View this article online: https://www.insurancejournal.com/news/west/2005/06/20/56341.htm
Moisture is rotting newer homes and condominiums from Portland to Seattle left vulnerable by a combination of new building techniques, trouble-prone materials and shoddy construction, a newspaper reports.
An investigation by The Oregonian showed the problem is nationwide, but homeowners are especially suffering across the rainy Pacific Northwest, resulting in a heavy financial toll for them, along with builders and insurance companies.
In Portland’s West Hills, million-dollar units at Vista House Condominiums sit shrouded in tarps for more than a year while residents settle for $5.5 million in repairs.
In suburban Lake Oswego, a couple sues for $898,000 to fix a leaky roof, walls and windows of their $1.8 million dream house. In Depoe Bay on the Oregon coast, owners of a TrendWest time share demand $12 million for damages so extensive their lawyer says the complex needs to be rebuilt.
“For the last year and a half, when I wake up and it’s raining, I don’t go back to sleep,” said Brian Leitgeb, whose $600,000 home in the Forest Heights area of the West Hills suffered extensive moisture damage.
“I literally think about my house rotting every time that happens,” Leitgeb said. “My doctor says I must have some sort of sleeping disorder. No—I just have a crappy house.”
But Leitgeb turned out to be one of the luckier homeowners. After nine months of negotiation, his builder’s insurance company covered the $100,000 repair bill.
Many homeowners, even those who have launched expensive legal fights, get reimbursed for only 50 percent to 70 percent of their repair costs. The rest comes out of pocket.
Mold and problems with building materials have plagued the industry off and on since the early 1990s. But The Oregonian found that damage claims are exploding in step with the housing boom.
Based on extensive interviews with contractors, homeowners and engineers, and drawing from confidential legal settlements, the newspaper found the issues hotly disputed and little understood by homeowners.
Builders and engineers partly blame construction codes adopted in the 1970s and strengthened through the ’80s and early ’90s to require greater energy efficiency. The good intentions had an unintended consequence: when moisture penetrates walls built to current codes, they tend to stay wet.
“We used to build buildings like those great boxers from the 1950s who could really take a punch,” said engineer Joe Lstiburek, a nationally known expert on construction problems. “Now we’re building buildings with glass jaws.”
Some dispute that argument.
The National Association of Home Builders says money-hungry lawyers are primarily to blame for rising litigation over construction defects.
But the theory that design, materials and construction practices all contribute to the problem increasingly is embraced by housing professionals and other builders, some of whom are adopting new preventive techniques.
The fortunes of many are at stake. During the past decade, more than 16 million new homes or condos have been built in the United States, including 2 million last year.
Home building is one of the nation’s biggest industries, generating about 14 percent of the nation’s gross national product, according to the NAHB. And today, buyers are paying more money than ever for what, in most cases, will be their single largest investment.
Homeowners who have already made that big investment are fighting to protect it across the West.
In Oregon, Washington, California, Nevada and Colorado, courthouses are crammed with lawsuits against builders, a trend that has staggered the construction industry while adding thousands of dollars to home prices as insurers increase rates for builder liability policies, or refuse to cover some types of damage.
At least five insurance companies have pulled out of the contractor liability business in Oregon, saying defects and big payouts make it too risky. The builders, for their part, are pressing legislatures here and in other states for laws restricting the right of homeowners to sue for repairs.
One measure of the financial impact comes from insurance companies, which told Oregon regulators in a survey that they could pay out more than $125 million for construction defects on liability policies in place during 2001-03 alone. Regulators said insurers portrayed the figure as a dramatic increase from prior years.
Drawing on dozens of lawsuits and sealed settlements, The Oregonian confirmed that three Portland law firms alone have helped homeowners in Oregon and southwest Washington state win $70 million since 2001.
Nationally, construction defect losses run into the billions. Ron Kozlowski, a principal in the consulting and actuarial firm Towers Perrin in San Francisco, said the construction defect losses and loss reserves from 20 insurance companies he has studied stands at about $10 billion since 1995.
The number reflects just a portion of the building industry. “The actual total is way beyond that,” Kozlowski said.
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