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Legislative Updates

In collaboration with ASAC, as well as several other subcontractor associations, I am pleased to report that two bills URCA actively lobbied were signed by the Governor and chaptered in to law during the first year (2017) of the current two year session.

SB 92 (Bonta) extends an existing law sunset date from January 1, 2018 to January 1, 2023. This law authorizes that the retention proceeds withheld from any payment by an awarding public entity from the original contractor, by the original contractor from any subcontractor and by a subcontractor from any other subcontractor not to exceed 5% unless there is a finding prior to the bid that the project is “substantially complex” and requires a higher retention.

AB 1223 (Caballero) requires, within ten days of making a construction contract payment, a state agency to post on its internet website the project for which the payment was made, the name of the construction contractor or company paid, the date the payment was made, the payment application number or other identifying information and the amount paid. This law provides more transparency regarding payments made by state agencies to prime contractors and allow subcontractors to be paid for work performed as mandated by a contract with the prime contractor in a more expeditious manner.

The top legislative priority for URCA, during the second year (2018) of the current legislative session, is co-sponsoring with ASAC a “wrap up” insurance bill (SB1077), which Senator Wilk has agreed to author.
A major problem for subcontractors contemplating bidding on a “wrapped insurance” project, whether it be controlled by the owner (OCIP) or prime contractor (CCIP) is that the plan sponsor does not always disclose the insurance coverage terms and subcontractors are left in the dark as to the uninsured risk exposure they undertake as a participant of a “wrapped project.”  

Pursuant to Section 2 (a) (b) (c) (d) of the URCA/ASAC bill, the owner, builder or prime contractor obtaining the wrap-up insurance policy shall disclose the total amount or method of calculation of any credit or compensation for premium required from a subcontractor for that wrap-up policy in the contract documents. The contract documents shall disclose (1) the policy limits; (2) the scope of the coverage; (3) the policy term; (4) the basis upon which the deductible or occurrence is triggered by the insurance carrier; if the policy covers more than on work of improvement, the number of units, if any, indicated on the application for the insurance policy; (5) a good faith estimate of the amount of available limits remaining under the policy as of a date indicated in the disclosure obtained from the insurer. Furthermore, if the owner, builder or prime contractor obtaining the wrap-up insurance policy does not disclose the total amount or method of calculation of the premium credit or compensation to be charged to the participant prior to the time the participant submits its bid, the participant shall not be legally bound by the bid unless that participant has the right to increase the bid up to the amount equal to the difference between the amount the participant included for insurance in the original bid and the amount of the actual bid credit required by the owner, builder or prime contractor obtaining the wrap-up insurance policy.

Only on private residential projects are subcontractors guaranteed sufficient disclosure of “wrap-up” insurance terms. There is no good reason for treating commercial or public works projects differently. This bill would apply a standard set of disclosure requirements for all “wrap-up” insurance projects.

The Senate Rules Committee has not yet assigned the bill to its “Committee of Origin” but that will be established before the end of February and committee hearings will begin in March. Stay tuned for updates as the bill moves forward.


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