HOUSE FILE _____

BY  (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON SODERBERG)

A BILL FOR

An Act relating to residential contractors and providing a penalty.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

   Section 1.  NEW SECTION.  103A.71  Residential contractors.
   1.  As used in this section:
   a.  “Residential contractor” means a person in the business of contracting to repair or replace roof systems or perform any other exterior repair, replacement, construction, or reconstruction work on residential real estate or a person offering to contract with an owner or possessor of residential real estate to carry out such work.
   b.  “Residential real estate” means a new or existing building, including a detached garage, constructed for habitation by one to four families.
   c.  “Roof system” includes roof coverings, roof sheathing, roof weatherproofing, and roof insulation.
   2.  A residential contractor shall not advertise or promise to pay anything of value or rebate any insurance deductible or any portion thereof as an inducement to the sale of goods or services. A promise to pay anything of value or rebate any insurance deductible includes granting any allowance or offering any discount against the fees to be charged or paying an insured or a person directly or indirectly associated with the property any form of compensation, gift, prize, bonus, coupon, credit, referral fee, or other item of monetary value for any reason, including but not limited to permitting the residential contractor to display a sign or any other type of advertisement at the insured’s premises.
   3.  A person who has entered into a written contract with a residential contractor providing goods or services to be paid from the proceeds of a property and casualty insurance policy may cancel the contract prior to midnight on the fifth business day after the person has received written notice from the person’s insurer that all or part of the claim or contract is not a covered loss under the insurance policy. Cancellation shall be evidenced by the person giving written notice of the cancellation to the residential contractor at the address of the residential contractor’s place of business as stated in the contract. Notice of cancellation given by mail shall be effective upon deposit into the United States mail with prepaid postage, if properly addressed to the residential contractor. Notice of cancellation need not take a particular form, and is sufficient if the notice indicates, by any form of written expression, the intent of the insured not to be bound by the contract.
   4.  Before entering into a contract to provide goods or services to be paid from the proceeds of a property and casualty insurance policy, a residential contractor shall provide the insured along with the contract all of the following documents in substantially the following form:
   a.  The following statement in at least ten-point bold type:
  RIGHT OF CANCELLATION

  You may cancel this contract at any time before midnight on the fifth business day after you have received written notification from your insurer that all or any part of the claim or contract is not a covered loss under your insurance policy. See the attached notice of cancellation form for an explanation of this right.
   b.  A fully completed duplicate form which shall be attached to the contract, but easily detachable, and which shall contain the following statement in at least ten-point bold type:
  NOTICE OF CANCELLATION

  If you are notified by your insurer that all or any part of the claim or contract is not a covered loss under your insurance policy, you may cancel the contract by mailing or delivering a signed and dated copy of this cancellation notice or any other written notice of cancellation to (name of contractor) at (address of contractor’s place of business) at any time prior to midnight on the fifth business day after you have received such notice from your insurer. If you cancel the contract, any payments made by you under the contract will be returned to you within ten business days following receipt by the contractor of your cancellation notice.

  I hereby cancel this contract.

  ________________________

  Date

  ____________________________________

  Insured’s signature
   5.  Within ten days after a contract to provide goods or services to be paid from the proceeds of a property and casualty insurance policy has been canceled by notification pursuant to this section, the residential contractor shall tender to the person canceling the contract any payments, partial payments, or deposits made by the person and any note or other evidence of indebtedness. However, if the residential contractor has performed any emergency services, acknowledged by the person in writing to be necessary to prevent damage to the premises, the residential contractor shall be entitled to be paid the reasonable value of such services. Any provision in a contract to provide goods or services to be paid from the proceeds of a property and casualty insurance policy that requires the payment of any fee which is not for emergency services shall not be enforceable against any person who has canceled a contract pursuant to this section.
   6.  A residential contractor shall not represent or negotiate on behalf of, or offer or advertise to represent or negotiate on behalf of, an owner or possessor of residential real estate on any insurance claim in connection with the repair or replacement of roof systems, or the performance of any other exterior repair, replacement, construction, or reconstruction work on the residential real estate.
   7.  A residential contractor violating this section is subject to the penalties and remedies prescribed by this chapter.
   Sec. 2.  APPLICABILITY.  This Act applies to contracts entered into on or after the effective date of this Act.
EXPLANATION
   This bill prohibits a residential contractor from advertising or promising to pay anything of value or rebate any insurance deductible or any portion thereof as an inducement to the sale of goods or services. The bill specifies that such a promise to pay or rebate includes granting any allowance or offering any discount against the fees to be charged or paying an insured or a person associated with the property any form of compensation, gift, prize, bonus, coupon, credit, referral fee, or other item of monetary value for any reason, including permitting the residential contractor to display a sign or any other type of advertisement at the insured’s premises.
   The bill provides that a person who has entered into a written contract with a residential contractor to provide goods or services to be paid from the proceeds of a property and casualty insurance policy may cancel the contract prior to midnight on the fifth business day after the person has received written notice from the insurer that all or part of the claim or contract is not a covered loss under the insurance policy. The bill specifies that cancellation is evidenced by the person giving written notice of the cancellation to the residential contractor at the residential contractor’s address as stated in the contract. The bill provides that notice of cancellation given by mail becomes effective upon deposit into the United States mail with prepaid postage, if properly addressed to the residential contractor. The bill specifies that notice of cancellation need not take a particular form, and is sufficient if the notice indicates, by any form of written expression, the intent of the insured not to be bound by the contract.
   The bill provides that before entering into a contract to provide goods or services to be paid from the proceeds of a property and casualty insurance policy, a residential contractor must provide the insured with two documents, which must be formatted substantially as set out in the bill, along with the contract. The first document notifies the person of the person’s right to cancel the contract at any time before midnight on the fifth business day after receiving written notification from the person’s insurer that all or any part of the claim or contract is not a covered loss under the person’s insurance policy. The first document must direct the attention of the person to the second document, which must be attached to the contract. The second document is a cancellation notice which the person may return to the residential contractor to exercise the person’s cancellation rights as provided by the bill.
   The bill provides that within 10 days after a contract to provide goods or services to be paid from the proceeds of a property and casualty insurance policy has been canceled pursuant to the bill, the residential contractor must tender to the person any payments, partial payments, or deposits made by the person and any note or other evidence of indebtedness. The bill provides that if the residential contractor performed any emergency services which were acknowledged by the insured in writing to be necessary to prevent damage to the premises, the residential contractor shall be entitled to the reasonable value of such services. The bill provides that any provision in a contract to provide goods or services to be paid from the proceeds of a property and casualty insurance policy that requires the payment of a fee which is not for emergency services is unenforceable against any person who has canceled a contract pursuant to the bill.
   The bill prohibits a residential contractor from representing or negotiating on behalf of, or offering or advertising to represent or negotiate on behalf of, an owner or possessor of residential real estate on any insurance claim in connection with the repair or replacement of roof systems, or the performance of any other exterior repair, replacement, construction, or reconstruction work.
   A violation of the bill by a residential contractor is a simple misdemeanor pursuant to Code section 103A.21(3). A simple misdemeanor is punishable by confinement for no more than 30 days or a fine of at least $65 but not more than $625 or by both. The state building code commissioner may file a petition in the district court and obtain injunctive relief for any violation of the bill pursuant to Code section 103A.21(3).
   The bill applies to contracts entered into on or after the effective date of the bill.