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PENNSYLVANIA CONSUMERS WIN - BUILDER'S ATTEMPT TO REGULATE BUYERS VETOED
Saturday, 18 March 2006

THE SCANDLOUS BILL THAT BEGAN IN TEXAS IS KILLED IN PENNSYLVANIA

Governor Vetoes Residential Construction Dispute Resolution Act After State's AG Says It's Unconstitutional
"The proponents of this bill suggest that it would afford both contractors and consumers equal opportunity to resolve their disputes without having to resort to expensive litigation," the Governor said in his veto message. "In fact, I believe this bill has the potential to cause both parties to become more involved in litigation, requiring them to pay unnecessary legal bills and, ultimately, driving up the cost of builders' insurance and new homes as a result." Governor Rendell said the bill failed to address the real reasons why liability insurance premiums are increasing for homebuilders and contractors.

Pennsylvania Governor Rendell Vetoes Residential Construction Dispute Resolution Act After State's AG Says It's Unconstitutional
Friday March 17, 4:35 pm ET

 
Says Disputes Would Demand Expensive Legal Assistance

 

HARRISBURG, Pa., March 17 /PRNewswire/ -- Governor Edward G. Rendell today vetoed House Bill 1467, the so-called Residential Construction Dispute Resolution Act, after state Attorney General Tom Corbett said the legislation was unconstitutional.

"The proponents of this bill suggest that it would afford both contractors and consumers equal opportunity to resolve their disputes without having to resort to expensive litigation," the Governor said in his veto message. "In fact, I believe this bill has the potential to cause both parties to become more involved in litigation, requiring them to pay unnecessary legal bills and, ultimately, driving up the cost of builders' insurance and new homes as a result."

Governor Rendell said the bill failed to address the real reasons why liability insurance premiums are increasing for homebuilders and contractors.

"Pennsylvania's homebuilders bring pride to our state and, of course, their great craftsmanship and productivity have been key ingredients in our recent economic turnaround. I remain willing and open to addressing real barriers to progress faced by this great industry.

"Pennsylvanians would be well served by legislation that addresses many of the legitimate concerns raised by homebuilders and that creates a balance by imposing a registration and reporting requirement and a victim's compensation fund. I look forward to working with our fine homebuilders and consumer organizations to help such a law become a reality."

The Rendell Administration is committed to creating a first-rate public education system, protecting our most vulnerable citizens and continuing economic investment to support our communities and businesses. To find out more about Governor Rendell's initiatives and to sign up for his weekly newsletter, visit his Web site at: http://www.governor.state.pa.us.

EDITOR'S NOTE: A copy of Governor Rendell's veto message is attached, as is a copy of Attorney General Tom Corbett's opinion.

 

 <strong><font color="#000000">TO THE HONORABLE HOUSE OF REPRESENTATIVES
    OF THE COMMONWEALTH OF PENNSYLVANIA:</font></strong> I am returning House Bill 1467 without my approval.

I do so because the Attorney General has determined that, as written, this bill does not comport with the Constitution of the Commonwealth of Pennsylvania. The Office of General Counsel concurs in his opinion, and I believe his opinion is based on sound interpretation and reasoning. I have attached General Corbett's opinion to this message.

I also return this bill because I have seen no evidence, in Pennsylvania, of a present problem with homebuilder liability insurance costs that would require a bill so far-reaching in scope and effect. The proponents of this bill suggest that it would afford both contractors and consumers equal opportunity to resolve their disputes without having to resort to expensive litigation. In fact, I believe this bill has the potential to cause both parties to become more involved in litigation, requiring them to pay unnecessary legal bills and, ultimately, driving up the cost of builders' insurance and new homes as a result.

While I am concerned about the Constitutional issues discussed in General Corbett's opinion, I also spent many hours studying the issues presented to me by those who proposed the bill, as well as those who asked me not to sign it. I listened carefully to the views of the representatives of the homebuilding industry who came to see me. I read their documents and examined the data they provided. I found that while some homebuilders, in fact, are facing increases in insurance liability costs, these increases are not a result of increased numbers of lawsuits - at least not in our state. Rather, they are a result of trends in the insurance and housing industry that are not addressed by House Bill 1467. Moreover, those who attempted to persuade me of the merits of this bill acknowledged that those homebuilders who have mandatory arbitration clauses in their contracts are afforded the same, if not greater, protections as those outlined in House Bill 1467. Thus, each homebuilder could include mandatory arbitration language in every contract and thereby accomplish as much, if not more, than this bill does.

I also considered the views of citizens who wrote to me on this issue, particularly those who are dealing with loss of equity due to the actions of the few unscrupulous contractors who prey on the unwary. In fact, in this review, I became convinced that a law to register contractors and homebuilders, accompanied by appropriate public reporting requirements, is critical to boosting the protection our citizens expect and deserve their government to provide. I also believe we need to legislatively establish a fund to compensate victims for damages caused by unscrupulous builders who do not have insurance and cannot, or will not, pay for the full value of the problems they create.

Pennsylvania's homebuilders bring pride to our state and, of course, their great craftsmanship and productivity have been key ingredients in our recent economic turnaround. I remain willing and open to addressing real barriers to progress faced by this great industry. Likewise, I took an oath to ensure that Pennsylvanians are protected from the vagaries of our laws and our processes when either serves narrow interests. Pennsylvanians would be well served by legislation that addresses many of the legitimate concerns raised by homebuilders, and that creates a balance by imposing a registration and reporting requirement, and a victim's compensation fund. I look forward to working with our fine homebuilders and consumer organizations to help such a law become a reality.

 

 Sincerely,
 
                                      /s/
                                      Edward G. Rendell
                                      Governor
 
                                   *******
 
                         COMMONWEALTH OF PENNSYLVANIA
                          OFFICE OF ATTORNEY GENERAL
                             HARRISBURG, PA 17120
 
 
    TOM CORBETT
    Attorney General
                                                             March 14, 2006
 
    The Honorable Edward G. Rendell
    Governor
    Room <font color="#333333">225</font>, Main Capitol Building
    Harrisburg, PA <font color="#333333">17120</font> Dear Governor Rendell:

You have requested our opinion pursuant to Section 204(a) of the Commonwealth Attorneys Act, 72 P.S. 732-204(a), regarding the constitutionality of House Bill No. 1467 (HB1467), which has been passed by both houses of the General Assembly and presented to you for approval or veto. Upon careful review, and after consulting with the Office of General Counsel, we have concluded that HB1467 violates Article III, Section 18 of the Pennsylvania Constitution, and that its constitutionality under Article V, Section 10(c) is suspect.

Article III, Section 18 authorizes the General Assembly to enact workers compensation laws, but provides otherwise, in relevant part, that "in no other cases shall the General Assembly limit the amount to be recovered for injuries resulting in death, or for injuries to persons or property...."

HB1467 would establish a mandatory procedure for claiming damages or other relief against a contractor because of a construction defect in a dwelling. The claimant would be required to follow the procedure prior to filing a lawsuit and as a condition of recovering the full amount of damages to which the claimant would be entitled by law upon successful prosecution of such lawsuit. The bill provides in Section 4 that "[t]his act shall not apply to any claim for personal injury or death." The bill does not similarly exempt a claim for injury to property. The bill proceeds in Section 5(h) to limit the amount that a claimant may recover in a lawsuit seeking damages or other relief on account of a construction defect in a dwelling.

The limit set by Section 5(h) is conditional in that a claimant may recover the full amount of damages to which the claimant would be entitled by law if, in the mandatory procedure, the contractor offers the claimant either no monetary settlement or repair or a monetary settlement or repair that a judge or jury later determines to have been unreasonable. A conditional limitation, particularly one that hinges on so tenuous a thread as a claimant's prediction of how a judge or jury later will view the reasonableness of a contractor's offer, nonetheless is a limitation on the amount that a claimant may recover for an injury to property, which Article III, Section 18 prohibits.

In Singer v. Sheppard, 464 Pa. 387 (1975), the Pennsylvania Supreme Court rejected an Article III, Section 18 challenge to a provision of the No-Fault Motor Vehicle Insurance Act that eliminated recovery in tort for "non-economic damages" for a defined class of accident victims. Id. at 396-397. Observing that the Act, rather than restricting damages, created two classes of accident victims, each with different, but unlimited, compensable damages, the Court held that "[n]othing in Article III, Section 18 prevents the abolition or modification of a cause of action." Id at 397. HB1467 neither abolishes nor modifies any cause of action; thus Singer is inapposite.

The Supreme Court has had little occasion to discuss the purpose of Article III, Section 18. In Singer, the Court said that the original purpose of Section 18 was to invalidate a statute that had imposed absolute dollar maximums on the damages recoverable by a negligently injured plaintiff. Id. at 396. In DeJesus v. Liberty Mutual Insurance Company, 439 Pa. 180, 184 (1970), the Court said that "the purpose of Section 18, as amended, was to permit the General Assembly to enact a workmen's compensation program, but to preclude the enactment of general legislation covering injuries other than those arising in the course of employment." Both statements were context-specific; neither affords much assistance in our review of HB1467.

As Commonwealth Court has explained regarding the construction of provisions of the Pennsylvania Constitution by the courts:

 

 <font color="#333333">&quot;the fundamental rule of construction which guides us is that the
       Constitution's language controls and must be interpreted in its
       popular sense, as understood by the people when they voted on its
       adoption.&quot; Moreover, the general principles governing the construction
       of statutes apply also to the interpretation of constitutions. Thus,
       when the language of a constitutional provision &quot;is clear upon its
       face, and when standing alone it is fairly susceptible of but one
       construction, that construction must be given it.&quot;</font>
 

Jubelirer v. Pennsylvania Department of State, 859 A.2d 874, 876 (Pa. Cmwlth. 2004), aff'd, 582 Pa. 364 (2005) (citations omitted).

We, too, must be guided by the language of Article III, Section 18, interpreted in its popular sense, which admits of but one interpretation: that the General Assembly may not limit the amount that may be recovered for injuries resulting in death or for injuries to persons or property. HB1467 limits the amount that may be recovered for injuries to property because of a construction defect in a dwelling; it is therefore, in our opinion, unconstitutional.

Article V, Section 10(c) provides that "the Supreme Court shall have the power to prescribe general rules governing practice, procedure and the conduct of all courts...." The Supreme Court has interpreted this provision as conferring upon it exclusive power to prescribe the rules of practice and procedure in all actions in the Pennsylvania courts. Payne v. Department of Corrections, 582 Pa. 375 (2005).

HB1467 provides in Section 3(a) that "in every action subject to this act, the claimant shall, no later than 75 days before initiating an action against a contractor, provide service of written notice of claim on the contractor" and in Section 3(b) that "service of the notice of the claim shall be the equivalent of service of a lawsuit or demand for arbitration with respect to imposing on the contractor a legal obligation to pay as damages the cost of any repairs and/or monetary payment made to settle the claim." (emphasis added).

By making service of a written notice of claim the equivalent of service of a lawsuit, HB1467 arguably makes the mandatory procedure that follows, the provisions of which are conspicuously procedural in tone and effect, procedural within the meaning of Article V, Section 10(c). See, e.g.: Section 3(c) (claimant to provide contractor with evidence): Section 5(a) (content of claimant's notice of claim); Section 5(b) (contractor to serve written response to notice of claim within 15 days); Section 5(d) (contractor to provide written response, with discoverable evidence, within 15 days of inspection or testing): Section 5(e) (claimant barred from initiating action without in-person meeting with contractor. Having concluded that HB1467 violates Article III, Section 18, we needn't render a definitive opinion as to whether it also violates Article V, Section 10(c). It is sufficient to observe that the constitutionality of HB1467 under Article V, Section 10(c) is suspect.

In summary, it is our opinion, and you are so advised, that HB1467 violates Article III, Section 18 of the Pennsylvania Constitution, and that its constitutionality under Article V, Section 10(c) is suspect. Since our opinion is rendered in aid of your decision to approve or veto HB1467, our advice is not binding.

 

 Sincerely,
 
                                     /s/
                                     TOM CORBETT
                                     Attorney General
 
    cc: Honorable Barbara Adams
 
 
 
    CONTACT:
    Kate Philips
    717-783-1116

 



Source: Pennsylvania Office of the Governor
 
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