The Florida Legislature has started
its annual 60 day session. This will be a difficult
one because of a combination of factors. Budget
issues will dominate the session because of the
class size amendment, the bullet train and the
revenue shortfalls. This combined with the "no
new taxes" position of the House and the Governor
will require some difficult decisions.
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There is a great deal of concern
about workers' compensation both as to cost and
availability. The Legislature seems poised to
try to do something about it. Last year elimination
of exemptions from workers' compensation coverage
for commercial work of a value in excess of $250,000
was approved. At about the same time a number
of insurance companies withdrew from the Florida
market citing low premium rates, creating serious
problems.
A committee headed by Representative
Dennis Ross was appointed by the Speaker of the
House to address these issues, but a bill has
not yet been introduced. We do know that there
will be attempts to abolish all exemptions for
construction with the exception of three for corporate
officers. The latest information is that a 10%
ownership interest will also be required for an
exemption.
Availability of coverage may be
addressed by changes in the Joint Underwriters
Association run by the State. This is the insurer
of last resort and will provide coverage to anyone
who cannot obtain it elsewhere. The problem is
that the JUA rates are about 200% the standard
rates. There is some discussion about reducing
this to 25%, but the insurance industry is opposing
the change.
There is also a move to restore what is called horizontal
immunity. Presently, all workers injured on a
construction site are covered by workers' compensation
(unless there is a valid exemption) and in return
the employer is immune from any tort action. A
worker for a subcontractor who is injured by a
co-worker may look only to the workers' compensation
system. If the same worker was injured by the
employee of another subcontractor, a tort action
can be brought against the subcontractor whose
negligence caused the injury. The rationale for
this change is to treat all injuries on a work
site the same with coverage only by workers' compensation
and not through tort lawsuits.
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OCIP (Owner Controlled Insurance
Program) and CCIP (Contractor Controlled Insurance
Program) have been a cause of great controversy.
A number of subcontractors have complained about
the additional administrative expense required
to participate in these programs. Where these
programs exist, they are mandatory. This results
in a reduced requirement for insurance coverage
which impacts a contractor's ability to negotiate
competitive insurance rates. The bills as presently
drafted would prohibit these entirely on public
projects. There is discussion of a compromise
which would restrict OCIP's and CCIP's to single
projects in excess of $75 million. The proposed
changes would also extend tail coverage on the
OCIP's and CCIP's to match tail coverage provided
by the standard insurance policies.
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Under existing law there is no
requirement that an owner provide a contractor
with notice of a warranty claim and an opportunity
to fix it. A bill has been filed which requires
notice to the contractor of any warranty claim
and that the contractor be given the opportunity
to cure any problem. At present this is limited
to residential construction.
Much of this is driven by the increasing
concerns about mold. Mold is a hot button issue
right now because of the size of damages that
can result, coupled with the exclusion or severe
reduction in coverage by insurance companies.
Another bill more directly addresses mold and
would require registration of mold abatement contractors.
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This bill extends the existing
prompt pay requirements for some public work to
community colleges, universities and all state
projects. It would require reduction of retainage
to 5% after 50% of the work on the project has
been completed. The result would be a 5% retainage
at the end of the job rather than the current
10%. The bill also has provisions to require an
single punch list and release of retainage as
a trade completes its part of the punch list.
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Problems have arisen with the bonds
required for public work by Section 255.05 of
the Florida Statutes. These bond forms have varied
wildly from one public entity to another. This
bill would require use of the statutory forms
by all public entities. It is supported by Associated
Builders and Contractors, Associated General Contractors
and the Florida Surety Association.
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Under Florida Statute Section 489.128
an unlicensed contractor may not sue for unpaid
contract amounts or enforce any lien rights. A
federal court in Tampa issued a ruling that a
general contractor could not recover the unpaid
balance of its contract because a subcontractor
was allegedly unlicensed apparently because it
did not have the Qualified Business Number required
by the Construction Industry Licensing Board.
It is estimated that as many as
50% of the construction companies have failed
to obtain the QB number. This bill would make
it clear that only the unlicensed contractor would
be affected as well as making it clear that not
having a QB number does not make an otherwise
licensed contractor unlicensed.
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Several bills have been filed in
an attempt to make it harder to get constitutional
amendments on the ballot. With the number of bills
that have been filed, it is difficult to tell
what direction this will take.
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This is a bill that would prohibit
the use of the minimum wage ordinances (often
referred to as Living Wage ordinances) that have
been required by some municipalities. These ordinances
mandate the minimum amount the contractor must
pay workers in order to perform work for the municipalities.
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School Boards often try to reduce
the cost of school construction by arranging to
purchase materials for the project to avoid the
sales tax that the contractor would have to pay.
However, this has created administrative problems
for both contractors and the School Boards and
complicates warranty issues. This bill would provide
a process to obtain the sales tax exemption without
requiring purchase by the School Board.
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A bill from the Florida Association
of Insurance Agents would prevent private owners
from requiring indemnification for its own negligence
from the contractor. That prohibition is presently
in place for public projects. This would require
that each party bear the burden of its own negligence.
Under the existing law one party can transfer
responsibility or indemnity for its own negligence
to another.
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Bills have been filed to extend
the time to comply with requirements for installation
of fire sprinklers in older buildings. This is
apparently meeting with some resistance.
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A bill has been filed in the Senate
that would make significant changes to the Construction
Lien Law. One would limit the recovery of those
not in privity with the owner to the amount owed
to the general contractor at the time any liens
are filed. This eliminates the owners obligation
to be sure that subs are paid. It would also shorten
the time for filing liens to 45 days. Both of
these are bad ideas.
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Associated General Contractors has
filed a suit against the State of Florida seeking
to have the Minority Business Enterprise programs
declared unconstitutional. This would do away
with preference programs based on race and gender.
Recent U.S. Supreme Court decisions have made
justification of these programs considerably more
difficult than in the past. Suits brought to end
these programs have been meeting with a lot of
success lately. We will keep an eye on this as
it develops.
If you need additional information on any of these bills, please contact
our office and we will be happy to assist you.
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