SHELTER

June  2004

The Window Guy
A Dealer's Perspective

If You Build Them … They Will Come
Construction-Defect Claims Plague the Las Vegas Market
by R. Mark Reasbeck

Back half a year ago, when Samantha Carpenter asked me to be a columnist for SHELTER, I asked what subject matter I could write about. Her response was, “Anything that affects your day-to-day business as a window dealer/distributor.” Taking that to heart, I want to address a very serious subject that affects my business on a daily basis—construction-defect lawsuits. 

For some of you in small markets, you may never have to experience this “cancer of the construction industry.” To those of you in bigger markets, if you build condos, they (construction-defect lawsuits) will come. 

Just think of it this way, when you have the Orkin man spray your home for bugs, the surviving pests escape to your neighbor’s house and set up housekeeping. When California passed some new laws against frivolous construction-related lawsuits, the Construction- Defect Lawyers (CDL) scattered to Las Vegas, set up housekeeping and, like fire ants, they’re moving east. 

Part One
I would like to preface that I am intensely active in a local trade association—the Nevada Subcontractors Association. This group was organized as a neutral meeting ground for subcontractors to put advocacy into action by lobbying our state lawmakers for legislative reform of the construction-defect laws. 

Even though we made headway in the 2003 session, the attorneys still continue to promote and pursue class-action suits. We are working diligently to close the loopholes in the 2005 Nevada legislative session.

From Conception to Birth
The premise is simple. A CDL firm literally solicits Homeowners Associations (HOA) 95 percent of the time, preying on condominium projects because of the high density of attached housing. The CDL firms then try to convince the HOA board that it is living in “dangerous and unsafe” dwellings and can profit from a class-action lawsuit. If that tactic fails, then the CDL reminds the HOA board that it can be held liable for not disclosing this information to its homeowners.

At that point, a destructive testing contractor (who usually works with the CDL), starts tearing apart walls, stucco, roofs, windows, etc. to show the HOA that it has been ripped-off by the contractor. 

Once the suit has been filed (in Nevada), this is what happens:
• Every subcontractor who has ever been on the job is called into the lawsuit, regardless of what the alleged problem is;
• Subcontractors on the job are not allowed an opportunity to repair any alleged defect because of the abuse of the “extrapolation” (loophole) clause. To put it in layman’s terms: if two out of four windows are defective, then 350 out of 700 must be defective;
• Every subcontractor on the job now has to dig through the archives looking for every piece of paper for that job and present them to the insurance companies and lawyers. Then, they determine if my windows have anything to do with a leaking roof. This could go back as many as ten years; and
• Every subcontractor is given an opportunity to settle the suit. The insurance companies pay the “ransom,” and shortly thereafter, you receive a notice that your insurance rates are going up for, you guessed it, too many claims. Of course, the option always exists that they can also cancel your renewal.

So there you have it—the birth of the lawsuit. And as with any newborn, you will give it lots of time, attention and money. You can also look forward to many sleepless nights.

Random Thoughts

These are just some of the situations I have experienced in dealing with the 21st Century ambulance chasers in the past several years.

I have testified before the Nevada Insurance Commission and proposed the question, “While selling close to $70 million worth of windows in Las Vegas over the past 20 years, can someone tell me how only defective windows find their way to the condo projects and not single-family homes?”

Being called to the Nevada Attorney General’s office as an expert in my field, I witnessed pictures of test equipment used by the destructive testing experts. The pictures revealed an A-frame test ladder with sprinklers at strategic locations to spray windows for leaks. The only problem with the picture was there was no water source connected to the system. Yet the water gage was stuck at 25-28 pounds of pressure.

I’ve actually witnessed at a rally sponsored by the CDLs where their speaker told a group of homeowners that the building inspectors “drive by the jobsites at 45 mph and wave on their way to Dunkin Donuts.”

How does an attorney in San Diego, who poses as a builder looking for window prices for a specific job, get my cell phone number? Well, this happened to me.

Before Christmas, a man called claiming to be a new contractor and wanted some brochures on my products. Smelling a rat, I asked if I could send a salesperson. 

“Aaahhh, we’re moving into a new office,” he replied.

“How about a phone number?” I asked him.

“Aaahhh, this is my boss’s cell phone, and I can’t give out the number,” he said.

“Okay, I’ll send some brochures,” I said.

The mailing address he gave me was a Mail Boxes Etc. box. I happily obliged him by ripping a page from the Personal Injury Attorney section of the phone book and sent it to his personal mail box. I never heard back. Darn, I was looking forward to that sale.

There have been more than $600 million dollars in construction-defect settlements thus far in Las Vegas with attorneys garnering 40 percent of that plus fees. I think I have a new pet peeve. 


SHELTER

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