Builders won’t look to feds for defect issue help

Jennifer Shubinski

Friday, Jan. 24, 2003 | 10:51 a.m.

Home builders nationwide aren't planning to ask Congress for relief from rising premiums for construction defect insurance and in some cases their inability to obtain such insurance, but instead will address the problem on a state-by-state basis.

Home builders' insurance woes, which they say are fueled by construction defect lawsuits and settlements, have been compared to the medical malpractice insurance crisis that has led to walk-outs by doctors around the nation and some obstetricians to stop practicing in Nevada.

President Bush has asked Congress to speed up its reform of medical malpractice insurance to address the high insurance costs for doctors.

But unlike the medical malpractice reforms, the home building industry is looking to states for solutions despite the nationwide problem.

"I don't expect federal legislation about general liability insurance," said Stuart Price, chair of the National Association of Home Builders' General Liability Insurance Task Force and principal of Pennsylvania-based Granor Price Homes.

Price, speaking Thursday at an International Builders' Show news conference about construction defects and general liability insurance, said any reform would be done at the state level.

Las Vegas homeowner attorney Nancy Quon said that for the home builders it makes sense not to seek federal relief.

"Divide and conquer," she said. "If it's changed state by state it can be done behind closed doors."

Home builders are asking state legislatures in at least 13 states for the ability or right to fix an alleged defect before a lawsuit is filed.

"It is in everybody's best interest to solve this problem and keep the economy afloat," Price said.

He said in just about every state insurance premiums continue to increase and in some states insurance is not available at any price.

Home builders are looking to laws recently passed in Washington and California that address construction defects and litigation. In both states, the law requires that home builders have a chance to fix any problems, and in California, homeowners are required to give builders access to their home.

"(The California bill) does not take any homeowner rights away, but it does give builders some rights," said Harry Elliott, III, president of California-based Elliott Homes, who helped introduce the legislation. "It doesn't take away a homeowner's ability to file a lawsuit."

Elliott said it is too soon to tell if the California law has helped weed out frivolous lawsuits or whether it will lead to lower insurance rates.

"I think it will be doing its job," he said, adding that some insurance companies are coming back to California.

In Nevada, the right to repair before a lawsuit is filed is one of the main issues home builders are asking the Legislature to consider.

Quon said home builders' always have the right to repair homes before a lawsuit is filed.

"Homeowners don't call attorneys first, they call the home builder," she said.

As a result of rising insurance premiums, some home builders have stopped building attached affordable housing, Elliott said.

"The risk was 100 percent that you would get sued and not have insurance," he said.

Michael Sivage, chief executive officer of New Mexico-based Sivage-Thomas Homes, said he sees the same thing happening in Nevada. Sivage, who builds homes in New Mexico and Arizona, looked into entering the Nevada market, but decided against it because of the litigious environment and costs.

"It is very, very expensive," he said. "Construction costs are very high and the litigation makes it not a friendly environment."