Colorado Pool Systems, Inc. v. Scottsdale Insurance Co.
2012 Colo. App. LEXIS 1732
Colo. Ct. App.2012Background
- Colorado Pool Systems and Patrick Kitowski appeal after summary judgments for Scottsdale Insurance, GAB Robbins North America, and Don Hansen; decision reversed and remanded.
- Issue concerns whether a builder’s faulty workmanship can be covered under a CGL policy for damages, including demolition/replacement costs, absent exclusions.
- 2005: Colorado Pool built a pool; rebar near surface discovered; Founders Village demanded removal and replacement; White Construction Group involved; Colorado Pool sought policy pre-approval for demolition costs.
- Hansen (GAB) evaluated the claim; after delay, Scottsdale denied coverage and defense; damages incurred for replacement not reimbursed.
- 2006 arbitration: White admitted liability; Colorado Pool paid $133,500.
- 2008 suit: claims included coverage/indemnity, estoppel, bad-faith denial, and negligent misrepresentation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether faulty workmanship can be an 'occurrence' and cover demolition costs | Greystone-style approach supports coverage for nondefective damage; broad 'accident' interpretation favors insured. | Faulty workmanship is not an accident or covered unless policy exclusions apply. | Ambiguity governs; some damages covered, demolition costs not, consequential damage covered |
| Whether the Builders Insurance Act applies retroactively | Act applies to pending and future actions; retroactive application intended. | Act cannot retroactively alter pre-enactment coverage or rights. | Act applied retroactively to guide pending actions but retroactivity deemed impermissible as applied here |
| Estoppel based on Hansen's statements | Plaintiffs relied on Hansen's assurances of coverage. | Reliance not justifiable; policy terms ambiguous or unambiguous in defendants’ favor. | Issues of estoppel remanded; not decided due to other reversals |
| Negligent misrepresentation by Hansen | Hansen misrepresented coverage and damages; justifiable reliance shown. | Statements were opinions or not sufficiently clear misrepresentations; policy ambiguity restricts recovery. | Summary judgment reversed on negligent misrepresentation; genuine issue of reliance remains |
Key Cases Cited
- General Security Indem. Co. v. Mountain States Mutual Casualty Co., 205 P.3d 529 (Colo.App. 2009) (faulty workmanship not an 'accident' under prior approach, prompting Builders Act)
- Greystone Constr., Inc. v. Nat'l Fire & Marine Ins. Co., 661 F.3d 1272 (10th Cir. 2011) (injuries from faulty workmanship can be 'occurrence' if nondefective property damaged without foreseeability)
- Hoang v. Monterra Homes (Powderhorn) LLC, 129 P.3d 1028 (Colo.App. 2005) (faulty work deemed accident unless damage intended or expected)
- Thompson v. Maryland Cas. Co., 84 P.3d 496 (Colo. 2004) (ambiguity in policy terms requires broad reading in insured's favor)