The CLASC & SB 1271

The Construction Liability Apportionment Study Committee – The CLASC

The CLASC - Background

In the 2018 legislative session, Senator Karen Fann introduced legislation that sought to put an end to overreaching indemnity clauses that hold contractors responsible for the negligence of others. Existing law, which has been on the books for over 20 years, prohibits this unfair practice in public projects, and her legislation would have mirrored that law in private projects.

The introduced version of the bill included a “legislative intent clause” that clearly explained the objective of the proposal. To review the intent clause included in the bill, please click HERE (see page 3, lines 2 through 29).

Senator Fann’s legislation, however, was opposed by a number of organizations. In light of this substantial opposition, Senator Fann and proponents of the bill agreed to amend the legislation to form the Construction Liability Apportionment Study Committee – or the CLASC.

The CLASC was statutorily charged with studying and finding solutions for the following:

1. The use of an indemnity provision in construction contracts. 2. The allocations of liability based on degrees of fault. 3. The assignment of financial responsibility to negligent parties. 4. The opportunity to address and remedy alleged construction defects prior to litigation. 5. The frequency of construction defect litigation. 6. The affordability of insurance costs associated with construction claims.

The CLASC – Legislative Recommendations

The CLASC is comprised of six legislators - three members of the Arizona State Senate and three members of the Arizona House of Representatives.

The CLASC held public hearings in the fall of 2018, and adopted formal recommendations aimed at improving Arizona’s construction industry.

To review these recommendations – which were formally adopted by the CLASC and then shared with the Governor, the President of the Senate and the Speaker of the House – please click HERE (see page 2 from the minutes of the meeting).

The CLASC – Producing Solutions for Arizona Contractors Large and Small

The recommendations adopted by the CLASC were further refined by various stakeholders and included in SB 1271, a bill introduced by Senate President Karen Fann at the onset of the 2019 legislative session.

President Fann successfully championed SB 1271 through the legislative process, and Governor Doug Ducey signed SB 1271 into law on April 10, 2019.

This landmark legislation accomplishes the following:

SB 1271 – Getting Homes Repaired

SB 1271 amends the Purchaser Dwelling Act to require subcontractor notice at the onset of a claim that alleges construction defects. Prompt notice will provide subcontractors with as much advance notice as possible to coordinate and make the requested repairs, heading off lengthy and complex litigation.

SB 1271 provides homeowners with greater flexibility in coordinating the requested repairs by providing homeowners with a process to have the original subcontractor perform the repairs, or a different subcontractor altogether. If the homeowner selects a different subcontractor, the new subcontractor’s liability in performing the repairs is limited only to the subcontractors’ scope of work. This will help incentivize other subcontractors to make the requested repairs, once again heading off lengthy and complex litigation.

SB 1271 also requires the homeowner's notice to the seller to provide sufficient detail to identify the alleged construction defects, including the nature, location and impairment to the home. Another change that will help contractors better identify and repair the alleged construction defects, and avoid lengthy and complex litigation.

SB 1271 – A Streamlined Process

SB 1271 establishes a streamlined process for the resolution of construction defect claims.

The bill allows for the bifurcation of dwelling actions to dismiss claims without merit, release parties without fault and assign any remaining financial responsibility based on relative degrees of fault. Given the complexity of multi-party dwelling actions, these changes will simplify and accelerate the process.

Establishing a process that identifies each party involved and allocates liability on a pro rata basis (based on degrees of fault) will also help ensure that the process is efficient, economical and convenient for all parties involved.

SB 1271 – Proportional Liability

SB 1271 establishes proportional liability for homebuilders and residential construction contractors by limiting the scope of permissible indemnity agreements. This single change will ensure that responsible parties each pay their respective share of any loss, and that each share is based on the extent of fault attributable to that party.

SB 1271 – Awarding Attorney Fees

SB 1271 allows a court to award attorney fees to the prevailing party on a contested issue by contested issue basis. The bill also provides for the recovery of expert witness fees in cases involving a single homeowner. This approach will help reign in existing incentives to incur excessive fees for minimal defects.

SB 1271 – Continue to Improve Arizona's Construction Industry

The recommendations included in SB 1271 speak to the success of the CLASC and these stakeholder-driven discussions.

SB 1271 also extends the CLASC for one additional year, which will allow stakeholders to continue to identify solutions to the issues impacting Arizona homeowners and contractors.

To view the final version of SB 1271 that was signed by the Governor, please click HERE.

Please be sure to refer back to the Arizonan's for Fair Contracting website for updates, and don't forget to contact your legislators to express your support for President Fann and the CLASC's ongoing efforts!

And if you would like to thank the members of the CLASC, you can contact them here:

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