Colorado Appellate Court Clarifies Liability in Construction Defect Cases

By: Jason Buckley, Garfield & Hecht, P.C.

In construction defect cases, plaintiffs often allege claims of liability under many theories, including breach of contract, negligence, breach of warranty, misrepresentation, and fraud. In Dream Finders Homes, LLC v. Weyerhaeuser NR Company, the Colorado Court of Appeals clarified when certain non-contractual claims are not viable under the economic loss rule.

In the case, a manufacturer (Weyerhaeuser) designed, manufactured and sold floor joists for use in residential construction. As part of the sale, the manufacturer offered a warranty that required the manufacturer to pay for repair and replacement of defective floor joists. The manufacturer also included a term in its sales contracts that excluded certain types of damages and claims. A homebuilder (Dream Finders Homes) purchased the floor joists and installed them in residential homes.

After installation, the joists began to emit a chemical odor. The manufacturer offered to replace the joists under its warranty, and the homebuilder agreed. After the floor joists were replaced, the homebuilder sued the manufacturer and alleged claims for breach of contract, breach of express and implied warranties, negligence, negligent misrepresentation, and fraudulent concealment. The manufacturer argued that the non-contract claims were barred by the economic loss rule—a judicial rule that bars a party suffering only economic loss from a breach of contract asserting a tort claim unless an independent duty exists outside of the contract.

Ultimately, the appellate court ruled that the economic loss rule barred the homebuilder’s tort claims against the manufacturer, including the negligence, negligent misrepresentation, and fraudulent concealment claims. The economic loss rule applied because the tort duties were already subsumed within the manufacturer’s warranty, and no independent duty existed. The court also ruled that because the manufacturer’s contract excluded certain damages, the homebuilder could not claim those damages.

This appellate case helps clarify when contractual claims will bar tort-based claims. The holding in this case would also be helpful in transactional matters, as the court refused to allow damages that were expressly excluded in a construction contract.

Garfield & Hecht, P.C., attorneys represent homeowners and contractors in construction  and construction defect litigation. For more information, contact one of the following attorneys:

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