Decision in Colorado offers road map for building defensible case

In the case of Safeco Insurance v. Plateau Heating & Air Conditioning, et al., Colorado became the first state to issue a published decision on a tort reform statute enacted to limit liability to propane companies.

There are now 18 states with various forms of law that attempt to limit the liability of propane companies following accidents caused by an alteration to the gas system of which they are not aware.

In the Colorado case, an explosion occurred in a home on Feb. 18, 2011. The homeowners had asked Plateau HVAC to investigate low temperatures in the home in February 2008. An employee of Plateau came to the home to fix the problem and told the family he had removed a carbon monoxide detector, but this was later discovered to be a gas detector. He also told the family he had removed a shutoff valve at the second-stage regulator and left it near the regulator.

In mid-to-late 2009, Action Gas Inc. doing business as Independent Propane became the family’s propane supplier. Before initiating service, it performed a tank site check and the associated form and later a residential gas inspection. It supplied a 1,000-gallon propane tank.

In the course of the subsequent lawsuit, Independent Propane was added as a defendant with Plateau HVAC. Independent sought to be dismissed from the case before much fact discovery was completed. The court decided it had many unanswered questions that prevented it from granting the dismissal. It was also required to see all facts in the light most favorable to the party opposing the dismissal.

The court’s analysis of Colorado’s limited liability statute for propane companies started with the acknowledgement that Independent Propane was a company doing business in Colorado under which the statute was intended to apply. It then determined there was an alleged alteration, modification or repair of propane equipment or propane appliance. This would have been Plateau’s removal of the propane safety monitoring system and gas shutoff valve.

The court’s central focus was the propane company’s lack of knowledge and consent to the alteration, modification or repair of the gas system. According to evidentiary testimony in the record, an Independent Propane employee told an investigator that a solenoid valve found at the scene of the fire was not present when he did his pressure test in November 2009. Applicable law would require a solenoid shutoff valve on a furnace located in the basement such as this. The court determined these facts created a factual dispute that precluded dismissal of the case against Independent Propane at an early stage.

The court was also asked to dismiss a breach of contract claim brought against Independent Propane by the plaintiff because it only presented conclusory allegations. Colorado is a notice-pleading state as compared to a fact-pleading state. All that is necessary to allege a claim is a “short and plain statement of the claim showing that the pleader is entitled to relief.” Here the plaintiff simply alleged that Independent Propane had a contract with the plaintiff requiring it to inspect the propane system, and it failed to do this, resulting in damages. The court said these allegations, if true, would form the basis for a breach-of-contract claim. But the facts as developed in the case and at trial will ultimately determine if a breach of contract exists.

Finally, the plaintiff claimed Independent Propane was negligent per se and violated Colorado law because it serviced a system that was below grade and did not include a gas-detecting device. Independent Propane claimed the cited rule was eliminated as of Nov. 10, 2009, and it did not deliver fuel to the home until Nov. 24, 2009. The plaintiff claimed the law was not eliminated until Jan. 1, 2010. Here the court sidestepped the issue by saying the plaintiff could still proceed with its negligence per se claim, but it would not yet decide the effective date of the rule’s elimination.

A seasoned trial lawyer views this decision as a road map for building a defensible case, as well as a predictor of the critical issues in the case.

To obtain a favorable result for the propane company, it’s important to focus on the lack of knowledge of the altered system, the limited duty to inspect, and the elimination of the restriction on below-grade installations to sometime before Independent Propane initiated propane service to the home.

Given this decision was rendered when the lawsuit was in its early stages, other facts may develop that present good defense strategies.

John V. McCoy is with McCoy Leavitt Laskey LLC, and his firm represents industry members nationally. He can be reached at 262-522-7007 or jmccoy@MLLlaw.com.