Report Title:

Construction Professionals

Description:

Enacts a construction professional conciliation panel law.

 

HOUSE OF REPRESENTATIVES

H.B. NO.

2761

TWENTY-SECOND LEGISLATURE, 2004

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO CONSTRUCTION.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter    

CONSTRUCTION PROFESSIONAL CONCILIATION PANEL

   -1 Findings and purpose. The legislature finds that enactment of a law is necessary and appropriate concerning actions claiming damages, indemnity, or contribution in connection with alleged construction defects resulting in property loss or damage.

The legislature further finds that chapter 672, relating to the design professional conciliation panel, is unsuitable for handling construction defect allegations involving construction professionals.

   -2 Definitions. As used in this chapter:

"Construction professional" means a contractor, subcontractor, developer, builder, builder vendor, or inspector performing or furnishing the supervision, inspection, construction, or observation of the construction of any improvement to real property. If the improvement to real property is to a commercial property, the term construction professional shall also include any prior owner of the commercial property, other than the claimant, at the time the work was performed.

"Department" means the department of commerce and consumer affairs.

"Director" means the director of commerce and consumer affairs.

"Panel" means the construction professional conciliation panel.

   -3 Actions against construction professionals. In any action for damages arising out of the alleged professional negligence of actions performed in the professional practice of a construction professional, before the time of filing the complaint, the aggrieved person shall file a claim with the construction professional conciliation panel.

The claim shall list the alleged construction defects, and any claims for injury or loss to, or the loss of use of, any real property caused by an alleged defect in the construction of an improvement to the real property.

   -4 Construction professional conciliation panel; composition, selection, compensation. (a) There are established conciliation panels which shall review and render findings and advisory opinions on the issues of liability and damages in tort claims against construction professionals.

(b) A construction professional conciliation panel shall be formed for each claim filed pursuant to section    -3 and, after each panel renders its decision or the claim is otherwise disposed of, it shall be disbanded. Each construction professional conciliation panel shall consist of one chairperson selected from among persons who are familiar with and experienced in the tort claims settlement process, one attorney licensed to practice in the courts of the State and experienced in trial practice, and one construction professional appropriately licensed to practice in this State. The chairperson shall be appointed by the director from a list of eligible persons approved by the chief justice of the supreme court of Hawaii. The attorney shall be appointed by the chairperson from a list of not less than thirty-five attorneys experienced in trial practice submitted annually by the supreme court. The construction professional shall be appointed by the chairperson from a list of not less than thirty-five construction professionals submitted annually by the contractors licensing board.

The chairperson shall preside at the meetings of the panel. The chairperson and all panel members shall be compensated at the rate of $300 per claim which will become payable when the decision of the panel is submitted. At the discretion of the director, the chairperson and all panel members may be compensated at one-half of the amount of compensation specified in this section, when and if the claim is disposed of by any means prior to the hearing before the panel. The chairperson and all panel members shall also be paid allowances for travel and living expenses which may be incurred as a result of the performance of their duties. These costs shall be paid by the department from funds collected from the parties, to be shared equally. The claimant shall deposit $450 with the department upon the filing of the claim and the failure to do so shall result in the claim being rejected for filing. Each construction professional shall deposit $450 with the department within twenty days of being served with the claim and the failure to do so shall result in termination of proceedings under this chapter, allowing the claimant to proceed in accordance with section    -9. If the claim is withdrawn, determined to be unsuitable for proceedings under this chapter, or otherwise terminated without participation by a panel, the department shall return all moneys collected to the respective parties. Any moneys remaining after all costs have been paid shall be returned to the respective parties on a pro rata basis.

The office and meeting space, secretarial and clerical assistance, office equipment and office supplies for the panel shall be furnished by the department.

The board shall prepare a list of construction professionals along with their respective specialties who shall then be considered consultants to the panel in their respective fields. Panel members may consult with other legal, technical, and insurance specialists. Any consultant called by the panel to appear before the panel shall be paid an allowance for travel and living expenses which may be incurred as a result of such person's appearance before the panel. Such costs shall be paid by the department.

   -5 Review by panel required; notice; presentation of claims; termination. (a) Any person or the person's representative claiming that a tort has been committed by the construction professional or entities employing the construction professionals shall file a claim with the department before a suit based on the claim may be commenced in any court of the State. All claims shall be submitted to the department in writing. The claimant shall set forth facts upon which the claim is or may be based and shall include the names of all parties against whom the claim is or may be made who are known to the claimant. Within five business days thereafter, the panel shall give notice of the claim, by certified mail, to all construction professionals and others who are or may be parties to the claim and shall furnish copies of the claims to such persons. The notice shall:

(1) Set forth a date, not more than twenty days after mailing the notice, within which any construction professional against whom a claim is made shall file a written response to the claim, and a date and time for a hearing of the panel; and

(2) Describe the nature and purpose of the panel's proceedings and shall designate the place of the hearing. The times originally set forth in the notice may be changed by the chairperson, on due notice to all parties, for good cause; provided that a party requesting the rescheduling of the hearing within seven days of the scheduled date shall be required in the sole discretion of the panel chairperson to additionally compensate the panel in an amount equal to the fee panel members receive pursuant to section    -4.

(b) At any time, by mutual consent of the parties involved, the department, prior to the appointment of the chairperson, or the chairperson after the chairperson's appointment, may terminate the proceedings and the claimant may proceed in accordance with section    -9.

   -6 Construction professional conciliation panel hearing; fact-finding; evidence; voluntary settlement. Every tort claim shall be heard by the construction professional conciliation panel as soon as possible after the date for filing a response. No persons other than the panel, witnesses, and consultants called by the panel, and the persons listed in section    -7 shall be present except with the permission of the chairperson. The panel, in its discretion, may conduct an inquiry of a party, witness, or consultant without the presence of any or all parties.

The hearing shall be informal. The panel may require a stenographic record of all or part of its proceedings for the use of the panel, but the record shall not be made available to the parties. The panel may receive any oral or documentary evidence. Questioning of parties, witnesses, and consultants may be conducted by the panel, and the panel, in its discretion, may permit any party, or any counsel for a party to question other parties, witnesses, or consultants. The panel may designate who, among the parties, shall have the burden of going forward with the evidence with respect to such issues as it may consider, and unless otherwise designated by the panel, when a construction professional's records have been provided for the claimant's proper review, such burden shall initially rest with the claimant at the commencement of the hearing.

The panel shall have the power to require by subpoena the appearance and testimony of witnesses and the production of documentary evidence. When the subpoena power is utilized, notice shall be given to all parties. The testimony of witnesses may be taken either orally before the panel or by deposition. In cases of refusal to obey a subpoena issued by the panel, the panel may invoke the aid of any circuit court in the State, which may issue an order requiring compliance with the subpoena. Failure to obey such order may be punished by the court as a contempt. Any member of the panel, the director, or any person designated by the director of the department may sign subpoenas. Any member of the panel may administer oaths and affirmations, examine witnesses, and receive evidence. Notwithstanding such powers, the panel shall attempt to secure the voluntary appearance, testimony, and cooperation of parties, witnesses, and consultants without coercion.

At the hearing of the panel and in arriving at its opinion, the panel shall consider, but not be limited to, statements or testimony of witnesses, construction documents, inspection reports, calculations, and other records kept in the usual course of the practice of the construction professional without the necessity for other identification or authentication, statements of fact, or opinion on a subject contained in a published treatise, periodical, book or pamphlet, or statements of experts without the necessity of the experts appearing at the hearing. The panel, upon the application of any party or upon its own decision, may appoint as a consultant, an impartial and qualified construction professional person or expert to testify before the panel or to conduct any necessary professional or expert examination of the claimant or relevant evidentiary matter and to report to or testify as a witness thereto. The consultant shall not be compensated or reimbursed except for travel and living expenses to be paid which may be incurred as a result of such person's appearance before the panel; provided that the expenses shall be paid by the department as provided in section    -4. Except for the production of documents and records kept in the usual course of the practice of a construction professional, discovery by the parties shall not be allowed. Requests for production of documents shall be submitted to the chairperson of the panel for approval, denial, or modification, at the chairperson's sole discretion.

During the hearing and at any time prior to the rendition of an advisory decision pursuant to section    -8, the panel may encourage the parties to settle or otherwise dispose of the case voluntarily.

   -7 Persons attending hearings of panel. Unless excluded or excused by the panel, the following persons shall attend hearings before the panel:

(1) The party or parties making the claim;

(2) The construction professional against whom the claim is made, or a representative, other than counsel, authorized to act such construction professionals; and

(3) Counsel of the parties, if any.

   -8 Decisions. (a) Within thirty days after the completion of a hearing, the panel shall file a written advisory decision with the director, who shall thereupon mail copies to all parties concerned, or their counsel if represented by counsel, the board, and the representative of each construction professionals' liability insurance carrier authorized to act for the carrier. The panel shall decide the issue of liability, and shall state its conclusions in writing.

After a finding of liability, if evidence has been presented regarding damages, the panel shall decide the amount of damages, if any, which should be awarded in the case. Damages shall be limited to actual damages as follows: the fair market value of the property without the construction defect, the replacement cost of the property, or the reasonable cost of repair to the property, whichever is less, together with the relocation costs, interest as provided by law, costs of the action, and reasonable attorney fees. If the property is a residential property, additional damages shall be allowed for direct economic costs related to the loss of use, if any. Punitive damages shall not be recommended.

For purposes of this subsection:

(1) Special damages for bodily injury claims and derivative claims thereto shall be limited to the amounts of medical costs and lost wages. General damages for noneconomic loss and derivative claims thereto shall be limited to $250,000; provided that the limit amount shall be adjusted for inflation annually on July 1 of each year by the director, rounded upward or downward to the nearest $10 increment;

(2) "Reasonable costs of repair" means the amount of money necessary to remedy the construction defect.

(b) The decisions shall be signed by all members of the panel; provided that any member of the panel may file a written concurring or dissenting opinion.

(c) The advisory decision required by this section need not be filed if the claim is settled or disposed of before the decision is written or filed.

   -9 Subsequent litigation; excluded evidence. The claimant may institute litigation based upon the claim in an appropriate court only after a party to the construction professional conciliation panel hearing rejects the decision of the panel.

No statement made in the course of the hearing of the construction professional conciliation panel shall be admissible in evidence either as an admission, to impeach the credibility of a witness, or for any other purpose in any trial of the action, provided that such statements may be admissible for the purpose of section    -12. No decision, conclusion, finding, or recommendation of the construction professional conciliation panel on the issue of liability or on the issue of damages shall be admitted into evidence in any subsequent trial, nor shall any party to the construction professional conciliation panel hearing, or the counsel or other representative of a party, refer or comment thereon in an opening statement, an argument, or at any other time, to the court or jury; provided that such decision, conclusion, finding, or recommendation may be admissible for the purpose of section    -11.

   -10 Immunity of panel members from liability. No member of a construction professional conciliation panel shall be liable in damages for libel, slander, or other defamation of character of any party to the construction professional conciliation panel proceeding for any action taken or any decision, conclusion, finding, or recommendation made by the member while acting as a member of a construction professional conciliation panel under this chapter.

   -11 Statute of limitations tolled. The filing of the claim with the construction professional conciliation panel shall toll any applicable statute of limitations, and any such statute of limitations shall remain tolled until sixty days after the date the decision of the panel is mailed or delivered to the parties; provided that in no case shall the applicable statute of limitations be tolled for more than twelve months. If a decision by the construction professional conciliation panel is not reached within twelve months, the statute of limitations shall resume running and the party filing the claim may commence a suit based on the claim in any appropriate court of this State. The panel shall notify in writing all parties of this provision.

   -12 Duty to cooperate; assessment of costs and fees. It shall be the duty of every person who files a claim with the construction professional conciliation panel and every construction professional against whom the claim is made to cooperate with the construction professional conciliation panel for the purpose of achieving a prompt, fair, and just disposition or settlement of such claim, provided that such cooperation shall not prejudice any substantive rights.

After trial of the claim or after settlement of the claim after suit has been filed, any party may apply to the court in which the suit was brought to have the costs of the action assessed against any party or any insurance carrier or any other person providing professional liability insurance to a party construction professional, for failure to cooperate with the construction professional conciliation panel. The court may award costs, attorney's fees, witness fees, including those of expert witnesses, costs of discovery and transcribing depositions, and court costs to the party applying therefor.

On application of the director, the court may award as a civil penalty against any party or any insurance carrier or other person providing professional liability insurance to a party construction professional, all or a portion of the costs and expenses of the construction professional conciliation panel attributable to the claim, if the court finds that such person or persons failed to cooperate with the construction professional conciliation panel. Any penalty paid shall be deposited into the general fund.

In determining whether any person has failed to cooperate in good faith, the court shall consider, but is not limited to, the following:

(1) The attendance of the persons at the hearing of the construction professional conciliation panel;

(2) The extent to which representatives of the parties and counsel representing parties came to panel hearings with knowledge of the claims and defenses and authority to negotiate a settlement or other disposition of the claim;

(3) The testimony of members of the panel as to the facts of the person's participation in the panel hearing;

(4) The extent of the person's cooperation in providing the panel with documents and testimony called for by the panel; and

(5) The reasons advanced by the person so charged for not fully cooperating or negotiating.

   -13 Annual report. The director shall prepare and submit to the legislature annually, twenty days prior to the convening of each regular session, a report containing the director's evaluation of the operation and effects of this chapter. The report shall include a summary of the claims brought before the construction professional conciliation panel and the disposition of those claims.

   -14 Administration of chapter. The director shall be responsible for the implementation and administration of this chapter and shall adopt rules, in conformity with chapter 91, necessary for the purposes of this chapter."

SECTION 2. This Act shall take effect on January 1, 2005.

INTRODUCED BY:

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