Rippy ready to negotiate on builder insurance measure |

Rippy ready to negotiate on builder insurance measure

State Rep. Greg Rippy said last week he is ready to make the compromises necessary to pass some version of a bill meant to help contractors secure insurance at a reasonable cost.

House Bill 1161, sponsored by Rippy, R-Glenwood Springs, and three other Republicans, has come under fire for going too far to protect builders at the expense of homeowners.

But Rippy said he is willing to work with the state Senate’s watered-down version of the law in order to come up with something to deal with the growing insurance crisis for residential home builders.

“If we don’t do something, nobody is going to be building multifamily projects in Colorado,” Rippy said.

Most of the general contractors interviewed for this story confirmed that insurance has become an increasingly difficult issue. John Black, a builder of custom homes in Aspen, said the cost of liability insurance for a townhome project in the Roaring Fork Valley has gone from less than $10,000 a year in 1999 to $125,000 per year in 2002.

“It affects more than unscrupulous and incompetent builders – it affects competent and scrupulous builders as well,” Black said. “Knowing Greg Rippy, I don’t think it was his intention to make it impossible for a homeowner to recover damages when it’s deserved.”

The version of HB 1161 that came out of the state House of Representatives in late January would have made it much more difficult for a homeowner to sue a builder for faulty or even fraudulent work, however.

It required the homeowner to first allow the builder to offer to cure faulty work before suing. That is, in fact, the only major provision to survive the amendment process in the state Senate.

The House version went on to require that the homeowner either accept the offer to cure or prove in court that it is inadequate. The homeowner could not sue until he proved in court that the work was actually needed and the offer to repair it was below par. Once the case was in court, the homeowner would have then been required to prove “beyond a reasonable doubt” that the builder’s original offer to cure was fraudulent before recovering anything beyond that original offer.

The requirement to prove fraud beyond a reasonable doubt raised the standard of proof to the same level required in criminal court; currently under state law a dissatisfied homeowner is required to show that a preponderance of the evidence supports his case, the same as with all other civil disputes.

The House version also limited the number of times a homeowner could add to the list of necessary repairs. And it exempted all so-called construction professionals from having to pay triple damages under the Colorado Consumer Protection Act. The threat of triple damages was meant to discourage companies from ripping people off with false claims or inadequate service.

In mid-February, the Senate threw out much of the House version, restoring all of the standard legal protections Colorado’s consumers have come to rely on, including dropping the requirement to prove anything beyond a reasonable doubt.

The Senate did, however, keep the requirement that dissatisfied homeowner notify a builder of the problems and give the builder a chance to make good. The Senate also capped triple damages at $250,000, as suggested by Colorado Attorney General Ken Salazar.

“The thing we agree on is the right to remedy – the whole concept that previous to filing a lawsuit, you have to give a builder a chance to fix a problem,” Rippy said.

He questioned the $250,000 cap set by the Senate. The House version at least allowed the homeowner to recover all costs, no matter how much, associated with the suit, including attorney’s fees, once the homeowner prevailed in court.

But Rippy said he understands that in order to reach a satisfactory compromise, he and co-sponsors Timothy Fritz, Bill Cadman and Al White will have to settle for much less than they hoped for. The bill is scheduled to go into a conference committee in the coming weeks.

Conference committees are made up of three legislators from the House and three from the Senate who meet to resolve major differences on legislation. The full House and Senate must vote and approve whatever compromise is reached before it is sent to the governor.

“I’m fully aware that I can’t make substantial changes and still hold the votes needed to get it passed,” Rippy said.

The source of the insurance crisis is apparently large condominium and single-family home projects on the Front Range. There have been instances where attorneys have bought a unit, stripped it down and found defects or work different from what was promised, and then filed class-action lawsuits on behalf of the homeowners association.

The practice began in California, but has since spread to Colorado, said Dennis Kirtland, an executive at Shaw Construction. “About four or five years ago, construction became an issue that attorneys would take on,” he said.

As a result, larger insurers have become increasingly reluctant to work with residential builders. Shaw dropped its long-term insurance carrier a few years ago when its policy was up for renewal. The insurer wanted the 42-year-old company to drop its residential work as a condition of renewal.

Kirtland said Shaw was in a pinch for several months before signing a new policy with C.N.A. Insurance. “It wasn’t a matter of cost, it was whether we could get insurance at all,” he said.

He also wondered how smaller, less established builders are faring as major liability carriers like American Family Insurance pull out of the state.

But at least one custom home builder in the valley said his rates haven’t changed radically in recent years. After hearing of the crisis other builders were describing, he said, “Maybe I was paying too much to begin with.”

[Allyn Harvey’s e-mail address is]

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