HF 3978

as introduced - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to commerce; regulating building contractors; strengthening the
protection provided by homeowner warranties; amending Minnesota Statutes
2004, sections 60A.08, subdivision 6, by adding a subdivision; 60A.198,
subdivision 2; 326.89, subdivision 2; 326.91, subdivision 1, by adding a
subdivision; 326.94, subdivision 2.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2004, section 60A.08, subdivision 6, is amended to read:

Subd. 6.

Bankruptcy deleted text begin or deleted text end new text begin , new text end insolvency new text begin , or dissolution new text end clause.

Every bond or
policy of insurance issued in this state insuring against either actual loss suffered by the
insured, and imposed by law for damages on account of personal injury, death, or injury
to property caused by accident, or legal liability imposed upon the insured by reason of
such injuries or death, shall, notwithstanding anything in the policy to the contrary, be
deemed to contain the following condition:

The bankruptcy deleted text begin or deleted text end new text begin , new text end insolvency new text begin , or dissolution new text end of the insured shall not relieve the
insurer of any of its obligations under this policy, and in case an execution against the
insured on a final judgment is returned unsatisfied, then such judgment creditor shall have
a right of action on this policy against the company to the same extent that the insured
would have, had the insured paid the final judgment.

new text begin EFFECTIVE DATE; APPLICATION. new text end

new text begin This section is effective the day following
final enactment and applies to claims arising on or after that date.
new text end

Sec. 2.

Minnesota Statutes 2004, section 60A.08, is amended by adding a subdivision
to read:

new text begin Subd. 15. new text end

new text begin Direct action. new text end

new text begin On any insurance policy of liability insurance issued
to a vendor, as defined in section 327A.01, subdivision 7, or to a home improvement
contractor, as defined in section 327A.01, subdivision 10, the injured person shall have
a right of direct action against the insurer within the terms and limits of the policy,
notwithstanding whether the policy of insurance sued upon was written or delivered in
Minnesota, and notwithstanding whether such policy contains a provision forbidding such
direct action, provided that the cause of action arose in Minnesota. The actions may be
brought against the insurer alone or against the insured and the insurer.
new text end

new text begin EFFECTIVE DATE; APPLICATION. new text end

new text begin This section is effective the day following
final enactment and applies to claims arising on or after that date.
new text end

Sec. 3.

Minnesota Statutes 2004, section 60A.198, subdivision 2, is amended to read:

Subd. 2.

Compliance with statutory provisions.

A person shall not offer, solicit,
make a quotation on, sell, or issue a policy of insurance, binder, or any other evidence of
insurance with an eligible or ineligible surplus lines insurer, except in compliance with
sections new text begin 60A.08 and new text end 60A.195 to 60A.209.

Sec. 4.

Minnesota Statutes 2004, section 326.89, subdivision 2, is amended to read:

Subd. 2.

Contents.

The application must include the following information
regarding the applicant:

(1) Minnesota workers' compensation insurance certificate;

(2) employment insurance account number;

(3) certificate of liability insurance new text begin , showing compliance with all requirements
of section 326.94, subdivision 2 new text end ;

(4) type of license requested;

(5) name and address of the applicant:

(i) name and address of the applicant's qualifying person, if other than applicant; and

(ii) if the applicant is a sole proprietorship, the name and address of the sole
proprietor; if the applicant is a partnership, the name and address of each partner; if the
applicant is a limited liability company, the name and address of each governor and
manager; if the applicant is a corporation, the name and address of each of the corporate
officers, directors, and all shareholders holding more than ten percent of the outstanding
stock in the corporation;

(6) whether the applicant, any employee, or qualifying person has ever been
licensed in this or any other state and has had a professional or vocational license refused,
suspended, or revoked, or has been the subject of any administrative action;

(7) whether the applicant, qualifying person, or any of the applicant's corporate or
partnership directors, limited liability company governors, officers, limited or general
partners, managers, all shareholders holding more than ten percent of the share of the
corporation that have been issued, or all members holding more than ten percent of the
voting power of the membership interests that have been issued, has been convicted
of a crime that either related directly to the business for which the license is sought or
involved fraud, misrepresentation, or misuse of funds; has suffered a judgment in a civil
action involving fraud, misrepresentation, negligence, or breach of contract, or conversion
within the ten years prior to the submission of the application; or has had any government
license or permit suspended or revoked as a result of an action brought by a federal, state,
or local governmental unit or agency in this or any other state;

(8) the applicant's and qualifying person's business history for the past five
years and whether the applicant, any employee, or qualifying person has ever filed for
bankruptcy or protection from creditors deleted text begin or deleted text end new text begin , new text end has any unsatisfied judgments against the
applicant, employee, or qualifying person new text begin ; or has been a partner, shareholder, or member
holding more than ten percent of the ownership interest or voting power in a partnership,
corporation, or limited liability company that avoided potential liability for claims
or possible future claims made under a warranty provided under section 327A.02 by
dissolving when the entity was otherwise financially solvent new text end ;

(9) where the applicant is a firm, partnership, sole proprietorship, limited liability
company, corporation, or association, whether there has been a sale or transfer of the
business or other change in ownership, control, or name in the last five years and the details
thereof, and the names and addresses of all prior, predecessor, subsidiary, affiliated, parent,
or related entities, and whether each such entity, or its owners, officers, directors, members
or shareholders holding more than ten percent of the stock, or an employee has ever taken
or been subject to an action that is subject to clause (6), (7), or (8) in the last ten years; and

(10) whether the qualifying person is the qualifying person for more than one
licensee.

For purposes of this subdivision, "applicant" includes employees who exercise
management or policy control over the residential contracting and remodeling activities in
the state of Minnesota, including affiliates, partners, directors, governors, officers, limited
or general partners, managers, all shareholders holding more than ten percent of the shares
that have been issued, a shareholder holding more than ten percent of the voting power
of the shares that have been issued, or all members holding more than ten percent of the
membership interests that have been issued or more than ten percent of the voting power
of the membership interests that have been issued.

The commissioner may require further information as the commissioner deems
appropriate to administer the provisions and further the purposes of this chapter.

Sec. 5.

Minnesota Statutes 2004, section 326.91, subdivision 1, is amended to read:

Subdivision 1.

Cause.

The commissioner may by order deny, suspend, or revoke
any license or may censure a licensee, and may impose a civil penalty as provided for
in section 45.027, subdivision 6, if the commissioner finds that the order is in the public
interest, and that the applicant, licensee, or affiliate of an applicant or licensee, or other
agent, owner, partner, director, governor, shareholder, member, officer, qualifying person,
or managing employee of the applicant or licensee or any person occupying a similar
status or performing similar functions:

(1) has filed an application for a license which is incomplete in any material respect
or contains any statement which, in light of the circumstances under which it is made, is
false or misleading with respect to any material fact;

(2) has engaged in a fraudulent, deceptive, or dishonest practice;

(3) is permanently or temporarily enjoined by any court of competent jurisdiction
from engaging in or continuing any conduct or practice involving any aspect of the
business;

(4) has failed to reasonably supervise employees, agents, subcontractors, or
salespersons, or has performed negligently or in breach of contract, so as to cause injury
or harm to the public;

(5) has violated or failed to comply with any provision of sections 326.83 to 326.98
or any rule or order under sections 326.83 to 326.98;

(6) has been shown to be incompetent, untrustworthy, or financially irresponsible;

(7) has been convicted of a violation of the State Building Code or, in jurisdictions
that do not enforce the State Building Code, has refused to correct a violation of the State
Building Code when the violation has been certified by a Minnesota licensed structural
engineer;

(8) has failed to use the proceeds of any payment made to the licensee for the
construction of, or any improvement to, residential real estate, as defined in section 326.83,
subdivision 17, for the payment of labor, skill, material, and machinery contributed to the
construction or improvement, knowing that the cost of any labor performed, or skill,
material, or machinery furnished for the improvement remains unpaid;

(9) has not furnished to the person making payment either a valid lien waiver as to
any unpaid labor performed, or skill, material, or machinery furnished for an improvement,
or a payment bond in the basic amount of the contract price for the improvement
conditioned for the prompt payment to any person or persons entitled to payment;

(10) has engaged in conduct which was the basis for a contractor's recovery fund
payment pursuant to section 326.975, which payment has not been reimbursed;

(11) has engaged in bad faith, unreasonable delays, or frivolous claims in defense of
a civil lawsuit arising out of their activities as a licensee under this chapter;

(12) has had a judgment entered against them for failure to make payments to
employees or subcontractors, and all appeals of the judgment have been exhausted or
the period for appeal has expired;

(13) if unlicensed, has obtained a building permit by the fraudulent use of a fictitious
license number or the license number of another, or, if licensed, has knowingly allowed
an unlicensed person to use the licensee's license number for the purpose of fraudulently
obtaining a building permit; deleted text begin or
deleted text end

(14) has made use of forged mechanics' lien waivers under chapter 514 new text begin ; or
new text end

new text begin (15) has been a controlling owner or part of a group of controlling owners of a
partnership, corporation, or limited liability company that dissolved when otherwise
solvent while homeowner warranties under chapter 327A had not yet expired, without
making reasonable provisions for payment of all potential and actual warranty claims new text end .

Sec. 6.

Minnesota Statutes 2004, section 326.91, is amended by adding a subdivision
to read:

new text begin Subd. 5. new text end

new text begin Ineligibility for license. new text end

new text begin An applicant or licensee is ineligible to obtain or
retain a license for a period of five years after the applicant or licensee:
new text end

new text begin (1) has been convicted of a crime involving fraud, misrepresentation, or misuse
of funds;
new text end

new text begin (2) has had a civil court judgment entered against the person for fraud or
misrepresentation; or
new text end

new text begin (3) has been a controlling owner or part of a group of controlling owners of a
partnership, corporation, or limited liability company that dissolved when otherwise
solvent while homeowner warranties under chapter 327A had not yet expired, without
making reasonable provisions for payment of all potential and actual warranty claims.
new text end

Sec. 7.

Minnesota Statutes 2004, section 326.94, subdivision 2, is amended to read:

Subd. 2.

Insurance.

new text begin (a) new text end Licensees must have public liability insurance with limits
of at least $100,000 per occurrence, which must include at least $10,000 property damage
coverage.

new text begin (b) Licensees that are residential builders or residential remodelers must have
public liability insurance that complies with paragraph (a) and must also have completed
operations insurance with a limit of at least $500,000 per occurrence that covers completed
operations, including statutory warranty claims under section 327A.02, for at least 12
years after completion of work. Coverage under this paragraph must comply with section
60A.08, subdivisions 6 and 15.
new text end

new text begin (c) new text end The insurance must be written by an insurer licensed to do business in this state.
The commissioner may increase the minimum amount of insurance required for any
licensee or class of licensees if the commissioner considers it to be in the public interest
and necessary to protect the interests of Minnesota consumers.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2006.
new text end