Anyone hoping to buy a condominium in Colorado may soon get some good news – assuming the state legislature can overcome a few hurdles and objections.
Condos are tough to find in our state because of the way construction-defect laws are written. Reform efforts have failed in the past but state lawmakers this year are taking another stab at doing something about it.
A bill has been introduced that would allow the expense of defending against a construction-defect lawsuit to be split among “all insurers with a duty to defend.” Reasonable attorney fees also would be shared.
Typically, the general contractor’s insurer would be left to shoulder the burden of fighting a lawsuit on its own. Under the proposed legislation, subcontractors’ insurers would be on the hook, too.
That gives insurers good reason to support the proposed legislation.
Anyone left slack-jawed by soaring home prices in Denver also should welcome the effort. This legislation is written with our growing housing shortage in mind and should help encourage condo construction projects.
Although the legislation was written with contractors in mind, not everyone is happy.
The Colorado Association of Mechanical and Plumbing Contractors is concerned about provisions that would free insurers from requirements to defend the construction companies as soon as a notice of defect claim is filed.
The organization says that, as a result, it worries that contractors would have to foot their own legal bills during the period between when a claim is filed and a lawsuit.
House Speaker Crisanta Duran, who is a co-sponsor on the bill, is nonetheless hopeful.
“ I think Senate Bill 45 represents a significant change that will have a big impact,” she told the Denver Post. “For years we’ve heard the high cost of insurance is one of the major barriers to new condo construction. We are taking that on in this bill.”
Related: Red-Hot Housing Market Drives Demand for Wraps
Lawmakers have tried to tackle the problem in past years. Duran and her co-sponsors, which notably include Republican Senate President Kevin Grantham, took a significantly different tack in their effort this time around. Rather than try to push through legislation that would address more than one facet of the problem, they took a narrower, more focused approach.
That’s why Senate Bill 45 only goes so far. “In a construction defect action in which more than one insurer has a duty to defend a party, the bill requires the court to apportion the costs of defense, including reasonable attorney fees, among all insurers with a duty to defend,” it says.
The problem is that other lawmakers followed the filing of SB45 with their own bills, a number of which are laden with provisions that were unlikely to win bipartisan support.
Contractors looking for a fix to the problem increasingly have teamed up to buy “wrap” policies, bundles of insurance coverage that include workers’ compensation and general liability. Wraps not only help to manage a project’s insurance costs, but they also potentially reduce litigation among the insureds.
Eric Gabrielsen is a CCIG Insurance Adviser. Let him know if you have questions or concerns. Reach him at EricG@thinkccig.com or 720-212-2027.
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