HB1809 HD1

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;

(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; and

(3) Prohibiting a contractor from knowingly and intentionally acting as a public adjuster.

SECTION 2. Chapter 444, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§444- 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; provided that any notice of rescission shall include a copy of the notice by the homeowners insurer that all or any part of the claim or contract is not a covered loss under the homeowners insurance policy.

(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. Section 444-17, Hawaii Revised Statutes, is amended to read as follows:

"§444-17 Revocation, suspension, and renewal of licenses. In addition to any other actions authorized by law, the board may revoke any license issued pursuant to this section, or suspend the right of a licensee to use a license, or refuse to renew a license for any cause authorized by law, including:

(1) Any dishonest, fraudulent, or deceitful act as a contractor that causes substantial damage to another;

(2) Engaging in any unfair or deceptive act or practice as prohibited by section 480-2;

(3) Abandonment of any construction project or operation without reasonable or legal excuse;

(4) Wilful diversion of funds or property received for prosecution or completion of a specific construction project or operation, or for a specified purpose in the prosecution or completion of any construction project or operation, and the use thereof for any other purpose;

(5) Wilful departure from, or wilful disregard of plans or specifications in any material respect without consent of the owner or the owner's duly authorized representative, that is prejudicial to a person entitled to have the construction project or operation completed in accordance with those plans and specifications;

(6) Wilful violation of any law of the State, or any county, relating to building, including any violation of any applicable rule of the department of health, or of any applicable safety or labor law;

(7) Failure to make and keep records showing all contracts, documents, records, receipts, and disbursements by a licensee of all the licensee's transactions as a contractor for a period of not less than three years after completion of any construction project or operation to which the records refer or to permit inspection of those records by the board;

(8) When the licensee being a partnership or a joint venture permits any partner, member, or employee of the partnership or joint venture who does not hold a license to have the direct management of the contracting business thereof;

(9) When the licensee being a corporation permits any officer or employee of the corporation who does not hold a license to have the direct management of the contracting business thereof;

(10) Misrepresentation of a material fact by an applicant in obtaining a license;

(11) Failure of a licensee to complete in a material respect any construction project or operation for the agreed price if the failure is without legal excuse;

(12) Wilful failure in any material respect to comply with this chapter or the rules adopted pursuant thereto;

(13) Wilful failure or refusal to prosecute a project or operation to completion with reasonable diligence;

(14) Wilful failure to pay when due a debt incurred for services or materials rendered or purchased in connection with the licensee's operations as a contractor when the licensee has the ability to pay or when the licensee has received sufficient funds therefor as payment for the particular operation for which the services or materials were rendered or purchased;

(15) The false denial of any debt due or the validity of the claim therefor with intent to secure for a licensee, the licensee's employer, or other person, any discount of the debt or with intent to hinder, delay, or defraud the person to whom the debt is due;

(16) Failure to secure or maintain workers' compensation insurance, unless the licensee is authorized to act as a self-insurer under chapter 386 or is excluded from the requirements of chapter 386;

(17) Entering into a contract with an unlicensed contractor involving work or activity for the performance of which licensing is required under this chapter;

(18) Performing service on a residential or commercial air conditioner using CFCs without using refrigerant recovery and recycling equipment;

(19) Performing service on any air conditioner after January 1, 1994, without successful completion of an appropriate training course in the recovery and recycling of CFC and HCFC refrigerants, which included instruction in the proper use of refrigerant recovery and recycling equipment that is certified by Underwriters Laboratories, Incorporated;

(20) Violating chapter 342C;

(21) Failure to pay delinquent taxes, interest, and penalties assessed under chapter 237 that relate to the business of contracting, or to comply with the terms of a conditional payment plan with the department of taxation for the payment of such delinquent taxes, interest, and penalties; [~~and~~]

(22) Knowingly or intentionally employing a person to perform work under a contract subject to chapter 104 who is not eligible to work in the United States under federal law[.]; and

(23) Knowingly or intentionally acting as a public adjuster as defined in section 431:9-105."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2050.

HOUSE OF REPRESENTATIVES	H.B. NO.	1809
THIRTIETH LEGISLATURE, 2020		H.D. 1
STATE OF HAWAII