On February 27, 2017, in Goodman v. Heritage Builders, Inc., the Colorado Supreme Court held that the 90-day tolling period for indemnification claims stemming from construction defect actions tolls the Colorado statute of repose in addition to the statute of limitations ( (Feb 27, 2017)). This decision clarifies the effects of the tolling period after years of confusion created by conflicting appellate court decisions.

Heritage Builders was retained as the general contractor for the construction of a single-family residence in Pitkin County, Colorado. Pitkin County issued a certificate of occupancy for the home in September 2006. Between March and June 2012, the current owner of the home discovered construction defects and gave Heritage informal notice of his claims in July 2013. Three months later, on October 8, 2013, the owner sent a formal notice of claim letter to Heritage. Heritage sent a notice of claim letter to subcontractors Studio B Architects and Bluegreen, Inc. alleging design deficiencies at the home.

On December 20, 2013, the owner filed a lawsuit against Heritage and its subcontractors for defects arising out of the original construction. In response, Heritage asserted cross-claims and filed a third-party complaint against numerous subcontractors, including Studio B and Bluegreen.

Studio B filed a motion for summary judgment on March 10, 2016, which Bluegreen later joined. In the motion, Studio B argued that Heritage’s claims against them were barred by Colorado's six-year statute of repose. Under Colorado law, construction defect actions must be brought within two years after the claim arises, but the statute of repose bars any action brought more than six years after the substantial completion of the improvement to the real property (C.R.S. § 13-80-104(1)(a)).

On May 20, 2016, the trial court granted summary judgment in favor of Studio B and Bluegreen on the grounds that even if Heritage’s claims against Studio B and Bluegreen arose as early as when Heritage received informal notice of the alleged defects in July 2013, that date was more than six years after the substantial completion of the home, and therefore was barred by the statute of repose.

Heritage asked the court to vacate the order of summary judgment rendered in favor of Studio B and Bluegreen.

Colorado law provides for a 90-day tolling provision for indemnification claims related to construction defect actions (C.R.S. § 13-80-104(1)(b)(II)). The provision was meant to allow general contractors to defend against construction defect claims and then have 90 days after the underlying action is resolved to bring indemnification claims against relevant subcontractors. Conflicting appellate court decisions in Colorado created confusion as to whether the tolling provision tolled both the statute of limitations and the statute of repose.

The court disagreed with a series of appellate court cases that held that the tolling provision with respect to indemnification and third-party claims tolled the two year statute of limitations but had no effect on the statute of repose. The court found that these holdings ignored the plain meaning of the statute, which excludes the applicability of both the statute of limitations and the statute of repose to these types of claims.

The court held that the tolling provision applies to both the statute of limitations and the statute of repose, and explained that provision clearly indicates that third-party claims are timely so long as the claims are brought during either:

Since Heritage brought its third-party claims against Studio B and Bluegreen before any judgment or settlement, the court instructed the trial court to vacate the order granting summary judgment.

This case is important because it clarifies a unsettled point in Colorado law. General contractors and developers in Colorado should be aware that claims against subcontractors can be brought either during a pending construction defect litigation, or within 90 days after the resolution of the action, regardless of whether this time period extends past the statute of repose six-year period. Subcontractors should also be aware of this holding and be on notice that the statute of repose will not bar claims that comply with the 90-day tolling provision.