State laws previously gave homeowners a decade to file claims for most defects. "The construction of affordable condominiums and townhomes has all but ceased due to the virtual certainty that the builders and subcontractors involved in their construction would be sued over alleged construction defects," said Mick Pattinson, president of the California Builders Industry Association, a Sacramento-based homebuilders group, when the bill was passed.
According to CBIA, there were only three or four insurers for tract construction in California last year, and only one was willing to cover condominiums. "Insurers have basically written off California so they will need some time with the new regime before they come back," says Tim Coyle, CBIA's senior vice president. But last year insurers weren't especially pleased with all aspects of the proposed SB800, worrying that it would lead to claims against them.
Plaintiffs attorneys liked the parts of the bill that clearly state that homeowners have a right to file a claim for a defect after giving proper notice and allowing the builder to make repairs. Those provisions represent the culmination of years of negotiation between the building industry and plaintiffs attorneys, says Thomas E. Miller, a Newport Beach, Calif.-based lawyer for homeowners.
With time, CBIA officials say, insurers will develop a loss history under the new law and will decide whether to begin writing more affordable policies in the state.