STAND. COM. REP. 2428

Honolulu, Hawaii

, 2004

RE: S.B. No. 2358

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection and Housing, to which was referred S.B. No. 2358 entitled:

"A BILL FOR AN ACT RELATING TO CONSTRUCTION CLAIMS,"

begs leave to report as follows:

The purpose of this measure is to establish a process for resolving construction disputes that provides a contractor with the opportunity to repair a construction defect prior to the dispute proceeding to litigation.

The Coalition of Hawaii Engineering and Architectural Professionals, Building Industry Association-Hawaii, Pacific Structural Consultants, Inc., and Land Use Research Foundation of Hawaii testified in support of this measure. The Department of Commerce and Consumer Affairs supported the bill's intent. The Community Associations Institute (CAI) and Neely and Anderson LLP opposed the measure. The Judiciary and Consumer Lawyers of Hawaii presented comments.

This measure establishes a process of resolving disputes over construction defects that provides a contractor with notice of the construction defect claim and an opportunity to repair the defect, and for submission of the dispute to nonbinding arbitration if the claim is rejected or cannot be settled. This measure also requires that construction contracts provide notice to customers of their rights and obligations under the process.

Your Committee finds that the intent of this measure is to facilitate the amicable and nonlitigious resolution of claims, enable property owners to more quickly regain the full use of affected structures, reduce the cost of general liability insurance coverage for contractors, and ultimately reduce the cost of construction for consumers in Hawaii.

Your Committee further finds that concerns have been raised about the proposed process by parties such as CAI, including concerns that:

(1) The time requirement for a claimant's response to a contractor's settlement offer places an unwarranted hardship on homeowners' associations that only convene on a periodic basis;

(2) Claimants may lack access to the information necessary to evaluate the reasonableness of a contractor's settlement offer; and

(3) A claimant's obligation to disclose the basis for the claimant's rejection of the contractor's settlement offer unduly prejudices the claimant's legal position and may require the disclosure of privileged communications.

Your Committee further finds that these and other concerns raised about the process merit further consideration, and that the affected parties should be provided with the opportunity to propose alternate language that addresses the concerns. Accordingly, in order to facilitate further review and discussion, your Committee has amended this measure by inserting a delayed effective date of July 1, 2030.

Additionally, your Committee has amended this measure by:

(1) Adding a definition for "mediation"; and

(2) Making technical, nonsubstantive changes for purposes of clarity, consistency, and style.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection and Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2358, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2358, S.D. 1, and be referred to the Committee on Judiciary and Hawaiian Affairs.

Respectfully submitted on behalf of the members of the Committee on Commerce, Consumer Protection and Housing,

____________________________

RON MENOR, Chair