The Residential Roofing Bill
A decade ago, Colorado enacted a new law as part of its Consumer Protection statutes that specified mandatory terms in roofing contracts to be paid by insurance proceeds to ensure transparency and protect homeowners. The Residential Roofing law was passed to protect consumers from roofing fraud following a surge in storm damage repair scams.
Given the current severe hail season, it is a good time to remember the details of this law. At Underhill Law we have seen misunderstandings or straight up abuse of this law by some. Below, I will discuss some of the key components of the law and how they connect in the roofing process. Remember, this all only applies to contracts for roofing work to be paid by insurance proceeds.
- Scope of the Work and Cost
All contracts must specify the scope of the work to be done. It is unclear, exactly, about how that scope needs to be laid out. It would be wise to make sure the contract outlines the broad scope of what is being done, such as removing the existing roof, installing the new roof, repairing gutters, fixing windows, and any other related services. But, does the contract need to provide a fixed and absolute scope and a fixed bid?
Probably not, and this is one of the problems with the law in my opinion. Many customers hire a roofer to perform work for a scope and price to be later finalized by an insurance company. The scope and price can both change due to supplements and discussion about what work is to be done. That means that, as a practical matter, it may be impossible for the parties to agree on a fixed scope and price, and may contracts instead identify the specific way in which both will be calculated or provide estimates only.
I strongly suspect the legislature was not thinking of this supplement process when the law was written. Instead, the statute seems to expect that the roofer offers a fixed price and the homeowner then goes to the carrier to see if that particular fixed prices is approved. That is why there is clause allowing cancellation when the claim is denied, I suspect; the legislature did not want homeowners on the hook for a fixed cost in excess of coverage. If the cost is linked to coverage, though, this risk never arises.
Regardless, any roofing contract should articulate some price and scope or be extremely clear about the method it will be calculated. A contract with no price term and no scope is likely unenforceable.
- Deposits Held in Trust.
The contract should include a term requiring that any deposit be held in trust at least until materials are delivered. In practice, this usually is not a problem because most roofers will ask for the deposit, typically the ACV check, to be paid at about the same time materials drop. But, if it is paid early, the roofer needs to take care to ensure that money is kept safe until it is allowed to utilize it.
- Provision for Contract Cancellation
The contract needs to allow for a cancellation period after signing and after a claim for roofing work is denied by the carrier per a specific provision of the statute. The earlier of these two periods is a common cooling off period, but the latter is more unusual. As I mentioned before, I think the thought process by the legislature was that if the homeowner was obligated to the roofer for a fixed price and that price was not paid by the carrier, the homeowner would be in trouble. But, that’s not how these projects usually go.
Instead, usually the claim for roofing work is approved to some degree. After all, if there was no hail damage in the first place the roofer probably wouldn’t have bothered to sign a contract. So, when a claim for roofing work is approved, but the scope or price is modified somewhat from what the roofer wanted, does that mean the claim was “denied” in part? I think that is a difficult argument to make where the roofer is ultimately only charging for what was approved.
Another wrinkle is where other parts of the job are denied. The cancellation right applies to roofing work specifically. If a separate claim for windows, fences, stucco, or something else is denied, that probably doesn’t give rise to the cancellation right.
- Prohibition of Waiving Deductibles
The contract must not pay, waive or rebate an insurance deductible for a property. Instead, the homeowner should expect to pay the deductible to the roofer regardless. If a roofer proposes waiving the deductible to induce a homeowoner to sign a contract, that is a very bad sign.
- Insurance Information
The contract should include contact information for the roofer’s insurance carrier. The law is not clear on whether this should be a phone number, address, or email address. At a minimum, make sure the contract has the name of the carrier and some way of getting in touch with it.
project, especially those that were not included in the initial estimate.
As with scope of work and cost, the contract needs to specify a date of service but it is very common that contracts will note this date is an estimate only. Particularly if the parties need to wait for the insurance company to approve supplements, this date may be outside of the parties’ control.
A good understanding of these requirements is invaluable for both homeowners and contractors involved in roofing repair projects following hail damage. One of the best ways to get along in a project like this is for both sides to understand and respect the terms of the deal. Please consult with a professional for advice tailored to your situation, as this blog post provides a general overview and may not encompass all requirements. If you need specific help on a roofing contract, give the best Denver Business Attorney, Underhill Law a call for a consultation.