Cap on builder fines wins support: Panel approves limiting payouts to homeowners

By Peggy Lowe
Denver Post Staff Writer

Homebuilders lost their exemption to the state Consumer Protection Act but won a limit on huge damage payoffs under a bill approved Thursday by a state Senate committee.

SB 143 is an attempt by the Colorado Homebuilders Association to cap the increasingly expensive lawsuits filed by Front Range homeowners whose houses have been damaged by expansive soils.

The bill was approved on a 5-2 vote by the Senate Agriculture Committee, whose seven members do not have constituents with such problems. SB 143 now goes to the full Senate for debate.

As changed Thursday, SB 143 still would allow homeowners to get actual damages, but would limit any additional fines to just $5,000.

The bill was sponsored by Sen. Ed Perlmutter, D-Golden, who said the Consumer Protection Act should not allow automatic “treble damages,” or a figure three times the actual damages.

As amended, SB 143 still would allow a wronged homeowner to get a punitive award if he proved the homebuilder acted out of “fraud, maliciousness or willful and wanton conduct.”

“The statute has grown over the years and is really anti-business. It is out of balance,” Perlmutter said.

A lawyer who represents hundreds of homeowners in the south Denver area said the bill, combined with current law, effectively would shut out homeowners from the large settlements for their damaged homes. By law, punitive damages may not be awarded in arbitration, so builders are placing pro-arbitration clauses in their contracts with homeowners, said Ron Sandgrund, a lawyer with Vanatta, Sullan, Sandgrund and Sullan .

Sandgrund also was angered at the $5,000 limit on additional damages.

“By placing the cap on the treble damages they have absolutely destroyed the deterring effect of our consumer protection laws,” he said.

Said Sandgrund’s lobbyist, Faye Fleming: “It’s definitely special interest legislation.”

But a lobbyist for the homebuilders said SB 143 is needed because the industry has been socked with huge class-action lawsuits. The Consumer Protection Act and its treble damages was never meant to cover something as expensive as houses, just smaller consumer-bought items such as toasters, televisions and hearing aids, said Kathy Oatis.

“When you’re dealing with the large loss of a house, we’re dealing with three times that,” she said.

Those voting for SB 143 were: Sen. Dave Watternberg, R-Walden; Sen. Ken Chlouber, R-Leadville; Sen. Jim Dyer, D-Durango; Sen. Gigi Dennis, R-Pueblo West; and Sen. Mark Hillman, R-Burlington. Voting against the bill were Sen. Rob Hernandez, D-Denver, and Sen. Terry Phillips, D-Louisville.