Tuesday, April 24, 2012

Iowa Proposes New Rules for Residential Contracts

At the end of last week the Iowa Senate passed an insurance industry bill purporting to protect homeowners.

The Iowa Senate Bill SF466 is in response to "unscrupulous residential contractors" nicknamed "storm chasers that chase major storms from state to state in order to perform repairs on homeowners that suffer damage as a result of the storms' furry. In the worst instances, the contractors suggest repairs beyond what are needed, demand up-front payments, perform poor quality work and leave the state before any action can be taken.

The bill was introduced to curb these practices. Prohibitions and requirements contained in the proposed bill are as follows:

1. Prohibits a residential contractor from holding itself out as an insurance adjustor
2. A contractor cannot promise to pay the home owners' deductible. (Yes, the insurance industry couldn't resist protecting itself in a bill designed to protect homeowners)
3. Residential contractors must give the customer written notice at the signing of the contract that the conract is binding whether or not the homeowner's insurance company agrees to pay for the work completed. Without this notice, the contract is void.

Now for the legislative wrangling. According to Thomas E. Stanberry & Jessica S. Harder of the Government Relations Report, "The bill passed the Senate in 2011 with a vote of 48-2. The House added the contract voiding language, passed the amended bill 95-1 and sent it back to the Senate. The Senate refused to consider the bill without amending it to include language proposed by the State Attorney General reinforcing that the Iowa Consumer Fraud Act applied to the residential contractor’s behavior. After the insurance industry agreed to the AG’s proposed language the Senate passed the amended bill 47-2 and returned it to the House. The House generally does not favor consumer legislation such as SF466 or the Iowa Consumer Fraud Act and is negotiating with the AG and the insurance industry over the notice requirement. The outcome of the negotiations will be clear this coming week."

Whew! Legislatures at work always make me tired...and disgruntled. But we'll leave that for another post.

For more information on mechanics lien rights in Iowa, click here.

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