Defeat of SB-246 Good News for Colorado Home Builders
On Friday, March 13th, SB-246 was introduced by Senator John Morse (D-Colorado Springs). SB-246 was aimed at overturning the "Goodyear" decision which was handed down in a unanimous ruling by the Colorado Supreme Court on October 6th, 2008. In the "Goodyear" case, the plaintiff constructed a home that contained a radiant heating and snow melting system. In 1994, the system began to leak and continued to leak until it was repaired in 2002. The plaintiff then proceeded to file suit against numerous parties including Goodyear. Upon completion of the litigation, the plaintiff was awarded pre-judgment interest from the date of the original installation and Goodyear appealed. The court then reduced the amount of pre-judgment interest indicating that pre-judgment interest is only available from the point at which the aggrieved party's property was "wrongfully withheld," not from when the aggrieved party was wronged. It then went on to clarify that a party's property is "wrongfully withheld" when a plaintiff's injury is measured either by expending monies to repair the defect or when the person's property experiences a diminution in value.
Because of "Goodyear," plaintiff's attorneys are no longer able to obtain pre-judgment interest from the point at which homebuyers take possession of a property. Before "Goodyear" they were successful in doubling the size of many judgments after pre-judgment interest was applied at 8% annually for several years. SB-246 would have effectively overturned "Goodyear" by allowing prejudgment interest to accrue at an annual rate of 6% from the point at which a buyer closed on a home up until a notice of claim was filed with the builder, and 8% interest to accrue from that point until a judgment was rendered.
The Colorado Association of Home Builders, together with a broad-based coalition made up of other industry groups and several mayors from the Denver Metropolitan Area and city councilmen from some of the mountain communities, implemented a plan to defeat the bill and was successful in doing so. A hearing on SB-246 was held on April 1st in the Senate Committee on State, Veterans, & Military Affairs and was attended by an overflow crowd with entities representing both sides of the issue. Over six hours of testimony was provided and the hearing concluded without a vote on the bill. The committee then met on Friday, April 3rd at which point the bill sponsor asked that the measure be tabled for the remainder of the session. It apparently became clear to him that it was unlikely to pass. Conservatively speaking, the defeat of SB-246 likely saved members of the building industry over $100 million over the next 12 to 18 months.
Rob Nanfelt is executive vice president of the HBA of Colorado.
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