Interests with the power to drive housing development in Colorado say the lone construction defects bill in the legislature would do little to spur construction.

But House Speaker Crisanta Duran, D-Denver, who has rested much of her hopes for bipartisan success this year on the insurance-related defects bill, is adamant that the measure gets to the “heart” of the problem.

“To me, this is a very meaningful part of making sure that we have reforms to address the issue that has come up in previous years and to make sure that homeowners and people who would like to buy a condo have the opportunity to buy a condo,” Duran said.

Passing construction defect reform would be a significant bipartisan win for the split legislature.

The measure, which aims at equitably dividing litigation defense costs, is co-sponsored by Senate President Kevin Grantham , R-Canon City, along with Duran.

Legislative leaders wasted no time, introducing the bill on the first day of the session.

Both Duran and Grantham highlighted the issue in their opening day remarks. Gov. John Hickenlooper, a Democrat, also underscored the issue in his State of the State address, telling lawmakers and the public “we WILL pass” reform this year.

The issue has stalled in the legislature for at least four years, as housing demand continues to rise, not just along the Front Range, but in mountain communities like Durango as well.

From the insurance industry’s standpoint, Senate Bill 45 has the potential to lower insurance rates, which would lower costs for developers, potentially spurring development.

“There isn’t a magic bullet in the construction defect conversation, we just know that insurance is a component of it,” said Kelly Campbell , vice president, state government relations, for the Property Casualty Insurers Association of America in Colorado.

The bill aims at reducing the defense costs for developers and contractors facing defect lawsuits, as well as to curb the incentive for additional litigation.

The way the system works now can be complex, long and costly.

When a general contractor or developer is sued for shoddy construction, they reach out to all the subcontractors and make a demand for how much the subcontractors need to contribute to assist with defense costs.

Subcontractors either agree to pay the percentage, or they disagree, which adds to the litigation, as the general contractor can sue subcontractors for not complying with the demand. Similarly, all the subcontractors can enter into litigation.

Senate Bill 45 would allow a judge to determine the allocation of defense costs, as opposed to the general contractor. Once a case is resolved, the courts would be able to re-evaluate the original demand to determine if the initial evaluation was appropriate, or tweak it if necessary.

“Hopefully that will create clarity for the subcontractors, also hopefully it will ensure that the general contractors’ defense costs are paid appropriately along the way,” Campbell said.

But the legislation would not likely have an impact on the ultimate amount of the verdict.

More so, the insurance industry in Colorado can’t say whether insurance rates would decrease from the legislation, though Campbell underscored that premiums are impacted by how much insurance companies pay out.

And while the bill might help subcontractors, such as painters, to avoid burdensome shares of the cost, those subcontractors aren’t the ones developing housing projects, so they don’t have much influence over whether more condos and townhouses are built.

Given the uncertainty of the measure, homebuilders and their allies in the business world say Senate Bill 45 must be part of a package of measures addressing construction litigation.

“Senate bill 45 could be a meaningful improvement but only as a complement to other legislation that allows for alternative dispute resolution, developers’ right to remedy and requires a majority vote of properly informed homeowners before taking legal action on behalf of a homeowner’s association,” said Kelly Brough , president and chief executive of the Denver Metro Chamber of Commerce.

The chamber, along with other business leaders, builders and local elected officials, make up a coalition working on the defects issue, called the Homeownership Opportunity Alliance.

Many in the coalition had expected to see defects reform unravel as a package, including bills requiring a majority of all homeowners in a development to agree to a lawsuit, rather than just a simple vote by the association board.

The Homeownership Opportunity Alliance had also expected to see a measure requiring homeowners associations to enter into mediation or arbitration before heading to court. Several of the coalition partners are waiting to take a position on the legislation until accompanying bills that “get at the heart of the construction defects issue” are introduced.

“While we’re encouraged to see this step taken, we know there is much more work to be done in order to increase the opportunity for Coloradans to buy entry level housing in their communities,” Brough said. “Our coalition looks forward to partnering on additional legislation.”

“If this is it, we don’t feel it’s going to be something that’s going to push the needle,” added Lakewood Mayor Adam Paul , with the Metro Mayors Caucus, a member of the Homeownership Opportunity Alliance. “Our whole goal is to limit litigation.”

When the bill was introduced on the first day of the session, after Democrat and Republican leaders highlighted it in their opening day remarks, coalition members behind the scenes expressed that they felt blindsided.

Duran shrugged off notions that she did not engage in a robust outreach process. She said she has been conducting meetings with coalition members since the end of the legislative session last year, and that it should not have come as a surprise that the insurance legislation was going to be a priority.

“I’ve listened a lot,” Duran said. “I’ve listened to what the problem is, what they think the solutions are, and I also reached out to the insurers to get their perspective. I’ve definitely done my due diligence.

“When there’s this conversation about a coalition, it seems there are different perspectives in that coalition of people that want to have reform.”

But Duran is hesitant to outline other legislative efforts, though she says she is open to weighing additional bills that might be introduced.

One issue that concerns Duran is requiring arbitration or mediation before a lawsuit is filed.

“I am not convinced at this point that that is going to drive down insurance rates,” Duran said.

Homeowners groups, who make up a separate coalition called Build Our Homes Right, are perhaps one of the few groups to celebrate not yet seeing any other pieces of legislation. The group has argued for protecting the litigation process.

“It solves the problem developers have identified as the No. 1 barrier to building affordable housing by bringing down the cost of construction insurance, while protecting the rights of homeowners,” Jonathan Harris , president of Build Our Homes Right, said of the bill. “It’s a win-win all the way around.”