SPARKS, NV - “I have over now over 300 Chapter 40 claims, over a thousand plaintiffs” says Mary Davis, owner of J & L Windows in Sparks. Davis says the growing number of baseless lawsuits have forced her to close her business. She’s one of many business owners in the construction industry calling for reform of NRS 40.
Davis believes the current law offers incentives to class action lawyers by guaranteeing attorney fees at 40% of construction defect settlements. “Initially it was a good thing,” adds Rick DeMar, CEO of the Builders Association of Western Nevada. “Over the years though, we've seen chapter 40 amended to where it's not beneficial to anybody.” He says the current law does not specifically define what is considered a “construction defect,” so many suits are manufactured by compiling small imperfections instead of actual negligence.
DeMar says many of the suits are settled by insurance companies out of court, and that has led to sky-rocketing premiums for local builders. As a result, some contractors have had to layoff workers or go out of business. Now, lawmakers are being asked to make changes to Chapter 40 that would put stricter guidelines on construction defect suits.
Two Assembly Bills presented in this Legislative Session address those changes. AB 285 seeks to limit guaranteed attorney's fees. It did not pass out of committee. However, lawmakers are still considering AB 401 which more clearly defines a “construction defect” and reduces the number of years builders are liable for problems. On April 20th, AB 401 was revised to allow any party to petition the court to determine the reasonableness of attorney’s fees.
DeMar says even with Chapter 40 reform, homeowners have a number of avenues to hold contractors responsible for truly shoddy work. He is hopeful that changes in the law will offer some protection for Nevada builders, and help put more people back to work in the construction industry.