New Law Impacts All Builders and Insurers
More than four years after comprehensive construction defect reforms were implemented in Nevada, Nevada's construction defect laws are changing again. On June 3, 2019 Governor Sisolak signed AB 421 into law. While AB 421 retains some of the 2015 reforms, a number of significant changes will go into effect on October 1, 2019. Here is a brief summary of the more notable changes which are likely to raise issues in litigated matters in the future:
- Statute of Repose – The new law increases the time for bringing an action for construction defects from six years to ten years (NRS 11.202(1)); also of note, NRS 11.202(2) adds language allowing a claim to be brought at any time, i.e. without any limitations period, after substantial completion, for "any act of fraud in causing a deficiency in the design, planning, supervision or observation of construction or the construction of such an improvement." However, lower-tiered subcontractors are exempt if they did not know and should not have reasonably known of the defect at the time they performed their work.
- Warranty Claims – Under AB 421 claimants will only need to "diligently pursue" a claim under the Builder's Warranty, however, this is no longer a pre-condition to giving a Chapter 40 notice; the amendments also clarify that a warranty is not a type of insurance. Further, claimants are no longer required to disclose information to the contractor about home warranties applicable to the claim (NRS 40.687); and provisions tolling the statutes of limitations and repose from the time a warranty claim is made until it is denied are eliminated (NRS 40.650).
- Recoverable Damages – AB 421 eliminates the requirement that additional costs, such as expert costs, reasonably incurred by the claimant are limited to those construction defects proven by the claimant (NRS 40.655(1)(e)). As such, this change may be interpreted by the trial courts to allow for the recovery of expert fees and testing costs in post trial motions to the court that were not proven to the jury, if the trial judge finds that they were reasonably investigated. This amendment may be one of the more significant changes to the statute.
- HOA Standing – Under existing law an HOA is only able to bring a Chapter 40 claim pertaining exclusively to the common elements. Under AB 421 an HOA will also be able to bring claims relating to any portion of the common interest community that the Association owns (NRS 11.3102(d)(2)) or that it does not own but has an obligation to maintain, repair, insure or replace because the Association's governing documents expressly make such an obligation the Association's responsibility (NRS 11.3102(d)(3)).
- Notices – The degree of specificity required in a Chapter 40 notice has been scaled back. Notices under AB 421 will only require that the claimed defects be identified with "reasonable detail" rather than "specific detail" (NRS 40.645(2)(b)).
- Inspections – AB 421 retains the requirement that the claimant must be present at the inspection but incorporates the option to have "a representative of the claimant" attend and "to the extent possible" to "reasonably identify the proximate locations of the defects, damages or injuries specified in the notice" (NRS 40.647(1)(b)). Further, the amendments eliminate the requirement that an expert who provided an opinion concerning the alleged construction defect or his/her representative must be present during the Chapter 40 inspection (NRS 40.647(1)(b)).
- Notably, AB 421 did not reinstate the recovery of attorneys’ fees as a recoverable damage under NRS 40.655.
Most of the changes contained in AB 421 apply to Chapter 40 notices given on or after October 1, 2019. But, the changes to the statute of limitations apply retroactively to actions where substantial completion of the improvement occurred before October 1, 2019. Only time will tell how the Nevada courts interpret and apply the AB 421 changes in future cases.