COLUMN: Building industry airs grievances

Where were the legislators?

More than 800 members of the home building industry squeezed into conference rooms in Las Vegas and Carson City last Monday. They were there to air their grievances to Nevada Insurance Commissioner Alice Molasky-Arman about the insurance crisis in the construction industry. There was not a legislator to be seen.

Attendees wore tags proclaiming the Coalition for Fairness in Construction, a statewide alliance of builders, contractors, subcontractors and other construction industry-related businesses.

At issue was the difficulty in obtaining liability insurance. And, when the insurance can be obtained, it comes at a cost that prices mom-and-pop shops out of business. That doesn't even address exclusions, which make it almost impossible for a company to bid on any project. For instance, no subcontractor can get insurance to cover a job on condominiums or townhomes.

What is the core of this insurance crisis? Molasky-Arman said it best when she told about attending a construction defect seminar in California.

"I was in a state of disbelief when I heard an attorney tell others, `Come to Nevada, the water's fine' and litigation is thriving."

After a particularly bitter comment about Gov. Kenny Guinn focusing his attention on the doctor issue, Molasky-Arman assured attendees that their problems are no less important to the state than the medical malpractice insurance crisis. She pointed out that the medical crisis deals with people's lives immediately, and therefore became a more pressing issue.

Speaker after speaker said while the insurance industry had to take some of the blame, the crux of the problem was a litigious society.

"I don't know how a carrier can predict losses from claims arising from some opportunistic trial lawyers promoting needless litigation not for the benefit of their clients, but rather primarily to generate huge contingency fees for themselves," said Robert Lewis, president of Lewis Operating Corp.

Steve King, president of Pete King Nevada Corp. and a third-generation home builder, begged for help so he could turn the paint and drywall company over to a fourth generation.

"I am here today to tell you there is an insurance crisis in our industry. It is a direct result of the massive number of construction lawsuits filed in the past few years and the insurance costs to litigate and settle these cases," King said.

Mark Tomlinson, president of the Southern Nevada Home Builders Association and executive vice president with Pacific Properties & Development, said, "the insurance crisis is directly attributable to the rampant and ever-increasing number of construction lawsuits that our builders face. ... I can tell you from personal experience that because of the litigious environment and associated insurance difficulties, my company is no longer building any for-sale homes."

Several speakers pointed out that the skyrocketing cost of insurance is directly seen in the skyrocketing median price of a home in the Las Vegas Valley. In May 2000, the median price of a home was $155,241. In May 2002, the median price of a new home was $186,858. While some of that hike can be attributed to the rising cost of land, some of it reflects the builder's rising insurance costs per home.

Steve Hill, president of Silver State Materials and coalition chairman, summed it up by saying liability insurance is not available to many contractors, subcontractors and material suppliers. Currently, no standards insurance companies are willing to write new residential construction business in the state, according to Hill, and those that can renew are doing so at rates exceeding 400 percent or more of rates a year ago.

"Additionally, that insurance is routinely riddled with exemptions, in many cases leaving the contractor and the public without adequate insurance coverage."

Hill said the rising costs force up the costs of homes and are "causing many people not to be able to pursue the traditional American dream of homeownership."

"The ultimate solution to this crisis must be crafted by our state Legislature. The current laws of Nevada allow an environment that is detrimental to the citizens of our state and those laws need to be improved."

So, where were the legislators?

Carmel Hopkins, real estate product manager for the Las Vegas Review-Journal and Las Vegas Sun, can be reached at 380-4574. Her e-mail address is Carmel_Hopkins@ reviewjournal.com. Snail mail is P.O. Box 70, Las Vegas, NV 89125.

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