As it pertains to litigation, the 2019 legislative session was fairly quiet, according to David McLain of Higgins Hopkins McLain & Roswell.
“Given the election last year, where the Democrats essentially took control of both houses of the legislature … and all four statewide constitutional offices,” McLain said, he had some “doomsday predictions” for the type of legislation that would come out of the most recent session that, thankfully, haven’t surfaced.
For example, McLain said at a Lunch and Learn event hosted by Construction Resource Group that he had expected to see efforts to require builders to cover plaintiffs’ attorney fees in construction defect cases; to remove the cap on damages arising from Colorado Consumer Protection Act claims; and to bring back prejudgment interest on construction defect cases.
“For some reason I can’t fathom, none of that came to pass,” he said.
McLain shared what did happen in the most recent session that affects home builders in some way.
Colorado Consumer Protection Act
New attorney general Phil Weiser supported a bill (HB19-1289) that expanded the scope of the CCPA by increasing the penalty for violations from $2,000 to $20,000 per violation and $10,000 to $50,000 for violations against elderly people.
The bill also reduced the standard for violation. Previously, builders had to “knowingly” deceive homebuyers to be sued for violations; the new standard only requires that they act “recklessly.”
“Either you knew, or you should have known, that it was false,” McLain explained. “It’s a little bit easier now to prove the Consumer Protection Act claims.”
Clauses that could have had a “detrimental effect” on builders but were lobbied out of the bill, McLain said, include contract clauses that would have set limits on where dispute resolution forums could be held; delays in resolution of 60 days or more from filing a claim; prohibition of damage caps; and prohibition of arbitration.
“All in all, that was one bill that was out there that could have had an impact, and we dodged a bullet,” McLain said.
McLain said that juries tend to award plaintiffs three times the damages that an arbitrator will, especially if the arbitrator is familiar with the building industry. Juries also tend to award larger portions of what plaintiffs ask for in damages. In cases that McLain’s firm has tracked, juries will award as much as 95% of damages, compared to 58% that arbitrators tend to award.
“We’ve got to have a different discussion about what to do if you can’t get your case in arbitration,” he said.
He suggested that the day may come when builders would be wise to remove arbitration clauses from their contracts and add a provision that takes any dispute to a bench trial rather than a jury trial. That would give builders and homeowners the right to settle a dispute with a judge acting as the arbitrator.
Danielle Andrus is the managing editor of Colorado Builder. She can be reached at [email protected].