Builders are finding it expensive – for some, impossible – to get liability insurance, according to Timothy Harris, general counsel for the Building Industry Association of Washington (BIAW). “A number of insurers have pulled out of the market entirely,” he says.

Harris indicates he’s heard from several builders, with good records and no claims, whose premiums have gone up four and five-fold. Those who may have a claim against them are truly in dire straits, he says.

The BIAW has worked legislatively to reduce the liability on builders.

This past session, Harris says, they were successful in getting a bill passed to reduce the amount of time after construction that a builder may be held liable. Previously, there were six years to find a problem, and six more years before time ran out on filing a lawsuit. Now the same six years covers both.

Additionally, Harris explains, more responsibility has been placed on owners. One question is the intended use. Is it a single-resident home being used for commercial purposes, or to house several families?

A more common problem addressed by the 2003 state legislature is that an owner’s failure to properly maintain a house may now be given consideration by courts.

Still, the growing cost of insurance required for contractors is ominous.

Art Castle, executive vice president of the Home Builders’ Association of Kitsap County (HBA), says insurance became a crisis for builders in the past couple of years, as premiums jumped between four and 10-fold. He cites as example one builder in South Kitsap who only builds one or two homes per year, and whose annual liability insurance increased from $1,500 to $15,000.

Castle explains that insurance runs in cycles, and that in the 1990s it was not profitable, but that the stock market bailed the industry out – right up until the market tanked. The insurance industry was hurt nationwide, forcing the skyrocketing premiums. The loss of some insurers means little or no competition to temper high prices.

The problem is exacerbated in our state, Castle says, because of “very aggressive trial attorneys here, and courts that have been friendly to them.”

Castle’s perspective is that a builder’s liability insurance was never intended to be a guarantee for the purchaser, but he says courts have treated it so. That being the case, he believes tort reform is desperately needed, putting financial limits on a builder’s liability.

Castle adds that in 2002, a law was passed that would permit a building contractor to try to fix a problem before a lawsuit could be filed. Even with these pieces in place and more efforts at relief to come, he doesn’t anticipate a quick fix to builders’ liability insurance problem.

Consequences include higher consumer prices on construction, and some builders driven from the business. Castle fears some may put themselves and others at risk by working uninsured, which means they are not registered, bonded or taxed.