Core-Mark Midcontinent, Inc.; Core-Mark International, Inc.;
United States Fire Insurance Company; and Commonwealth
Insurance Company, Plaintiffs-Appellees, v. Sonitrol
Corporation, Defendant-Appellant.
Court of Appeals Nos. 10CA2289 & 11CA0369
COURT OF APPEALS OF COLORADO, DIVISION ONE
2012 COA 120; 2012 Colo. App. LEXIS 1132
July 19, 2012, Decided
NOTICE:
THIS OPINION IS NOT THE FINAL VERSION AND SUBJECT TO REVISION UPON FINAL
PUBLICATION
PRIOR HISTORY: [**1]
Adams County District Court Nos. 03CV3836, 04CV1978 & 04CV3625. Honorable
Katherine R. Delgado, Judge.
DISPOSITION: JUDGMENT AFFIRMED IN PART AND REVERSED IN PART, ORDER
VACATED,
AND CASE REMANDED WITH DIRECTIONS.
COUNSEL: Davis Graham & Stubbs LLP, Andrew M. Low, Kyle W. Brenton, Denver,
Colorado, for Plaintiffs-Appellees.
Sander, Ingebretsen, & Wake, P.C., Richard G. Sander, S. Kirk Ingebretsen,
Christopher Noecker, Denver, Colorado, for Defendant-Appellant.
JUDGES: Opinion by JUDGE J. JONES. Russel and Vogt*, JJ., concur.
* Sitting by assignment of the Chief Justice under provisions of Colo.
Const.
art. VI, § 5(3), and § 24-51-1105, C.R.S. 2011.
OPINION BY: J. JONES
OPINION
[*P1] Defendant, Sonitrol Corporation, appeals the judgment entered
against
it after a jury trial on the breach of contract claims of plaintiffs,
Core-Mark
International, Inc. and its wholly owned subsidiary, Core-Mark Midcontinent,
Inc. (collectively, Core-Mark); and Core-Mark's casualty insurers, United
States
Fire Insurance Company and Commonwealth Insurance Company (collectively, the
Insurers). It also appeals the district court's award of costs based on that
judgment. We affirm the judgment as to liability, reverse the judgment as to
damages, vacate the costs award, [**2] and remand the case for a new
trial on
damages.
I. Background
[*P2] Sonitrol and Core-Mark contracted to have Sonitrol install and
monitor a burglar alarm system at one of Core-Mark's warehouses. Section
12.C of
the contract purported to limit Sonitrol's liability as follows:
[CORE-MARK] UNDERSTANDS AND AGREES THAT IF [SONITROL] SHOULD BE
FOUND LIABLE FOR ANY LOSS OR DAMAGES DUE FROM A FAILURE TO PERFORM ANY
OF ITS OBLIGATIONS OR A FAILURE OF THE EQUIPMENT TO PROPERLY OPERATE,
[SONITROL]'S LIABILITY SHALL BE LIMITED TO A SUM EQUAL TO THE TOTAL OF
ONE-HALF YEAR'S MONITORING PAYMENTS, OR FIVE HUNDRED DOLLARS ($500)
WHICHEVER IS THE LESSER, AND THIS LIABILITY SHALL BE EXCLUSIVE AND
SHALL APPLY IF LOSS OR DAMAGE, IRRESPECTIVE OF CAUSE OR ORIGIN,
RESULTS DIRECTLY OR INDIRECTLY TO PERSONS OR PROPERTY FROM PERFORMANCE
OR NON-PERFORMANCE OF ANY OF [SONITROL]'S OBLIGATIONS OR FROM
NEGLIGENCE, ACTIVE OR OTHERWISE, OF [SONITROL], ITS EMPLOYEES OR
AGENTS.
[*P3] In December 2002, Sonitrol failed to detect or to respond to a
burglary at the warehouse. One of the burglars, David Ottersberg, started
a fire
in the warehouse that effectively destroyed the building and its contents.
[*P4] Core-Mark recovered part of its [**3] losses from the
Insurers, and
it then sued Sonitrol to recover its uninsured losses. The Insurers
separately
sued Sonitrol in a subrogation action to recover the insured losses. Both
plaintiffs asserted tort and breach of contract claims. The cases were
consolidated.
[*P5] Sonitrol moved to dismiss the tort claims based on the economic
loss
rule and, as relevant here, moved for summary judgment on the breach of
contract
claims to the extent those claims sought damages in excess of those permitted
under Section 12.C of the contract. The district court granted both motions.
Core-Mark and the Insurers then voluntarily dismissed the breach of contract
claims to the extent the court had not previously dismissed them.
[*P6] On appeal, a division of this court affirmed the dismissal of the
tort claims, but held that the district court had erred by determining that
Sonitrol's claims for willful and wanton breach of contract were subject
to the
limitation of liability in Section 12.C. United States Fire Ins. Co. v.
Sonitrol
Mgmt. Corp., 192 P.3d 543, 548-49 (Colo. App. 2008) (Sonitrol I). Because
there
was a genuine issue of material fact as to whether Sonitrol's actions were
willful and wanton, the division [**4] reversed the summary judgment on the
breach of contract claims and remanded the case for further proceedings.
Id. at
549-50.
[*P7] On remand, a jury found in plaintiffs' favor on their claims for
willful and wanton breach of contract and willful and wanton breach of the
contractual duty of good faith and fair dealing, and awarded Core-Mark
$7,348,732 and the Insurers $10,965,777.1
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -1 The
district court added prejudgment interest to the awards and entered
judgment in
the amounts of $15,589,964 for Core-Mark and $17,490,255 for the Insurers.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
II. Discussion
[*P8] On appeal, Sonitrol contends that the division in Sonitrol I
erred by
ruling that a limitation of liability provision like that here is not
enforceable where a party has committed a willful and wanton breach of
contract.
It also contends that the district court erred on remand by refusing to allow
Sonitrol's expert witnesses to testify and by striking Sonitrol's
designation of
Mr. Ottersberg as a nonparty at fault. We reject Sonitrol's contentions
regarding the decision in Sonitrol I and Mr. Ottersberg. However, we agree
with
Sonitrol that the district court abused its discretion by refusing to
allow its
experts to testify, and conclude that [**5] the error was not harmless.
A. Enforceability of Liability Limitation Provision
1. Law of the Case
[*P9] Before reaching the merits of Sonitrol's contention, we must
consider
whether it is appropriate for us to reexamine the prior division's ruling.
[*P10] When an appellate court rules on an issue in a case, that ruling
becomes the law of the case. People v. Roybal, 672 P.2d 1003, 1005 (Colo.
1983);
Ferrel v. Colo. Dep't of Corr., 179 P.3d 178, 184 (Colo. App. 2007). The
law of
the case doctrine generally requires a court to follow its prior relevant
rulings in the case. Giampapa v. Am. Family Mut. Ins. Co., 64 P.3d 230, 243
(Colo. 2003). However, the doctrine "is merely discretionary when applied
to a
court's power to reconsider its own prior rulings." Id.; see also
Christianson
v. Colt Indus. Operating Corp., 486 U.S. 800, 817 (1988) ("[T]he
law-of-the-case
doctrine 'merely expresses the practice of courts generally to refuse to
reopen
what has been decided, [and is] not a limit to their power.' . . . A court
has
the power to revisit prior decisions of its own or of a coordinate court
in any
circumstance, although as a rule courts should be loathe to do so in the
absence
of extraordinary circumstances [**6] . . . ." (citation omitted) (quoting in
part Messinger v. Anderson, 225 U.S. 436, 444 (1912))). Thus, a division
of this
court may review another division's ruling in the same case where "the
previous
decision is no longer sound because of changed conditions or law, or legal or
factual error, or if the prior decision would result in manifest injustice."
Vashone-Caruso v. Suthers, 29 P.3d 339, 342 (Colo. App. 2001); accord Saint
John's Church in the Wilderness v. Scott, 2012 COA 72, ¶ 9; see also
Giampapa,
64 P.3d at 243.
[*P11] Here, Sonitrol contends that the Sonitrol I division's ruling was
legal error and resulted in manifest injustice. Specifically, Sonitrol argues
that the prior division's ruling ignored the distinction between tort and
contract claims and failed to consider numerous decisions from other
jurisdictions enforcing limitation of liability clauses such as the one at
issue
here. Because legal error is an exception to the law of the case doctrine,
and
because the law in this particular area involves relatively subtle, but
nonetheless meaningful, distinctions that are sometimes misunderstood, we
choose
to reach the merits of Sonitrol's contention.2
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -2 We
emphasize that a party's [**7] mere assertion of legal error does not
require a
division of this court to revisit another division's prior ruling. As noted,
whether to do so is a matter entrusted to the division's discretion.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
2. Analysis
[*P12] Sonitrol does not challenge the sufficiency of the evidence of
willful and wanton breach of contract.3 It does, however, challenge the
award of
damages by asking us to revisit the division's holding in Sonitrol I that a
limitation of liability provision is not enforceable to limit the damages
recoverable for willful and wanton breach of contract.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -3 The
evidence of this conduct is described in Sonitrol I, 192 P.3d at 546.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
[*P13] A limitation of liability provision is generally enforceable
because
it represents the parties' bargained-for agreement regarding allocation of
risks
and costs in the event of a breach or other failure of the contemplated
transaction. Metropolitan Life Ins. Co. v. Noble Lowndes Int'l, Inc., 643
N.E.2d
504, 507 (N.Y. 1994); see Town of Alma v. AZCO Constr., Inc., 10 P.3d
1256, 1262
(Colo. 2000) ("Contract law is intended to enforce the expectancy interests
created by the parties' promises so that they can allocate risks and costs
during their bargaining."); Restatement (Second) of Contracts § 195 cmt. a
[**8] (1981). As with other contract provisions, however, a limitation of
liability provision is not enforceable if, for example, it is contrary to
public
policy or unconscionable. See Rhino Fund, LLLP v. Hutchins, 215 P.3d 1186,
1191
(Colo. App. 2008) (exculpatory clause); see also Meyerstein v. City of Aspen,
P.3d , , 2011 WL 915747, *4 (Colo. App. No. 09CA1651, Mar. 17,
2011)
(a contract provision that violates public policy is void).
[*P14] Courts in other jurisdictions have routinely upheld limitation of
liability provisions in contracts for the installation and servicing of
burglar
alarm systems, even in actions premised on system failure. See, e.g., Leon's
Bakery, Inc. v. Grinnell Corp., 990 F.2d 44, 48 (2d Cir. 1993) (applying
Connecticut law) (collecting cases); E.H. Ashley & Co., Inc. v. Wells Fargo
Alarm Servs., 907 F.2d 1274, 1278 (1st Cir. 1990) (applying Rhode Island law)
("Courts . . . have repeatedly upheld limitation of liability clauses in
burglar
alarm service contracts against allegations that they are violative of public
policy or unconscionable."); see also University Hills Beauty Academy,
Inc. v.
Mountain States Tel. & Tel. Co., 38 Colo. App. 194, 196, 554 P.2d 723, 725
(1976) [**9] (a limitation of liability provision in a services contract is
generally valid if it was fairly made and the breaching party has no duty
to the
public). The courts reason that
"[m]ost persons, especially operators of business establishments,
carry insurance for loss due to various types of crime. Presumptively
insurance companies who issue such policies base their premiums on
their assessment of the value of the property and the vulnerability of
the premises. No reasonable person could expect that the provider of
an alarm service would, for a fee unrelated to the value of the
property, undertake to provide an identical type [of] coverage should
the alarm fail to prevent a crime."
Leon's Bakery, 990 F.2d at 48-49 (quoting Guthrie v. Am. Protection
Indus., 206
Cal. Rptr. 834, 836 (Cal. Ct. App. 1984)); accord Rassa v. Rollins Protective
Servs. Co., 30 F. Supp. 2d 538, 545 (D. Md. 1998) ("'It would be
unreasonable to
expect appellant to assume the responsibilities arising under a burglary
insurance policy upon payment of . . . th[e] nominal [monthly burglar alarm
services] fee.'" (quoting Vallance & Co. v. De Anda, 595 S.W.2d 587, 590
(Tex.
Civ. App. 1980))). Rather, because the probability [**10] a burglary will
occur
and the potential loss the property owner may suffer depend largely on the
value
of the property the owner chooses to retain on the guarded premises, courts
consider the owner best able to determine what amount of insurance is
necessary
and to negotiate an appropriate insurance rate. Leon's Bakery, 990 F.2d at
48-49
; E.H. Ashley, 907 F.2d at 1278-79; Ostalkiewicz v. Guardian Alarm, 520 A.2d
563, 565-66 (R.I. 1987).4 Were an alarm service provider not permitted to
limit
its liability, it effectively would become an insurer of the property, and
might
be discouraged from providing the service or be unable to provide it at an
affordable price. Leon's Bakery, 990 F.2d at 49; Champion Home Builders
Co. v.
ADT Sec. Servs., Inc., 179 F. Supp. 2d 16, 23-24 (N.D.N.Y. 2001) (applying
New
York law).
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - -
-4 Indeed,
Section 12.A of the contract here provides:
It is understood and agreed by the parties that [Sonitrol] is not
an insurer and that insurance, if any, covering personal injury and
property loss or damages on [Core-Mark]'s premises shall be obtained
by [Core-Mark], at [Core-Mark]'s sole expense; . . . [and] that
[Sonitrol] makes no guarantee, representation or warranty including
[**11] any implied warranty of merchantability or fitness for
particular purpose that the system or service supplied will avert or
prevent occurrences or the consequences therefrom which the system or
service is intended to detect or avert . . . .
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
[*P15] Though a limitation of liability provision in a burglar alarm
system
contract is thus generally enforceable, courts in other jurisdictions have
recognized certain exceptions. One exception is that such a provision does
not
apply to conduct that is willful and wanton. E.g., ADT Sec. Servs., Inc. v.
Swenson, 276 F.R.D. 278, 301 (D. Minn. 2011) (applying Minnesota law);
Fed. Ins.
Co. v. Honeywell, Inc., 641 F. Supp. 1560, 1562 (S.D.N.Y. 1986) (applying New
York law). This exception often is applied where the willful and wanton
conduct
is pled in the context of a tort claim. E.g., Morgan Co. v. Minnesota
Mining &
Mfg. Co., 246 N.W.2d 443, 447-48 (Minn. 1976). But a number of courts also
have
applied the exception to claims of willful and wanton breach of contract.
Honeywell, Inc. v. Ruby Tuesday, Inc., 43 F. Supp. 2d 1074, 1079-80 (D. Minn.
1999) (applying Alabama and Minnesota law) (because an exculpatory clause
cannot
release a party from liability [**12] for willful or wanton acts, a
limitation
of liability clause also does not apply to such acts); Lenny's, Inc. v.
Allied
Sign Erectors, Inc., 318 S.E.2d 140, 142 (Ga. Ct. App. 1984); see Campmor,
Inc.
v. Brulant, LLC, 2011 WL 2745922, *6 (D.N.J. No. 09-5465 (WHW), July 12,
2011)
(unpublished opinion) (applying Ohio law) (a limitation of liability
provision
will be upheld "'so long as the party invoking the provision has not
committed a
wil[l]ful or reckless breach'" (quoting Nahra v. Honeywell, Inc., 892 F.
Supp.
962, 969-70 (N.D. Ohio 1995))); cf. Onconome, Inc. v. University of
Pittsburgh,
2010 WL 1133425, *3 (W.D. Pa. No. 09cv1195, Mar. 23, 2010) (unpublished
memorandum opinion and order) (applying Pennsylvania law) (applying
exception to
breach of a research contract); AGIP Petroleum Co., Inc. v. Gulf Island
Fabrication, Inc., 920 F. Supp. 1330, 1345 (S.D. Tex. 1996) (applying
Louisiana
law) (product fabrication agreement); Hosiery Corp. of Am., Inc. v. Int'l
Data
Processing, Inc., 1991 WL 30015, *12-13 (D.N.J. No. Civ. A. 89-115, Feb. 28,
1991) (unpublished opinion) (applying New Jersey law) (exculpatory clause
does
not apply to a willful and wanton breach of contract claim; concluding
[**13]
that the distinction between willful and wanton breach of contract and tort
claims was irrelevant to determining whether the exculpatory clause applied);
Southworth & McGill, P.A. v. S. Bell Tel. & Tel. Co., 580 So. 2d 628, 633-34
(Fla. Dist. Ct. App. 1991) (exculpatory clause in a telephone directory
contract); but see Rent-All Shops, Inc. v. Bellsouth Adver. & Publ'g
Corp., 849
F.2d 606, 1988 WL 60581, *1-2 (4th Cir. No. 87-1119, Mar. 11, 1988)
(unpublished
table opinion) (per curiam) (applying South Carolina law) (affirming without
explanation the district court's rejection of the argument that a willful
breach
of contract barred enforcement of a limitation of liability clause in part
because the clause was voidable only for unconscionability); LDCircuit,
LLC v.
Sprint Commc'ns Co., L.P., 364 F. Supp. 2d 1246, 1258 (D. Kan. 2005)
(applying
Kansas law) (the rule that a provision limiting liability for willful or
wanton
conduct is unenforceable applies only to tort claims; whether the
provision is
enforceable in a breach of contract action depends on whether the
provision is
"fairly and knowingly entered into and not illegal, unconscionable, or
contrary
to public policy").5
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -5 Some
courts [**14] have analogously held that a limitation of liability
provision is
inapplicable to claims of gross negligence. See Marjorie A. Shields,
Annotation,
Validity, Construction, and Application of Exculpatory and Limitation of
Liability Clauses in Burglary, Fire, and Other Home and Business Monitoring
Service Contracts, 36 A.L.R.6th 305, § 14 (2008) (collecting cases).
Core-Mark
pled a claim for gross negligence in its initial complaint, but the district
court dismissed that claim, and Core-Mark tried only its willful and wanton
breach of contract claims. Core-Mark has not appealed the dismissal of its
gross
negligence claim. Thus, to the extent Core-Mark suggests that the
limitation of
liability clause does not apply here because Sonitrol's actions were grossly
negligent, we conclude that it has abandoned this argument.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
[*P16] The reason for refusing to allow limits on liability for a
willful
and wanton breach of contract concerns the nature of that conduct.
"Willful and
wanton conduct is purposeful conduct committed recklessly that exhibits an
intent consciously to disregard the safety of others. Such conduct extends
beyond mere unreasonableness." Forman v. Brown, 944 P.2d 559, 564 (Colo. App.
1996) [**15] (citing Terror Mining Co., Inc. v. Roter, 866 P.2d 929, 933
(Colo.
1994)); see also New Light Co., Inc. v. Wells Fargo Alarm Servs., 525
N.W.2d 25,
30 (Neb. 1994); Tessler & Son, Inc. v. Sonitrol Sec. Sys. of N. New
Jersey, Inc
., 497 A.2d 530, 533 (N.J. Super. Ct. App. Div. 1985); Metropolitan Life Ins.
Co. v. Noble Lowndes Int'l, Inc., 600 N.Y.S.2d 212, 216 (N.Y. App. Div.
1993),
aff'd, 643 N.E.2d 504 (N.Y. 1994); cf. § 13-21-102(1)(b), C.R.S. 2011
(defining
willful and wanton conduct for purposes of awarding exemplary damages in a
tort
action). Because of the egregiously wrongful nature of the conduct,
enforcing a
limitation of liability provision to shield a party from the consequences of
such conduct is deemed to be contrary to public policy. See New Light Co.,
525
N.W.2d at 30-31 (balancing the right to contract freely against the
interest in
protecting the public, and concluding that a provision insulating a party
from
damages caused by its willful and wanton conduct is against public policy
because such reckless conduct has a tendency to be injurious to the
public); see
also Tide Natural Gas Storage I, L.P. v. Falcon Gas Storage Co., Inc.,
2011 WL
4526517, *6 (S.D.N.Y. No. 10 [**16] Civ. 5821, Sept. 29, 2011) (unpublished
opinion and order) (applying New York law). Moreover, limiting liability for
"[a] willful failure to monitor th[e] system or a deliberate disregard of a
contractual duty would not be consistent with the intended protection service
set forth in the contract." Carriage Meat Co., Inc. v. Honeywell, Inc.,
442 So.
2d 796, 798 (La. Ct. App. 1983) (concluding that an exculpatory clause
would not
shield the defendant "if personnel failed to notify [the] plaintiff during
many
hours of the alarm's being triggered"; considering a tort action).
[*P17] We reject Sonitrol's contention that refusing to enforce a
limitation of liability provision in the context of a claim for willful and
wanton breach of contract improperly blurs the distinction between tort and
contract law.
[*P18] It is true that the concept of liability for willful and wanton
conduct arises most frequently in the context of tort law. E.g., Pham v.
State
Farm Mut. Auto. Ins. Co., 70 P.3d 567, 571 (Colo. App. 2003) (claim for
willful
and wanton breach of an insurance contract is a tort claim); Metropolitan
Life
Ins. Co., 600 N.Y.S.2d at 216. However, the rule that a contract provision is
void if it is contrary [**17] to public policy is well-established.
F.D.I.C. v.
Am. Cas. Co., 843 P.2d 1285, 1290 (Colo. 1992); see Equitex, Inc. v.
Ungar, 60
P.3d 746, 750 (Colo. App. 2002). And numerous Colorado appellate decisions
have
held that a contract provision relieving a party from liability for its own
willful and wanton conduct is against public policy. Constable v. Northglenn,
LLC, 248 P.3d 714, 716-17 (Colo. 2011) (public policy precludes agreements
indemnifying a party for damages resulting from its own intentional or
willful
wrongful acts); Jones v. Dressel, 623 P.2d 370, 376 (Colo. 1981) ("in no
event
will [an exculpatory] agreement provide a shield against a claim for
willful and
wanton negligence"); Rhino Fund, 215 P.3d at 1191 (most courts will not
enforce
exculpatory or limiting provisions that "purport to relieve parties from
their
own willful, wanton, reckless, or intentional conduct"); Barker v. Colo.
Region-Sports Car Club of Am., Inc., 35 Colo. App. 73, 80, 532 P.2d 372, 377
(1974) (same as Jones).
[*P19] Further, and in any event, Colorado recognizes an action for
willful
and wanton breach of contract, and permits a party to recover noneconomic
damages6 in such an action, even outside of the [**18] insurance context.
See
Decker v. Browning-Ferris Indus. of Colo., Inc., 931 P.2d 436, 447-48 (Colo.
1997) (willful and wanton breach of an employment contract); Denver Publ'g
Co.
v. Kirk, 729 P.2d 1004, 1009 (Colo. App. 1986) (newspaper distribution
agreement), abrogated on other grounds by Mortg. Fin., Inc. v. Podleski, 742
P.2d 900 (Colo. 1987); Smith v. Hoyer, 697 P.2d 761, 764 (Colo. App. 1984)
(loan
agreement); see also Giampapa, 64 P.3d at 238-40 (discussing the history and
basis for the rule that noneconomic damages are awardable for a willful and
wanton breach of contract).7 This theory of recovery does not sound in
tort but
instead "adhere[s] to basic contract law principles." Giampapa, 64 P.3d at
240.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - -
-6 Exemplary
damages, however, are not recoverable. Mortg. Fin., Inc. v. Podleski, 742
P.2d
900, 902-05 (Colo. 1987).
7 Though, as Sonitrol points out, section 13-21-102.5(6)(a)(I), C.R.S.
2011,
now limits the circumstances in which noneconomic damages are awardable for
willful and wanton breach of contract, it does not limit the types of
contracts
as to which a party may seek recovery for a willful and wanton breach of
contract.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
[*P20] Therefore, we conclude that the division's ruling [**19] in
Sonitrol I was correct.
B. Expert Testimony
1. Background
[*P21] Before trial, Sonitrol deposed or obtained the reports of three
persons whom it intended to call as expert witnesses to testify concerning
Core-Mark's alleged storage of an excessive amount of hazardous, flammable
liquids in the warehouse and its alleged failure to store those liquids
safely.
[*P22] Carroll Pruitt, an architect, opined in his report that:
o Core-Mark had stored a windshield washer concentrate in the
warehouse that was 99.8 percent methanol;
o though the applicable building and fire codes permitted no more
than 120 gallons of that type of product to be stored in the warehouse
(as it was configured before the fire), Core-Mark had stored more than
3,000 gallons there;
o the fire code required that certain containment measures be taken
to store properly the volume of that class of liquid Core-Mark had
chosen to store at the site, and those measures had not been taken;
o a memorandum (which Core-Mark later introduced at trial) by an
assistant fire marshall who had investigated the fire opining that
storage of the flammable materials at the warehouse did not violate
the fire code was incorrect; and
o the failure to comply with [**20] the building and fire codes
was "a significant contributing factor to the fire loss."8
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -8 Mr.
Pruitt also noted that the product safety report for the product
recommended a
foam-based suppression system because water is ineffective to stop fires
involving that product (the warehouse had a water-based system). The court
allowed Sonitrol to introduce the product safety report at trial.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
[*P23] Ron Coker, a fire protection engineer, elaborated further on the
alleged noncompliance with the fire code.9 He also opined that the
noncompliance
was a "significant contributing factor[] to the fire loss."
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -9
Specifically, Mr. Coker said in his report that for the volume of hazardous
liquid at issue, the fire code required (1) a liquid storage room, which the
warehouse did not have; and (2) a sprinkler system designed to provide a
greater
density of water per square foot than the one in place at the warehouse.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
[*P24] Finally, Marshall Littleton, an expert in fire and explosives
investigation, testified in his deposition, in relevant part, that:
o based on his discussion with a fire protection engineer, he had
concluded that the warehouse's sprinkler system was designed for
noncombustible items;
o the inadequate sprinkler [**21] system, combined with the way
the fire had begun, prevented the system from effectively stopping the
fire;
o had Mr. Ottersberg not used the methanol-based concentrate to
start one fire, the fire would have been "substantially less
dramatic"; and
o when the concentrate became involved in the fire, it "contributed
significantly" thereto.
[*P25] Core-Mark moved to exclude this testimony. It argued that because
the experts did not know how much windshield washer concentrate had burned in
the fire10 and had not analyzed specifically (1) how the existing fire
sprinkler
system had actually functioned during the fire or (2) whether an upgraded
system
would have produced a different result, the experts could not establish the
allegedly necessary causal connection between the volume of the
concentrate and
the spread of the fire. Sonitrol responded that it did not have the burden of
proving causation and that the testimony was admissible to show that the
extent
of the damages suffered was not reasonably foreseeable.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - -
-10 Though
the experts did not know how much of the concentrate had burned in the
fire, it
was undisputed that some of it had.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
[*P26] The district court excluded the testimony, concluding that it was
[**22] "irrelevant and unreliable" and unsupported "by a scientific and/or
technical analysis which supports opinions regarding the effect an
upgraded fire
sprinkler system or the effect that code violations would have had on the
spread
of the fire inside the warehouse."
2. Analysis
[*P27] CRE 702 governs the admissibility of expert testimony. It
provides:
"If scientific, technical, or other specialized knowledge will assist the
trier
of fact to understand the evidence or to determine a fact in issue, a witness
qualified as an expert by knowledge, skill, experience, training, or
education,
may testify thereto in the form of an opinion or otherwise."
[*P28] To be admissible under CRE 702, expert testimony must be both
reliable and relevant. Estate of Ford v. Eicher, 250 P.3d 262, 266 (Colo.
2011).
To determine whether testimony meets these requirements, the court must
consider
whether: (1) the scientific, technical, or specialized principles
underlying the
testimony are reasonably reliable; (2) the expert is qualified to opine to
the
matter; (3) the expert testimony will be helpful to the jury; and (4) the
probative value of the evidence is substantially outweighed by the danger of
unfair prejudice. Id.; [**23] accord People v. Rector, 248 P.3d 1196, 1200
(Colo. 2011). An expert need not testify with certainty on a matter for his
testimony to be admissible; rather, "the fact . . . the witness cannot
support
his or her opinion with certainty goes only to the weight to be given to the
opinion and not to its admissibility." Schultz v. Wells, 13 P.3d 846, 853
(Colo.
App. 2000); accord Schuessler v. Wolter, 2012 COA 86, ¶ 73.
[*P29] We review the district court's decision not to admit expert
testimony for an abuse of discretion. See Rector, 248 P.3d at 1200;
Antolovich
v. Brown Grp. Retail, Inc., 183 P.3d 582, 596 (Colo. App. 2007). We will not
disturb the decision unless it is manifestly erroneous or based on an
incorrect
legal standard. See Estate of Ford v. Eicher, 220 P.3d 939, 942 (Colo. App.
2008), aff'd, 250 P.3d 262 (Colo. 2011); see also Luster v. Brinkman, 205
P.3d
410, 414 (Colo. App. 2008). If we determine that the court abused its
discretion, we will reverse only "if we can say 'with fair assurance' that
the
trial court's exclusion of that evidence 'substantially influenced the
outcome
of the case or impaired the basic fairness of the trial itself.'" Bly v.
Story,
241 P.3d 529, 537 (Colo. 2010) [**24] (quoting in part E-470 Pub. Highway
Auth.
v. 455 Co., 3 P.3d 18, 23 (Colo. 2000)); see CRE 103(a); C.R.C.P. 61 (an
error
is harmless, and does not require reversal, unless it affects the parties'
substantial rights).
a. The District Court Abused Its Discretion by Excluding the Testimony
[*P30] We conclude that the experts' testimony was relevant and
admissible
on the issue of damages.
[*P31] Contract damages are recoverable only to the extent they "were
the
foreseeable result of a breach at the time the contract was made."
Giampapa, 64
P.3d at 240. Although the test is an objective one, if the defendant did not
have a reason to foresee that a particular loss was the probable result of a
breach at the time of contracting, "[t]he mere circumstance that some loss
was
foreseeable, or even that some loss of the same general kind was foreseeable"
does not make the defendant liable for the portion of the loss that was not
foreseeable. Restatement (Second) of Contracts § 351 cmt. a (1981). The
defendant must have had a reason to foresee both the type and the general
magnitude of damages. Landmark Land Co., Inc. v. F.D.I.C., 256 F.3d 1365,
1378
(Fed. Cir. 2001); 11 Joseph M. Perillo, Corbin on Contracts § 56.7,
[**25] at
108 (rev. ed. 2005).
[*P32] We assume that Sonitrol could have foreseen that if it failed to
detect a break-in at the warehouse, a burglar could start a fire. However,
the
jury should have been able to consider Sonitrol's proffered expert testimony
relating to whether Sonitrol could have foreseen that the fire set by Mr.
Ottersberg would prove so calamitous due to the alleged code violations. Cf.
Sunnyland Farms, Inc. v. Cent. New Mexico Elec. Coop., Inc., 255 P.3d 324,
346
(N.M. Ct. App. 2011) (cert. granted May 17, 2011) (the trial court's
refusal to
reduce contract damages was not sustainable when it was clear the court
believed
that the plaintiff should have avoided or mitigated against the spread and
magnitude of the fire).
[*P33] Further, the proffered testimony supported Sonitrol's theory that
its conduct was not the cause of all the damages Core-Mark claimed. In this
regard, the district court incorrectly assumed that, to be admissible, the
testimony at issue had to include an analysis of how the alleged code
violations
actually impacted the spread of the fire or precisely how the result would
have
differed under a compliant suppression system. Such a conclusive analysis
is not
required [**26] of expert testimony; rather, it is sufficient that the
testimony permits the jury to infer the proposition for which it is
offered. See
People v. Ramirez, 155 P.3d 371, 381-82 (Colo. 2007); Hartford Fire Ins.
Co. v.
Pub. Serv. Co., 676 P.2d 25, 29 (Colo. App. 1983); see also Wackman v.
Rubsamen,
602 F.3d 391, 400 (5th Cir. 2010); DiCosolo v. Janssen Pharm., Inc., 951
N.E.2d
1238, 1249-50 (Ill. App. Ct. 2011). Here, though further explanation might
have
been more helpful to the jury, the jury could have inferred from the experts'
testimony that storing more than twenty-five times the permissible amount of
flammable liquid without taking appropriate precautionary measures
resulted in
the fire causing more damage than it would have otherwise -- in short, that
Sonitrol was not responsible for all the damages plaintiffs sought. See
Ramirez,
155 P.3d at 381-82; cf. Nguyen v. Uniflex Corp., 440 S.E.2d 887, 889 (S.C.
Ct.
App. 1994) (though there was "no evidence that the manner in which the
chemicals
were stored constituted the proximate cause of the fire, nevertheless, the
jury
may have premised its finding of negligence on its determination that the
city
ordinances relating to fire safety [**27] had been violated and their
violation
was the proximate cause of the fire"). Any doubts about the extent to
which the
code violations contributed to the fire's spread would have been
"sufficiently
addressed by vigorous cross-examination [and] presentation of contrary
evidence,
. . . rather than exclusion." Estate of Ford, 250 P.3d at 266; see Daubert v.
Merrell Dow Pharm., Inc., 509 U.S. 579, 596 (1993).
[*P34] The court also suggested that the experts were required to have
performed a scientific or technical analysis for their testimony to be
admissible. But an expert need only possess some specialized knowledge that
would be helpful to the jury. Here, that knowledge concerned the
applicable fire
and building codes and fire safety recommendations. See CRE 702; Gresham v.
Petro Stopping Ctrs., LP, 2011 WL 1042705, *4 (D. Nev. No.
3:09-cv-00034-RCJ-VPC, Mar. 18, 2011) (unpublished order) ("expert opinion
need
not be based on scientific expertise"); Ji v. Bose Corp., 538 F. Supp. 2d
354,
357 (D. Mass. 2008) (specialized knowledge need not be scientific or
technical);
see also People v. Davis, 2012 COA 56, ¶¶ 43-47 (police detective's expert
testimony concerning gang hierarchy, communication [**28] methods, and
ideology
was admissible specialized knowledge).
[*P35] Therefore, we conclude that the district court abused its
discretion
by excluding Sonitrol's experts' testimony.
b. The Error Was Not Harmless
[*P36] We further conclude that the court's erroneous exclusion of the
testimony was not harmless.
[*P37] The court precluded Sonitrol from presenting expert testimony
that
Core-Mark had violated the fire code by storing so much flammable liquid
at the
warehouse and that the safety measures in place at the warehouse did not
comply
with building and fire codes for the amount of concentrate stored there.
Core-Mark's witnesses, however, were allowed to testify that:
o there were no code provisions governing storage of hazardous
materials at the warehouse;
o the warehouse had not been in violation of the fire code in any
way that was significant with respect to the fire;
o the sprinkler system complied with code requirements;
o any flammable materials were stored in a manner consistent with
the fire and building codes; and
o it was foreseeable that a forced entry into the warehouse could
have led to the entire warehouse burning down.
[*P38] Core-Mark's counsel reiterated in closing argument that one of
Core-Mark's [**29] witnesses had testified that "Core-Mark complied with
all of
the building and fire codes," and emphasized that "it's significant that
there's
not anyone [who is not a former Sonitrol employee] who has testified on
behalf
of Sonitrol."11
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -11 At
oral
argument, Core-Mark's counsel suggested that its witnesses' testimony on this
subject was irrelevant, and therefore testimony on the issue from Sonitrol's
witnesses could not have been relevant. But Core-Mark did not take that
position
in the district court or in its briefs on appeal.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
[*P39] In effect, the court did not allow the jury to hear testimony
rebutting that of Core-Mark's witnesses on issues central to the
determination
of damages. Because the jury could have inferred from Sonitrol's experts'
testimony that the loss from the fire would have been substantially less had
Core-Mark or the warehouse owner complied with the alleged code
requirements, we
can say with fair assurance that the court's exclusion of the testimony
substantially influenced the outcome, at least as to damages. See Bly, 241
P.3d
at 537; Estate of Ford, 220 P.3d at 947 (exclusion of expert testimony was
not
harmless because it concerned the likely cause of the claimed injury
[**30] and
opposing counsel pointed out in closing argument that no defense witness had
offered an alternative theory of causation).12
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -12
Core-Mark and the Insurers contend that excluding the testimony was harmless
error because Mr. Ottersberg testified that he would have purchased
gasoline to
start the fire if the concentrate had not been available. But that
testimony was
wholly irrelevant to the issue of the extent of the impact Core-Mark's
alleged
code violations might have had on the amount of damages the fire caused.
And, in
any event, we cannot assume that the jury believed Mr. Ottersberg.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
[*P40] Therefore, we reverse the judgment as to damages and remand
the case
for a new trial on damages in which Sonitrol may present its expert
testimony.
We also vacate the costs award associated with the judgment.
C. Designation of Nonparty at Fault
[*P41] Sonitrol contends that the district court erred by ruling that it
could not designate Mr. Ottersberg as a nonparty at fault under section
13-21-111.5, C.R.S. 2011. We address this contention because it affects
Sonitrol's potential liability on remand.
[*P42] Sonitrol's contention presents a question of statutory
interpretation. We review such a question de novo. Hassler v. Account
Brokers of
Larimer Cnty., Inc., 2012 CO 24, ¶ 15.
[*P43] [**31] In interpreting a statute, our primary goals are to
discern
and give effect to the General Assembly's intent. Id.; L & R Exploration
Venture
v. Grynberg, 271 P.3d 530, 533 (Colo. App. 2011). We first look to the
statutory
language, giving the words and phrases used therein their plain and ordinary
meanings. Hassler, ¶ 15; L & R Exploration Venture, 271 P.3d at 533. We
read the
language in the dual contexts of the statute as a whole and the comprehensive
statutory scheme, giving consistent, harmonious, and sensible effect to
all of
the statute's parts. Jefferson Cnty. Bd. of Equalization v. Gerganoff, 241
P.3d
932, 935 (Colo. 2010); BP Am. Prod. Co. v. Patterson, 185 P.3d 811, 813
(Colo.
2008). After doing this, if we determine that the statute is not
ambiguous, we
enforce it as written and do not resort to other rules of statutory
construction. Denver Post Corp. v. Ritter, 255 P.3d 1083, 1089 (Colo. 2011);
Carruthers v. Carrier Access Corp., 251 P.3d 1199, 1203 (Colo. App. 2010).
[*P44] Section 13-21-111.5 addresses pro rata liability of defendants in
civil actions. It provides, in relevant part:
(1) In an action brought as a result of a death or an injury to
person or property, no defendant [**32] shall be liable for an amount
greater than that represented by the degree or percentage of the
negligence or fault attributable to such defendant that produced the
claimed injury, death, damage, or loss, except as provided in
subsection (4) of this section.
. . . .
(3)(a) Any provision of the law to the contrary notwithstanding,
the finder of fact in a civil action may consider the degree or
percentage of negligence or fault of a person not a party to the
action . . . in determining the degree or percentage of negligence or
fault of those persons who are parties to such action. . . .
. . . .
(4) Joint liability shall be imposed on two or more persons who
consciously conspire and deliberately pursue a common plan or design
to commit a tortious act. . . .
[*P45] Before trial, Sonitrol moved to allow the jury to apportion
liability to Mr. Ottersberg as a nonparty at fault under section
13-21-111.5(3).
The district court denied the motion, reasoning in part that though the
phrase
"negligence or fault" in subsections (1) and (3) establishes that the statute
does not apply to negligence actions alone, subsection (4)'s reference to a
"tortious act" indicates that the section permits apportionment of [**33]
liability only to a nonparty at fault in a tort action.
[*P46] We agree with the district court's conclusion.
[*P47] We observe initially that section 13-21-111.5 applies only to "an
action brought as a result of a death or an injury to person or property." §
13-21-111.5(1). In interpreting similar language in another damages
statute, the
supreme court has held that the phrase "for a wrong done to the person, or to
personal or real property" refers to tortious conduct. Mortg. Fin., Inc. v.
Podleski, 742 P.2d 900, 902 (Colo. 1987) (interpreting section
13-21-102(1)(a),
C.R.S. 2011 (relating to exemplary damages)); see also § 13-21-111.6, C.R.S.
2011 (governing reduction of damages for collateral source payments in "any
action . . . to recover damages for a tort resulting in death or injury to
person or property"); cf. § 13-17-201, C.R.S. 2011 (addressing the award of
attorney fees in "all actions brought as a result of a death or an injury to
person or property occasioned by the tort of any other person"). Consistently
applying this interpretation, we read section 13-21-111.5 as also limited to
tort actions. See Stoorman v. Greenwood Trust Co., 908 P.2d 133, 135 (Colo.
1995) ("Generally, similar [**34] language should be interpreted in the same
manner . . . .").
[*P48] Further, as the district court recognized, the supreme court has
interpreted the term "tortious act" in subsection 13-21-111.5(4) to
"include[]
any conduct other than breach of contract that constitutes a civil wrong and
causes injury or damages." Resolution Trust Corp. v. Heiserman, 898 P.2d
1049,
1055 (Colo. 1995) (emphasis added). Sonitrol contends that subsection (4)
has no
bearing on the interpretation of subsections (1) or (3) in this case. But in
Resolution Trust, the supreme court rejected a party's argument that "the
term
'tortious act' must mean something other than the phrase 'negligence or
fault,'"
the phrase used in subsections (1) and (3). Id. at 1056. Later, the court
said
that it had held in Resolution Trust that "'tortious act' did include
'negligence or fault,' . . . [thereby] implicitly equat[ing] 'negligence or
fault' with negligent and intentional acts." Slack v. Farmers Ins.
Exchange, 5
P.3d 280, 286 (Colo. 2000); see also Redden v. SCI Colo. Funeral Servs.,
Inc.,
38 P.3d 75, 80 (Colo. 2001) ("Fault is broader than negligence, including,
for
example, intentional torts . . . ."). Consequently, the holdings [**35] in
Resolution Trust and Slack suggest that because a breach of contract is not a
tortious act, such a breach does not fall within the meaning of "fault" as
used
in subsections (1) and (3). Cf. Fidelity & Deposit Co. of Maryland v.
Bondwriter
Sw., Inc., 263 P.3d 633, 637 (Ariz. Ct. App. 2011) (comparative fault statute
did not authorize apportionment of damages on contract claim); Lesmeister v.
Dilly, 330 N.W.2d 95, 101 (Minn. 1983) (definition of fault in comparative
fault
statute was not intended to apply to contract cases in part because "contract
law has never spoken in terms of fault; the contract measure of damages
generally is based on recovery of the expectancy or benefit of the bargain").
[*P49] Therefore, the district court did not err in ruling that Sonitrol
could not designate Mr. Ottersberg as a nonparty at fault under section
13-21-111.5. See Trustees of Colo. Laborers' Health & Welfare Trust Fund
v. Am.
Benefit Plan Adm'rs, Inc., 2005 WL 1661079, *2 (D. Colo. No.
04-CV-02630-EWN-OES, July 14, 2005) (unpublished magistrate judge order) (
section 13-21-111.5 does not apply to contract-based claims).13
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - -
-13 Because
section 13-21-111.5 does not apply to the plaintiffs' breach of contract
[**36]
claims, we do not need to address Sonitrol's contention that the district
court
erred in ruling that Sonitrol could not designate Mr. Ottersberg as a
nonparty
at fault because he was not a party to the contract and therefore owed no
duty
to Core-Mark.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
[*P50] The judgment of liability is affirmed, the judgment as to
damages is
reversed, the order awarding costs is vacated, and the case is remanded for a
new trial on the issue of Core-Mark's damages.
JUDGE RUSSEL and JUDGE VOGT concur.