Contractors call for anti-lawsuit legislation

Contractors across the country are crying out for legislation to restrict the ability of homeowners and businesses to sue them for building defects.

In the past year insurance companies have nearly doubled their rates for general liability policies to cover the cost of increased lawsuits against contractors. What many contractors would like to see happen in state legislatures is action much like what federal lawmakers approved last year for workers’ compensation and medical malpractice insurance.

In 2003, CNA Financial, one of the largest insurance carriers in the country, was hit with $1 billion in construction lawsuit settlements. To prevent paying more in settlement costs, the Chicago-based firm stopped writing general liability insurance for contractors who do more than 10 percent of their business in residential construction. Because the majority of defect lawsuits come from homeowners, commercial contractors are still covered by most insurance companies.

But for most contractors, commercial and residential, the costs of insurance are significantly more than in the past. Paul Furr, president of Bradenton’s PDF Roofing Concepts of Sarasota, Florida, says his rates increased from $25,000 to $60,000 last year. Furr said insurance is becoming almost impossible to obtain, especially for contractors new to the industry.

For a short-term solution to the problem, some contractors are buying less insurance, passing on higher insurance costs to their customers and getting homeowners and business owners to sign contracts that release them from liability from certain types of damage, including mold.

No legislation restricting insurance costs or lawsuits has been passed yet, but small steps are being taken. The Florida legislature passed a bill last year that prevents homeowners from filing lawsuits until they give contractors a chance to inspect properties and fix the defects.