Core-Mark Midcontinent Inc. v. Sonitrol Corp., 2016 COA 22

Background

Core-Mark contracted with Sonitrol to install and monitor a burglar-alarm system at a warehouse storing inventory.
In 2002 burglars entered the warehouse undetected for hours, one set a fire, and the warehouse and inventory were largely destroyed; Sonitrol employees failed to detect or respond to multiple alarm activations.
Core-Mark and its insurers sued Sonitrol for breach of contract (tort claims were dismissed). A prior division held willful and wanton breaches were not subject to the contract's limitation-of-liability clause and remanded for trial on damages.
At the retrial on damages the jury awarded Core-Mark $2,750,000; Core-Mark and insurers appealed, and Sonitrol cross-appealed some matters.
Key contested legal issues on appeal concerned (a) whether Sonitrol could present evidence that arson/fire was not foreseeable, (b) whether a proposed jury instruction defining “natural and probable consequence” should have been given, and (c) whether evidence about the nature of Sonitrol’s breach and the prior jury’s willful-and-wanton finding should have been admitted.

Issues

Issue	Core‑Mark's Argument	Sonitrol's Argument	Held
Admissibility of evidence that the arson/fire was unforeseeable	The prior appellate mandate assumed fire was foreseeable and thus retrial was limited; evidence contesting foreseeability should be barred	Mandate did not decide foreseeability of fire; Sonitrol may present evidence relevant to foreseeability of extent of damages	District court did not abuse discretion: evidence about foreseeability of fire was admissible because (i) ‘‘arson’’ is not a distinct type of damages (the type was loss of inventory), and (ii) evidence that fire was unlikely was relevant to foreseeability of the general magnitude of damages.
Jury instruction defining “natural and probable consequence”	Requested instruction reading equated natural and probable consequence to a but‑for cause and did not require >50% likelihood	Pattern instruction, which used "probable" and "would probably occur," correctly stated law; plaintiff’s instruction was circular and conflated causation with foreseeability	Abuse of discretion not shown: the court properly rejected the tendered instruction because foreseeability requires that damages be probable (i.e., more likely than not) and the proposed instruction was circular/misstated the law.
Exclusion of detailed evidence of Sonitrol’s pre-breach conduct and refusal to inform jury of prior willful-and-wanton finding	Details of Sonitrol’s prior misconduct and prior jury’s willful-and-wanton finding were relevant to foreseeability and damages magnitude	Such evidence was relevant to liability/punitive damages but not to foreseeability at time of contracting; much background was provided; further detail would confuse issues	No abuse of discretion: excluded pre-breach conduct and prior jury finding were not probative of foreseeability at time of contract formation and could mislead the damages-only jury.
Sonitrol’s challenge to prior rulings on enforcing limitation-of-liability for willful/wanton breach (cross-appeal)	—	Sonitrol asked to revisit prior holdings that willful/wanton breach invalidates limitation-of-liability clause	Declined to reconsider prior panels; conditional cross-appeal dismissed as moot.

Key Cases Cited

U.S. Fire Ins. Co. v. Sonitrol Mgmt. Corp., 192 P.3d 543 (Colo. App. 2008) (prior appellate decision addressing foreseeability and limitation clause)
Core‑Mark Midcontinent, Inc. v. Sonitrol Corp., 300 P.3d 963 (Colo. App. 2012) (remanded for new trial on damages and discussed foreseeability of type and magnitude)
W. Union Tel. Co. v. Trinidad Bean & Elevator Co., 267 P. 1068 (Colo. 1928) (adoption of Hadley foreseeability test in Colorado)
Denny Constr., Inc. v. City & Cty. of Denver, 199 P.3d 742 (Colo. 2009) (foreseeability under Hadley; comparison to tort foreseeability)
Giampapa v. Am. Family Mut. Ins. Co., 64 P.3d 230 (Colo. 2003) (treatment of foreseeability instruction language)
Vanderbeek v. Vernon Corp., 50 P.3d 866 (Colo. 2002) (contrast of contract vs. tort foreseeability limits)
Landmark Land Co. v. Fed. Deposit Ins. Corp., 256 F.3d 1365 (Fed. Cir. 2001) (type of loss foreseeable but extent not; relevance of later events to magnitude of damages)