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April 16, 2014

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J. Patrick Coolican:

Why the construction defect fight is likely to get nasty this session

J. Patrick Coolican

J. Patrick Coolican

As my colleague Anjeanette Damon reports this week, the Groundhog Day legislative battle over construction defect litigation has broken into the open, with state Sen. Michael Roberson using some legislative legerdemain to move his bill from a hostile committee to a friendly one.

Your perfectly understandable reaction is probably, huh? Who cares?

More than people realize, the Legislature is often consumed with special interest issues, like fights between hospitals and insurance companies or one class of gaming company against another. This isn’t to say the issues aren’t important, at least to the players involved, but if you think your elected representatives are just up here having lofty discussions about education reform or transportation priorities, you’re kidding yourself.

As happens every two years, developers, contractors and subcontractors want to make it more difficult for homeowners to claim construction defects, known as “Chapter 40 notices” for their place in Nevada’s statutes. They say the litigation is often frivolous and expensive — adding to the cost of new homes and apartments — and filed just so plaintiff attorneys can collect hefty attorney fees. Attorneys for homeowners say they just want to protect Nevadans from shoddy building.

It’s a nasty battle every session because it’s seen as a zero-sum game — if one side wins, the other loses. And there’s boatloads of money at stake. It’s hard to see your way through to a compromise.

And this session will be as tough as ever. How do we know? For one thing, building is coming back in Southern Nevada, and the developers would no doubt like to clear away the plaintiff attorneys as they embark on plans to blast into the desert and throw up their mediocre product.

The plaintiff attorneys, meanwhile, are on the defensive — they’ve suffered a tough bout of negative publicity from the scandal in which fraudsters fixed up homeowner association board elections so they could steer construction defect lawsuits to favored law firms for kickbacks.

Here’s another thing about these seemingly arcane issues that can so dominate a legislative session — they fund campaigns. Both sides have dumped big money into into the campaign accounts of the key players.

Roberson, the Republican Senate minority leader, has raked in through his personal campaign and political action committees $100,000 or more from developers, contractors and their lobbyists, including big donations from Nevada Realtors, Nevada Subcontractors, Associated General Contractors, Pardee Homes, Leading Builders of America and Marnell Companies, as well as the chambers of commerce of Reno and Las Vegas, both of which support Roberson’s construction defect effort.

It’s easy to see, as Damon has reported, why Roberson wanted to move his legislation out of the Senate Judiciary Committee, whose chairman is state Sen. Tick Segerblom, an attorney who is a friend of the trial bar. In recent years he’s received $40,000 — and that’s just the big-dollar donations I plucked out — from plaintiff attorneys such as $5,000 from Fenton, Grant, Mayfield, Kaneda & Litt; $6,000 from Kemp, Jones & Coulthard; $5,300 from Lynch, Hopper, Salzano & Smith; and $3,500 from Robert Maddox. The political action committee of the trial attorney lobby, called the Citizens for JusticeTrust, has given more than $10,000. (Segerblom has also received money from law and lobby firms and developers on the other side of the fight. Always hedge your bets.)

This fight is so brutal, so tribal, that I don’t mean to suggest that campaign money will determine the ultimate outcome.

But it’s always good to keep in mind that everyone here knows who his friends are.

How important is this issue to the construction industry? Roberson has said it’s one of his top priorities and will be part of end-game negotiations that will also involve tax reform and school budgets.

In other words, if we take him at his word, somehow the future of the state will — at least in part — hinge on the outcome of this parochial fight between developers and trial lawyers.

Great, isn’t it?

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  1. I'm less concerned with sub-contractor liability than homeowner issues. Say you purchased a house with defects and YOU TRY TO SELL IT. Foolish legislation (BDR's) have put the crunch on the current homeowner to fix AND disclose all defects they are aware of AND to inspect. This tends to put the liability on homeowners even after they've moved on. Much more appropriate to go after the contractors AND the owners/former owners, managers, partners, investors, key employees of the builders. Pierce the corporate veil. Enough LLC's.

  2. The idea of protecting the consumer is never found in any legislation or law introduced by any party into this debate in Nevada.

    The builders and subcontractors are required, by law to follow construction codes while they are building a home in Nevada. Construction lawsuits claim that the builder, through his work or his subcontractors work failed to follow these codes. That is the base of all lawsuits.

    The simple answer is that if a builder or subcontractor fail to follow code they should loose their license, or at the very least, their license should be suspended until they correct their mistakes.

    But, this discussion never happens. Why? Because neither party wants to solve the real problem of protecting the consumer in a construction defect case.

    The builders and subcontractors know they can build a code deficient home and save more money than they could if they had to build that home by code. Even after they pay out claims for construction defects lawsuits the builders find it more profitable to continue to build code deficient homes. Why else would they continue this same practice for 15 years?

    Solving this problem is simple - Deny licenses to those builders or contractors who fail to build code compliant homes.

    Seems simple right? So why doesn't either party suggest this idea?

    BTW - General liability insurance for home builders is less than 5% of the total cost of building a home. So how devastating our these lawsuits? it's laughable..... all the lies....