Bill Text: NJ A3961 | 2024-2025 | Regular Session | Introduced
Bill Title: Limits home improvement contractor from entering into contract with full indemnification provision.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced) 2024-03-04 - Introduced, Referred to Assembly Financial Institutions and Insurance Committee [A3961 Detail]
Download: New_Jersey-2024-A3961-Introduced.html
Sponsored by:
Assemblyman GABRIEL RODRIGUEZ
District 33 (Hudson)
SYNOPSIS
Limits home improvement contractor from entering into contract with full indemnification provision.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning liability between contractors and subcontractors for home improvements and amending P.L.2004, c.16.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 7 of P.L.2004, c.16 (C.56:8-142) is amended to read as follows:
7. a. On or after December 31, 2005, every registered contractor business who is engaged in home improvements shall secure, maintain and file with the director proof of a certificate of commercial general liability insurance in a minimum amount of $500,000 per occurrence and workers' compensation insurance unless exempted by law.
b. Every registered contractor business engaged in home improvements whose commercial general liability insurance policy or workers' compensation insurance policy is cancelled or nonrenewed shall submit to the director a copy of the certificate of commercial general liability insurance or workers' compensation insurance for a new or replacement policy which meets the requirements of subsection a. of this section as soon as is practicable following the cancellation or nonrenewal of the former policy, but in no case more than 10 days following the cancellation or nonrenewal of the former policy.
c. Every home elevation contractor business engaged in performing home elevations, in addition to the insurance required pursuant to subsection a. of this section, shall secure and maintain cargo or other insurance that specifically covers home elevation activities, in a minimum amount of $1,000,000 per occurrence to cover damages or other losses to the homeowner, lessee, tenant or other party resulting from a home elevation, except as otherwise provided in this subsection. The Director of the Division of Consumer Affairs in consultation with the Department of Banking and Insurance may promulgate rules and regulations to implement this subsection, which rules and regulations also may require that contractor businesses engaged in home elevations secure and maintain additional insurance of such kind and in such amounts as the director may determine in consultation with the Department of Banking and Insurance.
d. A home elevation contractor business, prior to entering into an agreement to perform a home elevation, shall provide proof of insurance to the homeowner including the issuing insurer, policy number, type, and amount of insurance coverage maintained by the contractor business in accordance with this section.
e. Every contractor business that is engaged in home improvement or home elevation services shall maintain, in effect during the entire period of registration:
(1) a compliance bond issued by one or more sureties authorized to transact business in this State;
(2) an irrevocable letter of credit issued by a bank; or
(3) securities, moneys or other security acceptable to the division to fulfill the requirements of this section.
f. The principal sum of the compliance bond, letter of credit, or securities, moneys or other security shall be a minimum of:
(1) $50,000 for the performance of services pursuant to a contract valued at more than $120,000 or for the performance of services, in the previous 12 months, for contracts valued at a minimum of $750,000;
(2) $25,000 for the performance of services pursuant to a contract valued between $10,000 and $120,000 or for the performance of services, in the previous 12 months, for contracts valued between $150,000 and $750,000; and
(3) $10,000 for the performance of services pursuant to a contract valued at less than $10,000 or for the performance of services, in the previous 12 months, for contracts valued less than $150,000.
g. The contractor business shall, from time to time, to the extent that claims are paid, promptly replenish the amount of the compliance bond, letter of credit, securities, moneys or other security maintained pursuant to paragraphs (1) through (3) of subsection f. of this section.
h. The compliance bond, letter of credit, or securities, moneys, or other security shall cover penalties assessed by the division for violations of P.L.2004, c.16 (C.56:8-136 et seq.).
i. The compliance bond, letter of credit, or securities, moneys, or other security shall not be payable for treble damage claims pursuant to P.L.1960, c.39 (C.56:8-1 et seq.).
j. The aggregate liability of the surety, bank, or issuer of securities, moneys or other security to all individuals for all breaches of the conditions of the compliance bond, letter of credit or the securities, moneys or other security shall not exceed the amount of the bond, letter of credit, or the securities, moneys or other security.
k. Every bond, letter of credit, or securities, moneys, or other security shall provide that cancellation or nonrenewal of the bond, letter of credit, or securities, moneys, or other security shall not be effective unless and until at least 10 days' notice of intention to cancel or nonrenew the bond, letter of credit, or securities, moneys, or other security has been received in writing by the contractor business from the surety, bank, or other issuer.
l. Dollar amounts required pursuant to this section for general liability insurance and for a compliance bond, letter of credit, or securities, moneys, or other securities may be adjusted by the division if a contractor business registered pursuant to section 3 of P.L.2004, c.16 (C.56:8-138) provides only limited specialty services.
m. Every contractor who is subject to the provisions of P.L.2004, c.16 (C.56:8-136 et seq.) shall be prohibited from:
(1) contracting for full indemnification from a subcontractor; and
(2) including any liability clause in a contract with a subcontractor for defects or poor workmanship which exceeds 50 percent indemnification.
(cf: P.L.2023, c.237, s.32)
2. Section 16 of P.L.2004, c.16 (C.56:8-151) is amended to read as follows:
16. a. Every home improvement contract for a purchase price in excess of $500, and all changes in the terms and conditions of the contract, shall be in writing. The contract shall be signed by all parties thereto, including the home improvement contractor licensed pursuant to P.L.2023, c.237 (C. ) and shall clearly and accurately set forth in legible form and in understandable language all terms and conditions of the contract, including but not limited to:
(1) The legal name, business address, and registration number of the contractor business, any contractor who will provide home improvement services, and the license number of the contractor licensed pursuant to P.L.2023, c.237 (C. );
(2) A copy of the certificate of commercial general liability insurance required of a contractor business pursuant to section 7 of P.L.2004, c.16 (C.56:8-142) and the telephone number of the insurance company issuing the certificate; [and]
(3) The total price or other consideration to be paid by the owner, including the finance charges; and
(4) A certification from the contractor that the contractor shall not contract for full indemnification from a subcontractor, and that any liability clause in a contract between a contractor and a subcontractor for defects or poor workmanship shall be limited to 50 percent indemnification.
b. On or after December 31, 2005, a home improvement contract may be cancelled by a consumer for any reason at any time before midnight of the third business day after the consumer receives a copy of it. In order to cancel a contract the consumer shall notify the contractor business of the cancellation in writing, by registered or certified mail, return receipt requested, or by personal delivery, to the address specified in the contract. All moneys paid pursuant to the cancelled contract shall be fully refunded within 30 days of receipt of the notice of cancellation. If the consumer has executed any credit or loan agreement through the contractor business to pay all or part of the contract, the agreement or note shall be cancelled without penalty to the consumer and written notice of that cancellation shall be mailed to the consumer within 30 days of receipt of the notice of cancellation. The contract shall contain a conspicuous notice printed in at least 10-point bold-faced type as follows:
"NOTICE TO CONSUMER
YOU MAY CANCEL THIS CONTRACT AT ANY TIME BEFORE MIDNIGHT OF THE THIRD BUSINESS DAY AFTER RECEIVING A COPY OF THIS CONTRACT. IF YOU WISH TO CANCEL THIS CONTRACT, YOU MUST EITHER:
1. SEND A SIGNED AND DATED WRITTEN NOTICE OF CANCELLATION BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED; OR
2. PERSONALLY DELIVER A SIGNED AND DATED WRITTEN NOTICE OF CANCELLATION TO:
(Name of Contractor Business)
(Address of Contractor Business)
(Phone Number of Contractor Business)
If you cancel this contract within the three-day period, you are entitled to a full refund of your money. Refunds must be made within 30 days of the contractor business's receipt of the cancellation notice."
(cf: P.L.2023, c.237, s.39)
3. This act shall take effect immediately.
STATEMENT
This bill provides that a contractor that is subject to the "Contractors' Registration Act" is prohibited from entering into a contract for full indemnification from a subcontractor. Under the bill, the term contractor includes home improvement contractors and home elevation contractors. The bill prohibits the contractor from entering into a contract with a liability clause between a contractor and a subcontractor for defects or poor workmanship which exceeds 50 percent indemnification.
The bill also requires a home improvement contractor who is subject to its provisions to certify, in every home improvement contract for a purchase price in excess of $500, that the contractor will not contract for full indemnification from a subcontractor, and that any liability clause in a contract between a contractor and a subcontractor for defects or poor workmanship will be limited to 50 percent indemnification.
