HOUSE OF REPRESENTATIVES

H.C.R. NO.

262

TWENTY-SECOND LEGISLATURE, 2004

 

STATE OF HAWAII

 
   


HOUSE CONCURRENT

RESOLUTION

 

REQUESTING THAT THE DIRECTOR OF COMMERCE AND CONSUMER AFFAIRS APPOINT AN ADVISORY COMMITTEE ON CONSTRUCTION CLAIMS AND COMMERCIAL GENERAL LIABILITY POLICIES.

 

WHEREAS, over the past decade property owners have filed countless lawsuits alleging damages arising from construction defects, against contractors, subcontractors, and other construction professionals who have worked on construction projects; and

WHEREAS, these construction professionals have often tendered such claims to their insurers under commercial general liability (CGL) policies in an attempt to obtain insurance coverage for their construction defect liabilities; and

WHEREAS, CGL policies are not designed to provide coverage for most types of construction defect claims; and

WHEREAS, if insurance covered the repair and/or replacement of poorly constructed products, a contractor or subcontractor could receive initial payment for the work, as well as subsequent payment from the insurance company for its repair or replacement; and

WHEREAS, forcing insurers to pay for construction defects under CGL policies is a disincentive to perform the initial job properly, and is poor public policy; and

WHEREAS, contractors' attempts to "shoe-horn" construction defect claims into CGL policies that were not designed to cover them have sometimes resulted in confusing and result-oriented court decisions; and

WHEREAS, insurers have had to raise the cost of CGL policies to reflect these decisions; and

WHEREAS, CGL insurance can only be made affordable by imposing the economic cost of unprofessional work on the construction professionals who perform inadequately; and

WHEREAS, the CGL insurance affordability issue is exacerbated because not all of the lawsuits filed by property owners are meritorious; and

WHEREAS, both the insurance and construction industries have focused on this aspect of the problem and consequently support legislation to limit property owner access to judicial remedies as a means of reducing the cost of CGL insurance; and

WHEREAS, property owners who are the victims of incompetent and/or unethical contractors can suffer catastrophic economic and emotional damages; and

WHEREAS, these circumstances make it essential to devise legislative solutions to the CGL cost issue which address nonmeritorious litigation without denying property owners the right to full redress of legitimate grievances; and

WHEREAS, there is a recent trend for state legislatures, including the legislatures of Florida, Kentucky, and Colorado in 2003, to address the CGL cost issue by imposing new pretrial procedures in construction litigation cases; and

WHEREAS, Governor Lingle's 2004 State of the State address proffered this approach as warranting consideration; and

WHEREAS, the House of Representatives and the Senate have held hearings on several such measures, most notably S.B. No. 2358, S.D. 2, heard jointly by the House of Representatives' Consumer Protection and Commerce and Judiciary Committees on March 15, 2004; and

WHEREAS, from the testimony received it was clear that more information must be obtained and analyzed in order to factually establish the true nature and extent of the problem; and

WHEREAS, once the nature and extent of the problem is better defined, insurers, contractors, and property owners can find common ground in solutions that narrowly focus on the real inefficiencies in the current insurance policies, judicial decisions, and statutes; now, therefore,

BE IT RESOLVED by the House of Representatives of the Twenty-Second Legislature of the State of Hawaii, Regular Session of 2004, the Senate concurring, that the Director of Commerce and Consumer Affairs is requested to convene an informal advisory panel to prepare a report on the availability and affordability of CGL insurance in Hawaii, with recommendations for possible legislation to address problems; and

BE IT FURTHER RESOLVED that the advisory panel include, if possible:

(1) An attorney with experience in representing plaintiffs in construction litigation;

(2) An attorney with experience in representing defendants in construction litigation;

(3) A representative of an insurance company that sells CGL polices in Hawaii;

(4) A general contractor;

(5) The State Insurance Commissioner or the Commissioner's designee;

(6) The senior hearings officer for the Design Profession Conciliation Panel Program;

(7) A member appointed by the Chair of the Senate's Commerce, Consumer Protection and Housing Committee; and

(8) A member jointly appointed by the Chairs of the House of Representative's Consumer Protection and Commerce and Judiciary Committees;

and

BE IT FURTHER RESOLVED that a certified copy of this Concurrent Resolution be transmitted to the Director of Commerce and Consumer Affairs.

 

 

OFFERED BY: ______________________

 

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