Quick Connecticut Legislative Update

Construction going on in the city.

Connecticut’s governor has recently signed two bills into law that pertain to the construction industry.

Public Act No. 16-35

According to Public Act No. 16-35, (Effective January 1, 2017), restoration and remediation work will fall within the definition of a “home improvement” pursuant to Conn. Gen. Stat. § 20-419. As a result, water, fire, and storm restoration and mold remediation contractors will have to register as Home Improvement Contractors and have contracts that meet all the requirements of the Home Improvement Act. As more fully explained in my other posts, the Home Improvement Act is an onerous piece of legislation that may bar a contractor’s right to recover the monies it is due simply because there is a technical defect in its contract. The Home Improvement Act is overly burdensome because it does not stop at invalidating the subject contract. If violated, all forms of recovery in law and in equity are prohibited. A contractor subject to the Home Improvement Act cannot even successfully file a mechanic’s lien if its contract does not have a required provision.

Notwithstanding the foregoing, Public Act No. 16-35 does take into account the fact that restoration and/or remediation work is often performed on an emergency basis. The act provides that, in the case of an actual emergency, the Chapter 740 Notice of Cancellation Rights may be waived through a “separate and dated signed personal statement in the insured’s handwriting describing the bona fide personal emergency requiring immediate remedy and expressly acknowledging and waiving the right to cancel within three business days.”

Raised Bill No. 5328

Signed into law on Friday, June 3, 2016, Raised Bill No. 5328 makes two changes to public works construction contracts. First, retainage is reduced from 10 percent to 7.5 percent. Second, the Raised Bill codifies a recent decision by the Connecticut Supreme Court.

In an issue of first impression, the Connecticut Supreme Court overturned a lower court ruling which held that a surety that does not respond to a payment bond claim within the 90 days provided by statute waived its rights to dispute the claim. The Raised Bill states that “The surety’s failure to discharge its obligations under this section shall not be deemed to constitute a waiver of defenses the surety or its principal on the bond may have or acquire as to the claim, except as to undisputed amounts for which the surety and claimant have reached agreement.” However, the Raised Bill goes to state that “If, however, the surety fails to discharge its obligations under this section, then the surety shall indemnify the claimant for the reasonable attorneys’ fees and costs the claimant incurs thereafter to recover any sums found due and owing to the claimant.” Thus, there is, at least, some penalty for a surety that does not follow the statutory requirements.

It does seem fair that there be some penalty for a surety that does not comply with the statutes. After all, a contractor that does not give notice within the time allowed by statute can no longer pursue its claim. Therefore, the surety should not be able to ignore the statutory time limits with impunity.

If you should have any questions about these bills or any pending legislation affecting the construction industry, please give me a call at (203) 640-8825.

Scott Orenstein