By Michael C. Loulakis and Ashley P. Cullinan
As we have noted in previous columns, it is not unusual to have disputes over what is included as the scope of a design-builder’s contract. This is particularly true when the contract documents include geotechnical reports, studies, and other information that might suggest approaches to the design but that did not align with what the contracting parties negotiated during contract formation. A recent Colorado decision, Ironshore Specialty Insurance Co. v. Pool and Spa Co., demonstrates how this issue played out for the general contractor of a hotel and the subcontractor it hired to design-build the hotel’s pool.
The case
Brinkman Construction Inc. was hired as the general contractor for the construction of a Marriott hotel in Westminster, Colorado. Brinkman entered into a subcontract with Pool and Spa for the design and construction of the hotel’s outdoor swimming pool and spa in the amount of $160,500. P&S began working on the project “after obtaining all the necessary approvals from Brinkman and its architect, Worth Group Architects and Designers,” according to court documents. P&S completed its work within a few months, and the work passed final inspection.
When P&S submitted its request for final payment, Brinkman rejected it and informed P&S that it was in default of the subcontract. Brinkman cited several defects in the work, including workmanship issues over the coping and handrails. However, a short time later, Brinkman raised a more significant issue: The pool had some leaks. Brinkman asserted that the leaks were P&S’s responsibility because it did not design and install a leak collection system that had been identified in a geotechnical report incorporated into the subcontract.
Brinkman ultimately removed and replaced the entirety of the swimming pool and concrete pool deck at a cost of approximately $647,000. Then, along with its insurer, Ironshore Specialty Insurance Co., Brinkman sued P&S. A few months after the lawsuit was filed, Ironshore paid Brinkman approximately $540,000 and released all claims against Brinkman relating to the pool project. This gave Ironshore the right (as Brinkman’s subrogee) to step into Brinkman’s shoes and attempt to recover the $540,000 from P&S.
After a six-day trial, the jury concluded that although P&S had breached its subcontract with Brinkman, Brinkman had also failed to substantially perform its subcontract obligations. Specifically, the jury found that Brinkman and P&S were both negligent, but that P&S was only 15% at fault for Brinkman’s damages and Brinkman was 85% at fault. Because Brinkman was predominantly to blame for its damages, the jury concluded that Ironshore was not entitled to any damages on its claims. Ironshore appealed to the Colorado Court of Appeals.
The ruling
The appellate court first noted that in reviewing a jury verdict, an appellate court was to determine whether the evidence, viewed as a whole and in the light most favorable to the prevailing party, was sufficient to support the verdict. In giving deference to the jury’s assessment, the court stated that it would not “disturb a jury’s verdict if there is competent evidence in the record to support it, even if reasonable people could reach a different conclusion based on the same facts,” per court documents.
The geotechnical report at issue recommended that the pool include the leak collection system because it would “reduce the potential for leak-induced post-construction heave” arising from the site’s expansive subsoils. While the report was incorporated by reference into the subcontract, the subcontract did not explicitly state that “the pool must be equipped with the recommended system.” Moreover, the subcontract only included as an exhibit the cover page of the report, and noted that the “(f)ull report (was) available in Sharefile.” In fact, there was evidence that Brinkman never provided P&S with anything more than the first page of the report until after the pool design had been completed and approved by Brinkman.
Ironshore’s position was that P&S breached the subcontract by failing to design and install the recommended leak collection system, or to at least confirm with “Brinkman whether it was expecting the pool to have such a system.” Ironshore argued that this failure “led to the build-up of leaking pool water in the expansive subsoils, which, in turn, caused the pool and the surrounding concrete deck to shift,” per court documents.
P&S argued that the leak collection system was not within its scope of work, pointing to evidence that the leak collection system was not required under the bid request that it had received from Brinkman, its proposal to Brinkman, or the design drawings developed by P&S’s engineer that the parties had negotiated and agreed upon. P&S also highlighted that both Brinkman and Worth, the architect, signed off on the design.
The court also cited expert testimony offered during the trial. One expert testified that a leak collection system is “specialized” and that one would have expected Brinkman’s bid to include that system as a separate item. The court was influenced by the fact that Brinkman and Worth approved the final design documents and that the jury could find that those design documents defined P&S’s scope of work.
The appellate court also cited an expert opinion that “Brinkman specifically failed to exercise reasonable care in reviewing and approving” P&S’s drawings. Brinkman was aware that the leak collection system was identified in the geotechnical report but never commissioned anybody to do the work or assigned that work to a contractor. The court specifically noted the following expert testimony:
I mean, if (Brinkman) had expected that Pool & Spa was going to do that work, then when Pool & Spa submitted those shop drawings of the work they were going to do, and there was no leak collection system there, then that would have been when Brinkman (was) supposed to say, hey, you guys, you’re supposed to do this leak collection system. Go get that on these drawings before we approve them.
Viewing all the evidence in a light most favorable to P&S, the court concluded that a reasonable jury could conclude (as the jury did) that the leak collection system was outside P&S’s scope of work and not its responsibility. As a result, the court noted that Brinkman was not entitled to withhold payment of the final contract balance, which also supported the jury’s findings that Brinkman had breached the subcontract.
The takeaways
This case highlights an issue that should have been simple: What did the parties really intend when they signed the subcontract? Based on all the evidence, it seems clear that neither party thought the leak collection system was part of P&S’s scope. Brinkman did not contemplate the need for the leak collection system when it bid out the pool contract and ultimately hired P&S. Additionally, there was evidence that P&S had no experience whatsoever with these systems. From the authors’ perspective, there appeared to be a “meeting of the minds” between Brinkman and P&S that the leak system was not part of P&S’s scope.
We found the court’s discussion of Brinkman’s responsibilities quite interesting. There was expert opinion that Brinkman was the party that should have known the contents of the geotechnical report and taken appropriate action. Brinkman also had an obligation to review P&S’s design drawings and identify significant work that was missing. Because the leak collection system was obviously not on Brinkman’s “radar screen,” it is likely that Brinkman signed off on the design because it thought the design was sufficient. Fortunately for Brinkman, Ironshore paid for much of the repair costs and released its claims against Brinkman. Ironshore was therefore the party that was negatively impacted by Brinkman’s failures.
Michael C. Loulakis is the president and CEO of Capital Project Strategies LLC in Reston, Virginia. Ashley P. Cullinan is an associate with Smith Currie Oles LLP in Tysons, Virginia.
This article first appeared in the September/October 2025 issue of Civil Engineering as “Does a Design-Builder’s Scope of Work Include Recommendations in a Geotechnical Report?”
