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Mid-Century Insurance Company v. HIVE Construction, Inc.
This case involves limits on the reach of the economic loss rule. Mid-Century Insurance Company contends that because it had alleged willful and wanton conduct by HIVE Construction, Inc., with which Mid-Century’s subrogor, Masterpiece Kitchen, had contracted to construct a restaurant, the economic loss rule did not preclude it from asserting a negligence claim, notwithstanding the existence of the contract.
The dispute stemmed from a fire in the restaurant’s kitchen as a result of substituted plywood HIVE installed that was combustible and installed too close to a heat source. HIVE didn’t submit a change order asking permission to deviate from the plans for the wall construction between the restaurant’s kitchen and dining area. The restaurant was forced to close after the fire.
Following a jury trial, and after Mid-Century presented its case, HIVE moved for a directed verdict, arguing that the economic loss rule barred Mid-Century’s negligence claim. Relying on McWhinney Centerra Lifestyle Center LLC v. Poag & McEwen Lifestyle Centers-Centerra LLC, in which a division of the Court of Appeals had concluded, contrary to other divisions, that in most instances, the economic loss rule does not bar intentional tort claims, the district court concluded that the rule does not apply to allegations of willful and wanton conduct. Accordingly, the court denied HIVE’s directed verdict motion.
At the conclusion of the trial, the jury returned a special verdict, finding that HIVE’s conduct was willful and wanton and caused Mid-Century’s damages. The district court then entered judgment in Mid-Century’s favor.
HIVE appealed, arguing, as pertinent here, that the district court had erred in denying its directed verdict motion on the ground that the economic loss rule does not apply to willful and wanton conduct. A division of the Court of Appeals agreed with HIVE and reversed.
Mid-Century asked the Colorado Supreme Court to reverse the ruling of a division of the Colorado Court of Appeals concluding that the economic loss rule barred its negligence claim.
The state Supreme Court concluded that no exception to the economic loss rule exists for allegations of willful and wanton conduct. It also concluded that, based on long standing economic loss rule principles, the rule barred Mid-Century from asserting a negligence claim premised on a duty established by the contract in this case.
The court affirmed the judgment of the division.