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October 22, 2014

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The Legislature:

Assembly bill scores one for lawyers in construction defect tug of war

New version would require contractors to carry liability insurance

Assembly Bill 215 was proposed as a way to allow homeowners and their attorneys to sue contractors over construction defects, even if contractors go bankrupt. This week, according to its critics, the bill morphed into something else — leverage for trial lawyers to gain the upper hand in an ongoing fight over construction defect law.

No two groups have been more at odds this session than the trial attorneys and subcontractors, general contractors and homebuilders, as they battle over proposed changes in the state’s construction defect statutes.

Trial attorneys have close ties to Assembly Democrats, while the building groups have found a sympathetic ear in the Senate.

The conflict is now shining a light on end-of-the-session strategy, as lawmakers’ public deliberations give way to hard-edge tactics. Bills that pass one house, favoring one group’s interests, are countered with bills that pass out of the other house, favoring the other group. Proposed legislation can be held “hostage” until targeted bills pass or die.

Smarting over construction defect reform passed by the Senate 19-1 last week, the trial attorneys, who want the Senate’s proposed reform killed, appeared to need leverage.

Whether written for that purpose or not, the new version of AB215 gives the attorneys a bill the construction industry will have to fight.

Passed unanimously late Monday by the Assembly, the amended bill would require all licensed contractors to carry liability insurance.

Assembly Majority Leader John Oceguera, D-Las Vegas, called it a victory for owners of shoddily built homes who are trying to get them fixed.

Gary Milliken, who represents the Associated General Contractors, called it “a bargaining chip.”

Scott Canepa, a prominent construction defect lawyer, said the Nevada Justice Association, formerly known as the Nevada Trial Lawyers Association, was “deeply disappointed” that the Senate passed out the construction defect law. While he supports the new language in AB215, he denied it was related to the construction defect legislation.

“That’s sheer fantasy,” he said. “We could have asked the Assembly for a lot of things to give us leverage. We don’t want to play the game that way.”

The primary complaint of those who represent the construction industry is that they say it wasn’t properly vetted and they have not had time to fully explore the new language’s impact.

The bill would require contractors to carry between $300,000 and $3 million worth of insurance, depending on the size of the contract.

“We’re still trying to understand what it does to us,” said Josh Griffin, a lobbyist who represents the Nevada Subcontractors Association. “We think this establishes an incredibly high threshold, an incredibly expensive standard.”

Jim Wadhams, a veteran lobbyist who represents the Southern Nevada Homebuilders Association, said, “As far as I know, no one knew about it. My client became aware of it for the first time when the amendment was added on the floor.”

But Oceguera, who authored the original bill, and Assistant Majority Leader Marcus Conklin, D-Las Vegas, chairman of the Assembly Commerce and Labor Committee, defended the amended bill.

Oceguera said that during hearings in March, he expressed concern that homeowners with construction defects are finding companies have gone bankrupt and there’s no one to turn to.

The Nevada State Contractors Board testified that contractors could be required to carry liability insurance.

“People are being defrauded, and there’s no place for them to turn to,” Oceguera said. “This closes that loophole.”

He pointed out that the bill was amended in the committee nearly two weeks ago.

“It passed out of committee on April 10 and they couldn’t figure that out?” Oceguera said.

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