Settlement Disclosure Stakeholder Meetings

Welcome to the information page for stakeholder meetings CSLB is holding to address the issue of whether licensees should be required to disclose out-of-court settlements of civil or administrative actions, and binding arbitration awards or settlements. You can submit your comments online to CSLB below.

Background

On July 1, 2015, Senate Bill (SB) 465 was amended to require licensed contractors and insurance companies to report to the Contractors State License Board (CSLB) all civil action settlements or administrative actions that result in a settlement worth $50,000 or more, and all binding arbitration awards or settlements of $25,000 or more.

Sen. Jerry Hill (D-San Mateo) introduced this language “to address what we believe to be a loophole in state law exposed by the June 16, 2015 balcony collapse in Berkeley that killed six people and injured seven others. The company that constructed the apartment complex, Segue Construction Company, had a history of questionable work. Notably, over the past three years, the company paid out $26.5 million in legal settlements over construction defects. State law, however, does not require contractors to report defect settlement cases to the CSLB. Such disclosure requirements are routine for professionals such as architects, engineers and doctors.”

SB 465 remains in the Assembly Committee on Business and Professions and cannot be acted on until next January. Sen. Hill and Sen. Lori Hancock have requested that CSLB work with interested parties to determine which information licensees should be required to report, so that CSLB has the information it needs to protect the public.

Main Issues to Address

  • To what extent civil action settlements or binding arbitration awards should be disclosed to CSLB. Should all of them be disclosed, or just those over a certain amount, or just those that are substantially related to the qualifications, functions, and duties of a licensed contractor.
  • If disclosure is warranted, when should information be made available to the public. Should information be limited to when CSLB conducts an investigation and determines action should be taken?

Previously Expressed Concerns

  • The SB 465 requirement could result in tens of thousands of reports being submitted to and process by CSLB, with many providing little meaningful information.
  • The general contractor would be required to notify CSLB of a settlement, regardless of which party caused the underlying problem.
  • Construction defect complaints do not require the homeowner to verify the allegations, which could result in a significant number of settlements.
  • The types of claims that required reporting in SB 465 were overly broad and did not necessarily relate to the quality of the work.
  • It is not clear how CSLB will review and prioritize settlement reports.

What Happens Next?

At the conclusion of the stakeholder meetings, CSLB staff will report its findings and any recommendations to CSLB’s Enforcement Committee, and then to the full Board for consideration.

September 30, 2015 Stakeholder Meeting Webcast

Background Info

SB 465 Information
July 27, 2015 Letter Requesting CSLB Stakeholder Meetings


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