economic loss rule in Colorado

2026Id. at 1262. ¶31 To determine whether the economic loss rule applies, courts look not to the nature of the damages but to the source of the duty allegedly breached, i.e., the contract or some other source.

2026See Town of Alma , 10 P.3d at 1263. ¶32 Applying these principles, we concluded in Van Rees v. Unleaded Software, Inc. , 2016 CO 51, ¶ 15, 373 P.3d 603, 607, that tort claims based on misrepresentations made prior to the formation of a contract and that allegedly induced the plaintiff to enter into that contract violated an independent duty in tort and, thus, such claims were not barred by the economic loss rule.

2026In so concluding, we observed that an important distinction exists between "failure to perform the contract itself, and promises that induce a party to enter into a contract in the first place." Id. at ¶ 13, 373 P.3d at 607. ¶33 Although questions regarding the application of the economic loss rule frequently arise in disputes involving one-to-one contractual relationships, "[c]ontractual duties arise just as surely from networks of interrelated contracts as 18 from two-party agreements." BRW, Inc. v. Dufficy &Sons, Inc. , 99 P.3d 66, 72 (Colo. 2004). ¶34 With these principles in mind, we turn

2026In this way, the "application of the economic loss rule encourages a subcontractor to protect itself from risks, holds the parties to the terms of their bargain, enforces their expectancy interests, and maintains the boundary between contract and tort law." Id. 20 ¶38 Applying these principles to the facts in that case, we observed that the interrelated contracts at issue contained the duties of care owed by the engineer and its agent and that the subcontractor's remedies therefore existed in contract.

2024The supreme court explained that this outcome was supported by three overarching policy considerations behind the economic loss rule: (1) to maintain a distinction between contract and tort law; (2) to enforce expectancy interests of the parties so that they can reliably allocate risks and costs during their bargaining; and (3) to encourage the parties to build the cost considerations into the contract because they will not be able to recover economic damages in tort. 39 Id. ¶ 83 In determining whether a duty in tort is independent of a contractual duty, the court should look to three factors:

2021Tr., 56 P.3d 1224, 1231 (Colo. App. 2002); see also Grynberg, 10 P.3d at 1268 (noting that the focus in an analysis under the economic loss rule is on the source of the duties alleged to have been breached).

2021Hamon Contractors , 229 P.3d at 291 , 293 ; see Van Rees v. Unleaded Software, Inc. , 2016 CO 51, ¶ 15 , 373 P.3d 603, 607 (explaining that the economic loss rule does not bar claims "based on misrepresentations made prior to the formation of the contracts, which [the plaintiff] alleges induced him to enter into the contracts and therefore violated an independent duty in tort to refrain from such conduct").

2021LLC , 2012 COA 129, ¶¶ 20, 33 , 317 P.3d 1226, 1231, 1233 (barring fraudulent misrepresentation and fraudulent concealment claims under the economic loss rule); Hamon Contractors , 229 P.3d at 289 (holding that the economic loss rule barred the plaintiff's fraudulent concealment and fraudulent misrepresentation claims). ¶ 63 Dicta in Bermel and McWhinney Centerra Lifestyle Center LLC v. Poag & McEwen Lifestyle Centers-Centerra LLC , 2021 COA 2 , 486 P.3d 439 , suggests that the economic loss rule has only limited applicability to intentional tort claims.

2026See Town of Alma , 10 P.3d at 1263 . ¶32 Applying these principles, we concluded in Van Rees v. Unleaded Software, Inc. , 2016 CO 51 , ¶ 15 , 373 P.3d 603 , 607 , that tort claims based on misrepresentations made prior to the formation of a contract and that allegedly induced the plaintiff to enter into that contract violated an independent duty in tort and, thus, such claims were not barred by the economic loss rule.

2026See Town of Alma , 10 P.3d at 1263. ¶32 Applying these principles, we concluded in Van Rees v. Unleaded Software, Inc. , 2016 CO 51, ¶ 15, 373 P.3d 603, 607, that tort claims based on misrepresentations made prior to the formation of a contract and that allegedly induced the plaintiff to enter into that contract violated an independent duty in tort and, thus, such claims were not barred by the economic loss rule.

2021A. Standard of Review ¶ 35 "Whether the economic loss rule precludes a particular claim raises a legal issue subject to de novo appellate review." In re Estate of Gattis , 2013 COA 145, ¶ 10 , 318 P.3d 549, 552 (quoting Makoto USA, Inc. v. Russell , 250 P.3d 625, 627 (Colo. App. 2009) ).

2019Id. at 1194-95. ¶25 The following year, in Makoto , a different division rejected the argument that "the economic loss rule, as a judicial construct, cannot be applied to preclude a statutory claim." 250 P.3d at 629 .

2013Plaintiff further relies for this argument on the division's decision in Jardel Enterprises, Inc. v. Triconsultants, Inc., 770 P.2d 1301, 1304 (Colo.App.1988) which stated that the economic loss rule "does not prevent a negligence action to recover for physical injury to property." We disagree with plaintiff's argument. 31 We first note that the supreme court in Town of Alma did not state that property damage never constitutes economic loss; it merely stated that economic loss "generally" does not include property damage. 10 P.3d at 1264.

2013Thus, the language from Jardel relied upon by plaintiff-that the economic loss rule "does not prevent a negligence action to recover for physical injury to property," 770 P.2d at 1304 -ap-pears to have been abrogated by subsequent supreme court decisions. 133 As discussed above, there was no independent duty here.

2024And just as we have held that “[u]nder no circumstances will an exculpatory agreement be permitted to shield against a claim of willful and wanton negligence,” we note that the economic loss rule generally should not be available to shield intentional tortfeasors from liability for misconduct that happens also to breach a contractual obligation. 2019 CO 31 , ¶ 20 n.6 (alteration in original) (citations omitted).

2021In light of the Colorado Supreme Court’s opinion in Bermel v. BlueRadios, Inc., 2019 CO 31 , the division concludes that in most instances the economic loss rule will not bar intentional tort claims.

2021Excavating v. Yacht Club II Homeowners Ass'n, Inc. , 114 P.3d 862, 866 (Colo. 2005). ¶ 58 We agree with Homes and Mandarin that Weyerhaeuser owed them at least two common law duties: (1) not to engage in pre-contractual fraud or make material misrepresentations, see Van Rees , ¶ 15, 373 P.3d at 607 (explaining that the economic loss rule does not bar claims "based on misrepresentations made prior to the formation of the contracts, which [the plaintiff] alleges induced him to enter into the contracts and therefore violated an independent duty in tort to refrain from such conduct"); and (2) to a

2013As a result, "the economic loss rule has no application" to negligence that produces latent defects in residential construction "and does not bar a plaintiff's tort claim." Id.

2024Culpepper, 877 P.2d at 883 ; see also Coors Brewing Co. v. Floyd, 978 P.2d 663, 665-66 (Colo. 1999) (affirming trial court’s order granting motion to dismiss outrageous conduct claim “[a]s a matter of law” because “no reasonable person could find” defendant’s actions “arose to the high level of outrageousness required by our case law”); First Nat’l Bank in Lamar v. Collins, 616 P.2d 154 , 155-56 (Colo. 1980). ¶ 29 And “[w]hether the economic loss rule precludes a particular claim raises a legal issue subject to de novo appellate review.” Dream Finders Homes LLC v. Weyerhaeuser NR Co., 2021 COA

2024Culpepper, 877 P.2d at 883 ; see also Coors Brewing Co. v. Floyd, 978 P.2d 663, 665-66 (Colo. 1999) (affirming trial court’s order granting motion to dismiss outrageous conduct claim “[a]s a matter of law” because “no reasonable person could find” defendant’s actions “arose to the high level of outrageousness required by our case law”); First Nat’l Bank in Lamar v. Collins, 616 P.2d 154 , 155-56 (Colo. 1980). ¶ 29 And “[w]hether the economic loss rule precludes a particular claim raises a legal issue subject to de novo appellate review.” Dream Finders Homes LLC v. Weyerhaeuser NR Co., 2021 COA

2013See, eg., Hamon Contractors, Inc., 229 P.3d at 295 (post-contractual fraud); Parr v. Triple L & J Corp., 107 P.3d 1104, 1107-08 (Colo.App.2004) (intentional interference with prospective business advantage); Carder, Inc. v. Cash, 97 P.3d 174, 183-84 (Colo.App.2003) (conversion); Logixx Automation, Inc. v. Lawrence Michels Family Trust, 56 P.3d 1224, 1230-31 (Colo.App.2002) (civil conspiracy).

2012See Parr v. Triple L & J Corp., 107 P.3d 1104, 1108 (Colo.App.2004).

2021With respect to fraud specifically, the two cases cited by the court ... did not involve claims of fraud in the performance of a contract. 229 P.3d at 291 (first citing Brody v. Bock , 897 P.2d 769, 772, 776 (Colo. 1995) ; and then Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc. , 960 S.W.2d 41, 43-44, 46 (Tex. 1998) ). ¶ 64 This is one of those cases in which the economic loss rule bars fraud claims, particularly because Homes and Mandarin received the full benefit of their bargain documented in the contract and because they seek to recover through their tort claims the very

2013Id. at 71 ; see also Brody, 897 P.2d at 776 (distinguishing between a promise to perform and a promise intending to induce reasonable reliance and action on the part of the promisee). 3 ¶ 23 Accepting Van Rees’s position would frustrate the purpose of the economic loss rule.

2004Terrones v. Tapia, 967 P.2d 216, 220 (Colo.App.1998)(barring owner's negligence claim against contractor under the economic loss rule even though parties did not have a direct two-party contract because source of contractor's duty was in contract); Scott Co. of Cal. v. MK-Ferguson Co., 832 P.2d 1000, 1005-06 (Colo.App.1991) (barring subcontractor's negligence and negligent misrepresentation claims against project owner under the economic loss rule even though the litigating parties had not contracted directly with each other). 3.

2003See, eg., Terrones v. Tapia, 967 P.2d 216 (Colo.App.1998)(the economic loss rule bars negligence claim for lost profits as a result of restaurant owner's inability to use drive through window); Chellsen v. Pena, 857 P.2d 472 (Colo.App.1992)(economic loss rule bars action for negligent termination of employment); Scott Co. v. MK-Ferguson Co., 832 P.2d 1000 (Colo.App.1991)(the rule bars subcontractor's negligence claim because no independent duty was breached); Centennial Square, Ltd. v. Resolution Trust Co., 815 P.2d 1002 (Colo.App.1991)(upholding dismissal of borrowers' negligence claim agains

2026See Town of Alma , 10 P.3d at 1263. ¶32 Applying these principles, we concluded in Van Rees v. Unleaded Software, Inc. , 2016 CO 51, ¶ 15, 373 P.3d 603, 607, that tort claims based on misrepresentations made prior to the formation of a contract and that allegedly induced the plaintiff to enter into that contract violated an independent duty in tort and, thus, such claims were not barred by the economic loss rule.

2026In so concluding, we observed that an important distinction exists between "failure to perform the contract itself, and promises that induce a party to enter into a contract in the first place." Id. at ¶ 13, 373 P.3d at 607. ¶33 Although questions regarding the application of the economic loss rule frequently arise in disputes involving one-to-one contractual relationships, "[c]ontractual duties arise just as surely from networks of interrelated contracts as 18 from two-party agreements." BRW, Inc. v. Dufficy &Sons, Inc. , 99 P.3d 66, 72 (Colo. 2004). ¶34 With these principles in mind, we turn

2021Tr., 56 P.3d 1224, 1231 (Colo. App. 2002); see also Grynberg, 10 P.3d at 1268 (noting that the focus in an analysis under the economic loss rule is on the source of the duties alleged to have been breached).

2013See, eg., Hamon Contractors, Inc., 229 P.3d at 295 (post-contractual fraud); Parr v. Triple L & J Corp., 107 P.3d 1104, 1107-08 (Colo.App.2004) (intentional interference with prospective business advantage); Carder, Inc. v. Cash, 97 P.3d 174, 183-84 (Colo.App.2003) (conversion); Logixx Automation, Inc. v. Lawrence Michels Family Trust, 56 P.3d 1224, 1230-31 (Colo.App.2002) (civil conspiracy).

2019Cf. Boehme v. U.S. Postal Serv., 343 F.3d 1260, 1266 (10th Cir. 2003) (holding that “Colorado’s economic loss rule has no application” to bar a landlord’s statutory unlawful detention claim because “the Colorado legislature has provided a statutory remedy to landlords that ‘exist[s] independent of a breach of contract claim’” (quoting Alma, 10 P.3d at 1263 )). ¶38 We are especially wary of limiting the availability of a statutory remedy that so long predates this court’s adoption of the economic loss rule.

2019Cf. Boehme v. U.S. Postal Serv. , 343 F.3d 1260 , 1266 (10th Cir. 2003) (holding that "Colorado's economic loss rule has no application" to bar a landlord's statutory unlawful detention claim because "the Colorado legislature has provided a statutory remedy to landlords that 'exist[s] independent of a breach of contract claim' " (quoting Alma , 10 P.3d at 1263 )). ¶38 We are especially wary of limiting the availability of a statutory remedy that so long predates this court's adoption of the economic loss rule.

2014See Robinson, 179 P.3d at 1003 . 128 Finally, though the parties devote substantial discussion in their briefs to the economie loss rule, we conclude that the economic loss rule has no bearing on this case.

2013See, e.g., Robinson v. Colo. State Lottery Div., 179 P.3d 998, 1009 (Colo. 2008).

2004Terrones v. Tapia, 967 P.2d 216, 220 (Colo.App.1998)(barring owner's negligence claim against contractor under the economic loss rule even though parties did not have a direct two-party contract because source of contractor's duty was in contract); Scott Co. of Cal. v. MK-Ferguson Co., 832 P.2d 1000, 1005-06 (Colo.App.1991) (barring subcontractor's negligence and negligent misrepresentation claims against project owner under the economic loss rule even though the litigating parties had not contracted directly with each other). 3.

2003See, eg., Terrones v. Tapia, 967 P.2d 216 (Colo.App.1998)(the economic loss rule bars negligence claim for lost profits as a result of restaurant owner's inability to use drive through window); Chellsen v. Pena, 857 P.2d 472 (Colo.App.1992)(economic loss rule bars action for negligent termination of employment); Scott Co. v. MK-Ferguson Co., 832 P.2d 1000 (Colo.App.1991)(the rule bars subcontractor's negligence claim because no independent duty was breached); Centennial Square, Ltd. v. Resolution Trust Co., 815 P.2d 1002 (Colo.App.1991)(upholding dismissal of borrowers' negligence claim agains

2024Culpepper, 877 P.2d at 883 ; see also Coors Brewing Co. v. Floyd, 978 P.2d 663, 665-66 (Colo. 1999) (affirming trial court’s order granting motion to dismiss outrageous conduct claim “[a]s a matter of law” because “no reasonable person could find” defendant’s actions “arose to the high level of outrageousness required by our case law”); First Nat’l Bank in Lamar v. Collins, 616 P.2d 154 , 155-56 (Colo. 1980). ¶ 29 And “[w]hether the economic loss rule precludes a particular claim raises a legal issue subject to de novo appellate review.” Dream Finders Homes LLC v. Weyerhaeuser NR Co., 2021 COA

2024Culpepper, 877 P.2d at 883 ; see also Coors Brewing Co. v. Floyd, 978 P.2d 663, 665-66 (Colo. 1999) (affirming trial court’s order granting motion to dismiss outrageous conduct claim “[a]s a matter of law” because “no reasonable person could find” defendant’s actions “arose to the high level of outrageousness required by our case law”); First Nat’l Bank in Lamar v. Collins, 616 P.2d 154 , 155-56 (Colo. 1980). ¶ 29 And “[w]hether the economic loss rule precludes a particular claim raises a legal issue subject to de novo appellate review.” Dream Finders Homes LLC v. Weyerhaeuser NR Co., 2021 COA

2025LLC v. Poag & McEwen Lifestyle Ctrs.-Centerra LLC, 2021 COA 2, ¶ 72 (“As the supreme court has made clear, tort claims based on theories of negligence and negligent misrepresentation necessarily 26 stem from duties created by a contract between parties and, therefore, the economic loss rule often applies.”) (emphasis added). 2.

2024LLC v. Poag & McEwen 41 Lifestyle Centers-Centerra LLC, 2021 COA 2, ¶¶ 73-75, 77, 80 (holding that intentional tort claims stemmed from tort law duties independent of the contract and the economic loss rule did not apply, adding “generally, the economic loss rule does not bar common law intentional tort claims”), with Dream Finders Homes LLC v. Weyerhaeuser NR Co., 2021 COA 143, ¶¶ 63-67 . ¶ 87 Veolia chiefly relies on Dream Finders; there, the division held that a series of interrelated documents between a lumber product distributor and homebuilder/contractor arranging for the sale of a produ

2019However, three divisions of the court of appeals have grappled with that question and arrived at different conclusions. ¶24 In the first case, Rhino Fund, LLLP v. Hutchins, a division of the court of appeals considered whether the economic loss rule barred an investor from suing an investment fund owner for conversion and civil theft where the owner had diverted proceeds that were required, by contract, to be placed in escrow to secure repayment of the investor's loan. 215 P.3d 1186 , 1194-95 (Colo. App. 2008).

2019It agreed with a Florida court's reasoning that a "legislatively imposed duty to avoid civil theft" was independent from a contractual obligation to transfer money to the plaintiff, and further that the economic loss rule "cannot abrogate a legislatively created scheme designed to extend a civil remedy to those harmed by alleged criminal activity." Id. at 1194 (quoting Burke v. Napieracz , 674 So.2d 756 , 758-59 (Fla. Dist.

2026See Core-Mark Midcontinent, Inc. v. Sonitrol Corp., 2012 COA 120, ¶ 11 (declining to apply law of the case doctrine where the law on the relevant issue was unsettled and “sometimes misunderstood”). ¶ 18 For the same reason, we decline Wolfe’s invitation to impose sanctions on the City for filing a frivolous appeal.

2013See Core-Mark Midcontinent, Inc., 2012 COA 120, ¶¶ 15-19 . 142 But merely proving willful and wanton conduct is not sufficient to avoid the economic loss rule.

2025But even if the district court erred in its application of the economic loss rule, any error was harmless because his claims for fraudulent inducement and breach of lease failed for other 29 reasons.3 See C.R.C.P. 61; Bly v. Story, 241 P.3d 529, 535 (Colo. 2010) (An erroneous ruling only requires reversal if it affects a party’s substantial right, and “[a]n error affects a substantial right only if ‘it can be said with fair assurance that the error substantially influenced the outcome of the case or impaired the basic fairness of the trial itself.’” (citation omitted)).

2025But even if the district court erred in its application of the economic loss rule, any error was harmless because his claims for fraudulent inducement and breach of lease failed for other 29 reasons.3 See C.R.C.P. 61; Bly v. Story, 241 P.3d 529, 535 (Colo. 2010) (An erroneous ruling only requires reversal if it affects a party’s substantial right, and “[a]n error affects a substantial right only if ‘it can be said with fair assurance that the error substantially influenced the outcome of the case or impaired the basic fairness of the trial itself.’” (citation omitted)).

2024Allen v. Steele , 252 P.3d 476, 482 (Colo. 2011). ¶ 34 But even when the plaintiff sufficiently pleads a negligent misrepresentation claim, the economic loss rule may bar it .

2024Allen v. Steele , 252 P.3d 476, 482 (Colo. 2011). ¶ 34 But even when the plaintiff sufficiently pleads a negligent misrepresentation claim, the economic loss rule may bar it .

2026"If the parties have memorialized the applicable duty of care in their contract (i.e., if the duty is contained within or imposed under the contract) , then no duty exists independent of the contract, and the economic loss rule will apply to bar a tort claim." Id.

2026"If the parties have memorialized the applicable duty of care in their contract (i.e., if the duty is contained within or imposed under the contract), then no duty exists independent of the contract, and the economic loss rule will apply to bar a tort claim." Id.

2013The court held that "[an obligation to act without negligence in the construction of a home is independent of contractual obligations." Id. at 1042 . {12 Although Cosmopolitan Homes predates the supreme court's adoption of the economic loss rule, "Town of Aima firmly establish[ed] that the economic loss rule does not apply to negligent construction claims against homebuilders because homebuilders have an independent duty of care to act without negligence in the construction of homes." A.C.

2003Cosmopolitan Homes, Inc. v. Weller, 663 P.2d 1041, 1042 (Colo.1983) (‘An obligation to act without negligence in the construction of a home is independent of contractual obligations ....”); see also Town of Alma v. AZCO Constr., Inc., supra< (affirming the rule of Cosmopolitan Homes as an exception to the economic loss rule).

2019It agreed with a Florida court’s reasoning that a “legislatively imposed duty to avoid civil theft” was independent from a contractual obligation to transfer money to the plaintiff, and further that the economic loss rule “cannot abrogate a legislatively created scheme designed to extend a civil remedy to those harmed by alleged criminal activity.” Id. at 1194 (quoting Burke v. Napieracz, 674 So. 2d 756 , 758–59 (Fla. Dist.

2019It agreed with a Florida court's reasoning that a "legislatively imposed duty to avoid civil theft" was independent from a contractual obligation to transfer money to the plaintiff, and further that the economic loss rule "cannot abrogate a legislatively created scheme designed to extend a civil remedy to those harmed by alleged criminal activity." Id. at 1194 (quoting Burke v. Napieracz , 674 So.2d 756 , 758-59 (Fla. Dist.

2026See id. ¶49 Specifically, as noted above, Veolia contends that if its misrepresentations were post-contractual, then any tort duty to refrain from such misrepresentations would be subsumed by either its express or implied contractual duties and barred by the economic loss rule.

2026See id. ¶49 Specifically, as noted above, Veolia contends that if its misrepresentations were post-contractual, then any tort duty to refrain from such misrepresentations would be subsumed by either its express or implied contractual duties and barred by the economic loss rule.