Willful or Wanton Conduct Not Sufficient to Overcome Financial Loss Rule Says Colorado Courtroom | Bradley Arant Boult Cummings LLP

Bradley Arant Boult Cummings LLP


In Mid-Century Insurance coverage Co., v. HIVE Building, Inc., a Colorado courtroom of appeals lately reversed the choice of a decrease courtroom that had refused to use the financial loss rule to a negligence declare alleging wanton or willful misconduct. The appellate courtroom decided that, the place the negligence declare was primarily based solely on the breach of a contractual responsibility, it was barred by the financial loss rule no matter whether or not the negligence was willful or wanton.

The undertaking at difficulty concerned the buildout of a restaurant in Denver, Colorado. The overall contractor substituted a layer of fire-resistant plywood rather than a layer of drywall used to separate the kitchen and eating room of the restaurant. Though fire-resistant, the plywood was flamable, and the broiler chosen for the kitchen required eight inches of clearance from flamable supplies. The events disputed whether or not the proprietor was on discover of the substitution. The proprietor put in the broiler solely an inch from the plywood layered wall. Regardless of that, the kitchen handed inspection.

Two years later, a hearth broke out within the wall subsequent to the broiler, and the proprietor’s knowledgeable opined that the ignition of the plywood as a consequence of warmth radiated from the broiler brought about the fireplace. The proprietor asserted a single negligence declare in opposition to the contractor alleging, partly, that the contractor’s set up of the flamable plywood demonstrated a careless and reckless disregard for the rights and security of others, which constituted willful and wanton conduct.

The contractor answered the criticism by arguing the financial loss rule barred restoration on the negligence declare. After the jury returned a verdict in favor of the proprietor, the contractor moved for a directed verdict primarily based on the financial loss rule. The trial courtroom denied the movement, relying totally on prior Colorado precedent that the “financial loss rule doesn’t apply to intentional conduct.” The contractor appealed.

Per the appellate courtroom, the “financial loss rule usually supplies {that a} occasion struggling solely financial loss from the breach of an categorical or implied contractual responsibility might not assert a tort declare for such breach absent an unbiased responsibility of care underneath tort legislation.” The rule is meant to keep up a distinction between breaches of contractual obligations/guarantees and breaches of duties imposed by legislation with out settlement or contract (tort). “Even when the responsibility allegedly breached is individually acknowledged underneath tort legislation, it’s not ‘unbiased’ of the contract for the needs of the financial loss rule if it addresses the identical obligations created by the contract.

The events agreed that the aid sought by the proprietor underneath the negligence declare was equivalent to the aid it may have sought underneath a breach of contract declare — purely financial damages. The appellate courtroom concluded the responsibility allegedly breached underneath the negligence declare was indistinguishable from the responsibility the contractor owed underneath the events’ contract. In different phrases, no unbiased responsibility existed.

In rejecting the trial courtroom’s utility of current Colorado precedent, the appellate courtroom famous that there was no allegation of  an intentional tort. Particularly, the courtroom wrote “willful and wanton conduct is that which approaches however doesn’t embody an intentional tort nor can it’s categorised as such.” The courtroom additional famous that there was no want for an exception from the financial loss rule for wanton or willful misconduct. That form of conduct can’t be abrogated or restricted by contract in Colorado, so the wronged occasion maintains a treatment underneath the contract. Per the courtroom, utility of the financial loss rule relies upon extra on the character of the responsibility owed and never on the character of the defendant’s conduct. The appellate courtroom reversed the trial choose’s denial and remanded with directions to grant the directed verdict.

The Colorado appellate courtroom’s opinion is instructive in describing the idea for and utility of the financial loss rule. Inexplicably, the proprietor in Mid-Century didn’t file a corresponding breach of contract declare, which resulted in a very harsh final result on this case. Events to a contract might need to watch out to pursue tort claims within the various to or along with contract claims to forestall this form of outcome. Events generally pursue tort claims to keep away from contractual limitations on treatments, and there could also be exceptions to the financial loss rule that allow this method. However, relying solely on these exceptions to pursue a declare might end in an unfavorable or surprising ruling. 

Related Post