THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY PRESTON, CALTAGIRONE, D. COSTA, DeLUCA, JOSEPHS, KORTZ, PAYTON, READSHAW, K. SMITH AND YOUNGBLOOD, FEBRUARY 10, 2011

REFERRED TO COMMITTEE ON CONSUMER AFFAIRS, FEBRUARY 10, 2011  

AN ACT

Amending the act of October 17, 2008 (P.L.1645, No.132),

entitled "An act providing for the regulation of home

improvement contracts and for the registration of certain

contractors; prohibiting certain acts; and providing for

penalties," further providing for definitions; establishing

the Home Improvement Guaranty Fund; and providing for claims

against the fund, for procedure for submitting claims and for

reimbursement of fund.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 2 of the act of October 17, 2008

(P.L.1645, No.132), known as the Home Improvement Consumer

Protection Act, is amended by adding a definition to read:

Section 2.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

* * *

"Fund."  The Home Improvement Guaranty Fund established in

section 10.1.

* * *

Section 2.  The act is amended by adding sections to read:

Section 10.1  Home Improvement Guaranty Fund.

(a)  Establishment.--The Home Improvement Guaranty Fund is

established in the State Treasury and shall be administered by

the bureau in accordance with this act. All moneys deposited

into the fund shall not be considered general revenue of the

Commonwealth but shall be used only to effectuate the purposes

of this act.

(b)  Biennial fund fee.--Each contractor who applies for a

certificate, or renewal of a certificate, pursuant to this act

shall pay a fee of $100 biennially to the fund. The fee shall be

payable with the fee for an application for a certificate or

renewal of a certificate and shall be refunded in full in the

event the applicant is denied a certificate.

(c)  Minimum balance.--Payments received under subsection (b)

shall be credited to the fund which shall maintain a balance of

at least $2,000,000. If the bureau finds that, because of

pending claims, the amount of the fund may fall below

$1,000,000, the bureau shall assess each contractor $25. The

bureau may not make more than one assessment under this

subsection in any calendar year.

(d)  Failure to make payments.--Failure to make payments to

the fund as required by this act shall result in suspension of

registration. Barring the existence of other grounds for

suspension or revocation of registration, the contractor's

certificate of registration shall be reinstated upon full

payment of all the required fees.

(e)  Investment.--The moneys of the fund shall be invested

and the interest arising from the investments shall be credited

to the fund.

(f)  Waiver of biennial fund fee.--In the event that the

bureau finds that the fund is adequately funded, the bureau

shall, during the first month of each fiscal year, adjust or

waive any biennial fund fee for the fiscal year.

Section 10.2  Claims against fund.

(a)  Eligibility.--

(1)  An owner may be compensated from the fund if:

(i)  there is an actual loss that results from an act

or omission by a contractor in the performance of

services under a home improvement contract or a violation

of this act by a contractor as found by a court of

competent jurisdiction, upon the final determination of

or expiration of time for appeal in connection with any

such judgment; or

(ii)  the owner is prevented from collecting the

entirety of a final judgment as a result of the

contractor's filing for bankruptcy protection under

Federal law.

(2)  In the event the bureau and a contractor enter into

an assurance of voluntary compliance which requires payment

of restitution to an owner and the contractor fails to pay as

required by the terms of the assurance of voluntary

compliance, the bureau shall issue an order of payment from

the fund to the owner.

(3)  A payment made pursuant to an assurance of voluntary

compliance shall be considered a claim for purposes of

reimbursement of the fund and subsection (f) shall not be

applicable.

(b)  Acts of subcontractors and employees.--For purposes of

recovery from the fund, the act or omission of a contractor

includes the act or omission of a subcontractor or employee of

the contractor whether or not any express agency relationship

exists so long as the subcontractor or employee acted within the

scope of the home improvement contract.

(c)  Limitation on recovery.--

(1)  The bureau may not provide from the fund:

(i)  More than $10,000 to one owner for acts or

omissions of one contractor.

(ii)  More than $50,000 to all owners for acts or

omissions of one contractor unless, after the bureau has

paid out $50,000 on account of acts or omissions of the

contractor, the contractor reimburses the fund. In no

case shall any one contractor be indebted, at any one

time, to the fund for more than $50,000.

(iii)  An amount for any attorney fees, consequential

damages, court costs, interest, personal injury damages

or punitive damages, except as may be provided in an

assurance of voluntary compliance.

(2)  In addition to the limits specified in paragraph

(1), an owner may not recover from the fund more than the

owner's actual loss, to a maximum of $10,000, for a claim

made on one contract.

(3)  Nothing in this section shall be construed to

preclude an owner from recovering or seeking to recover from

a contractor:

(i)  the difference between the amount of the

judgment against the contractor received by the owner and

the amount actually paid to the owner from the fund; or

(ii)  the difference between the amount a contractor

agrees to pay to an owner under an assurance of voluntary

compliance and the amount actually paid to the owner from

the fund.

(4)  In the event an owner does not receive payment in

full of a judgment amount from the fund, the judgment shall

be deemed to be satisfied only to the extent of the payment

received, and the judgment shall continue in full force and

effect with respect to the amount still owed until the owner

receives payment in full.

(d)  Excluded claimants.--A claim against the fund based on

the act or omission of a particular contractor may not be made

by:

(1)  a spouse or other immediate relative of the

contractor, or of a party which holds a financial stake in

the business of the contractor;

(2)  an employee, officer, director, partner or other

party which holds a financial stake in the business of the

contractor; or

(3)  an immediate relative of an employee, officer,

director, partner or other party which holds a financial

stake in the business of the contractor.

(e)  Limitations period.--A claim must be made against the

fund:

(1)  within two years after the owner obtains an entry of

final judgment or decree against the contractor and all

appeal rights have expired or been exhausted; or

(2) in the case of an assurance of voluntary compliance,

within the later of two years of entry into such assurance or

one year after nonpayment according to the terms of the

assurance.

(f)  Offer of proof.--In order to recover from the fund an

owner must offer proof to the bureau that the owner has

exhausted all reasonable actions available at law and in equity

to collect the unpaid amount of a final judgment.

(g)  Partial payments for fund integrity.--In order to

preserve the integrity of the fund, the bureau may order payment

out of the fund of an amount less than the judgment amount or

the amount agreed to be paid in an assurance of voluntary

compliance. The balance remaining due to the claimant shall be

paid from the fund pursuant to subsection (h).

(h)  Special order of payment.--If the money in the fund is

insufficient to satisfy any duly authorized claim or portion

thereof, the bureau shall, when sufficient money exists in the

fund, satisfy the unpaid claims or portions thereof, in the

order that those claims or portions thereof were originally

determined.

(i)  Investigation by bureau.--

(1)  As provided in section 10.4, if the bureau pays any

amount from the fund as a result of a claim against a

contractor, the bureau may conduct an investigation to

determine if the contractor is possessed of assets liable to

be sold or applied in satisfaction of the claim on the fund.

(2)  If the bureau discovers any such assets, the bureau

may take any lawful action necessary for the reimbursement of

the fund.

(j)  Revocation caused by payment of claim.--

(1)  Except as otherwise provided under paragraph (2), if

the bureau makes a payment of an amount as a result of a

claim against a contractor, the bureau shall revoke the

certificate of the contractor and the contractor shall not be

eligible to receive a new or renewed certificate until that

contractor has repaid such amount in full, plus interest,

from the time the payment is made from the fund.

(2)  (i)  The bureau may permit a contractor to receive a

new or renewed certificate after the contractor has

entered into an agreement with the bureau in which the

contractor agrees to repay the fund in full in the form

of periodic payments over a set period of time.

(ii)  If the contractor fails to pay in accordance

with the terms of the agreement, the bureau shall

automatically suspend the contractor's certificate.

Section 10.3  Procedure for submitting claims.

(a)  Initial claim.--

(1)  In order to recover from the fund, a claimant must

submit to the bureau the documentation required under section

10.2(f), together with a copy of the judgment and evidence

that:

(i)  the judgment has not been appealed or a copy of

the assurance of voluntary compliance and a certification

that the contractor has failed to pay; or

(ii)  the owner has been prevented from collecting

the entirety of a final judgment as a result of the

contractor's filing for bankruptcy protection under

Federal law.

(2)  if paragraph (1)(ii) applies, the owner shall only

be entitled to collect from the fund the amount the owner was

prevented from collecting as a result of the filing.

(b)  Copy of claim to contractor.--

(1)  On receipt of a claim pursuant to this section, the

bureau shall send a copy of the claim to the contractor

alleged to be responsible for the actual loss.

(2)  The contractor shall file a response or objection to

the claim within 30 days of receipt of the notice of such

claim.

(3)  Failure to respond to the claim shall constitute a

waiver of any defense or objection to the claim.

(4)  The only defense a contractor may raise in his

response is a defense of payment in full of the claim.

(c)  General order of payment.--Except as otherwise provided

in this act, the bureau shall pay from the fund approved claims

in the order that they are submitted.

Section 10.4  Reimbursement of fund.

(a)  General rule.--After the bureau pays a claim from the

fund:

(1)  The bureau shall be subrogated to all rights of the

owner in the claim up to the amount paid.

(2)  The owner shall assign to the bureau all rights of

the owner in the claim up to the amount paid.

(3)  The bureau has a right to reimbursement of the fund

by the contractor for:

(i)  The amount paid from the fund.

(ii)  Interest on the amount at an annual rate of 5%

as adjusted by the Consumer Price Index on an annual

basis.

(b)  Deposit of recovered claims.--All money that the bureau

recovers on a claim shall be deposited in the fund.

(c)  Suit for nonpayment.--If, within 30 days after the

bureau gives notice, a contractor on whose account a claim was

paid shall fail to reimburse the fund in full, the bureau may

initiate an action against the contractor in a court of

competent jurisdiction for the unreimbursed amount.

(d)  Judgment.--The bureau is entitled to a judgment for the

unreimbursed amount if the bureau proves that:

(1)  A claim was paid from the fund on account of the

contractor.

(2)  The contractor has not reimbursed the fund in full.

(3)  The bureau directed payment based on a final

judgment of a court of competent jurisdiction or an assurance

of voluntary compliance.

(e)  Withholding of tax refund.--If a person is delinquent

for at least one year in making payments to the bureau for the

purposes of reimbursing the fund, the Department of Revenue

shall credit the amount of any refundable overpayment of tax

imposed by Article III of the act of March 4, 1971 (P.L.6,

No.2), known as the Tax Reform Code of 1971, against the

delinquency in respect to this act on the part of the person who

made the overpayment.

(f)  Bankruptcy proceedings.--For the purpose of excepting to

a discharge of an individual or business under Federal

bankruptcy law, the bureau shall be a creditor of the individual

or business for the amount paid from the fund.

Section 3.  This act shall take effect in 180 days.