New Warranty Bill Doesn’t Offer Solutions

The AIA WA testified yesterday, Jan. 26, in Senate Labor, Commerce & Consumer Protection Committee. The testimony was regarding Senate Bill 6701. This bill is another in a line of attempts to create warranties on single family homes.

The bill was introduced by Senator Kline with the intention of mirroring the “Condominium Act” and protecting home owners from shoddy construction. However, this bill misses the mark. The goals of the “Condominium Act” were to prevent and solve problems in construction without costly lawsuits. SB 6701 does not have any prevention clauses and encourages litigation as the answer.

Further, as AIA/WA testified on similar legislation last year, provisions of this bill make projects uninsurable for architects. Since architects are covered by Errors and Omissions insurance, if this bill passes architects would not be able to gain coverage for these residential projects or have to work without insurance.

The AIA/WA encourages a different approach like the amendment that Senator Haugen added last year. An approach like Senator Haugen’s provides legitimate redress to consumers and models itself after the Condominium Act by decreasing the need for litigation.

You can see the AIA WA testimony on the bill below.

L&I Begins Campaign to Help Homeowners

The Department of Labor and Industries (L&I) is doing its part to help with the problem of residential construction when homeowners who used unregistered and unqualified contractors get burned.

L&I recently published a press release that offers good advice on finding a contractor and explains that the “lowest price isn’t always a good deal.” The Department is also beginning an ad campaign that started May 22 and will include radio ads, print ads, and billboards.

Could Your Professional Liability Insurance Be Voided by a Proposed Law?

The legislature has been debating residential construction liability measures for the last few years. The latest bill to tackle this issue is E2SHB 1393. The bill as amended in the Senate would effectively void architects’ professional liability insurance.

The AIA|WA asked Victor O Schinnerer & Company to analyze the bill. Schinnerer is one of the nation’s premier providers of professional liability insurance for architects and engineers. They found that several of the bill’s provisions would leave architects without insurance coverage.

Regarding warranties and guarantees Schinnerer states,

“Professional liability policies do not cover express warranties or guarantees. Any allegation of breach of warranty would neither be defended by a professional liability insurance policy nor could any party suffering a loss based on the allegation of breach of warranty ever recover damages under a professional liability insurance policy.”

This is a lose-lose situation where the claimant and the defendant are exposed with no protection and no way to recover their expenses.

Regarding the fraud exclusion from the statute of repose they state,

“In addition, the CNA Policy – and to my knowledge all similar professional liability insurance policies – exclude from coverage any allegation of fraud. Therefore, legislation that creates a cause of action against design firms based on fraud and allows that cause of action to exist beyond any statute of repose places that firm at risk in perpetuity for an uninsurable exposure.”

Again, regardless of which party wins a suit, both parties lose. The claimant cannot recover damages and the defendant bears the crippling cost of defense.

The letter goes on to state that this legislation would lead to the loss of insurance for architects and engineers:

“It is highly likely that if this legislation were enacted, many design firms providing residential design services in the State of Washington will find that insurers will be unable to provide coverage to defend them at an acceptable cost.”

E2SHB 1393 is pending on the Senate floor calendar and could be voted on as soon as Monday.

Problematic Home Warranties Bill Passes House

Last night the House passed HB 1393, which is a watered down version of the initial home warranty bill. This bill, while improved, still has some challenging provisions.

The House bill took architects and engineers out of the definition of “construction professional.” So it doesn’t directly target architects. However, the bill still includes “inspectors” in the definition of construction professional. And the definition also covers “design, supervision, inspection…or observation of the construction.” Therefore, an architect who inspects a project could still be held liable.

Overall, the bill does several things:

• Proves that the “common law implied warranty of habitability” cannot be
  waived
• Requires all contracts on the sale/construction of new residential projects
  have a written express warranty.
• Establishes a “Home Construction Board” to investigate and mediate construction defect claims and pays for the board with a $100 fee added to the registration for builders doing residential
  construction.

The house bill does not include the problematic stamping or inspection requirements that are in the Senate Bill, Engrossed Second Substitute SB 5895.

As mentioned previously, we hope that we can continue to work the bill to clear up the ambiguities. There was controversy about the bill coming up last night in the form it did. The builders, contractors, architects/engineers, and insurers were in negotiations with the sponsor, Representative Larry Springer. It was expected that the warrant provisions would not be in the bill. It was quite surprising when the bill came out with those provisions.

Stay tuned, this issue will continue to develop and change as the bills progress.

Architects Lobby the Legislature on Feb. 19

The AIA Washington Council had an exciting lobby day on Feb. 19. Each year the AIA/WA holds Capitol Connections, the lobby day for state architects. Over 35 active and involved members attended and participated in: presentations on the state of government; meetings with their legislators and state leadership; and hearings where they testified or signed-in supporting architect issues.

Capitol Connections is a key time when legislators can put a face on issues. A great example of how members make a difference during Capitol Connections was in evidence during the hearing for the architect licensing law bill, HB 1634. Washington is one of seventeen states that allow those who have held internships for a period of years to be grandfathered-in and allowed to take the licensing exam. Below you can hear testimony on HB 1634 from AIA/WA members Sue Lani Madsen, Madsen, Mitchell, Evenson & Conrad of Eastern Washington; and Dave Huotari, ALSC of Spokane.

Architects Testify Against Increased Liability

On Wed, Feb 5, the AIA\WA President Jeffrey Hamlett, Callison-Seattle; and AIA\WA immediate Past President Timothy Buckley, Greenstone Architecture-Vancouver; testified against House Bills 1045 and 1393.

Timothy Buckley testified on behalf of the AIA Washington Council and our members. Jeffrey Hamlett is also the current President of the Architects & Engineers Legislative Council (AELC) and testified on their behalf.

House Bills 1045 and 1393 are strongly opposed by the AIA\WA. As they are currently written these bills include design professionals as liable for construction flaws and product flaws in residential construction– damages found by the original owner of the home and ALL subsequent owners. Most erroneous, with passage of these bills architects would lose the ability to be covered by professional liability insurance when doing residential construction; thus making architects open to frivolous lawsuits.

Both Jeffrey and Timothy testified that these bills will encourage architects to stop all residential construction rather than be the victims of expensive and unfounded legal action. You can view this testimony below.


To see the full hearing please click here to visit TVW.

Housing Liability Workgroup Issues Recommendations

The 2008 Home Construction Workgroup, a task force of Washington State Legislators, met today and issued its draft recommendations for dealing with problems in residential construction.

The legislature has been struggling with problems in residential construction for several years. After multiple attempts to expand liability for architects and contractors, the legislature created a workgroup to investigate the issue in more depth.

The workgroup has issued three recommendations:

1. Establishing a certification requirement for the five areas of greatest potential home damage (roofing, siding, framing, foundation and doors/windows), along with enhanced contractor registration.
2. Creating an ombudsman’s office within the Attorney General’s Office to receive consumer complaints, provide consumer education, and in the future to provide an alternative dispute resolution mechanism for lower cost consumer/ contractor disputes.
3. Requiring some residential construction warranties for homeowners with a narrow statute of limitation.

At the same time, the Department of Licensing has been conducting a sunrise review report (PDF) of how to best regulate residential construction contractors. The DOL’s report is complementary in some areas and conflicts in others with the Workgroup report. You can read the DOL’s full report on its website.

AIAWA has been actively monitoring the process and is providing comments to the workgroup.

If you have thoughts on the details please contact Stan Bowman, Executive Director, of the AIA Washington Council at bowman@aiawa.org.

House Committee Passes Housing Liability Expansion Bill

The House Judiciary Committee passed a bill that would expand liability for architects, engineers, contractors and inspectors involved in the development of single family housing and residential duplexes.

SSB 6385 was originally introduced by Senator Brian Weinstein (D-41, Mercer Island). As passed by the Senate it creates broad new legal liabilities for all design and construction professionals involved in the construction of any improvement on residential property.

Representative Pat Lantz (D-26, Gig Harbor) introduced a striking amendment in the House Judiciary Committee that replaced the text of the bill with new language. Her amendment creates an implied warranty, which cannot be waived and creates new legal causes of action. As mentioned, the language is largely taken from the Condominium Act reforms passed in 2004 and 2005 (RCW 64.34, 64.35, 64.50 and 64.55). It does explicitly apply the statute of repose and statute of limitation provisions of RCW 4.16.310. It also exempts condominiums projects (because they are covered by a separate statute) and non-profit housing developers. No clear reason was given for exempting non-profit developers.

From the perspective of AIA/WA, the bill has many negatives. It uses a few of the provisions of the Condominium Act reforms, but leaves out many of the provisions that have worked to improve construction and reduce litigation. It expands liability with new warranties, but provides little protection from meritless suits.

The bill now goes to the House Rules Committee. It is expected that the bill will be held in the Rules Committee and not pass the House. However, it is unclear if the changes made in the Judiciary Committee will change the views of the House leadership.

AIA/WA Testifies Against Expanded Liability for Building Officials

The legislature’s concern over the poor construction in the residential market continued today with a hearing on a bill to add statutory liability for building officials if a problem occurs. SB 5892 was introduced in 2007 by Senator Jim Honeyford (R-15, Yakima). The hearing was held before the Senate Consumer Protection & Housing Committee.

The bill would hold a city or county building official “liable for damages caused by their negligent failure to enforce the provisions of the state building code.” AIA/WA testified that there are many other measures before the legislature to address problems with residential construction including, licensing home inspectors, licensing residential construction contractors, and other bills. More fundamentally, the solution to bad construction practices is not to create new lawsuits. Education, training and enforcement are better ways to address the problems.

Weinstein’s Housing Liability Bill Passes the Senate

Substitute Senate Bill 6385 passed the Senate today on a vote of 27-20 with 2 excused. The AIA/WA and other groups representing engineers, landscape architects, surveyors, contractors, and developers are on record as opposing the bill.

Sponsored by trial lawyer Senator Brian Weinstein (D-41, Mercer Island), this bill would create huge new liabilities for architects and contractors without addressing any of the problems in the residential construction market. SSB 6385 will not improve the quality of construction. It will only create new lawsuits around construction.

The AIA/WA agrees that there does need to be action taken to improve the quality of residential construction. And, steps are being taken in the legislature.

First, last year the legislature created the Joint Legislative Task Force on Underground Economy in the Construction Industry. The task force is comprised of representatives of the labor, contractors, legislators and state agencies. Out of the task force have come two bills that are being considered this session. SB 6732 implements many of the recommendations of the task force. SB 6731 clarifies statutes affecting independent contractors.

Next, Representative Mark Ericks (D-1, Bothell) is leading a bi-partisan task force to specifically investigate the problems with quality in residential construction. This task force is meeting with proponents of SSB 6385, contractor, architects and others to find the root cause of quality problems and develop solutions to address the problems.

In summary, the AIA/WA urged lawmakers to vote “no” on SSB 6385, which will only creates more lawsuits. Instead, we urged them to support the work of the Underground Economy task force and the task force being led by Rep. Ericks to find real solutions to construction problems.

AIA/WA will work aggressively in the House to defeat the bill there.

Housing Lawsuit Bill Stumbles

ESSB 5550 expanding contractor and designer liability for housing projects hit a major roadblock this week. House Speaker Frank Chopp (D-43, Seattle) has publicly stated that he will kill the bill for 2007. He recognized that some of the ideas in the bill may have merit, but they need to be studied more before being implemented. This would indicate that the legislature is likely to create a study committee to work on the issue after the end of the 2007 legislative session, reporting back for action in 2008. For more background on this story visit the Olympian newspaper at: http://www.theolympian.com/125/story/73859.html.

In addition to Speaker Chopp, several other of the House Democrat’s leadership team have voiced concerns about the bill. While the press has focused on the Building Industry Association of Washington, every other group involved with design and construction are opposed the bill, including the AIA/WA. Major insurers testified that they would not be able to provide liability insurance if the bill is enacted. At least on insurer said it would pull out of Washington’s market entirely if ESSB 5550 passes. While the bill did pass out of the House Judiciary Committee yesterday, it now appears to be dead for the year.

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UPDATE: Recent news reports have given more details on a meeting between Speaker Chop and the primary sponsors Representative Brendan Williams (D-22, Olympia) and Senator Brian Weinstein (D-41, Mercer Island). The Seattle Times and The Olympian report that the Speaker has not changed his opposition to the bill as a result of the meetings.

AIA/WA Lobbies Against Housing Lawsuit Bill

The House Judiciary Committee held a hearing today on Engrossed Substitute Senate Bill 5550 to create a new avenue for lawsuits on residential construction by creating what is termed a “home warranty.” Under this warranty different parts of a residence would be warranted to be free of defects for up to 10 years (see previous posts).

Mort James, AIA, of Morton Safford James III AIA Architects in Olympia, attended the hearing to testify against the bill on behalf of the AIA Washington Council. Unfortunately, due to time constraints, he was unable to testify.

Mr. James was to testify about his extensive experience in residential construction and concerns about creating a new avenue for lawsuits, which would drive up home prices and not prevent construction defects. The AIA/WA will follow-up with committee members with written comments for the record.

The AIA/WA understands the concerns about faulty residential construction and supports the provision in ESSB550 to create a study committee to analyze the problems in residential construction.

The AIA is further concerned that ESSB 5550 does an end run around the state’s current 6-year statute of repose and 3 year statute of limitations by creating this new warranty. It explicitly creates a new 10-year statute of repose and a 6 year statute of limitations for purposes of the warranty provisions. Repose is the time in which a defect must be found. Limitations are the time after a defect is found or should have been found that a lawsuit must commence.

The AIA/WA also supports efforts to increase qualification standards for contractors and improving efforts to more closely regulate contractors. To that end, the AIA/WA is supporting Substitute House Bill 1843 improving contractor registration provisions and Engrossed Substitute SB 5788 creating a new license requirement for home inspectors.

You can listen to the hearing at www.tvw.org. Enter the bill number 5550 in the search engine and select the House Judiciary Committee hearing on March 23, 2007.

Certificate of Merit Bill Dies in the Senate

The AIA-backed bill requiring a certificate of merit for design professionals, SB 5833, died today when it failed to pass the Senate. The AIA/WA had been working very hard to get the bill brought to the Senate floor before the deadline today for bills to pass out of their house of origin.
The AIA/WA thanks all of its members who contacted their Senators in support of the bill in the past week. While the bill hit a barrier this year, we will look to bring it back in the 2008 Legislature.

Bill Circumventing Statute of Repose Passes Senate

A bill that would undermine the state’s statute of repose for designers and builders of residences passed the State Senate late yesterday on a 30-19 vote. SB 5550, sponsored by Senator Brian Weinstein (D-41, Mercer Island), creates a new “warranty” requirement for residences. The warranty would be up to 10 years for certain aspects of a residence – nearly doubling the current 6 year statute of repose. The bill does not directly alter the statute of repose, rather it creates new legal rights to sue builders and designers beyond the current 6 year limit. While AIA/WA and its allies were successful in getting the bill narrowed before it came to a vote in the Senate, we remain very concerned about the negative impact the bill would have on housing prices and the availability of professional liability insurance for those that design and build houses.

The bill now goes to the House of Representatives where it will be referred to the House Judiciary Committee. A companion bill, HB 1935, sponsored by Representative Brendan Williams (D-22, Olympia) remains pending on the House Second Reading Calendar.

Action Alert Issued on Certificate of Merit Bill

The AIA/WA has issued an all member Action Alert on the Certificate of Merit Bill, SB 5833. The alert was issued through the AIA Advocacy Center and calls on AIA members to contact their Senators to support SB 5833. The bill must pass the full Senate by March 14, 2007, or it is dead for the year. As previously reported, the bill is now in the Rules Committee, which decides the bills that will move the Senate floor for a vote. It is critical that SB 5833 move to the floor quickly before the next deadline on March 14.

To take action today, visit the AIA Advocacy Center and click on “Contact Your State Officials” for the alert, talking points on the bill and additional information on how to contact your individual senator.

Building Official Liability Bill Has Hearing

Today, the Senate Government Operations and Elections Committee heard testimony on SB 5892. This bill would create new liability for county and city building inspectors when the lack of inspection or enforcement of the building code results in damage to property. The bill states, “A county or city is liable for damages caused by their negligent failure to enforce the provisions of the state building code. The liability of a county or city is limited to fifty percent of the actual damages proved.”

The AIA Washington Council signed-in as being opposed to the bill. AIA member John Neff, AIA, testified against the bill in his role as a city building official. To listen to the hearing, go to www.tvw.org and enter the bill number in the search engine.

Senate Committee Hears Certificate of Merit Bill

On Friday, the Senate Judiciary Committee held a hearing on the AIA/WA-backed bill, SB 5833, to require a “certificate of merit” be filed prior to a lawsuit proceeding against a licensed design professional (architect, engineer, landscape architect or land surveyor). Last year the legislature passed a similar requirement for medical professionals as part of a larger package on medical liability reform. Several states currently have this requirement for design professionals as well. AIA/WA is pushing the bill as part of the Architects & Engineers Legislative Council (AELC). The only testimony against the bill was from the Washington State Trial Lawyers Assn. Even though WSTLA agreed to similar language for medical professionals, they continue to oppose our bill.

Now that the bill has had a hearing, it is eligible to be considered in “executive session” and passed out of the committee. The next step is to schedule a committee vote on the bill.

Senate Committee Passes Housing Liability Bill

The Senate Consumer Protection and Housing Committee passed Substitute SB 5500 out of committee today. Senator Jim Honeyford (R-15, Yakima) offered several amendments, but all of them were rejected by the majority Democrats on the committee. The substitute bill was not public available at the hearing today and the AIA/WA is working to get an official copy of the amended bill. But, according to the debate in committee it appears that they removed the section which changes the statute of repose from 6 years to 10 years. The committee also added a provision to require a legislative study of residential construction practices. The bill now goes to the Senate Rules Committee, which determines which bills come to the floor of the Senate and when.

UPDATE

The substitute bill was posted this morning. It has been shortened to the following subjects:

Section 1. Sets the definitions of what is to be covered by the home warranty. Basically, it boils down to the home (structure, siding, etc.) and appliances. The warranty does not include condos, manufactured or mobile homes, outbuildings, landscape features/systems, or appurtenant recreational facilities.

Section 2. Sets the length of warranties: 2 years for defects in materials and workmanship, 3 years for electrical and mechanical systems, 5 years for water penetration, 10 years for structural defects. It also includes a number of exemptions including normal wear and tear, insect damage, materials not supplied by the builder, damage from non-residential uses, damage due to homeowner negligence, damage by persons other than the builder, and acts of God.

The dollar limit on warranty is limited to the actual cost of repair or the fair market value of the home. The contractor has a right to collect from subcontractors who are at fault for defects. It sets a six year statue of limitations from when the defect is discovered or should have been discovered. It also sets a 10 year limit for the warranty period. The warranty is transferable to new owners.

Section 3. Creates a committee on residential construction to study “the cause, extent, and type of construction defects” in the residential market (and a bunch of other stuff). An architect is on the committee.

Homeowner’s Bill of Rights

The Senate Consumer Protection and Housing Committee held a work session on construction problems with single-family residential construction. Senator Brian Weinstein (D-41) has introduced a series of bills that he has labeled the Homeowners Bill of Rights:

SB 5044 changes the statute of repose from 6 years to 10 years and exempts structural from the limits of the statute.
SB 5045 creates a new practice act licensing requirement for contractors.
SB 5046 creates a new legal cause of action for complaints about residential construction.
SB 5048 extends the statute of limitations on condominium projects if the suit is dismissed without prejudice.
SB 5049 creates a “home warranty” for single family construction.

The AIA/WA is very concerned that the approach taken in the bills will negatively impact the market for single family homes. They would create a whole new set of “legal rights” for single-family residential construction; or, more accurately, they would create new grounds for lawsuits. The resulting litigation will likely increase liability insurance rates for architects, engineers and contractors.

The “work session” was stacked with proponents for these bills including an advocacy coalition, attorneys for homeowners and homeowners with bad experiences. For an alternative perspective the Building Industry Association of Washington (BIAW), which represents homebuilders, and Contractors Bonding and Insurance Company (CBIC) testified about current industry practices.

Again, the hearing can be heard at http://www.tvw.org/; search for the committee name.

Attack on Architect and Builder Liability

If the first week is any indication we will be spending much of our time defending against bad bills. Senator Brian Weinstein (D-41) looks to be a source of many concerning bills dealing with liability and tort issues. On the second day of the legislative session he introduced several bills that bode ill for the design and construction community.

SB 5044 would increase the time limit in the state’s statute of repose from 6 years to 10 years and completely exempt structural defects in residential construction from any limits.

SB 5046 creates new causes of action for defects in residential (non-condominium) construction. It blows the doors wide open for new litigation on residential construction. You have to read the bill to understand how truly broad its application would be for architects, engineers, contractors, product manufacturers and others in the development community.

SB 5049 creates new warranty rights for basically everything in residential construction including: 2 years for defects in materials and workmanship, 3 years for systems in the home (plumbing, electrical, HVAC, etc.), 5 years for water penetration and 10 years for structural defects.

SB 5048 tolls the statute of limitations on condominium jobs if the suit is dismissed without prejudice. Basically, the bill extends the statute of limitations.

We are forming a Tort Reform Working group to tackle these bills. The working group will be responsible for analyzing the bills and helping with testimony. If you are interested in participating on this group, please contact me right away.

There is a work session the “Homeowners Bill of Rights” on Tuesday, January 16 at 1:30 p.m. before the Senate Consumer Protection and Housing Committee. It is no surprise that the chair of this new committee is Senator Weinstein. As this is a “work session” and not an official hearing, the witness list was preset and the AIA/WA was not included. The Building Industry Association of Washington (BIAW) will testify, but the deck is stacked with “homeowner” groups and trial attorneys.