Under Construction - September 2013: Economic Loss in Colorado

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The economic loss doctrine generally holds parties to the benefits, burdens and obligations set out in their contracts and bars tort claims such as negligence, misrepresentation and theft for purely economic loss when a contract exists. This doctrine is particularly strong in Colorado and has important implication for construction disputes, where claims can often be for economic loss and not personal injury or property damage.

For example, in Hamon Contractors, Inc. v. Carter & Burgess, Inc., 229 P.3d. 282 (Colo. App. 2009) the Colorado Court of Appeals held that claims for fraud, misrepresentation and negligence arising out of alleged excessive water on a construction project were barred by the economic loss rule. Those tort claims were dismissed and attorneys’ fees were awarded against the Plaintiff in that case. 

In BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66 (Colo. 2004) the Colorado Supreme Court held that design professionals generally are not responsible to contractors and subcontractors with whom they have no contract for lost profits and project delay and disruption. In other words, contractors can only look to those with whom they have a direct contractual relationship for recovery when projects encounter economic problems.

Obviously, then, those wishing to take advantage of the protections of the economic loss rule on construction projects should be extremely careful in making sure that their agreements state clearly and specifically the manner in which the risks of the project are to be allocated and, even more particularly, the standard of care assumed by each party. And, since the range of recovery for problems on bad projects is limited in Colorado, it is important to make sure that there is some level of comfort with the other parties to the contract, and that where risks cannot be allocated or assigned to another party, that they be insured wherever possible.

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