Colorado’s Construction Professionals in Their Own Words: HB 10-1394 Raised Our Insurance Premiums
March 18, 2015
In 2010, the construction industry was willing to accept increased insurance premiums in exchange for insurance policies that actually provided coverage for construction defects. Now, the construction industry is trying to use the increased premiums as a justification for enacting laws that make it more difficult for homeowners to hold construction professionals accountable for their own shoddy workmanship.
In 2010, builders lobbied to pass HB 10-1394 which proposed to amend insurance law to increase coverage for construction defects. At the legislative hearings, a representative from the Rocky Mountain Chapter of the Associated Builders and Contractors testified in favor of the Bill:
There is concern, obviously, that in terms of increase of premiums. But overwhelmingly what we have heard back from our members is they’re better to have slightly or increased premiums than to have no coverage.[1]
Subcontractors opposed the Bill arguing that it would make insurance unaffordable and drive carriers from the Colorado market:
If passed, you will see an exodus of insurance companies leaving the state, which in turn will drive premium costs through the roof. Many construction companies will be unable to obtain insurance and will be available only at a price far beyond the reach of most small and medium sized subcontractor businesses. This bill encourages poor workmanship and lower safety standards by requiring insurance companies’ to cover improperly performed work.[2]
A prominent defense law firm described the legislative hearings on HB 10-1394:
Some construction professionals testified during the legislative hearings that the Act might result in premium increases, the withdrawal of some insurers from the market, and stricter underwriting requirements, but they explained that the greater certainty and fairness the Act would afford was worth this cost.[3]
The Colorado legislature passed HB 10-1394, giving Builders what they asked for.
After the HB 10-1394 passed, another prominent law firm that represents construction professionals wrote an article applauding the new law:
While certain insurers have announced an intent to vacate the Colorado construction market as a result of the new law, we believe that these insurers never intended to provide coverage for construction defect claims. As such, the general liability policies these insurers issued had questionable value, at best, for construction professionals, and the failure of these insurers to disclose their intent not to cover construction defect claims both surprised and caused problems for many construction professionals involved in construction defect claims. The net result of HB 10-1394 should be that Colorado’s insurance market is left only with insurers willing to cover a construction professional’s primary risk – construction defects.[4]
The Builders got what they asked for in 2010 and now they are using their increased insurance premiums as an excuse to take away homeowner rights.
[1] April 28, 2010 Hearing transcript from House Bill 1394 at p. 41.17-21.
[2] http://www.insurancejournal.com/news/west/2010/04/28/109339.htm
[3] http://www.coloradoconstructionlitigation.com/2010/07/hb-10-1394-new-law-governing-insurance.html