Tag Archives: Minnesota attorney

Minnesota Federal District Court clears up confusion regarding accountant malpractice claims in North American Specialty Insurance Company v. WIPfli, LLC, et al.

5 Aug

On July 26, 2013, the Federal District Court for the District of Minnesota issued an order reconciling almost 40 years of ambiguous rulings concerning the claims available to a third party non-client seeking to sue an accountant. The case is North American Specialty Insurance Company v. WIPfli, LLC, et al. A copy of the Order, which denied WIPfli, LLC’s (“WIPfli”) motion to dismiss the complaint for failure to state claims against it, can be read here.

The case involved North American Specialty Insurance Company (“NAS”), which provided statutory performance and payment bonds on projects performed by general contractor Crowley Company, Inc. (“Crowley”). The purpose of these bonds is to guaranty for the project owner or developer that, in the event Crowley were to fail to perform its obligations under its contract, which might involve failure to complete the work (performance bonds) or failure to make full payment to all of its subcontractors and suppliers (payment bonds), NAS would act as “surety”, and would pay to ensure those obligations were met.

According to the Court’s Order, NAS alleged that WIPfli performed accounting and auditing services for Crowley. Thus, NAS was not WIPfli’s client. However, WIPfli prepared two “Independent Auditor’s Reports” regarding Crowley’s financial statements and condition, on which NAS claims it relied in providing $8 million in bonds on Crowley’s projects. Ultimately, according to NAS, Crowley began defaulting on its obligations to several parties because it was in poorer financial condition than Crowley’s financial statements suggested, and NAS alleges it ultimately was obligated to pay on approximately $2 million in claims.

NAS apparently alleged several items contained in WIPfli’s reports were inaccurate and were not based on generally accepted accounting standards despite a statement within the reports that WIPfli had done so. Importantly, NAS also alleged that WIPfli was aware that NAS would rely on the WIPfli reports. Therefore, in addition to suing Crowley to recover the amounts it claims it had to pay because it relied on the contractor’s misleading financial statements, NAS sued WIPfli alleging it failed to catch certain manipulated and inaccurate figures in those financial statements when preparing its “Independent Auditor’s Reports.”

WIPfli argued that NAS’s complaint should be dismissed because: 1) Minnesota does not recognize a claim for negligence against accountants by parties who were not clients of that accountant; and 2) failed to state with the required specificity a claim for negligent misrepresentation. The Court analyzed whether Minnesota law recognizes a claim for negligence (otherwise known as malpractice when referring to a professional such as a doctor or accountant) by a party in NAS’s position against an accountant providing services for another party (in this case, Crowley). Although noting that several cases issued by Minnesota’s appellate courts have allowed claims to proceed against accountants on claims that were referred to as based on “negligence”, this Court observed that a close reading of those cases demonstrates that Minnesota Courts had never held “negligence” was the appropriate cause of action. Rather, the claims at issue were permitted to proceed because they satisfied the standard for negligent misrepresentation.

The Court suspected the apparently confusing holdings in prior cases was due to the similarity between claims for negligence and claims for negligent misrepresentation. Ordinary negligence requires, among other things, that a defendant, who owes a duty to the plaintiff, breaches that duty (generally by failing to exercise the appropriate degree of care or competence). Negligent misrepresentation contains several additional elements, including the nature of the defendant’s role in the applicable transaction, but also includes a failure “to exercise reasonable care or competence in obtaining the information or communicating . . . information” to the plaintiff. A failure to exercise reasonable care is required under both claims, but the Court determined that a party in NAS’s position has been recognized as having a cause of action against another party’s accountant for negligent misrepresentation; not for negligence/malpractice.

The Court went on to determine that NAS had sufficiently pled facts necessary to continue with its negligent misrepresentation claim against the accounting firm. More importantly, however, based on its incisive analysis, the Court dismissed NAS’s claim for negligence against WIPfli after concluding that Minnesota courts had never intended to recognize such a claim despite certain cases that may at first have suggested otherwise.

Matt Drewes contributed this article. Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s eight-member Community Association Representation Group and the firm’s Creditors’ Remedies Group, and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law, and insurance. He has been included in the annual list of Minnesota’s Rising Stars for several years, and has been quoted in print publications such as the Minneapolis StarTribune, Minnesota Lawyer, Habitat Magazine, and on various websites including Yahoo!Finance.com, Bankrate.com, MSN.com, HOALeader.com, and elsewhere on issues involving construction litigation, community associations, and real property issues. He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

Minnesota Supreme Court Reverses Court of Appeals; Gives Advice On How to Preserve Claims and Avoid Spoliation (An Update on Miller v. Lankow)

4 Aug

On February 25, 2010, I first wrote about the case of Miller v. Lankow.  At the time, I explained why the Minnesota Court of Court of Appeals’ decision that upheld the district court’s dismissal of the plaintiff’s case seemed extreme and inconsistent with existing law.  (Read that post here).  The Minnesota Supreme Court apparently agreed, and on August 3, 2011 it reversed the dismissal and sent the case back to the district court for further proceedings.  (Read the Minnesota Supreme Court’s Opinion here).

Without going into too much detail, the facts of the case involve a property owner who discovered water intrusion problems, which the seller claimed to have fixed, were still causing problems and resulted in mold and other damage.  The buyer provided notice to the seller and the contractors who were involved that he had discovered these defects and that he would pursue legal action if the parties did not reach a resolution.  Several parties attended an inspection at the property where they had the opportunity to view some of the damage.   The contractors and former owners knew they might be sued, but they did not request the ability to conduct further investigation into the cause or extent of the damage.  The owner later repaired the damage without telling the defendants exactly when he planned to start.

After the owner sued the property sellers and contractors for construction defects, water intrusion, fraud and a seller’s failure to disclose defects, the defendants claimed they were not given a sufficient opportunity to inspect the cause and extent of the damage.  They asked the district court to exclude the evidence the plaintiff gathered because they claimed they did not have a similar opportunity to review the same evidence before it was removed and destroyed.  The district court agreed, ordering that the plaintiff may not use any evidence of the defects and damage that the defendants did not see, which was a sanction for “spoliation” (i.e., destroying evidence).  Without this evidence, the plaintiff had no case, and the district court concluded that the case must be dismissed.  The plaintiff appealed to the Minnesota Court of Appeals, which held that the district court had not abused its discretion by sanctioning the plaintiff and dismissing the case.

The concern the Court of Appeals’ decision raised for me was the notion that, even if the defendants have notice of the claim of damage and the potential for litigation, the plaintiff might still have to wait to make repairs to his home while the defendants seemed to be in no particular hurry to investigate the claims against them.  Sometimes, particularly where water intrusion is at issue, prompt repairs are necessary to avoid further property damage and even personal injury.

The Minnesota Supreme Court agreed that legitimate concerns about destroying evidence before others have had a chance to inspect it must be weighed against the reasonableness of asking the party in control of the evidence to maintain it.  The Supreme Court held that, as has always been the case, the party with custody of evidence has a “duty” to preserve relevant evidence to permit other parties to inspect the evidence for use in litigation.  It also remains true that  party who breaches this duty may be sanctioned for spoliation, whether or not the breach was committed intentionally or in bad faith.

But a custodial party’s duty to preserve evidence is not boundless.

*     *     *

[T]he duty to preserve evidence must be tempered by allowing custodial parties to dispose of or remediate evidence when the situation reasonably requires it.

The Court identified a three-factor test for evaluating a case of spoliation:

“(1) the degree of fault of the party who altered or destroyed the evidence; (2) the degree of prejudice suffered by the opposing party; and (3) whether there is a lesser sanction that will avoid substantial unfairness to the opposing party and, where the offending party is seriously at fault, will serve to deter such conduct by others in the future.”

(citing Schmid v. Milwaukee Electric Tool Corp., 13 F.3d 76, 79 (3d Cir. 1994)).  “[S]anctions are not appropriate when the custodial party has a legitimate need to destroy evidence, and it appears from the totality of the circumstances that noncustodial parties have received sufficient notice to protect themselves by taking steps to inspect or preserve the evidence and nevertheless do nothing.”

The Court went on to offer recommendations to avoid a sanction for spoliation.  Ideally, an owner will call a meeting or send a letter “indicating the time and nature of any action likely to lead to destruction of the evidence, and offering a full and fair opportunity to inspect.”  Obviously, any notice of the meeting or of an offer to inspect should be in writing.

People might be amazed to realize that this issue is just one hurdle to sustaining a successful case for construction defects.  There also are notice requirements under certain statutory warranties (as well as other requirements to satisfy prior to commencing suit), as well as statutes of limitation which differ from claim to claim and the little-known statute of repose.  There also are agreements by which a party may have reduced the time during which it has to raise a claim for construction defects.  To help navigate the issues that exist, parties should consult with an attorney knowledgeable in the area of construction and construction defects.  At Thomsen Nybeck, we know these issues, and we can help.  Find out more at www.tn-law.com or call us at 952.835.7000.

Entry by Matt Drewes.  Matt Drewes is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s nine-member Community Association Representation Group and co-leads the firm’s construction litigation group.  Matt practices in the areas of business and real estate litigation, construction litigation, community association law, debtor/creditor law, insurance and employment.  He has been quoted in articles appearing in the Minneapolis StarTribune, Minnesota Lawyer, and on websites such as Yahoo!Finance.com, Bankrate.com and HOALeader.com, and has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years.  He can be reached at mdrewes@tn-law.com.

Minnesota Court of Appeals Holds Buyer Was Earnest About Real Estate Purchase Even Though It Didn’t Pay the Earnest Money Due Under the Purchase Agreement

7 Apr

In the case BOB Acres, LLC v. Schumacher Farms, LLC, decided on April 5, 2011, the Minnesota Court of Appeals held that, as long as the parties to a real estate purchase agreement clearly express the intent to buy and sell real property, the fact that the buyer did not provide the earnest money stated in the contract did not render the contract invalid.  Read it here.  It may at first seem remarkable that the Court of Appeals would hold that a party that did not provide the earnest money specified in the purchase agreement might still be able to enforce the agreement, but there were several factors involved.

The earnest money was a fairly nominal amount ($500 earnest money on a $70,000 contract for the purchase of 25 acres of undeveloped land).  This suggests that the earnest money was not a significant factor in the seller’s decision to sell the property to the buyer, but rather earnest money is provided simply to show the buyer’s good-faith intentions.

The Court also noted that the failure of a party to perform a material provision of the agreement could be a breach that permits the non-breaching party to discontinue performance, but the seller did not raise any objection to buyer’s failure to tender the earnest money until it had already announced that it no longer wished to be bound by the purchase agreement.  This resulted in a waiver by the seller of any right to object to certain breaches of the agreement by buyer, which might have allowed it not to go through with the sale if it hadn’t waived its rights.  The Court of Appeals explained that there is a difference between the issue of contract formation and contract performance.  As far as contract formation is concerned, the Court cited to a treatise on contract law (but apparently found no prior Minnesota case law on point) to hold that a promise is sufficient consideration for a promise.  In other words:  the buyer’s promise to buy the property (presumably for the purchase price stated in the agreement) was sufficient consideration for the seller’s promise to sell the property; the modest earnest money payment was simply incidental to the agreement.

Thomsen Nybeck represents both buyers and sellers, as well as lenders and other parties involved in real estate transactions of all types and sizes.  If you have a question about your next deal, contact one of our attorneys for advice about how to ensure you get the deal you intend.

Matt Drewes contributed to this post.  Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s nine-member Community Association Representation Group and the firm’s Creditors’ Remedies Group. and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law and insurance.  He has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years, and has been quoted on issues involving construction litigation, community associations and real property issues in the Minneapolis Star Tribune, Minnesota Lawyer, Yahoo!Finance.com, Bankrate.com, and elsewhere.  He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

There are a Million Reasons (Almost) for Careful Attention To Employee Time and Wages

17 Mar

As a restaurant in Copiague, N.Y. learned the hard way, failure to track and pay employee hours accurately can lead to a big matzah ball of legal liability.  The Wage and Hour Division of the United States Labor Department has announced that the restaurant was ordered to pay $390,000 in back wages to approximately 40 employees who had not properly been paid overtime pay and had not received the equivalent of the required minimum wage, despite working 70-80 hours per week in some cases.  Based upon “liquidated damages” provisions under applicable law, the restaurant also was ordered to pay an additional amount equal to the  back pay owed to the employees.  As a result, the restaurant was required to pay the employees a total of $780,000.  The restaurant also apparently was adjudged not to have properly tracked wages and tips, and to have paid employees with un-tracked cash payments, leading to an additional civil fine of $20,000.  All told, the restaurant is picking up an $800,000 tab for its lax record keeping and for underpaying its overworked employees.

The action against the employer was based upon the Fair Labor Standards Act, a federal law which requires employers to pay qualifying employees at least the federal minimum wage, plus time and a half for time spent at work beyond 40 hours in a given week.  Although there is no indication the violations were inadvertent in this instance, an employer is not excused from paying an employee overtime even if the employer has not directed the employee to work overtime, but the employer generally has to be aware the employee is doing so before it is responsible to pay.  There also are provisions aimed at protecting employees who report a violation of the FLSA.

There also may be state laws that apply to a given situation where there are unpaid compensation or a failure to account for employee time.  For example, our home state of Minnesota has passed legislation that  provides strong remedies to employees, and even commission-based agents, who have not been paid as required.  There are strict timing requirements that apply to these payments as well.

Employers or employees with questions about whether a business is in compliance with the law should seek the assistance of counsel in determining whether the FLSA applies and whether changes are necessary.  Also, an attorney can pursue or defend cases for recovery of unpaid wages under the FLSA as well as applicable state laws.  If you have a question, contact us at Thomsen Nybeck.

Matt Drewes contributed this post.  Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s nine-member Community Association Representation Group and the firm’s Creditors’ Remedies Group. and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law and insurance.  He has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years, and has been quoted on issues involving construction litigation, community associations and real property issues in the Minneapolis Star Tribune, Minnesota Lawyer, Yahoo!Finance.com, Bankrate.com, and elsewhere.  He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

Is Collecting Money About to Get Harder?

25 Feb

In this challenging economy, one of the most important services we offer is helping clients collect money.  Garnishment is a vital tool created by statute, which we use to help these clients by seizing a debtor’s money from another party who may owe or be holding that money for the debtor.  Often this includes a bank where the debtor holds an account.

The garnishment process does not involve the immediate turnover of the seized funds to the creditor; banks typically respond to a garnishment by stating the amount that is in the debtor’s account.  The bank then holds that money for up to six months until we “levy” on the money, unless the debtor can point to a reason under law that the funds should not be released to the creditor.

A case recently filed in the United States District Court in Minnesota challenges the constitutionality of the garnishment process.  The plaintiffs in Billiar v. Atlantic Credit & Financial, Inc. claim the rights provided to creditors under the statute violate the 14th Amendment to the U.S. Constitution, the so-called “Due Process Clause”.  The Due Process Clause provides, essentially, that no person may be deprived of his or her property without first receiving “due process”, or in other words notice and an opportunity to be heard.

The claim asserted in Billiar is that the creditor, who was owed money by Mark Fiers, garnished an account that Mr. Fiers held jointly with his children and his partner Kristie Billiar.  Only Mr. Fiers owed money to the creditor, so the creditor had first obtained a judgment against Mr. Fiers, but it did not have a judgment against the other account holders.  So while Mr. Fiers received notice and the opportunity to be heard, Ms. Billiar and the children did not.

A recent Minnesota Supreme Court decision previously established that creditors may seize funds in a joint account until and unless the non-debtor is able to establish that the funds in the account do not belong to the debtor.  Ms. Billiar and the other plaintiffs claim that seizing the money of someone other than the debtor is not fair unless you first give them notice and a chance to object.  The plaintiffs and others also point out that even seizing money for a day may cause a check to bounce, causing further damage to the non-debtor.

On the other hand: 1) neither the creditor nor the bank know how much of each account holder’s money is in the account, and a creditor who knows of the account may not know it’s a joint account, so requiring the creditor to provide notice to a non-debtor is not practical; 2) it is reasonable to assume that anyone who holds an account jointly with another person would (or should) be aware of a judgment against the debtor; and 3) if funds held jointly with another person were automatically protected from creditors, then debtors would have an easy way to stop collection activities simply by opening joint accounts.

As attorneys who perform a lot of this work, we will be watching the outcome of this case.  Regardless what happens, however, we will continue to use our creative and results-driven approach to helping clients get paid.

Matt Drewes contributed this post.  Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s nine-member Community Association Representation Group and the firm’s Creditors’ Remedies Group. and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law and insurance.  He has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years, and has been quoted on issues involving construction litigation, community associations and real property issues in the Minneapolis Star Tribune, Minnesota Lawyer, Yahoo!Finance.com, Bankrate.com, and elsewhere.  He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

MORTGAGE FORECLOSURE: PROTECTING YOUR ASSOCIATION

6 Jan

In the midst of a foreclosure crisis negatively impacting all Associations, there are some steps Association s may take to protect themselves both physically and financially. 

In Minnesota, for the purposes of this article, we will focus on foreclosure by advertisement where a Notice of Mortgage Foreclosure Sale is personally served upon the occupants at least four weeks prior to the scheduled sale, and a copy is published in the legal newspaper for six weeks prior to the scheduled sale. 

Prior to the actual sale, the owner has a right to “reinstate” the mortgage by paying the lender the amount in default (as opposed the accelerated loan balance) plus all costs and a statutory amount of attorney fees.  Reinstatement stops the foreclosure process.

If the owner does not reinstate prior to the sale, then, the Sheriff of the county in which the property is located holds a sheriff’s sale.  The lender will make a cashless bid either of the amount owed, or often times for an amount less than what is owed.  Third parties are free to appear and over-bid the mortgage company with cash.

If the sale is held, then a redemption period follows which normally is six months from the date of the sale. However, if the mortgagor/borrower has paid more than two-thirds of the original principal balance of the mortgage, a 12 month redemption period will follow. 

If the property is “abandoned” within the meaning of Minn. Stat. § 582.032, the lender may shorten the statutory redemption period to five weeks.  This five week period may run from the date of sale if the was brought before the sale, or five weeks from when the order granting such relief is entered and filed against the property, if brought after the sale.

During the redemption period, the owner/borrower continues to own all right, title, and interest in and to the property.  He can continue to live there, continue to lease it or enter into a new lease and collect the rents.  He also may redeem the property by paying to the holder of the sheriff’s certificate of sale the amount bid in at the sale, plus additional interest at the underlying note rate, and attorneys fees and costs, as determined by the statute. Redemption usually is accomplished through new financing or the sale of the property.

Before property goes into foreclosure, i.e., before a Notice of Pendency & Power of Attorney to Foreclose has been rerecorded, one of the best things an Association  can do for itself is to file a Request for Notice of Mortgage Foreclosure and Redemption Reduction with the county per Minn. Stat. Sec. 580.032.  If filed before the Notice of Pendency and Power of Attorney, the lender’s attorneys are required to provide you notice of the mortgage foreclosure sale and, if the redemption period is being shortened, notice of this action too. 

Most mortgage-foreclosure law firms provide notice weeks if not months before the sale is to occur. This often saves the Association  a good deal of time and often attorneys’ fees if a known mortgage foreclosure sale is on the horizon.  Most importantly, it allows you to take the steps discussed below!  Our firm normally files the Request for Notice for all delinquent accounts we are asked to collect.

Another good step is to review legal newspapers for the names/addresses/legal descriptions of your Association ’s property.

Routine inspections of the property should be made, looking for vacant/abandoned property.  Also,  members should be encouraged to pass along such information if they believe a neighbor has moved out and property is sitting empty.

Since being “in foreclosure” often means different things to different people, if an owner indicates to you that his unit is “in foreclosure”, of even if property is abandoned, ascertain how far the foreclosure process has progressed.   Contact the county recorder/Registrar of Titles to see if a Notice of Pendency and Power of Attorney has been recorded.  Then, contact the attorneys who filed it to see if a sale has been set, or if one has occurred, the bid, etc.

Once the Association knows about a sale being scheduled to occur, it is vitally important for the Association  to follow up with the mortgagee’s attorneys as to whether the sale occurred.  Having such information would allow you to take steps to inspect the property to see if the property is occupied, or, if not, to see if the lender already has secured and/or winterized the same.  If property is vacant and abandoned and has not been winterized (usually you would see a sticker of some sort on the door), contact the lender’s attorneys, in writing, and let them know the property is vacant and abandoned. The Association  wants the lender to winterize and secure the property.  It also wants the lender to shorten the redemption period, discussed above.  Make sure to use the word “abandoned” when having this discussion with the lender’s attorneys.

If you get no response and the temperature is plummeting, do not wait for the mortgage company to act.  Most governing documents and the statute allow the Association  to take steps in order to protect units and common elements from damage.

Moreover, if the Association  incurs cost benefiting few than all the units (here, the cost to winterize, rekey, etc. a unit), under MCIOA, said cost may be assessed back to the unit and, depending on the stage of the foreclosure process, the mortgage company may, in fact, be responsible for these costs.  If your Association  is governed by the MCIOA, the holder of the sheriff’s certificate of sale will take subject to a lien in favor of the Association  for dues, special assessments, and insurance assessments that are assessed during the six  month period preceding expiration of the owner’s redemption period.  If the redemption period is six months, this usually runs from the date of sale forward.  If the redemption period is 12 months, we still go back only six months.  If the redemption period is shortened to five weeks, we still go back six months.

However, if the process just has started and the sale is not set to occur for several months, the Board then must weigh its options carefully.  It may secure and winterize a unit (a few hundred dollars) itself or risk payment of the insurance deductible and the increased premiums from making yet another claim.   Remember, the lender/holder of the sheriff’s certificate of sale only will be liable for special assessments if assessed during the six month period preceding expiration of the owner’s redemption period.  So, if the pipes burst and are repaired/assessed in January, the sale happens in February and the redemption period expires in August, the Association , not the lender, is liable for the bill (as is the prior owner).  Therefore, do not be penny wise but pound foolish.

In addition to asking the lender to secure abandoned property, effective August 1, 2009, cities now may require the holder of the sheriff’s certificate of sale to secure property.  If the lender fails to do so, the city may do so, with the costs incurred to do so being assessed by the city against the property (similar to the way a special assessment or taxes are assessed). 

Application of the law is unclear and, most cities have not yet set up exact offices through which to request such notice.  Some cities are more responsive than others. Our office has received notice of such actions through the filing of a Request for Notice of Mortgage Foreclosure which is recorded with the county recorder/registrar of titles office.  Such Request for Notice also have been the basis for receipt of tax forfeiture notices. 

If the sale has occurred, prepare for redemption as a junior lien creditor, if the bid makes doing so economically feasible, or, if not, calendar out to after the redemption period is to expire to contact the new owner about the dues.

Once the redemption period has run and, the lender/holder of the sheriff’s certificate of sale is the new owner of the property, make sure to start sending this entity copies of your complete ledger.   Some of you reading this article have experienced first hand how receipt of a letter prompts full payment from the lender even though only six  months worth of dues were out.  Others, especially when dealing with federal agencies such as HUD, or semi-federal agencies like Fannie Mae & Freddy Mac, know the wait for payment can be very long, often until re-sale.

Hopefully, the discussion above can assist Associations to help themselves.  The key is to keep informed of the process and to follow up once you know foreclosure is likely to occur.  If you do need assistance, however, our firm stands ready to help.

This blog entry is written by Gretchen Schellhas, a shareholder at Thomsen Nybeck.  Gretchen is the head of the litigation section at Thomsen  Nybeck. Gretchen’s practice is concentrated in the areas of Family law, Townhome and Condominium law, and General Civil Litigation. Gretchen is an experienced attorney, well-versed in trials and alternative dispute resolution. Gretchen has repeatedly been featured as a Superlawyer by Minnesota Law & Politics, as well as being recognized as one of Minnesota’s Top Family Lawyers by Mpls St. Paul Magazine.

Roofing Contractors and Homeowners Beware: New Restrictions Apply to Negotiating Storm Damage Claims

21 Dec

When a storm occurs, many homeowners may not understand the affect that the storm had on their property.  As a result, over the past several years roofing contractors have increasingly made themselves available to homeowners and sought to be a resource for them when negotiating property damage claims with a homeowner’s insurance company.  Sometimes, these roofing contractors will offer as a part of their contract with a homeowner to exclusively negotiate a claim settlement on behalf of the homeowner with the homeowner’s insurance company.  Such practices by roofing contractors are now subject to some new restrictions.  A recent law prevents roofing contractors, who will be paid by the homeowner from the proceeds of the homeowner’s insurance policy, from advertising or promising that they will pay or rebate all or part of the homeowner’s insurance deductible.  See Minn. Stat. § 325E.66.

Another recent law requires that roofing contractors give homeowners 72 hours to cancel a contract for roofing goods or services if the goods or services are to be paid by the homeowner from the proceeds of his insurance policy and the insurance company denies the homeowner’s claim.  Prior to entering into a contract with a homeowner, the contractor is now obligated to provide the homeowner with a statement advising the homeowner of this right.  If the homeowner chooses to cancel the contract, the homeowner must give written notice of cancellation to the roofing contractor at the address stated in the contract within the required 72 hour timeframe. The homeowner’s notice of cancellation does not need to be in any particular form, but it must express the homeowner’s intent to not be bound by the contract.  For further information on a roofing contractor’s obligation to provide notice of a right to cancel residential roofing contracts and the requirements related to a homeowner providing notice of cancellation of the contract, see Minn. Stat. § 326B.811.

One final change affecting roofing contractors is that they are now required to have a public adjuster’s license if they want to negotiate and act as a representative for a homeowner with the homeowner’s insurance company.  The Department of Commerce and the Department of Labor & Industry view such representation and actions by roofing contractors to constitute the contractor acting as a public adjuster, and therefore, under these circumstances, require that roofing contractors hold a public adjuster’s license. See Bulletin 2010-4 issued by the Minnesota Department of Labor & Industry and the Minnesota Department of Commerce.

Roofing contractors should be careful to make sure they are compliant with all these new requirements that apply to them.  Likewise, homeowners should be aware of these changes if they are approached by roofing contractors who wish to perform roofing goods or services for a homeowner after a storm.  If you are a roofing contractor or a homeowner who is approached by a roofing contractor, it may be beneficial to have an attorney review the roofing contract prior to entering into the contract so that you are aware of both your rights and obligations pursuant to these new law changes and under the proposed contract.  In addition, it is possible for an attorney or public adjuster to step in on behalf of a homeowner to conduct the negotiations with an insurance company while still receiving the input and expertise of the contractor to assist in obtaining a fair resolution to the homeowner’s claim.

This blog entry is written by Deb Newel, an Associate at Thomsen & Nybeck, P.A. Deb practices in the litigation area of the firm with primary focus on General Civil Litigation, Real Estate Litigation, Insurance Litigation, Construction Litigation and Townhome and Condominium Law.

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