Appeals on June 25, 2010, can be found here.

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