Recent Trends in Construction Defect Litigation

I.

INTRODUCTION

Throughout the nation, states are addressing the potential abuses inherent in construction defect litigation. Most states are taking steps to curtail this practice by enacting “right to repair” legislation. “Right to repair” statutes permit a contractor, after receiving notice from a homeowner about an alleged defect, to inspect and repair the defects complained of. While commentators argue that these new laws may lead to an admission in subsequent proceedings that a defect did in fact exist, and also that homeowners are still permitted to file suit after allowing the contractor the right to repair, homeowners have been adversely affected as well. By requiring homeowners to give notice to contractors of alleged defects, homeowners must bear the initial expense of hiring attorneys and experts to identify the alleged defects in order to give proper notice. These recent legislative developments, when analyzed together with the verdicts and findings by courts in Nevada, California, New York and Florida, indicate that states are trying to protect developers and insurers at the expense of homeowners.

II.

RECENT TRENDS IN CONSTRUCTION DEFECT LITIGATION IN NEVADA

Recent events at both the Nevada Supreme Court and the Legislature suggest that construction defect litigation in Nevada may not be as plaintiff “friendly” as in the past. The Nevada Supreme Court in December 2005, overturned a $7.8 million verdict in favor of a class of homeowners, as individual questions predominated which made the class unsuitable for certification. This decision has already shaken the legal community as plaintiffs’ attorneys are complaining that they hear “checkbooks slamming shut all over.”[1] As will be explained more fully in detail below, this may be the most significant development in construction-defect litigation in Nevada since the enactment of N.R.S. 40.600 et seq.

The Nevada State Legislature has also recently adopted legislation providing contractors with a “right to repair.” The Legislature intended to reduce the number of construction-defect lawsuits by mandating that contractors be given notice of alleged defects in order to make appropriate repairs. Despite being afforded the opportunity to make repairs, though, homeowners still have the ability to file a construction-defect lawsuits despite the quality of repairs.

These recent trends, and others as detailed below, show that Nevada is concerned about the direction in which construction-defect litigation is heading, with the result that steps are being taken to cut down on abuses.

A. Recent Cases.

In Darlene Shuette, et al. v. Beazer Homes Holdings Corp., et al., No. 14611, Nev. S. Ct. (Dec. 15, 2005), the Nevada Supreme Court overturned a $7.8 million verdict which, with interest, costs and attorneys fees, exceeded $15.6 million for improperly certifying a group of homeowners as a class.[2] Justice Hardesty stated that “[b]ecause single-family residence constructional defect litigation often raises diverse, individualized claims and defenses, we conclude then, generally, the requirements for class action certification cannot be met.”

Homeowners sued Beazer Homes alleging negligence after they discovered cracks in the foundations, walls and driveways and their North Las Vegas homes. The development consisted of 206 single-family homes. Judge Earl certified the class, which originally consisted of three original plaintiffs who complained of defect conditions. Experts alleged that expansive soil conditions caused the cracking. At trial, the jury did not find Beazer to have breached any implied or express warranty, but found it contributorily negligent.

The Court held that class actions involving real property are often incompatible with the fundamental maxim that each parcel of land is unique. If allowed to proceed on issues, including liability, that involve variables particular to unique parcels of land, such class actions would defeat this principle. Because these cases present issues of causation, liability defenses, and damages that cannot be determined or presumed through the use of generalized proof, but instead require each party to individually substantiate his or her claims, the Court found class certification to be improper.

Prior to the Shuette decision, juries had been awarding significant sums to plaintiff-homeowners. In Pacific Legends Green Valley Homeowners Association v. Pacific Properties and Development Corp., No. A405501, Nev. Dist. Ct., Clark Co. (1999), homeowners at the Pacific Legends Green Valley Homeowners Association sued Pacific Properties, alleging negligence, negligence per se, breach of implied warranties of fitness, merchantability, quality and habitability and strict liability. The plaintiffs argued that defects existed as to the design and construction of their condominium complex with regard to roofing, framing, electrical work, plumbing, the irrigation system, landscaping, water intrusion and stucco. Pacific defended by claiming that the defects did not exist, but offered the homeowners $199,000 for repairs.

After trial, the jury found that Pacific breached the implied warranty of habitability, resulting in the proximate cause of the homeowners’ damages. The jury also found that Pacific’s breach of the express warranty of quality caused Plaintiff’s damages. The jury awarded the HOA $12 million.

Koeth, et al. v. Capital Pacific Homes, Inc., et al., No. A410326, Nev. Dist. Ct., Clark Co., (1999), is Nevada’s first construction-defect case to go to trial. The defects at issue included hairline cracks in the walls and doors and also leaky roofs and windows. The jury awarded the homeowners $2,462,250.40.

Reaction to Shuette is, expectedly, split between plaintiff and defense attorneys. Both sides recognize that as a result of the decision, there will be an increase in the cost to bring such cases by plaintiffs, and their attorneys.[3]

The fall out from the Shuette matter has also reverberated down to the district courts. On February 14, 2006, Judge Saitta removed the class action status of a 2003 lawsuit involving homeowners at Sun City MacDonald Ranch in their case against homebuilder Del Webb. On February 27, 2006, Judge Earl refused to grant class action status to Sun City Summerlin residents in a construction-defect lawsuit against Del Webb. Also, on February 27, Judge Cherry, basing his decision on the Shuette case, ruled that a group of homeowners must individually prove damage to their homes before being certified as a class. The three rulings reflect the judges’ compliance with the Supreme Court’s decision.

B. Recent Settlements.

The following cases involve settlements of construction-defect lawsuits:

1. Lauriel Santoio, et al. v. Stanton Park Development, et al., No. 99-016408A Nev. Dist. Ct., Carson City. A class of 369 homeowners in the Mountain Park sub-division filed suit against the developers alleging defects related to ground water problems that damaged homes and fostered mold growth. Under the settlement, defendants agreed to pay $14 million.

2. In re Casa Linda Developments, Nos. A382341, A356772, A378750, Nev. Dist. Ct., Clark Co. (1997). A class of homeowners alleged construction defects including tilting and heaving of concrete slabs; cracking and disintegration of interior wall surfaces; cracking and disintegration of exterior wall surfaces; and deterioration of concrete flat work. Experts concluded these defects were related to highly expansive and corrosive soils. The parties settled for $16.2 million.

3. Rock Springs Vista 8 v. J.A. Black Construction Co., No. A363149, Nev. Dist. Ct., Clark Co. (1996). The homeowners alleged construction defects with regard to the roofing, framing, electrical, plumbing, irrigation, water intrusion and stucco. The parties settled for $4.75 million.

4. Rock Springs Vista 7 HOA v. J.A. Black Construction Co., No. A420295, Nev. Dist. Ct., Clark Co. (2000). The homeowners contended that their homes suffered from drainage issues due to defect in the roofs and stucco. The parties settled for $5.4 million.

5. Fairway Villas HOA v. Fairway Villas Ltd., No. A415860, Nev. Dist. Ct., Clark Co. (2000). The homeowners contended that the home suffered from drainage issues due to defective roofs and stucco. The parties settled for $990,000.

6. Island Park HOA v. Robert V. Jones Corp. The homeowners claimed that roof and window leaks, cracked stucco, cracked drywall and water that gathered in the common area of the condominium complex had been caused by architectural deficiencies. Defendants settled for $1.8 million.

7. Rock Springs Vista 3 HOA v. J.A. Black Construction Co. The homeowners charged the developers of the condominiums with more than 180 types of defects in the architecture, exterior walls and stucco, roofs, chimneys, deck and stairs, windows, doors, chips and wall board, thermal and fire protection, ceramic tile, floors, foundations, water drainage, plumbing, heating, ventilation and air conditioning, and electrical wiring. Defendants settled for $16 million.

The foregoing cases settled prior to the Supreme Court’s decision in Schuette. In light of the response to Schuette, that “checkbooks are slamming throughout the county,” it can be anticipated that settlements will be favorable to contractors and insurers going forward.

C. Recent Legislative Developments.

On August 1, 2003, Senate Bill 241 became effective, which allows developers and subcontractors to repair alleged construction defects in order to avoid litigation. SB241 has been codified beginning at NRS 40.645, which states in pertinent part:

. . . before a claimant commences an action or amends a complaint to add a cause of action for a constructional defect against the contractor, subcontractor, supplier or the design professional, the claimant must give written notice by certified mail, return receipt requested, to the contractor . . .

NRS 40.646 provides that within thirty (30) days of receipt of the notice, the developer must forward the notice to the subcontractor whom the contractor reasonably believes is responsible for the defects specified in the notice. The subcontractor may then inspect the home within thirty (30) days after receiving the notice and then inform the developer of any intentions to repair.

Although the intent of SB 241 and NRS 40.645 – 40.648 is to limit the number of lawsuits by allowing contractors the right to repair, many do not believe that the desired effects will be reached.[4] Prior to forwarding the notice letter, expert expenses are usually incurred. Even if all defects are repaired, the plaintiffs will not be made whole because of the large fees that attorneys and experts have generated. In other situations, plaintiffs would rather have the money needed to fix the deficiency than have the defect repaired by the sub-contractor who failed to properly construct the home in the first instance. Other concerns arise on the developer side in that the time periods prescribed by NRS 40.645 et seq. do not afford sufficient time to make proper repairs. As developers will not personally be liable for any damages arising from a lawsuit, but its insurance company, developers are not incented to make repairs. Finally, even if repairs are made, regardless of the quality, the homeowner can still sue, having complied with NRS 40.645.

D. Miscellaneous Issues.

Due to the continual increase in construction-defect lawsuits filed in Clark County, the Eighth Judicial District Court has created the Complex Division Construction Defect Court. Judges Earl, Cherry and Saitta are assigned to the construction-defect division of the Court. While a specialized division assist litigants in providing predictable and consistent decisions, in addition to assigning the majority of their dockets to construction defect lawsuits, the number of lawsuit has yet to abate.

E. Conclusion.

The Nevada Supreme Court, the Legislature and Clark County have taken steps to curtail the rise of the number of construction defect lawsuits filed since the enactment of NRS 40.600 et seq. The Schuette decision is having immediate effects as judges are already using it stringently to prevent class certification. The natural result is that homeowners and plaintiff’s attorneys will need to spend significant sums on expert testing to demonstrate to the courts that the construction defects are not individualized, but do in fact exist throughout a development. While the plaintiffs’ bar may be able to circumvent those results by, amongst other options, having several plaintiffs’ lawyers work with a group of plaintiffs in order to pool their resources, a significant burden still exists.

The Legislature has also sought to curtail construction defect litigation abuses by allowing contractors the right to repair. Although there are concerns as to whether the legislation will have the intended result, contractors and their insurers should still look to this option as a viable option to resolve defect issues short of litigation.

Finally, the creation of special courts focusing on this area of litigation also provides contractors and insurers with consistent and predictable opinions. This will in turn enable parties to better evaluate a construction defect case, and resolve the matter on terms more favorable than had previously been possible.

III.

RECENT TRENDS IN CONSTRUCTION DEFECT

LITIGATION IN CALIFORNIA

A. Recent Cases.

The following cases involve jury verdicts in construction defect lawsuits:

1. Lee, et al. v. Fieldstone, No. GIC 740075, Sup. Ct., San Diego Co. (May 14, 2002). The plaintiffs consisted of a group of 10 homeowners in a development located in Oceanside. Fieldstone built the single family homes, which plaintiffs alleged had been damaged due to high ground water levels. Defendants maintained that no construction defect existed at the time it sold the properties and that plaintiffs’ cost of repair was unreasonably expensive. The jury returned a verdict of $2,162,535, with the amount of the individual awards ranging from between $306,391 to $174,732 per house. Defense counsel reported that after the verdict, the parties agreed to settle the case for $1,870,714. Plaintiffs originally demanded $2 million, and the defendants offered $300,000. Plaintiffs claimed that the cost of remedial repairs to the respective homes would be $4.5 million.

2. Palmer v. Murphy, No. 221871, Sup. Ct., Sonoma Co. (July 19, 2002). Plaintiff undertook a home remodeling project in 1997, hiring Murphy, and his company, to remodel the 2-bedroom home. After completing construction, Plaintiff complained of defects involving HVAC and plumbing issues. Plaintiff also alleged the defendant fraudulently over-billed plaintiff. After a trial, the jury found 12-0 for defendants on the construction defect claim, 11-1 on the fraud claim and no liability on the part of defendants. Plaintiff demanded $325,000, while defendants offered $55,000.

3. Cathedral Hills Vistas HOA v. Pon, No. 300249, Sup. Ct., San Francisco Co. (January 31, 2003). Plaintiff HOA alleged water intrusion construction defects at a 20-unit condominium project located San Francisco. Prior to trial, the developer and all but the window subcontractor settled with the HOA (settlement terms not available.) The HOA proceeded on its claim against the window subcontractor for negligence in installing the windows. The jury returned a verdict for the subcontractor and no finding of negligence on its part. The HOA originally presented a repair bid for $1.7, and the subcontractor argued a reasonable repair bid for the entire project totaled $500,000.

4. Bauer v. Black Mountain Development, No. VO 17907-0, Sup. Ct., Alameda Co., Hayward (August 8, 2003). Plaintiff homeowner sued Black Mountain and its subcontractors for construction defects involving framing work and the installation of tiles in the first floor of Plaintiff’s residence. Plaintiff settled with Black Mountain and a subcontractor for $200,000 prior to trial. Black Mountain proceeded to trial against its subcontractors for indemnity as to its settlement with Plaintiffs, but the jury found that the subcontractors bore no liability for the tile cracking.

5. Cypress Grove Villas HOA v. Hennon Surveying & Mapping, Inc., No. GC 028430, Sup. Ct., L.A. County, Los Angeles (August 30, 2004). The HOA filed suit for construction defects affecting a 29-unit condominium project in Pasadena. The HOA alleged that the building pads had been built too low. At trial, the HOA sought damages in the amount of $1,009,770.64. The jury found that the defendants acted within the applicable standard of care and therefore bore no liability for the HOA’s alleged damages.

6. Bonnici, et al. v. Forecast Corp., No. RIC 361721, Sup. Ct., Riverside Co., Temecula (October 28, 2004). Plaintiffs claimed that they suffered from a variety of ailments allegedly caused by the defective installation of piping that then gave rise to mold growth in their residence. Defendants argued that Plaintiffs’ injuries had not been caused by any alleged defect and microbial growth, but instead had been caused by Plaintiffs’ excessive use of prescription drugs. The jury found that any alleged defects had not caused Plaintiffs’ damages and, further, that the pipe had not been defectively installed.

B. Recent Settlements.

The following cases involve settlements of construction defect lawsuits:

1. Tucker, et al. v. Pacific Mill Works, No. CV 032028, Sup. Ct., Marin Co., Marin (May 09, 2005). Plaintiffs owned a single-family residence which with alleged construction defects, including an improper deck drainage system which lead to mold and mildew contamination of the house. Plaintiffs claimed that the cost of repair totaled $2.5 million. During the third day of jury selection, the parties settled for $700,000.

2. Toy Warehouse Lofts Homeowners Ass’n v. Toy Warehouse Lofts Realty Investors, LLC, No. BC 292056, Sup. Ct., L.A. Co. (May 13, 2004). Plaintiff HOA converted an 80 year old warehouse into 20 residential condominium lofts. After the conversion, the new homeowners became aware of noises that permeated through the walls and ceilings. Defendant admitted that certain sound components had been omitted in constructing the lofts, but contended that the costs to repair amounted to $30,000. After the second week of trial, the parties settled for $1.32 million.

3. Cobblestone Racquet Club HOA v. CRC Development Corp., No. BC 223548, Sup. Ct., L.A. Co., Central (March 15, 2002). Cobblestone is a development comprised of several hundred units built in five phases located in Lancaster, California. The HOA sued the builder/developer for construction defects including civil engineering, architectural, roofing, fenestration, plumbing and electrical defects. Defendants contended that others bore responsible for the alleged defects and that the alleged defects had not yet caused any property damage. The case settled $2,300,000, after plaintiff originally demanded $4 million and defended offered less than $1 million.

4. City of Thousand Oaks v. Confidential, No. SC 021392, Sup. Ct., Ventura Co. (June 1, 2001). As part of a $68 million development of the Civic Arts Plaza, the improvements suffered damages from water intrusion and stucco failure. Plaintiffs sued for construction and design defects. Plaintiff first demanded the amount of $10 million, whereupon Defendants offered approximately $2 million. After lengthy mediations for over a period of one year, the case settled for $6,899,909.

5. Shelby Regency Homeowners Association v. Shelby Regency Investments and Zamin Const. Co., Inc., No. BC-221231, Sup. Ct., L.A. Co., Central (August 30, 2001). The Shelby Regency HOA claimed that a 20-unit condominium complex located in Los Angeles had defects including roof and deck leaks, sheet metal flashing failures and water intrusion problems. Defendants claimed that the damages were not as extensive as the HOA claimed, and that the defective conditions had been caused by other parties involved in the construction. Defendants settled for $960,000.

6. Avocado Town Homes Homeowners Association v. General Bank, No. BC-226661, Sup. Ct., L.A. Co., Central (October 15, 2001). The HOA claimed constructions defect existed at its 8-unit town home complex located in the Los Feliz area of Los Angeles. The alleged defects included roof leakage, subterranean garage water intrusion, deck and planter leakage and mold damage. Plaintiffs originally demanded $700,000, with Defendants countering at $125,000. The parties settled at $400,000.

7. Board of Trustees, California State University v. Dillingham Construction, et al., No. 312566, Sup. Ct., San Francisco Co. (February 15, 2002). This action arose out of a dispute relating to the design and construction of the Humanities Building located on the campus of San Francisco State University. Plaintiff alleged defects relating to water intrusion that caused mold contamination. Defendant denied Plaintiff’s allegations and filed a cross-complaint against numerous cross-defendants, including the architect and EIFS subcontractor, for indemnity. Defendants settled for $2.2 million.

C. Recent Legislative Developments.

California has recently enacted SB 800, which is intended to be a revolutionary “next step” in construction defect litigation.[5] SB 800 requires homeowners to allow builders the right to repair a home, or waive this right, prior to allowing the homeowners to file a construction defect lawsuit. The new legislation applies to all homes sold on or after January 1, 2003.

SB 800 also has a “Bill of Rights” that sets forth actionable defects. The Bill identifies the defects as including: water intrusion, defects in plumbing and drainage systems, defects in soil and structural components that allow cracking or deterioration of the home, and interference with the proper operation of the installed components such as an HVAC unit, electrical systems, doors, and other components.

Although SB 800 is meant to simplify the litigation process, the law has its deficiencies. In order to perform repairs, a builder may be required to admit that the claimed defect does not comply with the law and applicable building codes, which may then be admissible in a subsequent suit.

Homeowners are likewise adversely affected since each and every defect must be identified, and then subjected to a different repair and mediation process.

Additionally, there is the possibility that compliance of the terms of SB 800 will become as costly as protracted litigation, which burden is anticipated to be passed on to insurers.

D. Conclusion.

California recognizes the need to give definition to construction defect litigation. Through SB 800, California has sought to give builders guidelines under which to build, and homeowners to know whether to demand repairs or sue. Although the legislation has only been recently enacted, making it difficult to discern the actual consequence of its application, problems with SB 800 exists for both developers and homeowners.

IV.

RECENT TRENDS IN CONSTRUCTION DEFECT

LITIGATION IN NEW YORK

A. Recent Cases.

The following cases involve litigation issues in construction defect lawsuits:

1. State of New York v. 27 North Moor Association, et al., No. 01400215, N.Y. Sup., N.Y. Co. (February, 2001). The New York State Attorney General sued the developers of a condominium complex for $7.9 million. The alleged construction-defects included plumbing, foundation, roofing, stucco, and fire safety issues. The parties reached a stipulated settlement agreement that required, reportedly valued between $2 million to $3 million.

2. Pavarini Construction Co., Inc. v. Continental Ins. Co., No. 301034-98, N.Y. Sup., N.Y. Co. (July 10, 2001). Pavarini had been retained to build an office complex for General Insurance. After discovering defects including water intrusion, General Ins. and Pavarini entered into a corrective work agreement. After Pavarini failed to comply with the terms of the agreement, General Ins. sued Pavarini and its insurers, including Continental. Because the insurance policy at issue predate the construction project, the court dismissed the construction defect claims alleged against Continental.

3. Trump Village Section 3 Inc. v. New York State Housing Finance Agency, et al., No. 262, N.Y. Sup., App. Div., 1^st Dept. (March, 2002). After discovering construction defects affecting residences within a development, Plaintiffs sued not only the corporate construction company, but the owners individually. On appeal, the court upheld the lower court’s finding that the owners could not be pursued in their individual capacity.

4. Gorsky v. Triou’s Custom Homes, Inc., No. 51329 N.Y. Sup., Wayne Co. (January, 2003). Gorsky hired Triou to install shingles on his residence, which shingles proved to be defective. Although the installer admitted to the defects with the shingles and agreed to replace them, this did not cover the cost to install a new roof. Gorsky sued seeking recovery of costs for a new roof. Triou sought dismissal on statute of limitations grounds, arguing that the defect had been discovered within 6 years of filing the suit. The court refused to grant summary judgment as issues of fact existed as to whether Gorsky complied with the notice requirements of New York law in bringing a claim for defective workmanship.

5. Baker Residential Ltd. Ptsp. v. Travelers Ins. Co., No. 4167, N.Y. Sup., App. Div., 1^st Dept. (October, 2004). Travelers insured Baker with regard to the construction of a development at the Oak Ridge Hanover Condominium complex. After the HOA filed suit for defects to the structural beams of the buildings, Baker asserted that Travelers had a duty to defend Baker. An appellate court affirmed that Travelers, as a CGL insurer, had no obligation to defend and indemnify Baker with respect to damages resulting from its faulty workmanship.

6. Tratoros Construction Inc. v. AIU Insurance Co., No. 33226/01, N.Y. Sup., Kings Co. (April, 2005). Tratoros, as the general contractor for a project for the New York School Construction Authority, obtained coverage from AIU under the Authority’s wrap-up insurance program. After discovery of masonry defects, Tratoros agreed to remediate the defects and provided notice to AIU. AIU disclaimed coverage and sought summary judgment. The court granted summary judgment in favor of AIU, finding that Tratoros agreed to remediate the defects prior to giving notice to AIU of the defects, with the result that Tratoros’ actions arose out of faulty workmanship and constituted a breach of contract claim, and not an “occurrence” under the policy.

7. Hritz v. Great Northern Ins. Co., No. 6180-6180A, 6180B, 6180C, N.Y. Sup., App. Div., 1^st Dept. (July, 2005). Hritz alleged construction defects that gave rise to mold contamination in the residence. Great Northern claimed that its policy excluded the total loss of a home due to mold contamination. The court upheld Great Northern’s position, and also found that Great Northern could recoup the extra living expenses advanced to the homeowner.

8. Kramer v. Zeckendorf, No. 12801402, N.Y. Sup., N.Y. Co. (2006). Kramer and his family claimed that construction defects at his condominium unit suffered from mold contamination which caused the constructive eviction of his family. Kramer sued the developer and its subcontractors. The court rejected Kramer’s request to add a fraud claim relating to the mold contamination against the HOA, ruling that if it allowed the claim, it would expand the disclosure requirements beyond what is required under current state laws.

2. Conclusion.

New York is unlike the other states at issue in that it has not enacted legislation allowing contractors the right to repair. New York’s body of case law, though, appears to be favorable to developers and their insurers, as Court strictly enforce the terms of the contracts and policies at issue.

V.

RECENT TRENDS IN CONSTRUCTION DEFECT

LITIGATION IN FLORIDA

A. Recent Cases.

The following cases involve litigation issues in construction defect lawsuits:

1. Premix-Marbeltite Manufacturing Corp. v. SKW Chemicals Inc., No. 99-3138-CIV, S.D. Fla. (July, 2001). A group of homeowners initiated this suit seeking recovery for construction defects related to the violation of building codes. Defendants contended that they had obtained the necessary approval for the plans, but did not substantiate their argument at trial. After trial, the jury found that the homes violated Florida’s building codes and awarded them $5,237,893.

2. Berger v. Eagles Reserve HOA, No. 01-651-CI-11 (August, 2001). Klak v. Eagles Reserve HOA, No. 00-8168-CI-07, Fla. Cir., Pinellas Co. (August, 2001). Homeowners sued their HOA, as well as the developer and its subcontractors, for construction defects affecting 3 homes. After a jury trial, the jury returned a verdict in favor of the homeowners for $5.2 million. The defendants sought a new trial, claiming that the sampling of defects at 3 homes did not support the amount of the verdict. The court denied the motion, finding the verdict had been supported by the evidence.

3. Southwin, Inc. v. Verde, Nos. 3D00-612, 3D99-2233, Fla. App., 3^rd Dist. (August 2, 2001). A Florida appeals court upheld a $5.2 million award to owners of defectively built homes that had been marketed to victims of Hurricane Andrew.

4. IDC Construction LLC, v. Admiral Ins. Co., No. 03-14216-CIV, S.D. Fla. (November, 2004). IDC contracted with Holiday Inn Oceanside for repairs and renovations. After completion of the job, water intrusion occurred in many rooms. Holiday Inn filed a claim against IDC. IDC sought to have Admiral honor its duty to defend obligation. The underlying complaint involved damages for water intrusion, but did not specify the exact date when the damages first occurred. The complaint also alleged facts within and outside the coverage of the policy. The court found under these facts, Admiral had a duty to defend.

5. Sekura v. Granada Ins. Co., No. 3D04-377, Fla. App., 3^rd Dist. (March, 2005). After completion of constructing a residence, the homeowners filed suit for construction defects affecting their residence. Granada sought dismissal from the case, which the court allowed. The court based its decision on the rule that liability insurance does not cover the cost to repair or replace construction that does not comply with municipal building and Federal Emergency Management Agency requirements.

6. West Orange Lumber Co., Inc. v. Indiana Lumbermens Mutual Ins. Co., No. 5D04-1429, Fla. App., 5^th Dist. (April, 2005). A homeowner sued West Orange for failing to provide the proper grade of lumber. Indiana Ins. Co. refused to defend West Orange, which the court upheld. The court stated that an insurer has no duty to indemnify a construction material supplier in connection with an underlying defects dispute when the supplier fails to meet contract specifications and when other property suffers no corresponding damage.

7. Church of the Palms-Presbyterians USA, Inc. v. The Cincinnati Ins. Co., No. 8:04-ZV-1513, U.S. Dist., M.D. Fla. (January, 2006). The Church discovered mold contamination throughout the church and filed a claim with Cincinnati Ins., which denied coverage. The court ruled that the all-risk policy did not cover mold contamination because the policy specifically excluded fungus.

8. Mercedes Homes Inc. v. Rosario, No. 2D05-3153, Fla. App., 2^nd Dist. (March, 2006). The Rosarios contracted with Mercedes for the construction of a single-family residence. After moving in, the Rosarios complained of water intrusion that lead to mold contamination. Rosario sued for breach of contract and violation of Florida’s building code. Because the warranty provided by Mercedes compelled the parties to first arbitrate the claim, the court upheld the warranty’s arbitration provision.

9. Coy, et al. v. Allstate Floridian Ins. Corp., No. 2:05-CV-103, M.D. Fla. (March, 2006). The Coys filed an action seeking to certify a class by claiming that Allstate breached its contracts with them by not compensating them for mold damage sustained as a result of Hurricane Charley. Although the court found that the proposed met the typicality, numerosity and adequacy of representation requirements, the plaintiffs did not meet the commonality or predominance requirements for class certification because the individual policies differed as to mold coverage.

B. Recent Legislative Developments.

Florida has also recently enacted legislation providing for notice and the opportunity to repair alleged defects. Through SB 1286, Florida has set forth prerequisites for bringing a construction defect action.[6] In addition to providing for the notice that must be given by the homeowner, and the time to respond by the contractor, SB 1286 also requires a homeowner to give written notice of the acceptance or rejection of the contractor’s attempted remedy of the defect. The contractor likewise has the ability to offer to make repairs, or compromise the dispute by making a monetary settlement.

C. Conclusion.

As with California and Nevada, Florida has sought to curtail construction defect litigation abuses by enacting “right to repair” legislation. Although not as comprehensive as Nevada’s and California’s legislation, the Florida act does detail the procedure by which the homeowner gives notice to the contractor, and the manner by which the contractor responds thereto.

Florida’s courts do not appear to adjudicate construction defect cases in favor of one side versus the other. Florida Courts do interpret construction contracts and policies strictly, but have upheld jury verdicts awarding homeowners significant sums for defects that are proven, even if only occurring within a small sample of residences within a development.

VI.

CONCLUSION

Nevada, California, New York and Florida recognize that abuses exists with regard to construction defect litigation. In an attempt to diminish the number of frivolous lawsuits filed by homeowners, the majority of these states have enacted legislation allowing contractors the right to repair defects alleged by homeowners. While these laws cut against both homeowners and contractors, it remains to been seen whether the legislation will reach its intended affect of curbing abuses in this areas.

Based on the decisions, verdicts and settlements in each of the states, it is too early to tell whether abusive litigation practices have decreased. It is apparent, though, that courts will strictly enforce construction contracts and insurance policies in favor of contractors and their insurers.

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