HB1809

SECTION 1. The legislature finds that, after significant weather events, contractors often swarm into neighborhoods with promises to provide homeowners new roofs "at no cost to them", convincing homeowners to sign binding contracts to replace the entire roof. In cases where there has been substantial damage requiring a complete roof replacement, this not a problem; however, in many instances a subsequent inspection by a qualified adjuster reveals that the roof sustained minimal or no damage, and the insurer must limit the claim to the cost to repair the actual damage, if any. In those situations, homeowners find themselves responsible for the cost with no recourse.

The legislature further finds that following catastrophic storms, when contractors may be in short supply, unscrupulous individuals may take advantage of such circumstances and represent themselves as insurance claims experts who can obtain insurance proceeds to fix a house, even when the individuals are not licensed independent adjusters. The legislature believes that stronger consumer protection measures must be taken to protect Hawaii residents from this kind of unscrupulous predatory behavior.

Accordingly, the purpose of this Act is to protect homeowners from unsolicited offers to repair their homes predicated on the receipt of insurance proceeds by:

(1) Prohibiting residential contractors from offering to pay, in any monetary form, a homeowners insurance deductible as an incentive to encourage the homeowner to hire the contractor; and

(2) Allowing an insured to rescind a contract to repair or replace roof systems or other exterior work within five business days of receiving notice from a homeowners insurer that all or part of the claim or contract is not a covered loss under a homeowners insurance policy.

SECTION 2. Chapter 481B, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§481B- Residential contractors; roof systems; homeowners insurance policies; deductibles; rescission. (a) A residential contractor shall not advertise or promise to pay or rebate any portion, including the entire portion of any homeowners insurance deductible as an inducement to the sale of goods or services. As used in this subsection, a promise to pay or rebate includes granting any allowance against the fees to be charged; paying to the insured any form of compensation; or providing to the insured any gift, prize, bonus, coupon, credit, referral fee, or any other item of monetary value for any reason, including but not limited to permitting the residential contractor to display a sign or any other type of advertisement at the insured's premises.

(b) A person who has entered into a written contract with a residential contractor to provide goods and services to be paid from the proceeds of a homeowners insurance policy may rescind the contract prior to midnight on the fifth business day after the insured has been notified by the homeowners insurer that all or any part of the claim or contract is not a covered loss under the homeowners insurance policy. Rescission is evidenced by the insured giving written notice of rescission to the residential contractor at the address stated in the contract; provided that if notice of rescission is given by mail, the notice shall be effective upon deposit in the United States mail, postage prepaid and properly addressed to the residential contractor. Notice of rescission need not take any particular form and is sufficient if the notice indicates, by any form of written expression, the intention of the insured not to be bound by the contract.

(c) Within ten days of the rescission of a contract pursuant to subsection (b), the residential contractor shall tender to the insured of the residential real estate any payments, partial payments, or deposits made and any note or any other evidence of indebtedness; provided that if the residential contractor has performed any emergency services, which have been acknowledged by the insured in writing as necessary to prevent damage to the residential real estate premises, the residential contractor shall be entitled to the reasonable value of such services. Any provision in a contract for goods or services to be paid from the proceeds of a homeowners insurance policy that requires the payment of any fee for anything except emergency services shall not be enforceable against an insured who has rescinded a contract pursuant to subsection (b).

(d) A contract entered into pursuant to subsection (b) shall contain the following notices, in a type size no smaller than ten-point boldface type:

(1) A notice of right to rescind form in substantially the following form:

"You may rescind this contract at any time before midnight on the fifth business day after you have been notified by your insurer that all or any part of the claim or contract is not a covered loss under your homeowners' insurance policy. See attached notice of rescission form for an explanation of this right"; and

(2) A notice of rescission form, in duplicate, attached to the contract and easily detachable, completed with the name of the residential contractor and the address where the notice of cancellation is to be delivered, in substantially the following form:

"NOTICE OF RESCISSION

If you are notified by your insurer that all or any part of the claim or contract is not a covered loss under your homeowners insurance policy, you may rescind the contract by mailing or delivering a signed and dated copy of this rescission notice or any other written notice to [name of residential contractor] at [address of residential contractor's place of business] at any time prior to midnight on the fifth business day after you have received such notice from your insurer. If you rescind, any payment made by you under the contract, except for certain emergency work already performed by the residential contractor, will be returned to you within ten business days following receipt by the residential contractor of your rescission notice.

I HEREBY RESCIND THIS TRANSACTION

____________________

(Date)

________________________________

(Insured's signature)"

(e) A residential contractor shall not represent or negotiate, or offer or advertise to represent or negotiate, on behalf of an insured on any homeowners insurance claim in connection with the repair or replacement of roof systems, or the performance of any other exterior repair, replacement, construction, or reconstruction work.

(f) Any violation of this section by a residential contractor shall be considered an unfair method of competition and unfair or deceptive act or practice under chapter 480.

(g) For purposes of this section:

"Residential contractor" means a person or entity in the business of contracting or offering to contract with an insured who is an owner or possessor of residential real estate to repair or replace roof systems or perform any other exterior repair, replacement, construction, or reconstruction work on residential real estate.

"Residential real estate" means a new or existing building constructed for habitation by one to four families, including detached garages.

"Roof system" includes roof coverings, roof sheathing, roof weatherproofing, and insulation."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 2020.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1809
THIRTIETH LEGISLATURE, 2020
STATE OF HAWAII