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November 25, 2014

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THE LEGISLATURE:

Home defect law divides Democrats

Bill to pare homeowner lawsuits hasn’t received Assembly green light

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Democrats are locked in an increasingly acrimonious battle over construction defect legislation, which has emerged as one of the most contentious issues this session.

Senate Democrats, led by Judiciary Committee Chairman Terry Care, D-Las Vegas, passed a bill on a vote of 19-1 to curtail homeowner lawsuits against builders and subcontractors — a priority for the powerful but struggling construction industry.

Attorneys for homeowners groups vehemently oppose the measure because, they say, it would limit the rights of buyers who were dealt shoddy homes.

But the legislation, Senate Bill 349, is being held up in the Assembly, where Judiciary Committee Chairman Bernie Anderson, D-Sparks, hasn’t set a date to give the bill a hearing.

Care, in turn, won’t hold hearings on certain Assembly bills.

Anderson said he has told his committee “not to be surprised if their bills weren’t processed” in Senate Judiciary, Anderson said. “Scare tactics have been put on me, people have called me,” he said.

Although Anderson acknowledged that current law is imperfect, he said he would hear a bill only if it were “well agreed to,” meaning more moderate so as to not draw such strong opposition.

Anderson wouldn’t disclose which Assembly bills are gathering dust in the Senate, but he expressed displeasure with Care: “It’s a bad tactic. I won’t go for it.”

According to legislative staff, the Senate Judiciary Committee will have heard 70 of 73 bills referred to it by an important Friday deadline.

The three bills are all important to Anderson and Assembly Democrats, including Assembly Bill 388 and Assembly Bill 476, which involve gaming regulation.

Assembly Bill 495, which would loosen caps on medical malpractice awards, is the ultimate hostage, as it is an important goal of trial lawyers, who happen to be Care’s enemy on construction defect legislation.

Care brushed off the issue. “Uh-uh,” he said, noting that his committee has passed a number of Assembly Judiciary bills.

The conflict offers evidence of heightened tensions as the session nears its end.

Also on display: Democrats’ practice of infighting, which has historical roots of flying elbows every four years on the floor of their national conventions. Most fights like this among Republicans are settled behind closed doors.

Perhaps ironically, the standoff could lead to a compromise. The builders and subcontractors and their lobbyists, desperate to come away with at least something this session in preparation for the next building boom, will reach out to the other side in hopes of reaching a deal, according to two sources with knowledge of the discussions.

It’s not clear what a compromise would look like, however.

Current construction defect law offers a process to avert full-blown litigation, known as Chapter 40 for its place in Nevada statutes.

Builders and subcontractors say Care’s bill is welcome relief. They say the current system is flooded with bogus claims and exorbitant legal fees and often impedes home repairs.

The legislation would tilt the system significantly toward builders and subcontractors. Plaintiffs attorneys say it goes too far, imposing severe curbs on the rights of homeowners.

Chapter 40 was a compromise passed in the middle of the 1990s building boom to create a process to resolve disputes before litigation. Under it, homeowners who file lawsuits cannot claim noneconomic damages, such as emotional distress or punitive damages.

On the other hand, builders are obligated to pay the homeowners’ costs of bringing lawsuits, provided homeowners agree to reasonable settlements.

Builders and subcontractors say built-in attorney and expert fees create perverse incentives to bring Chapter 40 actions against them.

The proposed legislation would more narrowly define a construction defect. To qualify as defective, a home would have to present “unreasonable risk of injury to a person or property.” Alternately, it would have to meet all of the following criteria: violate building codes, cause damage to the property, and be built in a manner not “good and workmanlike” according to industry standards.

Currently, just one of those criteria — violating a building code — needs to exist to mark a home as defective and qualify it for the Chapter 40 process.

The legislation would also eliminate a provision in the law that allows plaintiffs to collect “reasonable attorney’s fees.”

A construction defect lawyer has offered withering attacks on the legislation. Scott Canepa, who’s litigated hundreds of Chapter 40 cases since the law’s inception, said the bill would leave homeowners, thousands of whom bought substandard houses during the building boom, defenseless against builders and their insurance companies and lawyers.

Canepa said current law necessarily requires nothing more than code violation to qualify as a construction defect.

“The code is the minimum standard to protect life, limb and property,” he said. If Nevada were to change the law to require criteria in addition to a code violation, the state “would leave the door open for contractors to build houses that are riddled with construction defects, without recourse for the homeowners.”

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