2021 Colorado Code
Title 8 - Labor and Industry
Article 41 - Coverage and Liability
Part 4 - Contractors and Lessees
§ 8-41-402. Repairs to Real Property - Exception for Liability of Occupant of Residential Real Property

1. Every person, company, or corporation owning any real property or improvements thereon and contracting out any work done on and to said property to any contractor, subcontractor, or person who hires or uses employees in the doing of such work shall be deemed to be an employer under the terms of articles 40 to 47 of this title. Every such contractor, subcontractor, or person, as well as such contractor's, subcontractor's, and person's employees, shall be deemed to be an employee, and such employer shall be liable as provided in said articles to pay compensation for injury or death resulting therefrom to said contractor, subcontractor, or person and said employees or employees' dependents and, before commencing said work, shall insure and keep insured all liability as provided in said articles. Such employer shall be entitled to recover the cost of such insurance from said contractor, subcontractor, or person and may withhold and deduct the same from the contract price or any royalties or other money due, owing, or to become due to said contractor, subcontractor, or person. Articles 40 to 47 of this title shall not apply to the owner or occupant, or both, of residential real property which meets the definition of a “qualified residence” under section 163 (h)(4)(A) of the federal “Internal Revenue Code of 1986”, as amended, who contracts out any work done to the property, unless the person performing the work is otherwise an employee of the owner or occupant, or both, of the property.
2. If said contractor, subcontractor, or person doing or undertaking to do any work for an owner of property, as provided in subsection (1) of this section, is also an employer in the doing of such work and, before commencing such work, insures and keeps insured all liability for compensation as provided in articles 40 to 47 of this title, neither said contractor, subcontractor, or person nor any employees or insurers thereof shall have any right of contribution or action of any kind, including actions under section 8-41-203, against the person, company, or corporation owning real property and improvements thereon which contracts out work done on said property, or against its employees, servants, or agents.
3. (Deleted by amendment,L. 91, p. 1295, § 9, effective July 1, 1991.)

History. Source: L. 90: Entire article R&RE, p. 483, § 1, effective July 1. L. 91: Entire section amended, p. 1295, § 9, effective July 1.

This section is similar to former § 8-48-102 as it existed prior to 1990.

Annotator's note. Since § 8-41-402 is similar to § 8-48-102 as it existed prior to the 1990 repeal and reenactment of the “Workers' Compensation Act of Colorado”, articles 40 to 47 of this title, relevant cases construing that provision have been included in the annotations to this section.

There is no reason that compensation coverage need be linked to common-law definitions of employment in order to be constitutional. Lancaster v. C.F. & I. Steel Corp., 190 Colo. 463 , 548 P.2d 914 (1976).

Section held to comport with constitutional provisions on due process, equal protection, and special legislation. Flick v. Indus. Comm'n, 78 Colo. 117 , 239 P. 1022 (1925); O'Quinn v. Walt Disney Prods., Inc., 177 Colo. 190 , 493 P.2d 344 (1972).

The industrial claim appeals panel's interpretation of subsection (1) does not violate equal protection requirements. The owners of other real property are not similarly situated with owners or occupants of qualified residential real property. The exemption is compatible with the normal expectations of property owners who contract with craftsmen and artisans for work on residential properties. Brown v. Muto, 943 P.2d 38 (Colo. App. 1996).

The 1991 amendment to subsection (1) did not violate equal protection by distinguishing between residential properties with encumbrances and those that are free from any encumbrances; the amendment did not draw such distinction. Colo. AFL-CIO v. Donlon, 914 P.2d 396 (Colo. App. 1995).

The intent of the workmen's compensation law was to create special categories of employees and employers to provide protection for employees and to compel employers to maintain insurance coverage. Lancaster v. C.F. & I. Steel Corp., 190 Colo. 463 , 548 P.2d 914 (1976).

Lack of ownership would, of course, preclude the applicability of this section. Lancaster v. C.F. & I. Steel Corp., 190 Colo. 463 , 548 P.2d 914 (1976).

This section confers an immunity on a real property owner in exchange for a duty which inheres to the benefit of a workman, so that, while a workman will be required to forego a negligence action against a real property owner, he will be assured that regardless of fault, the more solvent real property owner stands behind and secures the workmen's compensation liability of the workman's immediate employer. O'Quinn v. Walt Disney Prods., Inc., 177 Colo. 190 , 493 P.2d 344 (1972).

And this section was intended to cover a case where the landowners owned the real property and the improvements thereon, and contracted out work on and to the property to a contractor who hired at least four employees on this job, where the claimant was a regular employee. Stewart v. Indus. Comm'n, 163 Colo. 12 , 428 P.2d 367 (1967).

An entity is deemed a statutory employer only if the injured person was doing work while on the real property of the entity and to that real property. Krol v. CF&I Steel, 2013 COA 32 , 307 P.3d 1116.

Enhancement of real property's capital value is a relevant but not essential factor in determining whether an object is an improvement. The intention of the owner of the object located on the real property or the intention of the real property owner may be considered in determining whether the object constituted an improvement to real property within the meaning of subsection (1). Barron v. Kerr-McGee Rocky Mtn. Corp., 181 P.3d 348 (Colo. App. 2007).

The following three factors made the installation an improvement: (1) The owner intended the object to be an improvement; (2) the object enhanced the utility of the property; and (3) the object was permanently affixed to the property. Barron v. Kerr-McGee Rocky Mtn. Corp., 181 P.3d 348 (Colo. App. 2007).

To establish whether a workers' compensation award was the exclusive remedy available to a contract house cleaner who was injured while cleaning a leased condominium, case had to be remanded to determine whether the condominium was a “qualified residence”, and, if so, whether the house cleaner was “otherwise an employee” of the condominium owner. Thornbury v. Allen, 991 P.2d 335 (Colo. App. 1999).

House cleaner was “otherwise an employee” of condominium owner where owner qualified as a statutory employer under § 8-41-401(1)(a) . Thornbury v. Allen, 39 P.3d 1195 (Colo. App. 2001).

Legislative purpose of the 1963 amendment to this section, which added subsection (2), was to protect all landowners from all common-law liability if the landowner requires his contractor to carry approved workmen's compensation insurance. City of Colo. Springs v. Ellsworth, 187 Colo. 193 , 529 P.2d 646 (1974).

Government entity cannot be an employer under subsection (1). Univ. of Colo. v. Graham, 807 P.2d 1204 (Colo. App. 1990).

General assembly did not exempt municipal corporations from coverage under subsection (2). City of Colo. Springs v. Ellsworth, 187 Colo. 193 , 529 P.2d 646 (1974).

But cities protected if employee covered in primary employment. Cities that are landowners are among those protected from claims for either compensation or for negligence if the employee is covered by workmen's compensation in his primary employment. City of Colo. Springs v. Ellsworth, 187 Colo. 193 , 529 P.2d 646 (1974).

No competency test to be contractor. Subsection (2) requires no minimal competency test for designation as a “contractor, subcontractor, or other person”. Schwartz v. Tom Brown, Inc., 649 P.2d 733 (Colo. App. 1982).

Pleadings must allege that company “contracted out”. Although alleged to have been a co-owner of the land on which the accident occurred, if it does not appear from the pleadings that the company “contracted out” the work to the employer, it is not possible to bring the company within the terms of this section. Alexander v. Morrison-Knudsen Co., 166 Colo. 118 , 444 P.2d 397 (1968), cert. denied, 393 U.S. 1063, 89 S. Ct. 715, 21 L. Ed. 2d 706 (1969).

Where work not “contracted out”. Under the latter part of this section if the owner is contracting out a job, he protects himself against liability for anyone injured on the job by seeing that the contractor with whom he is dealing provides or carries a policy on all workmen on the job contracted for, but this part of the section does not apply where the work was not “contracted out” to claimant even though claimant is by business or trade a contractor and when doing contract work had his men insured at the time of the accident involved. Indus. Comm'n v. State Comp. Ins. Fund, 122 Colo. 128 , 220 P.2d 721 (1950).

Term “private home” in subsection (1) means a structure that is inhabited or capable of being inhabited, not substantially uncompleted structures. Betts v. Kempers, 745 P.2d 283 (Colo. App. 1987).

“Private home” under subsection (1) neither requires that structure be homeowner's primary residence, nor that homeowner be a citizen of or domiciled in locale of property, nor a minimum usage time. Homeowners were exempted from statutory employer status even though homeowners primarily resided in Mexico, were Mexican citizens, and used property less than six months during the year. English v. Indus. Claim Appeals Office, 764 P.2d 386 (Colo. App. 1988).

A residence may be a “qualified residence” entitling the owner or occupant to an exception from statutory employment status under subsection (1) even if the owner or occupant is not claiming an interest deduction under I.R.C. § 163(h) at the time of the injury or hearing on compensability. Organ v. Jorgensen, 888 P.2d 336 (Colo. App. 1994).

Definition of “qualified residence” under I.R.C. § 163(h) includes a second residence used by the taxpayer in accordance with related I.R.C. provisions. Thornbury v. Allen, 39 P.3d 1195 (Colo. App. 2001).

Respondent met his burden of proof that the barn on which claimant was injured was a “qualified residence”. The administrative law judge's determination is supported by testimony as to the planned use of the barn and the ultimate construction of a primary or secondary residence on the parcel. Brown v. Muto, 943 P.2d 38 (Colo. App. 1996).

The qualified residential property exemption applies to actual as well as statutory employment relationships. The exemption applies to actual as well as statutory employees of the owner or occupant of qualified residential real property unless the person is otherwise an employee of the owner or occupant. Brown v. Muto, 943 P.2d 38 (Colo. App. 1996).

The 1991 amendment to subsection (1) replaced the term “private home” with the phrase “owner or occupant, or both of residential real property which meets the definition of a ‘qualified residence'” under the Internal Revenue Code. Accordingly, home owners' residence under construction at the time of claimant's injury constituted a “qualified residence” under the Internal Revenue Code and the owners were exempt from statutory liability under the Workers' Compensation Act, regardless of the fact that they did not actually claim any interest on their tax return. Organ v. Jorgensen, 888 P.2d 336 (Colo. App. 1994).

Joint venturers may be held liable for claims arising under the workmen's compensation statutes where a joint activity results in injury. Breckenridge Co. v. Swales Mgt. Corp., 185 Colo. 160 , 522 P.2d 737 (1974).

Where the record indicates that the parties anticipated only the regular presence of the claimant and one assistant for the duration of the project, and assuming that one could include the respondent and a nine-year-old boy, the fact that on one day four people actually worked does not bring the employment within this section. Schultz v. Indus. Comm'n, 34 Colo. App. 122, 523 P.2d 164 (1974).

Machinery operator rented to contractor is employee of company. Where a company contracts for work to be done on its premises and rents machinery to a contractor together with its operator, the operator is the employee of the company and not of the contractor. Great W. Sugar Co. v. Erbes, 148 Colo. 566 , 367 P.2d 329 (1961).

But where a hotel company hired a plasterer to do remodeling and there was no specific time mentioned as to how long he would be hired nor any specific amount of plastering that was to be done and the company furnished all the materials to be used on the job, the plasterer was an employee of the hotel company even though he was an insured employer himself. Indus. Comm'n v. State Comp. Ins. Fund, 122 Colo. 128 , 220 P.2d 721 (1950).

Owner's liability to contractor working on job. The provision of this section that the building owner “shall keep insured his liability” means a liability not only to the employees of a contractor, but also to the contractor himself if working on the job. Indus. Comm'n v. State Comp. Ins. Fund, 122 Colo. 128 , 220 P.2d 721 (1950).

Owner immune if contractor insured. An owner of real property or improvements thereon who contracts out work to be performed thereon is immune from suit by the injured employees of the contractor, so long as the contractor is properly insured under this act. Wagner v. Coors Energy Co., 685 P.2d 1380 (Colo. App. 1984).

The landowner may protect himself in such situations by requiring the contractor to secure and maintain proper insurance coverage against such accidents as the one in the case at bar, or secure insurance coverage himself and deduct the premiums from the contract price. Stewart v. Indus. Comm'n, 163 Colo. 12 , 428 P.2d 367 (1967).

But if the contractor or subcontractor is unable to meet his responsibilities under the act, then those responsibilities devolve upon the owner. Alexander v. Morrison-Knudsen Co., 166 Colo. 118 , 444, P.2d 397 (1968), cert. denied, 393 U.S. 1063, 89 S. Ct. 715, 21 L. Ed. 2d 706 (1969); Nicks v. Electron Corp., 29 Colo. 114 , 478 P.2d 683 (1970).

However, where employer insures his liability to employees it is held that insurer's liability does not extend to employees of subcontractor. Where an employer of men lets out part of his work to contractors and insured his liability to employees, the insurer's liability extends only to employees of the employer -- its policy so providing -- and not to those of the contractors. United States Fid. & Guar. Co. v. Turkey Creek Stone, Clay & Gypsum Co., 75 Colo. 611 , 227 P. 569 (1924).

Under previous section, landowner was not immune from common-law liability where contractor was insured. Great W. Sugar Co. v. Erbes, 148 Colo. 566 , 367 P.2d 329 (1961).

But now, under this section, owner is free of tort liability if contractor is insured. If the contractor undertaking to do such work “shall before commencing such work insure and keep insured his liability for compensation”, the owner of the property shall be free of responsibility to the injured workman, including tort liability. Alexander v. Morrison-Knudsen Co., 166 Colo. 118 , 444 P.2d 397 (1968), cert. denied, 393 U.S. 1063, 89 S. Ct. 715, 21 L. Ed. 2d 706 (1969); Nicks v. Electron Corp., 29 Colo. App. 114, 478 P.2d 683 (1970); Varela v. Colo. Milling & Elevator Co., 31 Colo. App. 49, 499 P.2d 1206 (1972).

In order to be an employer under this statute, the owner must have contracted with a contractor, subcontractor, or person who, in turn, must hire or use employee in the doing of the contracted work. Moe v. Indus. Comm'n, 734 P.2d 661 (Colo. App. 1986); English v. Indus. Claim Appeals Office, 764 P.2d 386 (Colo. App. 1988).

Architects were immune under subsection (2) where contract provided that architects were “representative(s) of the Owner”, creating an agency relationship. Halter v. Waco Scaffolding & Equip. Co., 797 P.2d 790 (Colo. App. 1990).

Calculation of $2,000 threshold limit in subsection (3). The $2,000 threshold limit of subsection (3) is to be calculated on all property owned by the owner, irrespective of its location, in the pro rata share of ownership interest. Porta-Pacific v. Smithers, 781 P.2d 147 (Colo. App. 1989).

Applied in Lackey v. Indus. Comm'n, 80 Colo. 112 , 249 P. 662 (1926); Index Mines Corp. v. Indus. Comm'n, 82 Colo. 272 , 259 P. 1036 (1927); Ontario Mining Co. v. Indus. Comm'n, 86 Colo. 206 , 280 P. 483 (1929); Alson Inv. Co. v. Youngquist, 107 Colo. 1 , 108 P.2d 228 (1940); State Comp. Ins. Fund v. Batis, 117 Colo. 1 , 183 P.2d 891 (1947).