Association Urges Voters to Defeat “Anti-Insurer Ballot Initiative” in Arizona

The Property Casualty Insurers Association of America is urging voters in Arizona to defeat Proposition 201, the “Homeowners Bill of Rights.”

According to the ballot proposition, current Arizona law is “inadequate” in dealing with the state’s expanding population housing needs, home sales practices, and controversial lending practices. “The Legislature has enacted laws that served to unduly protect homebuilders at the expense of homeowners. It has become very difficult for homeowners to take effective legal action to correct even the most blatant design and construction defects,” the proposition text states.

Consequently, the Homeowners Bill of Rights, if approved by the voters, would “give homeowners the ability to get defective homes fixed, and have their homes when built match what they were led to expect and to better understand financing and insurance schemes that are offered to them,” the text notes.

In particular, the proposition notes that “if a seller presents a notice to an insurer that has issued an insurance policy to the seller that covers the seller’s liability arising out of the design, construction or sale of the property that is the subject of the notice, the insurer must treat the notice as a notice of a claim subject to the terms and conditions of the policy of insurance. An insurer is obliged to work cooperative and in good faith with the insured seller within the timeframes. … Nothing … affects the coverage under the policy of insurance or creates a cause of action against an insurer whose actions were reasonable under the circumstances, notwithstanding its inability to comply with the timeframes specified” in the proposition.

The Legislative Council’s analysis of the bill said proposition 201 effectively would make “mandatory changes to the legal procedures for any purchaser dwelling action and for the time to sue on any improvements for real property.” Among other things, the law would be expanded to grant “prospective buyers” the rights to sue over a dwelling action; would shorten the notice time a purchaser has to give the seller of alleged defects before filing a court action; and the contract for the sale of a newly constructed dwelling would need to include disclosures of a seller’s financial relationships with any financial institution, including arrangements for mortgage financing, title insurance, or property casualty insurance.”

Proponents of the proposition say measure would balance the legal rights between homebuilders and their customers, and change the state law that “denied buyers reasonable protection against deceptive sales practices and construction defects,” according to analysis of the proposition.

However, PCI said, “Proposition 201 guts the existing right to cure statute-which has helped reduce the need for litigation-and eliminates mediation or arbitration options to resolve issues. It also would prohibit defendants from recovering attorney’s fees even if the defendant wins, was wrongly name, or if the case is deemed frivolous.

“Rather than protect homeowners, this initiative will simply create more frivolous lawsuits, delay homeowners from getting problems addressed and raise legal and home buying costs,” the association states on its Web site.

Those against the bill agree with PCI that the proposal would create a “mandatory and complex litigation process that will cause unnecessary lawsuits without resolving homeowner’s problems,” according to the proposition text.

For more information, visit www.azsos.gov/election/2008/info/pubpamphlet/english/prop201.htm.

Sources: AZSOS, PCI