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    Alaska Builders Right To Repair Current Law Summary:

    Current Law Summary: HB151 limits the damages that can be awarded in a construction defect lawsuit to the actual cost of fixing the defect and other closely related costs such as reasonable temporary housing expenses during the repair of the defect, any reduction in market value cause by the defect, and reasonable and necessary attorney fees.


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    Interior Alaska Builders Association
    Local # 0235
    938 Aspen Street
    Fairbanks, AK 99709

    Bettles Alaska Building Expert 10/ 10

    Mat-Su Home Builders Association
    Local # 0230
    609 S KNIK GOOSE BAY RD STE G
    Wasilla, AK 99654

    Bettles Alaska Building Expert 10/ 10

    Home Builders Association of Alaska
    Local # 0200
    8301 Schoon St Ste 200
    Anchorage, AK 99518

    Bettles Alaska Building Expert 10/ 10

    Home Builders Association of Anchorage
    Local # 0215
    8301 Schoon St Ste 200
    Anchorage, AK 99518

    Bettles Alaska Building Expert 10/ 10

    Kenai Peninsula Builders Association
    Local # 0233
    PO Box 1753
    Kenai, AK 99611

    Bettles Alaska Building Expert 10/ 10

    Northern Southeast Alaska Building Industry Association
    Local # 0225
    9085 Glacier Highway Ste 202
    Juneau, AK 99801

    Bettles Alaska Building Expert 10/ 10

    Southern Southeast Alaska Building Industry Association
    Local # 0240
    PO Box 6291
    Ketchikan, AK 99901

    Bettles Alaska Building Expert 10/ 10


    Building Expert News and Information
    For Bettles Alaska


    Federal Court Predicts Coverage In Nevada for Damage Caused by Faulty Workmanship

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    Another Case Highlighting the Difference Between CGL Policies and Performance Bonds

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    BETTLES ALASKA BUILDING EXPERT
    DIRECTORY AND CAPABILITIES

    The Bettles, Alaska Building Expert Group is comprised from a number of credentialed construction professionals possessing extensive trial support experience relevant to construction defect and claims matters. Leveraging from this considerable body of experience, BHA provides construction related trial support and expert services to the nation's most recognized construction litigation practitioners, Fortune 500 builders, commercial general liability carriers, owners, construction practice groups, and a variety of state and local government agencies.

    Building Expert News & Info
    Bettles, Alaska

    Construction Costs Up

    February 21, 2013 —
    The cost of putting a building up just got a little higher. The General Contractors of America have tracked an 0.7 percent increase in the cost of building materials between December and January, leading to a 1.3 percent increase through 2012. Ken Simonson, the organization’s chief economist, said that “contractors had to contend with huge leaps in prices for gypsum, wallboard and lumber, as well as significant increases in the cost of insulation and architectural coatings such as paint.” And it isn’t just building materials. Simonson notes that diesel prices are up too, which increases the costs of moving heavy machinery across the site, among other considerations. Don’t expect things to change. “It is clear that costs are rising significantly higher in February,” said Simonson. Read the court decision
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    Hawaii State Senate Requires CGL Carriers to Submit Premium Information To State Legislature

    March 20, 2011 —

    In light of the decision in Hawaii’s Intermediate Court of Appeals in Group Builders, Inc.,v. Admiral Insurance Company, 231 P.3d 67(2010), Hawaii’s state senate is requesting that "every domestic and foreign insurance company that has ever issued commercial general liability policies in the State is requested to submit information to the Legislature on the total premiums received for their commercial general liability policies during the past ten years"

    Read Full Text of Hawaii State Senate Resolution

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    South Carolina Supreme Court Finds that Consequential Damage Arise From "Occurrence"

    October 10, 2013 —
    The South Carolina Supreme Court held that continuing damage that was part of a continuum of property damage constituted an "occurrence." Auto-Owners Ins. Co. v. Rhodes, 2013 S.C. LEXIS 248 (Sept. 25, 2013). Rhodes hired Eadon to design, fabricate, and erect three outdoor advertising signs on Rhodes' property bordering an interstate highway. After the signs were erected, one fell across the highway, blocking both lanes of southbound traffic. The state Department of Transportation ordered Rhodes to remove the remaining two signs and revoked Rhodes' permit to maintain signs on the property. Rhodes sued Eaton. Eaton's insurer, Auto-Owners, filed a declaratory judgment action to determine whether there was coverage under the CGL policy. The trial court found the sign falling on the interstate constituted an "occurrence" that resulted in damages beyond the defective work to property other than the defective work itself. Read the court decision
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    Reprinted courtesy of Tred Eyerly
    Tred Eyerly can be contacted at te@hawaiilawyer.com

    Delay In Noticing Insurer of Loss is Not Prejudicial

    April 28, 2014 —
    The Tenth Circuit reversed a district court's determination that untimely notice of the loss was prejudicial, eliminating the insurer's coverage obligations. B.S.C. Holding, Inc. v. Lexington Ins. Co., 2014 U.S. App. LEXIS 4492 (10th Cir. March 11, 2014). In January 2008, the insured's employees detected an inflow of water in a salt mine and feared dissolution of the salt or structural problems. The insured tried to devise a solution. Two and a half million dollars were spent to find the cause of the water inflow and to identify a solution. In April 2010, the insured determined the inflow was caused by an improperly sealed oil well. In July 2010, the insured notified Lexington of the water inflow. The ultimate proof of loss was for $7.5 million, which included remediation measures that the insured had performed before notifying Lexington. Lexington's all-risk policy required the insured to notify the company in writing as soon as practicable. Read the court decision
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    Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii
    Mr. Eyerly may be contacted at te@hawaiilawyer.com

    Colorado Mayors Should Not Sacrifice Homeowners to Lure Condo Developers

    September 17, 2014 —
    For the past two years, Colorado’s Metro Mayors Caucus has been aggressively lobbying the state legislature to strip away consumer protections in construction defect disputes, in the hope that more lax construction standards may attract condominium developers to their cities. Although the General Assembly voted down their proposals in the 2013 and 2014 sessions, Denver Mayor Michael Hancock raised the issue again during his recent State of the City address, and it is likely that proponents will sponsor another bill during the upcoming 2015 session. The mayors would do better to protect their constituents’ rights and work to correct the underlying problems that have hampered condominium construction in recent years. Eliminating consumer protections is not the right way to help their communities grow. Should developers build apartments to rent or condominiums to sell? At the core of this debate is the recent trend favoring apartments over condominiums. According to an October 2013 report from the Denver Region Council of Governments (DRCOG), the construction of new condominiums around Denver has not rebounded from the Great Recession as quickly as the construction of apartments or single-family homes. Many of the new attached-housing projects currently in development are expected to be offered as apartments for rent rather than condominiums for sale. This concerns some mayors, who feel that apartments promote a more transient population, with fewer permanent ties to the their communities. To encourage developers to build condominiums instead of apartments, the mayors have argued that Colorado should repeal or limit laws that currently protect condominium owners from shoddy workmanship and construction defects. In April 2013, DRCOG had urged the Colorado General Assembly to pass Senate Bill 13-52, which would have given immunity for environmental hazards to builders of multi-family communities located near bus stops or light rail stations. The bill would also have given these builders an unfettered right to choose what repairs were appropriate if any homeowners complained of other defects, and it would have prohibited homeowners from seeking relief in court for unsatisfactory repairs; if builders did not offer reasonable repairs, homeowners’ only option would have been to pursue costly private arbitration. During judiciary committee hearings, a number of mayors and homebuilders testified in favor of the bill, and expressed a belief that it was virtually impossible to build a condominium project without being sued over defective work, and that this was the reason why apartrments had become more popular. There were few data to support their anecdotes, however, and the DRCOG report had not yet been published. As a result, the committee rejected the bill. Just what the “Doctor” ordered. Several months later, DRCOG made its report available. Not surprisingly, portions of this document supported the type of legislation that DRCOG had promoted earlier in the year. The report’s authors acknowledged, in fact, that the subjective sections of their report were limited to the opinions of the development industry, and “should be recognized as one side of the discussion.” The authors also conceded that they had relied primarily on interviews with homebuilders, contractors, and defense lawyers in preparing their findings; they had spoken to “very few” plaintiff attorneys, and it does not appear that they spoke to any homeowner association representatives. Nevertheless, local politicians immediately seized on the report as evidence that laws should be changed. “God bless DRCOG,” joked one member of the Denver Metro Chamber of Commerce in an interview with Westword. “I think it’s devastating,” Lakewood Mayor Bob Murphy said in a separate interview with the Denver Business Journal. “I see this as a verification of what I’ve been talking about… I’m not aware of a single member of the 41-member Metro Mayors Caucus who is opposed to some kind of reform.” At the January 2014 meeting of the Metro Mayors Caucus, Mayors Murphy and Hancock cited the report when arguing for changes in the law. Other mayors echoed their concerns and voted to support legislation that would take away homeowners’ access to the courts, limit the power of homeowner associations to advocate for their members, and impose difficult administrative barriers to taking legal action against developers. Senate Bill 220 The mayors eventually found a receptive ear in Commerce City Senator Jessie Ulibarri. In the final days of the 2014 session, Ulibarri broke ranks with fellow Democrats and introduced Senate Bill 14-220. Ullibarri’s bill would have addressed the mayors’ concerns by making it illegal for homeowner association boards to speak with attorneys, consult experts, or request that builders repair construction defects, unless the board first obtained the votes of at least half of the community. The bill would have required that the board obtain votes from a majority of the entire membership—not just those who appeared at a meeting or participated in the election—and forbid the use of proxies to meet this total. In practice, this would have made it effectively impossible for large communities to hold a builder accountable for negligent construction, code violations, or breaches of warranty. In addition, even for communities that would be able to overcome these voting hurdles, the bill would force many disputes into binding arbitration with whatever service the builder had selected to resolve disputes. In theory, these changes would have made it so difficult for communities to enforce their legal rights that developers would have enjoyed de facto immunity from claims for defective work. Senator Ulibarri and the mayors hoped that giving this immunity to developers would spur them to build more inexpensive condominiums, without fear of liability for ignoring the building code or delivering low quality work. Ultimately, the late introduction of SB 220 proved fatal. Democratic leadership expressed frustratation that Ullibarri had put forth the bill without allowing sufficient time to discuss potential amendments to preserve consumer rights, and the 2014 session ended before the bill could pass through committee hearings. The mayors, however, seem intent on introducing similar legislation in 2015, repeating the mantra that it is impossible for developers to build quality condominiums at a reasonable price. Mayor Murphy, in particular, has been vociferous in his support for laws curtailing homeowner rights: He recently proposed a local ordinance that would deny Lakewood residents the consumer protections available to other Colorado homeowners in construction disputes. Litigation is not the only factor favoring rentals. This approach is fundamentally misguided. Although many apartment builders have cited the fear of litigation as a factor affecting their decision to avoid the condomium and townhome market, there is little in the DRCOG report, or elsewhere, to support the theory that eliminating consumer protections will cause these developers to start erecting condominiums. In reality, the DRCOG report itself (which was recently taken off the DRCOG’s website without explanation), identified multiple factors that have slowed condominium construction, not just the perceived legal risks of litigation over defective work. These factors included more stringent lending requirements from banks, surplus inventory from foreclosures, homebuyers’ inability to afford down payments, and overall economic and market conditions that have recently favored apartments. Giving builders immunity for defective work will not change any of these economic circumstances. In addition, the DRCOG report noted that some Millennials may simply prefer to rent rather than buy; it acknowledged the existence of a vigorous ongoing debate in academic circles over whether the “Gen-Y” and “Millennial” populations have the same desire to own property as their parents in the “Boomer” generation, though the report’s authors ultimately concluded that generational preferences have only had a minor effect on condominium construction. The report further noted that demand for condominiums may increase on its own over time, as older Boomers seek to downsize and move to smaller houses. These issues are also independent of any concern over construction defects. Moreover, one should not overlook a factor that received little attention from the DRCOG report: Colorado’s strong rental market. Recent reports show that rents are at all-time highs across the state, and many individuals are willing to pay a premium for desirable rental property in this tight market. It should therefore come as little surprise that homebuilders have started constructing more apartments to meet this demand. Mayors should concentrate on why apartments cost less to build. On the subject of construction and construction defects, the DRCOG report did identify three reasons why it may be less expensive to build apartments than condominiums in today’s market. One was quality control. For condominium projects, prudent developers often choose to retain a third-party inspector to visit the site and verify that subcontractors are performing their work correctly. This is a wise step to ensure that any defects are identified promptly and corrected on the spot; making such repairs during construction, while the responsible subcontractors are still on site, and before other trades have covered up their work, is typically far less expensive than taking a house apart and fixing mistakes years later. On an apartment project, however, a developer may choose to omit this step and wait to see if renters complain about defects or demand repairs. By eliminating this quality control expense, the DRCOG report found that a developer could save an estimated $1,800 per unit during construction. A second reason was the use of less-expensive subcontractors. The report found that general contractors who build condominium projects may demand a “premium” of between four and six percent of overall job costs to pay for subcontractors who have the necessary credentials and insurance to do the most challenging phases of the work. This is deemed crucial for condominium projects, because the eventual homeowners may seek redress in court if their homes contain construction defects. By contrast, those who lease apartments are thought less likely to insist on quality workmanship, and builders may therefore be able to get by with a cheaper workforce when constructing rental properties. The report found that using less-qualified subcontractors could save developers an estimated $9,300 per unit. The third reason was lower insurance costs. The report assumed that condominium communities would not have the same level of on-site maintenance as apartment complexes, and that condominium owner associations would “introduce an element of risk for litigation that apartment properties do not have.” As such, developers of apartment projects often pay between $3,674 and $3,952 less per unit for liability insurance than developers of condominium projects. Adding these three figures produces a total savings of $14,774 to $15,052 per unit for apartments. Developers interviewed for the DRCOG report stated that the only way they could make sufficient profits on “entry-priced” condominiums (those with a sales price under $450,000) was to use the cheaper construction methods associated with apartments. These developers were reluctant to cut such corners on condominiums, however, because of the fear that buyers might sue for the cost of repairing defects and code violations. Lowering quality standards will not help the industry. Although the DRCOG report helped explain why the perceived fear of litigation may have made some developers hesitant to build condominiums, this perception does not justify laws that would strip away consumer protections or lower quality standards in the industry. Overall, the DRCOG report described a market saturated with poorly-built condominiums, many of which have been the subject of multi-million dollar construction defect lawsuits and foreclosures in recent years. Although several national builders have now pulled out of the Colorado attached-housing market, the report noted that a lingering oversupply of condominiums has held sales prices down. The report stated that this oversupply would likely diminish within a few years, but it may take time before the market fully normalizes and returns to the point where local, honest contractors can compete with those who have been peddling cheap, substandard products. The last thing that Colorado lawmakers should do now is encourage more low-quality workmanship by limiting homeowner rights. Likewise, while high insurance rates remain a valid concern, the DRCOG report suggested that this increase is actually the result of 2010 legislation that the homebuilders themselves sponsored. Senate Bill 10-1394, now codified at Colo. Rev. Stat. § 13 20-808, protects builders from unfavorable policy interpretations by creating a rebuttable presumption of insurance coverage for property damage from construction defects. This is good for developers, but has made some insurance carriers nervous. According to the DRCOG report, roughly a dozen carriers have left the state in recent years, and insurance brokers “attribute their departure to the passage of the 2010 legislation.” The report also noted that new insurance providers have since entered the market, but these carriers tend to specialize in the “high cost/high risk” arena, and charge premiums that are twenty-five to forty-five percent higher. Developers likely did not intend this result when they sought insurance reform in 2010, but that does not mean that homeowners should be penalized in 2015. In sum, these data do not support curtailing consumer rights. If Senator Ulibarri and the mayors truly want condominium construction to become more economical for developers, they should direct their attention to the real issue: How did it become impossible for quality builders to earn a profit on condominiums? The DRCOG report suggests that construction defects are part of the problem, but politicians should be thinking about ways to prevent the defects, not penalize the consumers who end up stuck living in defective houses. If poor workmanship and code violations have become so commonplace that a developer can only make money by eliminating quality control and hiring unqualified workers, then steps should be taken to stamp out negligence and level the playing field for quality builders. Politicians should not create even more incentives for builders to cut corners. Moreoever, one should note that Colorado, unlike many states, does not license its general contractors at the state level; some cities require contractors to pass a local examination, but a statewide licensure program could help weed out builders with a history of defective work. Temporarily providing grants to offset quality control and insurance costs could also help condominium developers stay competitive until the economic conditions improve. In fact, Senator Ullibarri proposed a separate bill in 2014, SB 216, that would have done just that, but Republicans killed the measure shortly before SB 220 was heard in committee. Arbitration and HOA restrictions are not the answer. Unfortunately, however, many of Colorado’s mayors and legislators insist that eliminating consumer protections is the only way to create an incentive for builders to construct more condominiums. Thus, their ideas have largely ignored the underlying problems of cheap, substandard work; they have instead focused on concepts such as requiring private arbitration of disputes and limiting the power of homeowner associations to represent their members in lawsuits. Although these concepts may seem neutral at first glance, they could actually tilt the balance heavily in favor of the homebuilding industry. With regard to arbitration, one should recognize that the process is unlike mediation or other forms of alternative dispute resolution, in which the parties meet and try to reach a mutually acceptable compromise. Arbitration is more akin to a private lawsuit, wherein the parties give up their right to an impartial jury and, instead, pay a panel of lawyers or retired judges to hear their evidence and award monetary damages. This tends to make arbitration much more expensive, and to create a financial incentive for arbitrators to favor the large companies that are likely to give them future business, not the occasional consumer who is unlikely to need a professional dispute resolution service again. With regard to homeowner associations, individual homeowners often lack the resources to litigate claims against well-funded developers and insurance companies, and the only way they can protect their property values is to join together in an association with their neighbors. A united association of homeowners can often persuade a builder to make reasonable repairs; a divided group of individuals can rarely achieve such a result. Limiting this right of association would merely encourage developers to build more substandard units. Likewise, while homeowner voting requirements may seem innocuous, they often penalize communities with large numbers of military, absentee, or out-of-town owners, all of whom may be difficult to reach in the event that the community needs a quick vote on legal action. If nothing else, the hypocrisy of these arguments should anger the mayors’ constituents. Homeowner associations and cities both rely on the same model of representative government. But when a municipality hires a contractor to build a new city hall or erect a new bus stop, it does not let the contractor unilaterally dictate the terms of dispute resolution, nor does it promise to abandon all legal rights unless a majority of its entire population votes to act. Imagine if Mayor Hancock had to obtain affirmative votes from half of Denver’s 483,000 registered voters before he could ask the City Attorney to enforce a construction contract; DIA would be a defect-riddled nightmare for taxpayers. Despite such facts, however, many of the mayors at the January 2014 meeting seemed confused or naïve about what really happens when a homeowner gives up his or her legal rights. Some, for instance, did not seem to understand the different forms of alternative dispute resolution available, or to appreciate the difference between voluntary mediation (in which both sides meet and agree on appropriate repairs or solutions) and binding arbitration (in which the builder selects a private service to decide if the homeowners are entitled to money damages). Cherry Hills Village Mayor, Doug Tisdale, meanwhile, encouraged the other mayors to use talking points, such as arbitration being “faster, cheaper, more effective, and more efficient” than proceeding in court, precisely because neither side can appeal if the arbitrator misinterprets the law. He failed to offer any real facts or statistics to support this opinion, however, or to explain why homeowners should feel good about forfeiting their right to appeal an erroneous decision. Mayor Tisdale went on to suggest that mayors tell their constituents that homeowners of limited means could always find an attorney willing to represent them individually on a contingent fee, even if legislators took away the ability of homeowner associations to advocate on behalf of their members. No such statement should ever be part of a mayor’s talking points; anyone who actually practices in this field knows that construction attorneys will rarely agree to represent a single condominium owner on a contingent fee basis, because of both the high investigation costs and the reality that the owners’ association almost always has exclusive responsibility for maintaining and repairing the community’s structures and other common elements. An honest debate This is not to say that the homebuilders’ concerns about the increased costs of condominium construction are entirely without merit. The DRCOG report suggested that the prevalence of cheap, low quality work across Colorado forced many developers to cut back on quality control and hire inexperienced subcontractors in order to remain competitive and earn a profit in recent years. The resulting poor workmanship led to construction defects and litigation, and the insurance carriers responded by raising rates on builders across the board. The passage of SB 10-1394 appears to have exacerbated the problem and pushed insurance rates even higher. The combination of low sales prices and high insurance rates, coupled with a dip in demand for owner-occupied attached housing, has made it very difficult for local developers to make money on condominiums. As the DRCOG report confirmed, a key underlying cause of this problem has been defective work. Stripping away consumer protections will not encourage condominium developers to invest in more quality control or premium subcontractors, however; stripping away consumer protections will merely encourage more of the same mistakes that contributed to the condominium shortage in the first place. If the mayors truly want to address the lack of new condominiums, they should look at why substandard construction has become acceptable and ways to improve code compliance and overall quality. Mayors are in a unique position to direct their cities’ building departments, and they should take advantage; instead of lobbying for weakened consumer protections, mayors should invest their tax dollars in hiring and training more building inspectors, and they should establish a clear policy prohibiting approval of substandard construction. Once communities stop tolerating shoddy workmanship, good developers will again be able to build quality condominiums without fear of incompetent competitors undercutting their prices. Legislators may also want to revisit the option of providing temporary tax credits or other financial assistance to developers who hire their own quality control inspectors and take other steps to avoid building homes with construction defects. The DRCOG report concluded that the developers could shave about $15,000 off the construction cost of an entry-level condominium unit by eliminating quality control, using less-qualified subcontractors, and saving on insurance premiums, and the government could act to eliminate this incentive. Licensing contractors at the state level could help in the long term, but politicians may also wish to consider supporting tax credits or other incentives of up to $15,000 per unit to developers who agree to build quality condominiums instead of cheap apartments. This would allow the developers to offset the higher costs of building for-sale properties, avoid litigation over substandard work, maintain adequate insurance, and still earn an attractive profit. Obviously, some taxpayer advocates might object to the subsidization of real estate developers’ profit margins in this manner. Others might conclude that encouraging owner-occupied housing is a worthwhile investment of a community’s tax revenue. Regardless, this would at least be an honest debate about the real question: Who should bear the cost of building condominiums without defects? The mayors’ current plan to make homeowners pay for repairing a builder’s poor workmanship is the wrong answer. Jesse Howard Witt is an attorney with The Witt Law Firm in Denver. He focuses on construction law and represents homeowners, associations, developers, and contractors. He welcomes comments at www.wittlawfirm.net. Read the court decision
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    Contractor May Be Barred Until Construction Lawsuit Settled

    November 06, 2013 —
    In July, Pamar Enterprises was constructing a water main in Bad Axe, Michigan and an error on their part sent water and sewage into homes. This was similar to what happened when they constructed a water main in 2007 in Lyon Township. Now Michigan Representative Terry Brown wants the state to stop awarding contracts to Pamar until the lawsuits are resolved. “I’ve asked [the Michigan Department of Transportation] not to have any more contracts with Pamar,” said Mr. Brown. Mr. Brown is also seeking that the state withholds payments to Pamar. “I was assured that they would not be getting any more payments until the situation was satisfactorily resolved.” In the 2007 case, Pamar won in Oakland County Circuit Court, but the Michigan Court of Appeals, found that Pamar failed in its “duty to exercise reasonable care when it entered onto an altered private property.” Read the court decision
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    Four Companies Sued in Pool Electrocution Case

    June 26, 2014 —
    Back in April of this year, a seven-year old boy was electrocuted while swimming in his family’s pool in North Miami, Florida, according to CBS Miami. Now, the family is suing four companies in a wrongful death suit. The complaint claims that the victim “was electrocuted due to a faulty pool light and electrical grounding and bonding on the pool’s lighting system.” Pentair Water Pool and Spa, Inc., manufactured and designed the pool light. Florida Pool & Spa Center “provided periodic cleaning, maintenance and inspections of the pool,” while Gary B Electric and Construction Consultant is being sued for “improper bonding and grounding.” Also, Jorge Perez Enterprises Inspection Company is listed in the lawsuit since they conducted the inspection when the family purchased the home. Read the court decision
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    Condo Board Goes after Insurer for Construction Defect Settlement

    February 07, 2013 —
    The City Bella on Lyndale homeowners association settled with the high rise's developer and builder for $1.9 million over construction defects. The defects included structural deterioration in the project's pool area, extensive air and water leaks in the windows, and structural problems in the project's underground parking garage. City Bella consists of a 15-story tower and a four-story building on Lyndale Avenue in Minneapolis. They settled the lawsuit in 2011, but the homeowners association is still looking to the insurers to pay up. With legal fees and interest, the total rises to $2.82 million that Travelers could be paying the association. Read the court decision
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