DENVER – Construction defects bills are back.
Senate Bill 45, which would change statute regarding the allocation of defense costs amongst contractors, is sponsored by leadership from both parties and was the first up in what Colorado Senate President Kevin Grantham, R-Canon City, has described as a series of bills on this issue.
It passed out of the Senate Business, Labor and Technology Committee Wednesday, 6-1.
Grantham said the reform is needed because of increasing insurance costs for contractors as a result of lawsuits based on faulty construction.
S.B. 45 would allow courts to evaluate the level of culpability of contractors and decide their portion of litigation costs but would not remove a company’s duty to defend.
The duty to defend clause was a concern to witnesses who testified against the bill.
Part of S.B. 45 eliminates a requirement that insurance companies provide attorneys from when a defect claim is made until litigation ends.
That means insured parties would have to pay for lawyers out of pocket during the buildup to the lawsuit, when the extent and severity of the defect is being determined, said David Luedars, a Denver-area businessman.
The bill also fails to address the underlying problem, which is that the number of cases brought against contractors is driving up the cost of insurance and construction, Luedars said. “Until we deal with the litigation piece, it’s just going to be a continuing problem.”
S.B. 45 is a “small but surgical” part of construction defects reform aimed at providing incentives to build affordable housing throughout the state, Grantham said.
Scott Deering, a subcontractor who owns a company in Wheat Ridge, said he believes the bill falls short of providing incentives for condo construction because of the failure to address the underlying issues.
“I cannot see how this bill will help my company or entice my company to work on condos,” he said.
Committee members noted the shortcomings.
“This is not exactly the bill I want to see either, but I do think it’s an important issue,” said Sen. Jim Smallwood, R-Parker. “I know tremendous work has gone into it in a bipartisan, bicameral fashion, so I would like to see the amendments when they come out, whenever that happens. But I do think it’s too important to lay it over, so I’m an aye.”
Bills addressing construction defects have brought annual debate, while the lack of affordable housing across the state has persisted.
Arguments for reform are based on the pressure on small contractors to carry large insurance policies to offset potential damages and litigation costs. Those opposed to reform argue that it opens the door for contractors to get away with shoddy work on homes. Opponents believe it could leave homeowners with less ability to pursue compensation for defects in a major investment.
The lack of statewide reform has led some communities to take up the issue. In July, Durango joined the list by passing an ordinance that requires homeowners associations to have a majority vote for any construction defects litigation.
A study published by the Regional Housing Alliance of La Plata County in 2015 estimates that at least 560 new dwellings must be constructed yearly through 2035 to keep up with growth. In addition to S.B. 45, three other bills have been introduced dealing with this issue:
S.B. 155 would clean up the wording of “construction defect” in current statute. S.B. 156 would mirror Durango’s ordinance in that a majority vote would be required for a homeowners association to make a defects claim. It also would require mediation or arbitration – something that was dropped from Durango’s ordinance. H.B 1169 would mandate that “a construction professional has the right to receive notice from a prospective claimant concerning an alleged construction defect; to inspect the property; and then to elect to either repair the defect or tender an offer of settlement before the claimant can file a lawsuit seeking damages.”
Lperkins@durnagoherald.com
S.B. 155 would clean up the wording of “construction defect” in current statute. S.B. 156 would mirror Durango’s ordinance in that a majority vote would be required for a homeowners association to make a defects claim. It also would require mediation or arbitration – something that was dropped from Durango’s ordinance. H.B 1169 would mandate that “a construction professional has the right to receive notice from a prospective claimant concerning an alleged construction defect; to inspect the property; and then to elect to either repair the defect or tender an offer of settlement before the claimant can file a lawsuit seeking damages.”
