Among the new proposed legislation making its way through the Colorado legislature this year is Colorado Senate Bill No. 38, “Concerning Measures To Protect Consumers Who Engage A Roofing Contractor To Perform Roofing Services On Residential Property.” The bill is sponsored by Democratic Senator Lois Tochtrop and Republican House Representative Glenn Vaad.

In its present form, the bill requires residential roofing contractors to sign a written contract with customers which include the following details:

  • The costs of the services;
  • The roofing contractor’s contact information;
  • Identification of the roofing contractor’s surety and liability coverage insurer and their contact information, if applicable;
  • The roofing contractor’s policy regarding cancellation of the contract and refund of any deposit, including a rescission clause allowing the client to rescind the contract and obtain a full refund of any deposit within 72 hours after entering the contract; and
  • A written statement that if the client plans to use the proceeds of a property or casualty insurance policy to pay for the roofing work, the roofing contractor cannot pay, waive, rebate, or promise to pay, waive, or rebate all or part of any deductible applicable to the claim for payment for roofing work on the covered residential property.

See Bill No. 38, Bill Summary.

The Bill attempts to provide consumers additional protections against unscrupulous roofing companies. Certain requirements in the bill are tied to the homeowner’s property insurer—and that insurer’s decision regarding coverage or denial of the homeowner’s roof damage claim. Specifically,

A person who enters into a contract with a roofing contractor to perform roofing work on his or her residential property and who submits a claim to his or her property and casualty insurer for payment for the roofing work may rescind the contract for the roofing work if the insurer denies the claim in whole or in part, as long as the person notifies the roofing contractor within 72 hours after the claim is denied. The roofing contractor must refund any moneys paid by the customer within 10 days after receipt of the cancellation notice.

The Bill also prohibits roofing companies from making any offer or promise to cover or reimburse the homeowner’s insurance deductible.

When residential roofing work will be paid from the proceeds of a property and casualty insurance policy covering the residential property, the roofing contractor is prohibited from paying, waiving, rebating, or offering or promising to pay, waive, or rebate all or part of any deductible that applies to the claim.

The written contract requirements and the right to rescind portions of the Bill appear to achieve the objective of consumer protection (albeit logistical nightmares for even the most honest and professional roofing companies). However, the Bill is problematic, and in fact harmful to consumers when it comes to the consequences for roofing companies that violate the prohibition on offers or promises to pay/waive/rebate the homeowner’s deductible. The Bill states,

6-22-105. Waiver of insurance deductible prohibited.
(1) A ROOFING CONTRACTOR THAT PERFORMS ROOFING WORK, THE PAYMENT FOR WHICH WILL BE MADE FROM THE PROCEEDS OF A PROPERTY AND CASUALTY INSURANCE POLICY ISSUED PURSUANT TO PART 1 OF ARTICLE 4 OF TITLE 10, C.R.S., SHALL NOT ADVERTISE OR PROMISE TO PAY, WAIVE, OR REBATE ALL OR PART OF ANY INSURANCE DEDUCTIBLE APPLICABLE TO THE CLAIM FOR PAYMENT FOR ROOFING WORK ON THE COVERED RESIDENTIAL PROPERTY.
(2) IF A ROOFING CONTRACTOR VIOLATES SUBSECTION (1) OF THIS SECTION:
(a) THE INSURER TO WHOM THE PROPERTY OWNER SUBMITTED THE CLAIM FOR PAYMENT FOR THE ROOFING WORK IS NOT OBLIGATED TO CONSIDER THE ESTIMATE OF COSTS FOR THE ROOFING WORK PREPARED BY THE ROOFING CONTRACTOR; AND
(b) THE PROPERTY OWNER WHOSE RESIDENTIAL PROPERTY IS INSURED UNDER THE PROPERTY AND CASUALTY INSURANCE POLICY OR THE INSURER THAT ISSUED THE POLICY MAY BRING AN ACTION AGAINST THE ROOFING CONTRACTOR IN A COURT OF COMPETENT JURISDICTION TO RECOVER DAMAGES SUSTAINED BY THE PROPERTY OWNER OR INSURER AS A CONSEQUENCE OF THE VIOLATION.

Subsection (2) (a) above is harmful to consumers for several reasons: (1) it directly affects the protections afforded to consumers under C.R.S. 10-3-1115 and -1116, and bad faith common law, by releasing insurers from their duty to perform a timely and thorough investigation of the loss, which often includes a reasonable review and consideration of all damage estimates put forth by the insured homeowner; and (2) it forces the insured homeowner to suffer the consequences of the unscrupulous roofer’s actions.

Moreover, subsection (2) (b) above places a huge burden on the homeowner to prosecute not only their roof damages claim against their insurer, but in addition take on an second action in court to pursue damages against a roofing company that caused the non-payment of their roof damage claim.

Imagine the following likely scenario:

Grandma suffers terrible hail damage to her roof. Grandma submits a claim to her insurer for the roof damage. Insurer responds that the roof may or may not be covered (the adjuster saw some wear and tear on the roof) and Grandma must submit an estimate of hail damage to the insurer so that insurer can investigate and adjust the claim.

Roofer comes to Grandma’s door the next day soliciting the roof repair work. Grandma’s roof is leaking and more hail and rain is predicted in the coming week. Grandma signs a contract with the roofer, in part because she desperately needs a new roof, and in part because the roofer offers to rebate her insurance deductible via discounts in the roofer’s bill.

Grandma submits the roofer’s scope of work and invoice to her insurer requesting immediate coverage for the damage and an ACV payment so Grandma can get the roofer started working immediately. The insurer learns from Grandma that the roofer offered to reimburse Grandma for her insurance deductible, thus the insurer (based on the above Bill) refuses to even consider the roofer’s estimate.

Now, even though Grandma can rescind her contract with the roofer, Grandma’s roof leak is worse, rain and hail continue to leak causing additional damage to her interior, and she now has no insurance coverage (and not even the prospect of receiving a benefits check anytime soon), and no roofer signed up to start the work. Worst of all, she now has to take on the burden and cost of hiring a public adjuster or a lawyer to pursue a claim against her insurance company, as well as file a separate action against the roofer for his violation of the above Bill provisions. Grandma has neither the money nor the resources to find the proper lawyer to pursue these two separate actions.

As the Bill is worded now, it places far too heavy a burden on the homeowner. The homeowner is left in a position where she may have to fight both her insurer and the roofer, and still have an unrepaired roof. It would make more sense to place the burden of going after the unscrupulous roofer entirely on the insurer (i.e., the one party in this equation with sufficient money and resources).

Next week’s post will further discuss the Bill and additional possible unintended consequences as to homeowners, public adjusters, and professional roofers whose proper scope of work may not match up with the insurer’s goals of saving money by reducing the overall scope of work and reducing the insurer’s payout on roof claims.