Wisconsin’s Home Improvement Code Protects Homeowners When Remodeling

Wisconsin’s Home Improvement Code Protects Homeowners When Remodeling

There has been a significant increase in home remodeling projects since the pandemic began over a year ago, and many people choose to hire a contractor to assist them. Not all contractors provide written contracts with the details of the project, such as total costs, start and completion dates, and the type and quantity of materials to be used. The lack of a written agreement sometimes leads to disputes after the project begins and may lead to arguments about payment at the end of the project. Fortunately for homeowners, Wisconsin has the Home Improvement Practices administrative code sections which set forth requirements and penalties if contractors fail to follow the rules. These rules can be found in Chapter ATCP 110 of the Administrative Code. The rules require a contract, and all changes to that contract, to be in writing and signed by the contractor and the homeowner if (1) the contractor requires money up front, prior to completing the project, or (2) if the contractor solicits a homeowner’s business away from the contractor’s regular place of business, by mail or telephone, or with brochures or circulars delivered or left at someone’s home.

The requirements under the code are applicable if the project involves “Home Improvement” which the code defines as follows:

“Home improvement” means the remodeling, altering, repairing, painting, or modernizing of residential or non-commercial property, or the making of additions thereto, and includes, but is not limited to, the construction, installation, replacement, improvement, or repair of driveways, sidewalks, swimming pools, terraces, patios, landscaping, fences, porches, garages, basements and basement waterproofing, fire protection devices, heating and air conditioning equipment, water softeners, heaters and purifiers, wall-to-wall carpeting or attached or inlaid floor coverings, and other changes, repairs, or improvements made in or on, attached to, or forming a part of, the residential or non-commercial property. The term extends to the conversion of existing commercial structures into residential or non-commercial property. “Home improvement” does not include the construction of a new residence or the major renovation of an existing structure.

As you can see, home improvement is defined in very broad terms. You should note that it does not apply to construction of a new residence or the major renovation of an existing structure.

If a written contract is required under the code based on the circumstances described earlier, the contract must contain the following information:

  • The contractor’s name and address, and the name and address of the contractor’s sales representative or agent.
  • A description of the work to be done and the principal materials to be used. If the contractor promises to install specific products or materials, the contract must clearly describe those products or materials.
  • The total price, including finance charges. If the contract is for time and materials, it must clearly disclose the hourly labor charge.
  • The dates by which, or the time period within which, the contractor will begin and complete the work.
  • A description of any mortgage or security interest created in connection with the sale or financing of the home improvement.
  • All warranties that the contractor makes for labor, services, products or materials furnished in connection with the home improvement.
  • A description of every document incorporated in the home improvement contract.
  • Insurance coverage included in the home improvement contract, if any.

Additional provisions in the Home Improvement Code require the contractor to provide the customer with a written notice advising that the customer has a right to receive lien waivers. The code also requires that the contractor inform the customer of all building and construction permit requirements, and the contractor must refrain from starting work until the permits have been issued.

Should a contractor fail to comply with these code requirements, a homeowner has several potential remedies including the following:

  1. Cancel the contract;
  2. Demand return of any payments which the contractor has not yet earned;
  3. Demand delivery of all materials the homeowner already paid for;
  4. Demand an accounting of all payments that were made by the homeowner;
  5. The homeowner may be able to recover twice the amount of any damages they sustain as a result of the contractor’s violation of the Home Improvement Code;
  6. A homeowner may be able to recover actual attorneys’ fees that they incur in pursuing claims against the contractor for violations of this code.

If a homeowner is in a position where they believe they have sustained damages because a contractor failed to comply with the Home Improvement Code, it is advisable that they consult with a litigation attorney to discuss their options.

 

Contractors Beware – the Theft by Contractor Statute Imposes Stiff Penalties

Contractors Beware – the Theft by Contractor Statute Imposes Stiff Penalties

Wisconsin has codified a “Theft by Contractor” statute under Wis. Stat. § 779.02(5) which imposes stiff penalties if violated.  There are several potential penalties for violating this statute.  If such a claim is proven, a contractor could be subject to criminal prosecution, be held liable in a civil suit for money damages and in certain cases corporate officers can be held personally liable.

In general, any money provided by a project owner to a contractor is to be held in trust by that contractor until all subcontractors’ claims for labor and materials are paid.  The elements of a theft by contractor claim pursuant to Wis. Stat. § 779.02(5) include the following:  (1) the contractor acted as a prime contractor; (2) the contractor received money for the improvement of land from the owner (or a lender); (3) the contractor intentionally used the money for purposes other than the payment of bona fide claims for labor or materials; (4) the use of the money was without the owner or lender’s consent and was contrary to the contractor’s authority; (5) the contractor knew the use of the money was without consent and contrary to its authority; and (6) the contractor used the money with the intent to convert it to its own use or the use of another.

A typical example of a violation of the statute is a contractor who gets behind on his bills and ends up using money from the newest project to pay off amounts owed to suppliers or subcontractors from the last project.  This type of behavior is prohibited under the statute.  It is important to understand that the Wisconsin Supreme Court has confirmed that this statute can be violated even if the contractor obtained no benefit from the use of the money.

The consequences for being found civilly or criminally liable under this statute are severe.  Under the statute, any officer, director, member or agent responsible for the misappropriation is liable in civil court for damages including up to three (3) times the unpaid amount, and reimbursement of attorney’s fees and costs incurred by the property owner in obtaining a judgment.  Not only can significant damages be awarded, which cannot be dischargeable in bankruptcy by the contractor, there are potential criminal penalties.  Criminal prosecution will lead to bad publicity, negative internet presence and the potential loss of licenses, and loss of security clearances and access to public projects.

Therefore, it is imperative that the contractor maintain the funds for a particular project separate from other projects and only utilize those funds for a proper purpose under the statutes.  Contractors should speak with an attorney to ensure that the system they have in place for handling client funds is in compliance with the statutory requirements.  Prime contractors should be aware of the elements and consequences of a theft by contractor claim and be mindful of their disbursement practices and procedures.  It is always a good practice to maintain strict payment procedures, detailed records and documentation of lien waivers.  Additionally, property owners who believe their funds have been misused also should consult with an attorney to discuss the options they have available for recovering those funds that were improperly used.

 

The First Ruling on Issue Finds No Insurance Coverage for Business Interruption Due to COVID-19

The First Ruling on Issue Finds No Insurance Coverage for Business Interruption Due to COVID-19

This article is a follow-up to my article of May 4, 2020, which addressed litigation and claims involving business losses as a result of COVID-19. Hundreds of lawsuits have been filed throughout the country by business owners who have been forced to close their doors or restrict their operations due to mandated governmental orders and closures due to the spread of the COVID-19 virus.

On July 2, 2020, the first court to make a substantive ruling on these insurance coverage issues held in favor of the insurance company and denied coverage under the business owner’s insurance policy under the “business interruption” coverage provision. In Gavrilides Management Company, et al. v. Michigan Insurance Company, the owner of the Soup Spoon Café and The Bistro in Lansing, Michigan filed a $650,000.00 claim with its insurance company for damages it incurred as a result of the government mandated closure of the inside dining in its restaurants due to COVID-19.

The restaurant owner argued that the government order restricted the operations of the restaurant and this amounted to a “direct physical loss” under the terms of the policy because the order blocked public entry to the property. The restaurant owner also argued that the “virus exclusion” in the policy did not apply because the loss of access was caused by the government order, not the virus. The Michigan court rejected both arguments and held that there has to be something that physically alters the integrity of the property and there has to be some tangible, physical damage to the property in order for it to be a “direct physical loss” which could provide coverage. The court further held that the virus exclusion in the policy excluded coverage caused by the impact of COVID-19.

While this case is not binding precedent on Wisconsin courts, because it is the first court to address the substantive provisions of business interruption insurance coverage in light of the COVID-19 virus, this case will likely be cited by insurance companies in all of the other pending cases throughout the country. Only time will tell if other jurisdictions will follow the reasoning of the Michigan court, or if it will take an alternative approach. It should be noted that each insurance policy must be evaluated based upon its particular language that is in effect, as well as the particular facts of the business owner’s circumstances. Therefore, simply because one court ruled in favor of the insurance company does not mean that this will be the same result in every other claim brought by a business owner who suffered losses as a result of the mandated government closures during the COVID-19 pandemic.

 

The First Ruling on Issue Finds No Insurance Coverage for Business Interruption Due to COVID-19

Is Your Business Protected from Business Interruption During the COVID-19 Pandemic?

With the COVID-19 pandemic occurring, many states, including Wisconsin, have ordered all nonessential businesses, including restaurants and bars, to close their doors.  Unfortunately, there will be a substantial amount of revenue lost by these businesses for as long as their businesses are required to remain closed.  A significant question is whether these businesses will have any recourse under any of their business insurance policies to recoup lost revenue based upon the coronavirus and/or whether there is coverage triggered by government-mandated closures.  The answers to these questions require a detailed analysis of each individual insurance policy, as well as the circumstances surrounding the losses of each business.

Coverage for business interruption is typically an endorsement to the insured’s property insurance policy and designed to protect the insured for losses of business income it sustains as a result of the direct loss, damage, or destruction to insured property by a covered peril.  A typical clause in an insurance policy reads as follows (although there are variations to this depending on the insurance company):

“We will pay for the actual loss of business income you sustain due to the necessary suspension of your operations during the period of restoration.  The suspension must be caused by the direct physical loss, damage, or destruction to property.  The loss or damage must be caused by or result from a covered cause of loss.”

Usually, in order to recover under this policy provision, a business owner will need to demonstrate that (1) the business sustained physical damage to the insured property; (2) this damage was caused by a peril covered under the policy; (3) which resulted in quantifiable losses because of the business interruption, and (4) that these losses occurred during the time period needed to restore property that was damaged.

There are presently many lawsuits pending throughout this country in which businesses are attempting to enforce business interruption coverage under business insurance policies and to seek a determination by the courts of whether the coronavirus can be deemed to cause physical damage by infecting surfaces in the business, similar to gaseous fumes which have been found in some cases to constitute a physical loss.

In addition to determining whether the coronavirus may be deemed to be a physical loss under the business interruption policy, each insurance policy must be analyzed to determine whether any language provides coverage for business interruption due to civil authority – such as mandated closures by local, state, or the federal governments.

Each policy’s specific language and endorsements must be individually analyzed.   These provisions must also be evaluated in light of any exclusions in the policy and within the specific context of each business owner’s circumstances. Business owners financially impacted by this unprecedented pandemic should timely consult with an experienced attorney to determine whether or not there may be a valid claim under their insurance policy to pursue significant losses of revenue.  The attorneys at Anderson O’Brien are here to assist you with an insurance coverage analysis or other legal issues that may arise out of any business losses you sustain during these difficult times.

 

What Exactly is Involved in the Litigation Process?

What Exactly is Involved in the Litigation Process?

Over the course of my career, many people have asked me what area of law I practice in, and I usually respond by stating “civil litigation.”  Then I am typically asked, “What do you mean by civil litigation?”  The civil in “civil litigation” refers to the form of law, and generally speaking, litigation is the process that occurs after a lawsuit is filed and the parties are attempting to resolve a dispute, with the potential for having a trial to decide the issues for the parties.  Many attorneys, including myself, emphasize handling litigation matters as part of their practice.  While every case has different facts and many contain different legal issues, there are some similarities among all litigation matters that you should be aware of. This awareness will make the process easier to understand and can make it less stressful for you should you ever find yourself in a lawsuit.

Most types of litigated matters follow a similar process; however, I will use a personal injury matter as an example for how things typically proceed.  This process takes place before the lawsuit is filed, up through a trial and potential appeal and can take several years of time.  The following sequence of events is typical for a claim by someone who sustains personal injuries as a result of someone else’s negligence:

1.)  First, the client meets with the attorney to discuss injuries and who is at fault for causing the accident or incident.

2.)  Second, the attorney investigates the facts relating to liability and damages, gathers evidence and speaks with potential witnesses.

3.)  From that point, the client treats with doctors or other health care providers until they reach the end of their medical treatment, and the attorney gathers all relevant medical records, bills, and other evidence of damages which have been caused by the negligent party.  This process may take quite some time, as we do not want to try to settle cases before the client has reached the end of their medical treatment, because once a case is settled, no claim for that same incident can be pursued again.

4.)  After that, the attorney and client discuss the value of the claim, and the attorney sends out a demand to the insurance company, along with all supporting documentation, to attempt to settle the claim for a fair and reasonable value.

 5.)  Then, if the insurance company is unreasonable with its offer, the attorney will file a lawsuit against the negligent party and his or her insurance company, and the case will proceed in a circuit court in the county in which the lawsuit is filed.

6.)  Next Discovery takes place.  The process of discovery is when both parties learn about the relevant facts and strengths and weaknesses in each other’s cases.  The parties each serve written interrogatories (questions) to the opposing side; the parties also request documents from the opposing side, and it often involves the insurance company seeking authorizations to be signed by the injured party so that the insurance company can obtain all pertinent medical records and bills.  The parties in the lawsuit also take depositions of the parties, as well as other important witnesses, including doctors or health care professionals and of other experts who have been hired.  A deposition involves the attorneys asking the witness numerous questions, sometimes for several hours, where the witness must answer the questions under oath and a court reporter transcribes all the questions and answers.

7.)  Once most of the discovery is completed by both sides, each side evaluates their respective cases to determine whether they are in a position to try to settle the case.  The parties will then either pursue Mediation, or the Court will usually order mediation so that the parties have to attempt to settle the case without having to proceed with a trial.  Mediation is a process that is not binding, and no one can be forced to settle unless they agree to the settlement terms.  Mediation usually involves the parties jointly hiring a neutral attorney or a retired judge to assist the parties in taking a closer look at the strengths and weaknesses of their cases.  The mediator will go back and forth for several hours between separate rooms where the respective parties are sitting with their attorneys.  The mediator tries to persuade each party to be reasonable in light of the risk and expense of going forward and having a trial, and hopefully the parties will agree on a settlement.

8.)  If mediation fails and the parties do not settle, then the parties will have a trial.  The trial can be only to the judge, or either party can request a trial to a jury, which usually involves a 12-person jury.

9.)  During the trial, the parties’ attorneys, with the assistance of their clients, will pick the jury through a process called voir dire.  The attorneys will give opening statements, call witnesses, and present documents and other evidence to support or defend their positions.  A jury trial can last from a half day to several weeks, depending on the complexity of the case and the number of witnesses each side intends to call.  The parties will then give closing arguments to the jury and try to persuade the jury to find in their favor.

10.)  The jury then goes from the courtroom back into a separate jury room to deliberate privately and to complete a questionnaire which is called a special verdict.  The answers the jury gives on a special verdict will determine who is at fault for the incident and the amount of damages that should be awarded to the injured party.  The process of jury deliberations can take less than an hour to more than several days, depending on the complexity of the case, the number of exhibits that it must consider, and the number of questions it must answer on the special verdict questionnaire.  The judge will then read the answers on the verdict to the parties once the jury has completed the questionnaire.

11.)  Finally, after the verdict if the losing party is required to pay damages, they can either pay it, try to negotiate for a lower amount, or appeal the case to the Wisconsin Court of Appeals.  If the losing party does not appeal and does not pay the judgment, then the winning party must attempt to enforce a judgment through collection procedures.

While it is best for the parties to attempt to resolve issues without having to file a lawsuit, the litigation process may be the only way a party can actually enforce their legal rights if the other side is not willing to cooperate or be reasonable in reaching a resolution to the dispute.  While attorneys try to work with their clients to persuade the other party to reach a resolution so as to avoid the risk and expense of litigation, being able to effectively litigate is one of the critical skills an experienced attorney must have in order to increase their client’s chance of having a successful outcome.  At Anderson O’Brien, our experienced litigation attorneys assist clients from the very beginning of a dispute through the entire litigation process, including any trials or appeals that may be necessary.

If the parties have a full understanding of this entire process, including the amount of time, risks, and expense involved, that should assist them in making well-reasoned decisions in determining what efforts they wish to take in attempting to resolve their dispute, or to file a lawsuit and go through the litigation process to enforce their legal rights.

 

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