Las Vegas Sun

March 29, 2024

Defects task force recommends fee caps, timely suits

CARSON CITY -- Lawyers' fees should be capped in court judgments awarded for construction defects, a state advisory task force has recommended.

The task force, which is looking for ways to alleviate the insurance problems facing contractors, also voted to require homeowners to file their lawsuits soon after the defect is discovered and to limit the amounts paid to expert witnesses in the cases.

The meeting of the task force Friday showed there is still wide disagreement between attorneys who represent homeowners and the construction and insurance industries.

Las Vegas attorney Scott Canepa, representing the Nevada Trial Lawyers Association, was on the losing side of a number of votes.

The recommendations go to state Insurance Commissioner Alice Molasky-Arman who will compile a report and submit it to Gov. Kenny Guinn. She said she hopes to have it ready by the end of the month.

The tenor of the meeting indicated there will be another showdown in the 2003 Legislature to change the construction defect law -- just as there was in the 1999 and 2001 sessions.

Contractors say they have been hit with prohibitively large increases in their insurance rates because of construction defect lawsuits and settlements.

The most recent prominent case in Nevada was a $14 million settlement to 369 homeowners in Carson City who suffered water damage and mold-related illnesses.

Many insurance companies have even stopped writing the coverage in Nevada, officials said.

Molasky-Arman said there was "very limited insurance available in Nevada." She said some companies that left are interested in returning to Nevada but are waiting to see if the Legislature changes the law before making a move back.

The state task force is composed of contractors, subcontractors, insurance companies, insurance agents, homebuilders and representatives of the trial lawyers association.

Steve Hill, chairman of the task force and a member of the Coalition for Fairness in Construction, said he hoped that the insurance problems would stabilize if the Legislature enacts the recommendations.

He said the present law polarizes the parties involved.

"Repairs are impossible in that environment," said Hill, of Las Vegas.

At a previous meeting, the group agreed that the law should be changed to require that in cases of five or more homeowners, the contractor be given notice and a chance to make repairs before any suit is filed.

The present law sets up that procedure when there are four or fewer homeowners. In cases of five or more homeowners, the law allows them to file suit immediately and then give the contractors a chance to make the repairs.

Canepa had agreed to that change, saying it was an accommodation to help reduce insurance costs and get more coverage.

But Canepa lost the battle in a series of other recommendations.

The committee agreed by a 6-1 vote to reduce the time limit for a suit to be filed by homeowners who allege they have been victims of shoddy construction practices. There was no firm recommendation on what the new statute of limitations should be, however.

The present statute of limitations runs anywhere from six years to 10 years after completion of the property.

For instance, lawsuits alleging patent deficiencies that should have been found by a reasonable inspection must be filed within six years. Lawsuits alleging latent deficiencies that were not apparent through reasonable inspection must be filed within eight years.

Canepa said there was no evidence that reduction of the time limits would decrease insurance rates. Nevada's limits are shorter than a majority of other states, he said.

For class action suits, the task force agreed that a person should have to elect to be a plaintiff in the action against the builder. Mark Tomlinson of the Southern Nevada Homebuilders Association said the homeowner should have the choice to decide if he or she wants to be included in the suit.

Canepa said a homeowner already has the option to remove himself from the suit and there was no evidence to support a change in the law.

Mark Sektnan, representing the American Insurance Association, said attorney fees greatly expand the cost of judgments. In construction defect judgments, the fee for the attorney is added on to the judgment.

State insurance officials said this differs from a regular tort action. For instance, a person who receives a court award from an automobile accident pays the lawyer out of the judgment. In the construction defect cases, the judge adds the attorney's fee to the judgment.

Canepa questioned whether the cap on attorney fees would also apply to defense lawyers representing builders and insurance companies. Several task force members said they would.

Canepa said the lawyer representing the homeowner has to have extensive skills because he is sometimes taking on 50 law firms from insurance companies and contractors.

"Telling a segment of society how much it can make is offensive," Canepa said.

The task force did not put any specific figure on the cap, however.

The committee also voted to impose caps on expert fees and costs, although some task force members questioned whether this might be stepping on the toes of district judges who handle the cases.

The task force also voted 6-1 to prohibit a homeowner from making additional defect claims after a suit has started. The homeowner would be required to start a second suit, rather than piggybacking on the original suit, the task force said.

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