Legislature(2003 - 2004)
03/28/2003 03:18 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 151-DWELLING DESIGN/CONSTRUCTION CLAIMS Number 0050 CHAIR ANDERSON announced that the first order of business would be HOUSE BILL NO. 151, "An Act relating to claims and court actions for defects in the design, construction, and remodeling of certain dwellings; limiting when certain court actions may be brought; and amending Rules 79 and 82, Alaska Rules of Civil Procedure." Number 0067 REPRESENTATIVE KEVIN MEYER, Alaska State Legislature, sponsor of HB 151, testified that this legislation gives homeowners and construction professionals a process to work out building defects without going through litigation. This action is called "a notice and opportunity to repair process." He said this is a national movement; 20 other states are considering similar legislation; at least six states have passed it. This bill requires homeowners to provide a written notice at least 90 days prior to going into litigation so that the homebuilder has the opportunity to fix the defects. In Alaska, contractors and homebuilders are required to have liability insurance. As the result of some [court] judgments, liability insurance is harder to get and is very expensive, he testified, and unfortunately, that expense gets passed onto the homebuyer. Representative Meyer said he agreed to carry HB 151 because it is a consumer protection measure. The bill allows for timely repairs within 90 days. Otherwise, if people have to go through the courts, resolution [of the problem] can drag on for years. He said there is a lot of motivation by the homebuilders to get defects fixed before the dispute goes to court. Number 0252 REPRESENTATIVE GATTO moved to adopt the proposed committee substitute (CS) for HB 151, Version 23-LS0499\I, Bannister, 3/27/03, as the working document. There being no objection, Version I was before the committee. REPRESENTATIVE MEYER explained the two minor changes in the CS. The language on page 2, line 1, clarifies that the bill deals with a construction defect in a substantially completed dwelling or a remodeling job. He said the original language was too vague and needed to reflect the wording on page 2, lines 6-9, paragraph (b)(2). The second change is on page 6, lines 2-18, and requires that statutory language be added to the contract. This change gives the consumer and the homebuilder information on the statute that governs claims brought under this process. Number 0412 REPRESENTATIVE ROKEBERG asked if the "notice of claim" is preparatory to a formal court action or is it separate. Number 0472 JOHN BITNEY, Lobbyist for the Alaska State Homebuilders Association, replied that HB 151 requires the homeowner to serve a notice on or send a certified letter to the builder. Once the defect is discovered, the homeowner sends the notice; this step must be done before a homeowner can file a claim in court. The process is found on page 2, lines 12-24, "Notice of claim." Throughout the whole process, if discussions break down, the homeowner always has the option of going to court, he said. Under HB 151, the builder has the opportunity to get the problem fixed before litigation gets started. Currently, the homeowner is reluctant to have any work at all done on the defect because it's evidence [in a potential lawsuit]. If the defect is unhealthy, for example, causing a mold problem in the person's home, it's important to get the problem fixed [right away], he added. REPRESENTATIVE MEYER said that when [a problem arises with] a new house, the homeowner calls the homebuilder, who will come over and fix it. There may be times when the homebuilder gets busy; then the homeowner needs to put the request in writing. Then the clock starts, and the homebuilder has 90 days to fix the problem. If it's not repaired, it can be litigated. Number 0627 REPRESENTATIVE ROKEBERG asked when the one-year clock begins and if it includes the 90 days. MR. BITNEY replied that according to the language on page 1, line 13, the claimant must notify the builder within one year of discovering the defect. That year must fall within the 10 years after the completion of the construction or remodeling. The law will still have the same 10-year statute of limitation. REPRESENTATIVE ROKEBERG confirmed that the consumer can bring a complaint within 10 years. For purposes of this statute, he only has a year to bring the complaint to the builder. MR. BITNEY reiterated that the complaint must be reported within a year after discovery, within the 10-year timeframe. He clarified that if the defect is discovered after 9 years and 2 months, the consumer has 10 months to notify the builder of the problem. REPRESENTATIVE GATTO asked how an unscrupulous contractor could exploit HB 151. Number 0772 ALAN WILSON, Legislative Group Co-Chair, Alaska State Homebuilders Association, replied that his group does not believe this [bill gives homebuilders an unfair advantage]. He said that nothing in HB 151 prevents a homeowner from bringing in an expert to do further investigative work on a problem. If the homeowner asks the contractor to repair an item, and more problems are discovered, then the homeowner can still request the contractor to fix additional things; the homeowner can start the process again and again. He testified that a majority of homebuilders are trying to deliver a quality product and want the opportunity to fix the problem rather than go to court. REPRESENTATIVE GUTTENBERG noted that this bill narrows the options of buyers and builders who are abusers. He asked if this bill establishes a lemon law for bad homes. MR. WILSON replied [HB 151] does not go that far. REPRESENTATIVE ROKEBERG asked Mr. Wilson to describe the insurance problems in his industry. He noted the example of Chuck Spinelli, an Anchorage contractor, whose insurance increased from $50,000 to $400,000 a year. Number 0933 MR. WILSON said the bigger issue for the homebuilding industry is insurance - not so much the cost, as the availability. Some builders have experienced a 600 percent increase in premiums, he testified. A few years ago, a business could look elsewhere for insurance and find another company writing the same coverage for less money. Today, he said, there are only two insurers in the state writing general liability policies for the homebuilder industry. The builder might get a policy at a higher cost but with reduced coverage. He said that insurance companies are not covering mold problems; they're not even willing to write product liability any longer. He said that the insurance industry wants to see action by homebuilders that will reduce these lawsuits with high awards. He said that HB 151 is a step in that direction. Number 1004 REPRESENTATIVE ROKEBERG asked whether this bill is a mini tort reform or an alternative dispute resolution that benefits the consumer. He noted that HB 151 prevents the consumer from getting attorney's fees in court if the consumer rejects the homebuilder's offer or doesn't allow the homebuilder to repair the defect. MR. WILSON replied that HB 151 is a form of alternative dispute resolution. He said that experience shows that when these cases go to court, the repairs happen years later; the damages are often greater than they were on day one. Often, there's not enough money left after the court costs are paid to get the problem fixed. That's unfair to any consumer, he said. This bill is really consumer protection legislation, he added. Number 1071 REPRESENTATIVE ROKEBERG asked how HB 151 will help homebuilders in their dealings with consumers. MR. WILSON replied that HB 151 forces clients and builders to communicate, which should resolve a lot of issues. He said it puts consumers in a more advantageous position when they're dealing with builders. The bill allows consumers to avoid going to court, which can be a costly and lengthy process. REPRESENTATIVE GATTO mentioned that 9 of the 12 letters from contractors in his bill packet are identical. He said this looks like a campaign to get legislators to support this bill. MR. WILSON acknowledged that his association sent out sample letters to its members. CHAIR ANDERSON added that the letters show that these companies endorse the bill. Number 1177 REPRESENTATIVE DAHLSTROM asked if HB 151 covers [building] code violations. MR. WILSON replied that code violations are typically caught during the construction phase, final inspections, or the certificate of occupancy phase. If a problem was missed, the homeowner could address that as a defect. REPRESENTATIVE GATTO said that previously Rule 82, [Alaska Rules of Civil Procedure,] allowed the person prevailing in a lawsuit to collect 20 percent of the settlement [for attorney's fees]. He asked if Rule 82 is modified in HB 151. Number 1236 TERRY BANNISTER, Attorney, Legislative Legal Counsel, Legislative Legal and Research Services, Legislative Affairs Agency, drafter of the bill, confirmed that the title of HB 151 amends Rule 82. Language on page 7, Section 4, starting on line 29, indicates that AS 09.45.889(b) also changes Rule 82 "by allowing the court to deny costs to a claimant in the situation described in AS 09.45.889(b), even if the claimant is the prevailing party." It changes the rule to that extent, she said. REPRESENTATIVE GATTO asked if the bill intends to deny the prevailing party the usual right to have some of his expenses paid by the losing party. MS. BANNISTER explained that she can't speak to the intent of the bill. Number 1308 REPRESENTATIVE GUTTENBERG asked about the language on page 2, line 21, referring to rules of evidence and discovery. He noted that the legislature is trying to encourage a resolution between a contractor and a builder. MS. BANNISTER said this language describes what a claimant must produce in order to show [the builder] what [the defect is]. REPRESENTATIVE GUTTENBERG asked if the court rules of evidence are a higher standard than just saying, "Here's a picture of what I found." MS. BANNISTER said she doesn't know if it's a higher standard; it's an ascertainable standard. If the rules of evidence allow the information [to be used in court], the person has to [follow that procedure]. REPRESENTATIVE ROKEBERG asked if this is a mini-discovery process. Number 1392 MS. BANNISTER agreed that it's a discovery process and the bill uses as the criteria the [Alaska] Rules of Evidence. It's about what [information] can be produced. REPRESENTATIVE GUTTENBERG said he wants this to be an easy process so two people can say, "The faucet is broken." He said he wants this [conversation between consumer and builder] to go smoothly; he doesn't want to have somebody come back later and say, "You didn't follow the rules of evidence." REPRESENTATIVE ROKEBERG said the sponsor may want to look at this issue of using court rules of evidence. He asked whether there's a simpler method of [describing the defect]. He said he prefers that before the claimant hires an attorney and follows the court rules, the person will call up the builder and say, "Hey, we've got a problem." And the builder will say, "Okay, I'll come out and fix it." He suggested this procedure might be self-correcting. He said he doesn't want somebody to have to hire an attorney to get the faucet fixed. Number 1532 REPRESENTATIVE ROKEBERG moved to report CSHB 151, Version 23- LS0499\I, Bannister, 3/27/03, out of committee with individual recommendations and the committee fiscal notes that will be provided. There being no objection, CSHB 151(L&C) was reported from the House Labor and Commerce Standing Committee.
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