Earlier this year, insurance companies (and the Colorado legislators beholden to them) passed Senate Bill 38, now codified at C.R.S. § 6-22-101 et seq. Despite our best efforts to amend or defeat Senate Bill 38 (see my earlier posts on 2/22/12; 3/1/12; 3/7/12; 4/13/12; 4/19/12; and 5/2/12), insurance company lobbyists were able to strong-arm the Bill through the house and senate, and Governor Hickenlooper signed the Bill into law.
Restoration Contractors: You are likely subject to this new law and it imposes significant burdens and constraints you must be aware of.
As I discussed in my April 13, 2012 post, General Contractors and Commercial Roofers Should Be Aware Colorado Senate Bill 38 Could Be Expanded To Include Them, Not Just Residential Roofers, the Bill was carefully crafted to appear to only apply to “residential roofers.” The insurance companies drafted the legislation this way so that it wouldn’t raise concern—or any fight—from general contractors or restoration contractors. The tactic worked. Few contractors knew about the Bill, and even fewer read the definition of “roofer” within the Bill.
Fellow attorney, Dan Glasser, who specializes in construction law, wrote a recent article providing contractors a list of new requirements and potential pitfalls contained in the law, C.R.S. § 6-22-101.
In his article, Restoration Construction: Navigating the New Rules in Colorado, Dan Glasser writes,
On June 6, 2012, Colorado fundamentally altered the rules that apply to roofers and restoration contractors handling losses on residential property. Governor Hickenlooper signed into law a bill that, at first blush, appears aimed at unscrupulous “storm chasers.” The impact of the new statute, however, reaches far beyond its presumptive target. And the law is rife with unintended consequences for everyone within its reach.
The new rules arguably affect virtually every restoration contractor doing business in Colorado, regardless of whether that contractor’s primary business involves roof repairs. According to the statute, the term “Roofing Contractor” includes any “firm, partnership, corporation, association, business trust, limited liability company, or other legal entity that performs or offers to perform roofing work in [Colorado] on residential property for compensation.” Contractors in the restoration industry invariably assume the role of general contractor, and in doing so, they take on responsibility for all of their subcontracted trades. As a result, every residential restoration project that involves roofing work – no matter how minor – likely requires compliance with the statute. That includes fire losses in which the roof is damaged. And it includes water losses that are caused by high wind and roof damage (i.e., tornado, microburst, etc.). Indeed, the list of property losses that necessitate some degree of roofing work is virtually endless.
Moreover, the law introduces a number of new requirements that contractors will likely find difficult to follow. And non-compliance carries draconian consequences.
In an effort to help contractors navigate this new legislation, this article highlights four things that contractors must know: First, “industry standard” work authorizations are useless for purposes of residential roof work in Colorado and they need to be revised to comport with the new law. Second, contractors who fail to track every item of job costs (i.e., as if each project was a rate and material job) run significant collection risks. Third, no contractor can offer to waive or pay homeowner deductibles. Fourth, contractors cannot serve as public adjusters, and they need to be careful about negotiating a scope of work with the carrier because doing so may amount to a prohibited act of claim adjusting.
See Dan Glasser’s article for tips on how restoration contractors may want to re-write their contracts.
C.R.S. § 6-22-101, imposes burdens on restoration contractors and puts them at risk for non-collection of payment of work completed. This is what happens when we allow insurance companies to write legislation and we fail to bring all affected groups — contractors, roofers, public adjusters, policyholders, and consumers — to the table. I encourage all of the above groups to come together this October to amend or repeal this law and propose new legislation that actually helps consumers and doesn’t hurt business.
