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CA Contractors & Insurers Must Disclose Settlements

apartment construction

In January 2019, a new law went into effect in California that affects contractors, subcontractors, and their insurers. Senate Bill 1465 requires that final settlements valued at $1 million or more paid in response to claims of construction defects on multifamily residences be reported to the Contractors State License Board (CSLB).

Both contractors and subcontractors who perform work on rental residential projects are mandated to report to the CSLB judgment, settlement, or arbitration awards of $1 million or more that meet all of the following criteria:

  • The civil dispute that results in the settlement must have been filed after January 1, 2019;
  • The lawsuit must have resulted from a claim for damages caused by a structural failure, or risk of structural failure, of a multifamily rental residential structure;
  • The award must be final.

In cases where multiple parties are involved, if the contractor or subcontractor is found liable to pay more than $15,000 of the judgment/settlement/award, they must comply with the reporting requirements within 90 days of knowledge of the final settlement. Insurers who issue general liability, construction defect and/or professional liability policies for parties involved with residential rental projects are also required to notify the CSLB of payments made on behalf of their insured within 30 days of issuing the payment.

The written report issued to the CSLB must include:

  • Name and license number of the licensee(s);
  • Facts and date(s) of the reportable event;
  • Amount or value of the judgment, settlement, or arbitration award;
  • Title of the court action;
  • Court name;
  • Case, docket, or file number;
  • A copy of the judgment, settlement, or arbitration award;
  • Amount paid by the insurer and the identity of the payee (if an insurer);
  • Any additional information the party believes will assist the CSLB in reviewing the matter.

Once the report is received, the CSLB will review the facts to assess if further investigation is necessary to see if the licensee violated any of the CSLB laws. If so, disciplinary action may be taken.

This law is said to have been enacted to improve oversight of contractors and also increase the safety of structures of multifamily residential structures. For more information on reporting to the CSLB visit http://www.cslb.ca.gov/Media_Room/Industry_Bulletins/2019/January_2.aspx or call the CSLB at (800) 321-CSLB (2752).

About Business Consumer Alliance Business Consumer Alliance (BCA) is a non-profit company that started in 1928. The broad purpose of BCA is to promote business self-regulation. BCA's mission is achieved by assisting consumers in resolving complaints with businesses and using that complaint information, along with other relevant information such as customer reviews, to forecast business reliability. With community support, BCA can identify trustworthy and ethical businesses and warn the public to avoid unscrupulous businesses whose purpose is to defraud the marketplace. BCA also helps businesses promote themselves by providing services and tools to protect their business and reach out to their customers. BCA obtains its funding from member businesses who support the mission and purpose of the organization and who agree to abide by high standards of ethical business practices.