CONSTRUCTION DEFECT and GENERAL LIABILITY SEMINAR MATERIALSfiles.constantcontact.com/c4bee229501/6246be28-6516-4a11-9204-90... · construction defect, ... resolution process in mediation

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

mailto:[email protected]

http://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.

1

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.


5

(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.


7

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:


8

[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.


9

(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).


10

(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


11

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.


12

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


13

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.

http://www.leg.state.nv.us/NRS/NRS-018.html#NRS018Sec010



14

(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.


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


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.


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


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, §


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.


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


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:


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).


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.


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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


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


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.


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


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


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.


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.


31

(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.


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(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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(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:


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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);


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.


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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.


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);


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;


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.


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;


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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-


42

family home or attached dwelling and homeowners association.

All claims must be brought within the applicable statute of

limitations.


43


44


45

(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.


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


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


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


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.


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:


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


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


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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(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


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).


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


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.


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.


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


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


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


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.


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


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


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

http://www.constructiondefects.com/Claim-Development/Experts.aspx


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;


68

(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,

http://www.leg.state.nv.us/NRS/NRS-116.html#NRS116

http://www.leg.state.nv.us/NRS/NRS-117.html#NRS117


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.


70

(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,


(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



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


(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


(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,


75

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



76

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.







77

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.






79

(3.) Loss of use.

(4.) Reasonable value of any personal property damaged by the


(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,


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





80

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.


81

(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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http://www.answers.com/topic/bank

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http://www.answers.com/topic/bankruptcy

http://www.answers.com/topic/creditor

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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.

http://www.jeffvail.net/2010/07/certificate-of-review-litigation.html


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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.

http://www.law.com/jsp/ca/LawDecisionCA.jsp?id=1202568757742&Leung_v_Verdugo_Hills_Hospital


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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

http://www.leg.state.nv.us/nrs/NRS-041.html#NRS041Sec141

http://www.leg.state.nv.us/nrs/NRS-041.html#NRS041Sec141

http://www.nevadajudiciary.us/index.php/advancedopinions/1443-cafe-moda-v-palma-


88

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


(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


(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


95

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


97

(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


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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


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.


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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.


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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


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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.


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(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.


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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


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.


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.


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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.


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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)


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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

http://www.sccaweb.org/type_i_indemnity.htm

http://online.ceb.com/calcases/CA4/35CA4t856.htm


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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),


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


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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


136

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.


137

(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)


138

(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


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.


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)


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


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


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


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.


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)


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


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.


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.


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:


146

(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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147

(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


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.”


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


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.


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.


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


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.


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.


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.


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


158

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


159

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;


160

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,


161

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


162

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.


163

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


164

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.”

http://www.lexis.com/research/buttonTFLink?_m=411fd4137ebc329c62c9d46f4b1daf7c&_xfercite=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b222%20P.3d%20648%5d%5d%3e%3c%2fcite%3e&_butType=4&_butStat=0&_butNum=92&_butInline=1&_butinfo=NRS%2050.275&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLzVzk-zSkAl&_md5=88b21a1a4dfb21f51edabe91df17b716


165

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


166

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


167

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.


168

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


169

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


170

“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.


171

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.’


172

(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.


173

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


174

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.


175

(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.


176

(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




178

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


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


186

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.


187

(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.


189

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:


190

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


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