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Dworkin, Chambers v. Provo, 02SC792 (December 1, 2003): In 1998, an Administrative Law Judge (ALJ) ordered a workers' compensation insurer to pay for treatment of claimant by a particular chiropractor. The ALJ found that "occasional chiropractic treatment for temporary relief is especially reasonable and appropriate . . . medical benefits for a claimant with such severe injuries." Insurer's attorneys advised insurer that the ALJ's order did not require insurer to pay any specific medical benefits. Based on this advice, insurer refused to pay for the treatment.
In 1999, a second ALJ found that the 1998 order did require payment of the chiropractic treatment and held that insurer's refusal to pay was wrongful, deliberate, willful, unreasonable and legally unsupportable. The second ALJ assessed penalties against insurer under C.R.S. § 8-43-401(2)(a) in the amount of 8% of the
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wrongfully withheld medical benefits.
Claimant next sought penalties of $500 per day against insurer's attorneys under C.R.S. § 8-43-304(1), which states that penalties may be assessed against "any officer or agent" of the employer or insurer "or any other person" for violating any provision of the Act, failing or refusing to perform "any duty lawfully enjoined," or failing, neglecting, or refusing to "obey any lawful order." Claimant asserted that the attorneys failed to obey the 1998 order, refused to perform their duties, and interfered with claimant's medical care. A third ALJ dismissed the penalty claim against the attorneys, and found that the 1998 order was directed to the insurer, not the attorneys, and because the attorneys were not parties to the order, they could not be held liable for the refusal to pay medical benefits.
Interpreting § 8-43-304(1), the court of
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appeals held that insurer's attorneys could not fail, neglect, or refuse to obey an order not directed at them. However, the court of appeals concluded that as "agents" of the insurer, the attorneys could be liable under the statute if they acted with fraud or malice.
The supreme court disagreed with the court of appeals. Although it disapproved of the attorney's actions in this case, the supreme court held that an attorney who lacks the authority to bind an insurer does not violate a lawful order by advising the insurer to violate the order, even if the attorney acts with fraud or malice. Thus, § 8-43-304(1) does not extend to an attorney who allegedly acts with fraud or malice in advising an insurer to violate a lawful order. However, the supreme court noted that if a lawful order is directed at an attorney, the attorney's violation of the order could result in penalties under the statute.
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HOA has standing to sue subs
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Yacht Club II Homeowners Association, Inc. v. A.C. Excavating, 02CA645 (Nov-ember 20, 2003): Plaintiff homeowners association (HOA) sued various subcontractors for negligence related to multiple construction defects encountered in individual units and commons areas of a townhome development. The trial court ruled that the HOA lacked standing to assert claims for damages to individually owned units, and barred the HOA's negligence claims, even in relation to common areas.
The court of appeals reversed, and held that under the Colorado Common Interest Ownership Act, C.R.S. §§ 38-33.3-101, et
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seq., a HOA can bring an action not just on its own behalf, but also on behalf of two or more unit owners, as long as the matter affects the common interest community. Individual units are part of the common interest community. The trial court also erred in dismissing the HOA's negligence claims. Although the economic loss rule prevents recovery for negligence when the duty breached is a contractual duty and the harm is the result of failure of the purpose of the contract, subcontractors owe homeowners a duty of care, independent of any contract provision, in connection with the construction of homes.
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