{"id":904373,"date":"2025-05-27T15:28:37","date_gmt":"2025-05-27T21:28:37","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=904373"},"modified":"2025-05-20T15:38:35","modified_gmt":"2025-05-20T21:38:35","slug":"economic-loss-rule-no-exception-willful-wanton-conduct-colorado","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/economic-loss-rule-no-exception-willful-wanton-conduct-colorado\/","title":{"rendered":"No Exception for Willful and Wanton Conduct: Colorado Supreme Court Clarifies the Economic Loss Rule"},"content":{"rendered":"\n

David McLain | Higgins, Hopkins, McLain & Roswell<\/a><\/p>\n\n\n\n

In its recent decision in Mid-Century Insurance Co. v. HIVE Construction, Inc., 2025 CO 17, the Colorado Supreme Court definitively closed the door on an often-litigated theory: that the economic loss rule does not bar tort claims based on willful and wanton conduct.  The ruling clarifies a lingering ambiguity in Colorado law and underscores the importance of contractual risk allocation in construction projects.<\/p>\n\n\n\n

Background<\/h4>\n\n\n\n

HIVE Construction served as the general contractor for the build-out of Masterpiece Kitchen, a Denver-area restaurant.  The project\u2019s architectural plans called for two layers of drywall on a wall separating the kitchen and dining area to enhance fire resistance.  Instead, HIVE substituted one layer with plywood \u2014 without seeking approval or issuing a change order.  The plywood, being combustible, contributed to a fire that caused significant property damage.<\/p>\n\n\n\n

Mid-Century Insurance, which paid for the fire losses as Masterpiece Kitchen\u2019s insurer, brought a subrogation action against HIVE, asserting a negligence claim and alleging that HIVE\u2019s conduct was willful and wanton.  Notably, Mid-Century did not assert a breach of contract claim until just before trial, at which point the trial court denied its motion to amend.<\/p>\n\n\n\n

Trial and Appeal<\/h4>\n\n\n\n

At trial, the district court allowed the negligence claim to proceed, relying on McWhinney Centerra Lifestyle Center LLC v. Poag & McEwen Lifestyle Centers-Centerra LLC, 486 P.3d 439 (Colo. App. 2021), which suggested that the economic loss rule might not apply to intentional torts.  A jury found in Mid-Century\u2019s favor, concluding that HIVE\u2019s conduct was indeed willful and wanton.<\/p>\n\n\n\n

On appeal, however, the Colorado Court of Appeals reversed, holding that even willful and wanton conduct does not escape the reach of the economic loss rule when the duty allegedly breached arises solely from the parties\u2019 contract.<\/p>\n\n\n\n

Supreme Court\u2019s Ruling<\/h4>\n\n\n\n

The Colorado Supreme Court affirmed the appellate decision, drawing a firm line: the economic loss rule bars tort claims \u2014 whether for negligence, willful and wanton conduct, or otherwise \u2014 when the duty at issue is defined by the contract.<\/p>\n\n\n\n

Justice Gabriel, writing for a unanimous court, reasoned that willful and wanton conduct is not the same as intentional conduct and should not be treated as categorically distinct for purposes of the economic loss rule.  The Court explained that allowing parties to reframe contract breaches as tort claims simply by alleging willful and wanton conduct would erode the economic loss rule\u2019s central purpose: preserving the boundary between contract and tort law and respecting parties\u2019 negotiated risk allocations.<\/p>\n\n\n\n

Importantly, the Court reiterated the three-part test from BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66 (Colo. 2004), to determine whether a tort claim is barred:<\/p>\n\n\n\n

    \n
  1. Whether the relief sought in negligence is the same as in contract;<\/li>\n\n\n\n
  2. Whether a recognized common law duty exists;<\/li>\n\n\n\n
  3. Whether the tort and contract duties differ in any meaningful way.<\/li>\n<\/ol>\n\n\n\n

    Finding all three prongs satisfied in HIVE\u2019s favor, the Court concluded that Mid-Century\u2019s tort claim was simply a restated breach of contract claim and could not proceed under tort law.<\/p>\n\n\n\n

    Key Takeaways for the Construction Industry<\/h4>\n\n\n\n