Bill would broaden Maryland Home Improvement Commission's discretion to pay claims and allow attorney fees from guarantee fund

Senator Clarence Lam asked the Economic Matters Committee for a favorable report on Senate Bill 578, which would amend the Maryland Home Improvement Commission (MHIC) guarantee fund statute to allow the commission greater discretion to award eligible claimants and to permit the commission to award attorney's fees from the fund at its discretion.

Lam told the committee the bill removes the word "expressly" from the statutory language that MHIC uses to interpret arbitration awards and fund eligibility. He said the change responds to an appellate decision (Brzozowski v. Maryland Home Improvement Commission) that courts have applied in a way that narrowed homeowners' access to the fund. Lam said MHIC currently requires arbitration awards to "expressly" identify actual losses for the commission to pay, which has prevented some otherwise meritorious awards from resulting in fund disbursements.

The bill also would allow MHIC to pay reasonable attorney's fees up to a statutory cap on total awards. Lam said MHIC estimates any additional payouts could be funded by small increases in licensing fees—an example estimate cited at the hearing was an increase of $5 for new licenses and $9 for renewals if payouts increase 5%—and that the fiscal impact to the state would be minimal. Committee members asked for specifics about when attorney's fees would be paid from the fund and whether caps or reasonableness standards apply; Lam pointed to language in the bill limiting total awards to no more than $30,000 in some circumstances.

A virtual witness, identified as Sabin Swickard and described as a constituent, testified about a multi-year dispute with MHIC and a contractor. Swickard said his case had produced arbitration and appellate rulings in his favor but that MHIC refused to recognize those rulings, forcing him to file new proceedings and incurring substantial attorney fees. Swickard said an initial award of roughly $13,000, with roughly $1,500 in attorney fees early in the dispute, had resulted in six years of litigation and roughly $50,000 in attorney fees when MHIC did not enforce awards and the contractor subsequently reorganized under the same license number. Swickard attributed his extended costs and inability to collect to MHIC practices; those assertions were presented as his testimony to the committee.

Committee members asked whether MHIC had participated in the hearing and whether the bill would solve systemic problems; the sponsor said MHIC did not attend the hearing and that the bill seeks to address the statutory interpretation issue and to allow the commission discretion to make homeowners whole where appropriate. No formal vote on SB 578 was recorded at the hearing.