                         TO BE PUBLISHED IN THE OFFICIAL REPORTS


                              OFFICE OF THE ATTORNEY GENERAL

                                        State of California


                                        DANIEL E. LUNGREN

                                          Attorney General


                            ______________________________________

                   OPINION              :
                                        :          No. 95-108
                   of                   :
                                        :          November 2, 1995
          DANIEL E. LUNGREN             :

            Attorney General            :

                                        :

          MAXINE P. CUTLER              :

         Deputy Attorney General        :

                                        :

______________________________________________________________________________


             THE HONORABLE DAVID KELLEY, MEMBER OF THE CALIFORNIA STATE
SENATE, has requested an opinion on the following questions:

               1. Must all extended warranties executed by a structural pest control operator include
the performance of periodic inspections?

                2. Do the statutory requirements for executing a control service agreement by a
structural pest control operator apply to agreements executed prior to the statute's effective date of
January 1, 1994?

                                            CONCLUSIONS

               1. All extended warranties executed by a structural pest control operator must include
the performance of periodic inspections.

                2. The statutory requirements for executing a control service agreement by a structural
pest control operator do not apply to agreements executed prior to the statute's effective date of January
1, 1994.




                                                   1.                                             95-108

                                                                    ANALYSIS

                 The Legislature has enacted a comprehensive statutory scheme regulating the practice
of structural pest control. (Bus. & Prof. Code, '' 8500-8697.5.)1 Operators and field representatives
must be qualified in the use and understanding of poisons and other chemicals used in pest control and
the theory and practice of pest control. ('' 8506, 8507, 8565, 8566.) After inspection and completion
of a report describing and diagraming infestation and conditions likely to lead to infestation, as well as
recommendations for corrective measures, a company may enter into a contract with the consumer to
eradicate or control pests. (' 8516.)

                The focus of our inquiry concerns the terms and conditions of section 8516. The
statute applies to wood destroying pests or organisms and prescribes the requirements registered
companies must meet in order to perform work on contracts to correct any infestation. A control
service agreement may be entered into if the specified requirements listed in section 8516 regarding
inspection and reporting are met. Section 8516 provides in part:

                   ". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

                   "(b) No registered company or licensee shall commence work on a contract,
          or sign, issue, or deliver any documents expressing an opinion or statement relating to
          the absence or presence of wood destroying pests or organisms until an inspection has
          been made by a licensed Branch 3 field representative or operator. The registered
          company shall retain for three years all field reports from which a verbal or written
          estimate of or solutions for work are made. A written inspection report conforming to
          this section and on a form prescribed by the board shall be predated and delivered to the
          person requesting the inspection or to the person's designated agent. A copy of each
          report shall be filed with the board at the time the report is delivered or not later than 10
          working days after the date the inspection is commenced, except an inspection report
          prepared for use by an attorney for litigation is not required to be filed with the board.
          The report shall be delivered to the person requesting the inspection, or to the person's
          designated agent, before work is commenced. The following shall be set forth in the
          report:

                    ". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

                  "(6) A foundation diagram or sketch of the structure or structures or portions
          of the structure or structures inspected, indicating thereon the approximate location of
          any infested or infected areas evident, and the parts of the structure where conditions
          which would ordinarily subject those parts to attack by wood destroying pests or
          organisms exist.


    1
        Unless otherwise indicated, all section references hereafter are to the Business and Professions Code.


                                                                            2.                                         95-108

        "(7) Information regarding the substructure, foundation walls and footings,
porches, patios and steps, air vents, abutments, attic spaces, roof framing that includes
the eaves, rafters, fascias, exposed timbers, exposed sheathing, ceiling joists, and attic
walls, or other parts subject to attack by wood destroying pests or organisms.
Conditions usually deemed likely to lead to infestation or infection, such as earth wood
contacts, excessive cellulose debris, faulty grade levels, excessive moisture conditions,
evidence of roof leaks, and insufficient ventilation are to be reported.

        ". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

        "(10) Recommendations for corrective measures.

        ". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

        "(12) The inspection report shall clearly disclose that if requested by the
person ordering the original report, a reinspection of the structure will be performed if
an estimate or bid for making repairs was given with the original inspection report, or
thereafter.

        "An estimate or bid for repairs shall be given separately allocating the costs to
perform each and every recommendation for corrective measures as specified in
subdivision (c) with the original inspection report if the person who ordered the original
inspection report so requests, and if the registered company is regularly in the business
of performing corrective measures.

        "If no estimate or bid was given with the original inspection report, or
thereafter, then the registered company shall not be required to perform a reinspection.

         "A reinspection shall be an inspection of those items previously listed on an
original report to determine if the recommendations have been completed. Each
reinspection shall be reported on an original inspection report form and shall be labeled
`Reinspection' in capital letters by rubber stamp or typewritten. Each reinspection
shall also identify the original report by date and stamp numbers.

        "After four months from an original inspection, all inspections shall be original
inspections and not reinspections.

        "Any reinspection shall be performed for not more than the price of the
registered company's original inspection price and shall be completed within 10
working days after a reinspection has been ordered.

        ". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .




                                                                3.                                         95-108

        "(f) The report and any contract entered into shall also state specifically when
any guarantee for the work is made, and if so, the specific terms of the guarantee and
the period of time for which the guarantee shall be in effect.

        "(g) Control service is defined as the regular reinspection of a property after a
report has been made in compliance with this section and such corrections as have been
agreed upon have been completed. Under a control service agreement a registered
company shall refer to the original report and contract in a manner as to identify them
clearly, and the report shall be assumed to be a true report of the conditions as
originally issued, except it may be modified after a control service inspection. A
registered company is not required to issue a report as outlined in paragraphs (1) to (9),
inclusive, of subdivision (b) after each control service inspection. If after control
service inspection, no modification of the original report is made in writing, then it will
be assumed that conditions are as originally reported. A control service contract shall
state specifically the particular wood destroying pests or organisms and the portions of
the buildings or structures covered by the contract.

        "(h) A registered company or licensee may enter into and maintain a control
service agreement provided the following requirements are met:

        "(1) The control service agreement shall be in writing, signed by both parties,
and shall specifically include the following:

        ". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

        "(F) The frequency of the inspections to be provided, the fee to be charged for
each renewal, and the duration of the agreement.

        "(G) Whether the fee includes structural repairs.

       "(H) If the services provided are guaranteed, and, if so, the terms of the
guarantee.

        ". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

        "(3) A full inspection of the property covered by the control service agreement
shall be conducted and a report filed pursuant to subdivision (b) at least once every
three years from the date that the agreement was entered into, unless the consumer
cancels the contract within three years from the date the agreement was entered into.

        ". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

       "(6) For purposes of this section, `control service agreement' means any
agreement, including extended warranties, to have a licensee conduct over a period of


                                                                4.                                         95-108

        time regular inspections and other activities related to the control or eradication of
        wood destroying pests and organisms.

                ". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ."


                1. Requiring Inspections

                The first question presented concerns whether all extended warranties executed by a
licensed pest control operator must include periodic inspections as part of the agreement. While
section 8516 clearly contemplates that some extended warranties will include regular inspections ('
8516, subd. (h)(6)), does the statute require all extended warranties to include the performance of
inspection services?

                 In examining the language of section 8516, we are guided by several principles of
statutory construction. "When interpreting a statute our primary task is to determine the Legislature's
intent." (Freedom Newspapers, Inc. v. Orange County Employees Retirement System (1993) 6 Cal.4th
821, 826.) "In determining intent, we look first to the language of the statute, giving effect to its `plain
meaning.'" (Kimmel v. Goland (1990) 51 Cal.3d 202, 208-209.) "To discern legislative intent, we
must examine the legislative history and statutory context of the act under scrutiny." (Sands v.
Superior Court (1983) 34 Cal.3d 567, 570; accord, Long Beach Police Officers Assn. v. City of Long
Beach (1988) 46 Cal.3d 736, 743.) "[I]t is well established that reports of legislative committees and
commissions are part of a statute's legislative history and may be considered when the meaning of a
statute is uncertain. [Citations.]" (Hutnick v. United States Fidelity & Guaranty Co. (1988) 47 Cal.3d
456, 465, fn. 7.) "`The words of the statute must be construed in context, keeping in mind the statutory
purpose, and statutes or statutory sections relating to the same subject must be harmonized, both
internally and with each other, to the extent possible.'" (Walnut Creek Manor v. Fair Employment &
Housing Com. (1991) 54 Cal.3d 245, 268.) "We presume the Legislature intends to change the
meaning of a law when it alters the statutory language . . . ." (Dix v. Superior Court (1991) 53 Cal.3d
442, 461.)

                  Applying these principles to the provisions of section 8516, we find that the statute
does not specifically define the term "extended warranties." Subdivision (f) of section 8516 requires
that the initial inspection report "shall . . . state specifically when any guarantee for the work is made,
and if so, the specific terms of the guarantee and the period of time for which the guarantee shall be in
effect." Subdivision (h)(1)(H) of section 8516 requires that a control service agreement shall specify
"[i]f the services provided are guaranteed, and, if so, the terms of the guarantee."

                 The word "warranty" is commonly defined as "a usu[ally] written guarantee of the
integrity of a product and the good faith of the maker given to the purchaser and generally specifying
that the maker will for a period of time be responsible for the repair or replacement of defective parts
and will sometimes also provide periodic servicing (a one-year [warranty] on a television set)."
(Webster's New Internat. Dict. (3d ed. 1971) p. 2578.) The word "extended" is commonly defined as
"drawn out in length . . . esp[ecially] in length of time." (Id., at p. 804.) Nothing in the common


                                                                        5.                                          95-108

definitions of "extended" or "warranties" requires or precludes the performance of periodic inspections
by the warrantor.

                The key language of section 8516 requiring interpretation is subdivision (h)(6). It
defines a "control service agreement" as "any agreement, including extended warranties, to have a
licensee conduct over a period of time regular inspections and other activities related to the control or
eradication of wood destroying pests and organisms." The Legislature's choice of language is
ambiguous. It could mean that all extended warranties are control service agreements or only those
that "have a licensee conduct over a period of time regular inspections . . . ." Which did the
Legislature intend?

                 Obviously, an agreement that does not include periodic inspections could be priced
lower than one that does. The property owner in such circumstances could contract separately with the
licensee for inspections, or contract with another company, or possibly perform the inspections himself
or herself. Inspection of the property by a different company might well be in the best interests of the
consumer. On the other hand, it must be conceded that without any inspections, an extended warranty
covering termite infestations would reduce the value of the warranty significantly.

                 We believe that the legislative history of the 1993 amendment of 8516 which added
subdivision (h) (Stats. 1993, ch. 269, ' 1) discloses what the Legislature intended. In the report of the
Assembly Committee on Consumer Protection, Governmental Efficiency and Economic Development
for its hearing of June 23, 1993, the proposed legislation was described in part as follows:

                 "This bill would tighten requirements for control service and extended warranty
        agreements by requiring the company to perform a compete inspection, as specified,
        and to issue a report at least once every three years.

                ". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

                "Additionally, the bill codifies and clarifies what services must be provided to
        the consumer by a pest control company that offers a control service agreement. A key
        part of the stipulated agreement is a full inspection with a report filed at least once
        every three years. These agreements function as extended warranties."

Based upon this legislative history, it is clear that all extended warranties are to include follow-up
inspections in order for consumers to be properly protected. Extended warranties constitute control
service agreements. The Legislature intended for property owners to receive periodic inspections and
notification of any further infestation and the need for corrective measures covered by their warranties.

                In answer to the first question, therefore, we conclude that all extended warranties
executed by a structural pest control operator must include the performance of periodic inspections.

                2. Retroactive Application



                                                                        6.                                         95-108

               The second inquiry concerns whether the requirements of subdivision (h) of section
8516 with respect to the execution of control service agreements apply to agreements executed prior to
January 1, 1994, the effective date of the statutory amendment. We conclude that the statutory
requirements apply only to agreements executed after January 1, 1994.

                Unless passed as an urgency measure, which goes into effect immediately upon
enactment, a statute enacted at a regular session of the Legislature goes into effect on January 1 of the
following year. (Cal. Const., art. IV, ' 8, subd. (c)(1).) Once in effect, a statute may have retroactive
application by affecting the rights, obligations, acts, transactions, or conditions which were performed
or existed prior to the adoption of the statute. (Borden v. Division of Medical Quality (1994) 30
Cal.App.4th 874, 880.) However, legislation may not be retroactively applied when it constitutes an
impairment of an existing contract. (U.S. Const., art. 1, ' 10; Cal. Const., art. 1, ' 9; In re Marriage of
Hilke (1992) 4 Cal.4th 215, 222.)

                In this instance, we need not determine the constitutionality of applying section 8516
retroactively. Rather, we may rely upon the governing principles of statutory construction in
concluding that the 1993 amendment to section 8516 was not intended by the Legislature to be applied
retroactively. As stated by the Supreme Court in Evangelatos v. Superior Court (1988) 44 Cal. 3d
1188, 1207:

                 "[S]tatutes are not to be given a retrospective operation unless it is clearly made
        to appear by express language or clear and unavoidable implication that such was the
        legislative intent."

                We have found no indication in the language of section 8516 itself or in the legislative
history of the 1993 amendment suggesting that the Legislature intended the new requirements to apply
retroactively. As explained in Legislative Counsel's Digest, the purpose of the 1993 legislation was to
"allow a registered company or licensee to enter into and maintain a control services agreement." In
the report of the Senate Business and Professions Committee for its hearing of April 26, 1993, the
proposed legislation was described in part as follows:

                ". . . Existing regulations of the SPCB (16 Cal. Code of Regulations 1998)
        contain requirements that must be met whenever a company enters into a so-called
        `control services agreement' (maintenance contract).

                 "This bill would allow a registered company or licensee to enter into and
        maintain a control services agreement regarding work applicable to wood destroying
        pests or organisms if specified requirements are met. . . .

                ". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

                ". . . The bill is . . . intended to provide better protection to consumers who
        enter into control service agreements with structural pest control companies by clearly
        establishing in statute what requirements must be met.


                                                                        7.                                         95-108

                 "The bill would enact a statutory provision that would codify the SPCB's
        current regulations (16 CCR 1998) relative to control service agreements plus a few
        additional requirements. The specified requirements include that: (1) Agreements
        must be in writing and specify various items such as what pests are being controlled,
        the type and manner of treatment to be employed, the frequency of inspections to be
        provided, the fee and whether structural repairs are included; (2) Inspections be made at
        least once every 3 years, and be done by a licensee in the appropriate `branch'
        (classification) of structural pest control; and (3) Written reports be issued unless
        specified conditions are met."

                 Based upon the language of section 8516 and the Legislature's intent as expressed in the
legislative history of the 1993 amendment, we conclude that the statutory requirements for executing a
control service agreement by a structural pest control operator do not apply to agreements executed
prior to January 1, 1994.

                                                *****




                                                   8.                                               95-108

