SB 417: RELATING TO CONTRACTORS.

A BILL FOR AN ACT

RELATING TO CONTRACTORS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that in recent years, there has been a significant increase in fraudulent activities by unlicensed contractors, commonly known as "storm chasers," who exploit the vulnerabilities of homeowners in the aftermath of natural disasters.  These individuals often engage in deceptive practices, such as performing substandard repairs or absconding with advance payments, leaving property owners in precarious situations.  In 2021, the Federal Trade Commission received nearly seventy thousand cases of home repair, improvement, and product fraud, underscoring the pervasive nature of this issue.

     The legislature further finds that the financial impact of these types of fraudulent activities is substantial.  The National Insurance Crime Bureau estimates that post-disaster fraud results in billions of dollars in losses annually, with approximately ten per cent of catastrophe-related insurance payouts being diverted to unscrupulous contractors.  Post‑disaster fraud not only burdens individual homeowners but also contributes to increased insurance premiums and strains on public resources.

     The legislature also finds that in recognition of the severity of post-disaster fraud, several states have enacted stringent measures to deter and penalize contractor fraud during disaster recovery efforts.  For instance, Wisconsin implemented legislation granting homeowners the right to cancel contracts with contractors within a specified period if their insurance claims are denied, thereby providing a safeguard against hasty agreements with fraudulent operators.  Similarly, Tennessee has introduced laws requiring contractors to furnish detailed information to residents affected by storms, enhancing transparency and accountability in repair services.  Despite these efforts, the persistence of contractor fraud necessitates a unified and robust response.  Higher penalties for unlicensed contracting activities during declared states of emergency serve as a strong deterrent against these exploitative practices.  

     With Lahaina in the throes of rebuilding and with costs spiraling out of control, the legislature finds there is still a pressing need to enact further protections.  By adopting enhanced punitive measures, the State can better protect its residents from predatory contractors, ensure the integrity of disaster recovery processes, and promote public trust in the aftermath of natural disasters.

     Accordingly, the purpose of this Act is to establish as a class B felony the unlicensed performance of contractor work, during or within five years following a national emergency, state of emergency, or disaster proclamation, in an affected political subdivision.

     SECTION 2.  Section 444-10.6, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:

     "(e)  Any person who violates section 444-9[, in connection with the offer or performance of repairs to a residential or nonresidential structure for damage caused by a natural disaster in]:

     (1)  During or within five years following a national emergency proclaimed by the President or the Congress of the United States or a state of emergency proclaimed by the governor; and

     (2)  Within a political subdivision for which [a state of] the emergency or disaster is proclaimed [by the governor, may be punished by a fine of up to $10,000, imprisonment up to one year, or both],

shall be guilty of a class B felony, in addition to all other remedies or penalties."

     SECTION 3.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 4.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect on July 1, 2050.

Report Title:

National Emergencies; States of Emergency; Disasters; Contractors; Unlicensed Performance of Work; Penalties

Description:

Establishes as a class B felony the unlicensed performance of contractor work, during or within 5 years following a national emergency, state of emergency, or disaster proclamation, in an affected political subdivision.  Effective 7/1/2050.  (SD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

relating to contractors.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that in recent years, there has been a significant increase in fraudulent activities by unlicensed contractors, commonly known as "storm chasers," who exploit the vulnerabilities of homeowners in the aftermath of natural disasters.  These individuals often engage in deceptive practices, such as performing substandard repairs or absconding with advance payments, leaving property owners in precarious situations.  In 2021, the Federal Trade Commission received nearly seventy thousand cases of home repair, improvement, and product fraud, underscoring the pervasive nature of this issue.

     The legislature further finds that the financial impact of these types of fraudulent activities is substantial.  The National Insurance Crime Bureau estimates that post-disaster fraud results in billions of dollars in losses annually, with approximately ten per cent of catastrophe-related insurance payouts being diverted to unscrupulous contractors.  Post‑disaster fraud not only burdens individual homeowners but also contributes to increased insurance premiums and strains on public resources.

     The legislature also finds that in recognition of the severity of post-disaster fraud, several states have enacted stringent measures to deter and penalize contractor fraud during disaster recovery efforts.  For instance, Wisconsin implemented legislation granting homeowners the right to cancel contracts with contractors within a specified period if their insurance claims are denied, thereby providing a safeguard against hasty agreements with fraudulent operators.  Similarly, Tennessee has introduced laws requiring contractors to furnish detailed information to residents affected by storms, enhancing transparency and accountability in repair services.  Despite these efforts, the persistence of contractor fraud necessitates a unified and robust response.  Higher penalties for unlicensed contracting activities during declared states of emergency serve as a strong deterrent against these exploitative practices.  

     With Lahaina in the throes of rebuilding and with costs spiraling out of control, the legislature finds there is still a pressing need to enact further protections.  By adopting enhanced punitive measures, the State can better protect its residents from predatory contractors, ensure the integrity of disaster recovery processes, and promote public trust in the aftermath of natural disasters.

     Accordingly, the purpose of this Act is to establish as a class B felony the unlicensed performance of contractor work, during or within five years following a national emergency, state of emergency, or disaster proclamation, in an affected political subdivision.

     SECTION 2.  Section 444-10.6, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:

     "(e)  Any person who violates section 444-9[, in connection with the offer or performance of repairs to a residential or nonresidential structure for damage caused by a natural disaster in]:

     (1)  During or within five years following a national emergency proclaimed by the President or the Congress of the United States or a state of emergency proclaimed by the governor; and

     (2)  Within a political subdivision for which [a state of] the emergency or disaster is proclaimed [by the governor, may be punished by a fine of up to $10,000, imprisonment up to one year, or both],

shall be guilty of a class B felony, in addition to all other remedies or penalties."

     SECTION 3.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 4.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect upon its approval.

Report Title:

National Emergencies; States of Emergency; Disasters; Contractors; Unlicensed Performance of Work; Penalties

Description:

Establishes as a class B felony the unlicensed performance of contractor work, during or within 5 years following a national emergency, state of emergency, or disaster proclamation, in an affected political subdivision.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

STAND. COM. REP. NO. 436

Honolulu, Hawaii

RE:    S.B. No. 417

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committees on Commerce and Consumer Protection and Public Safety and Military Affairs, to which was referred S.B. No. 417 entitled:

"A BILL FOR AN ACT RELATING TO CONTRACTORS,"

beg leave to report as follows:

     The purpose and intent of this measure is to establish as a class B felony the unlicensed performance of contractor work, during or within five years following a national emergency, state of emergency, or disaster proclamation, in an affected political subdivision.

     Your Committees received testimony in support of this measure from the Subcontractors Association of Hawaii.

     Your Committees received comments on this measure from the Contractors License Board.

     Your Committees find that there has been a prevalence of unlicensed contractors performing fraudulent or unauthorized contractor work in the State, especially following a natural disaster.  Because not all states require contractor licensing, many unlicensed and unauthorized subcontractors come to the state attempting to sell or perform contracts to rebuild.  Homeowners are often not aware that a license is required to perform subcontracting work in the State and may enter into contracts with unlicensed contractors who perform substandard repairs or abscond with advance payments.  This measure will help control and abate unlawful activities of unlicensed contractors by enhancing the penalty as a class B felony to better reflect the severity of the offense to consumers.

     Your Committees have amended this measure by:

     (1)  Inserting an effective date of July 1, 2050, to encourage further discussion; and

     (2)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the records of votes of the members of your Committees on Commerce and Consumer Protection and Public Safety and Military Affairs that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 417, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 417, S.D. 1, and be referred to your Committee on Judiciary.

Respectfully submitted on behalf of the members of the Committees on Commerce and Consumer Protection and Public Safety and Military Affairs,