Tolling the Statutes of Limitations and Repose: The Notice of Claim Process in Colorado

The statutes of limitation and repose state that if homeowners do not pursue their claims within a set amount of time, their claims are forever time-barred (See cdlawblog.com’s April 2, 2012 blog “What Every Homeowner Should Know About Colorado’s Statutes of Limitations and Repose for Construction Defect Claims”).  However, the Colorado Construction Defect Action Reform Act (CDARA)—the statute under which homeowners bring their construction defect claims against construction professionals—requires a procedure that tolls, or stops, the clock on the statutes of limitation and repose before filing a lawsuit.  This procedure is identified as the Notice of Claim Process.  Ideally, the Notice of Claim Process allows an opportunity for the homeowner to identify the construction defects at the property, and for the construction professional to repair those defects without bringing a suit.  In the real world, it is rarely this simple.

The Notice of Claim Process begins when a construction professional receives a Notice of Claim from the homeowner reasonably describing the defects at the property.  Upon receipt of the Notice of Claim, the construction professional has 30 days to complete a physical inspection of the property. After the inspection, the professional has another 30 days to exercise the option of submitting an offer to repair the defect or an offer to pay money. The homeowner has 15 days to review the offer and decide whether to accept it. The homeowner may file suit at the earliest 75 days after the Notice of Claim if the construction professional ignores the Notice of Claim, the construction professional fails to make an offer, or the claimant rejects the offer.

This notice, inspection, and offer to repair procedure is known as the Notice of Claim Process.  Under Colorado law, the Notice of Claim must be sent within the prescribed time limits under the statutes of limitation and repose.  However, during the Process, and for 60 days after the completion of the Process, the statutes of limitations and repose are tolled.  A homeowner would typically argue from a tolling perspective, that the Notice of Claim Process must last a minimum of 75 days regardless of the actions of the parties because CDARA requires a claimant to wait a full 75 days after sending a Notice of Claim before filing lawsuit.  If the Notice of Claim Process could be cut short, there would be an absurd result.  For example, it is possible that a homeowner could send a Notice of Claim to a construction professional, and that construction professional could send back a response on the very same day denying all of the claims.  If this were to end the Notice of Claim process, there would only be 60 days of tolling, but the homeowner would have to wait 75 days to file a lawsuit.  This would leave the homeowner exposed to statutes of limitations and repose for a 15-day period.  The more logical result is that the Notice of Claim Process does not end until after the claimant has the right to sue—75 days.   After the Notice of Claim Process is over, there is an additional 60 days of tolling.  This conclusion guarantees 135 days of tolling for a Notice of Claim.

The minimum 135 days of tolling under the Notice of Claim Process may be extended.  For example, the homeowner and construction professional are permitted to deviate from the standard Notice of Claim Process in any manner they deem fit by “written mutual agreement” of the parties.  The construction defect statute does not prescribe or limit the manner in which the parties can negotiate or cooperate with the exception that evidence of the modification must be in writing.  A mutual agreement to extend to the notice of claim process is often referred to as a “Plan B” process—which has been successful in resolving claims without filing a lawsuit in some situations, and has been abused by the parties in other cases.  A second way to extend tolling under the Notice of claim Process may be by sending successive notices of claim.  The Colorado Supreme Court has asserted that successive notices of claim toll the statute of repose independently, and that the independent tolling periods must be added together to determine how long the statute of repose was tolled.   Last, CDARA contemplates tolling of the statute of repose if the parties contractually agree to mediation procedure.  Thus, if the homeowner and the construction professional enter into an agreement to mediate, the Notice of Claim Process is modified in accordance with the agreed-upon mediation procedure.  Until the agreed-upon mediation procedure has been satisfied, the Notice of Claim Process is not complete.

The Notice of Claim Process is a critical—and often strategic—component of a construction defect lawsuit.  It is important to understand the nuisances of the Notice of Claim Process—in particular, the implications of the Notice of Claim Process upon the tolling of the statutes of limitations and repose.