Rep. Pat Lantz (D-Gig Harbor) is acknowledged as the primary villain in this situation. As chair of the House Judiciary Committee, she has refused to allow tort reform to be debated on the House floor for the past two years

   The continuing liability insurance crisis for builders not only impacts the bottom line of the construction industry but ultimately makes housing less affordable, contractors say. That’s because the skyrocketing costs are being passed to the consumer through higher prices of new homes and condos as well as by increased apartment rents.
   Some estimates say liability insurance costs that increase four to 10 times each year add about $3,000 to the cost of a new home. In other instances, builders are going are out business.
   “I’ve heard horror stories of insurance costs for even small builders going from $1,500 to $15,000,” said Art Castle, executive director for Home Builders Association of Kitsap County (HBA). The insurance is mandatory for a company to be registered and licensed.
   “It’s a huge problem because insurance costs have been skyrocketing out of control and insurance companies have been leaving the market,” said Timothy Harris, general counsel for Builders Industry Association of Washington (BIAW). “It especially impacts the smaller builders.”

Art Castle of the Homebuilders Association notes that a small number of insurance companies are beginning to ease back into the market, and others offer coverage if the builder buys an additional warranty, but that additional cost is passed on to the buyer.

   For the last few years, tort reform has been one of BIAW’s main focuses. Much like in the medical field, the issue for construction insurance is compounded by a rash of “construction defect” lawsuits, which have become a cash cow for lawyers, while creating an unpredictable market for insurers.
   Multi-family housing, which is strongly encouraged by the state’s Growth Management Act, has been targeted by attorneys because it’s an easy target. Often there is a lot of transient occupancy and the resulting damage that occurs is difficult for a builder to prove he or she isn’t responsible for years after the fact.
   The unintended consequence is that less multi-family housing is being built in the designated Urban Growth Areas, but the continuing demand is driving up the cost of all housing in our state.
   Castle also noted that insurance companies stopped being profitable in the 1990s but the stock market held them up for a while. “When the stock market went sideways, a lot of the companies started cutting back,” he said. As a result, even builders with good records were dropped from coverage, and insurers started pulling out altogether.
   Representative Pat Lantz (D-Gig Harbor) is acknowledged as the primary villain in this situation. As chair of the House Judiciary Committee, she has refused to allow tort reform to be debated on the House floor for the past two years. It should be noted that not reforming the tort system in our state is a position favored by trial lawyers — and that Lantz and her husband are both attorneys.
   Unlike the health care industry, construction did see some relief with new legislation. The Cure Bill, for example, allows builders the chance to fix a problem before being sued. The Legislation also limited the time in which companies may be liable to six years after construction.
   A few insurance companies are coming back into the market, Castle said, and others are starting to offer coverage if builders buy additional warranty. But until there is more predictability, fewer excessive lawsuits, and better-defined liabilities, the consumers will continue to be impacted, he said.
   The situation makes it unattractive for new builders to start a business, especially when the ever-increasing land-use and planning regulations are added in. That means not only smaller companies closing doors but fewer businesses opening up.
   “Starting out today seems daunting,” said Mike Brown of FPH Construction. “It’s impacting all of us.”