The so-called right to repair law was enacted Aug. 1, 2003, after months of negotiations between homeowners' groups and the home building industry. The law is supposed to give builders the opportunity to repair any alleged defects on a house before a lawsuit is filed.

At the time, builders and contractors argued that something had to be done because of the high number of construction defect lawsuits being filed and the growing costs and scarcity of comprehensive liability insurance.

"The insurance companies have not come back to the state yet. They have to have a period of time where they're able to see how the law works," said Cindy Nevin, executive director of the Nevada Subcontractors Association. "Until there is some predictability, these companies aren't going to come back."

Industry watchers said it could take as long as two and a half years before admitted insurance companies are willing to write new policies again in the state.

"Unless you have been with a carrier for 25 years and you have no claims, you are in the surplus lines market," said Kay Lockhart, executive vice president of the Nevada Independent Insurance Agents, a trade association. "Three things have happened -- it's not even a choice of lesser evils. Premiums are up, deductibles are up and coverages are more limited."

Admitted insurance carriers are those that are regulated by the state and covered by the state's guarantee fund. The fund fills the gap, up to $300,000, on claims filed if the insurance company goes insolvent.

Surplus carriers are those insurance companies that are not regulated by the state and are not covered by the guarantee fund. Many contractors have had to turn to the surplus market to find insurance; the trade-off is higher premiums and deductibles, often for less coverage.

Chuck Knaus, a lead actuary with the Nevada Division of Insurance, said the agency does not track whether admitted or surplus carriers are writing policies because the division does not have authority over commercial insurance rates.

"I have heard that if you have been an existing insured for at least a few years, there are some (admitted) companies handling renewals," he said. "But it may be very difficult to go into the market with a newly formed construction company."

Many insurance companies wait until the last minute before a contractor's insurance policy is about to expire before quoting a new or renewal rate, many contractors said.

"You either take it or you don't -- and if you don't you're not in business tomorrow," Nevin said.

While insurance companies have taken a wait-and-see approach to the market, deductibles have risen by 200 percent to 300 percent and the insurance companies are asking for a letter of credit, industry experts said. Some companies are beginning to structure deductibles differently and, instead of one lump-sum deductible, are charging per house deductibles.

Premiums remain high and are cost prohibitive for many smaller subcontractors.

Many small contractors are even fearful about talking about their problems and inability to get reasonable insurance, citing a fear of repercussions if they spoke out.

Mark Reasbeck, president and owner of Legend Windows, shows a file cabinet containing construction defect lawsuits at the company's warehouse on Monday. Photo by Steve Marcus

Mark Reasbeck, owner and president of Legend Windows, has been an outspoken advocate for contractors in the state since 2003.

Reasbeck argues that there is still more to be done to protect subcontractors from lawsuits that many should not be a party to in the first place. For example, a lawsuit might list a window subcontractor or a landscaper when there appears to be plumbing problems. Reasbeck also said despite the new law, attorneys in some cases are using extrapolation to file class-action lawsuits.

"I'm a material supplier, I drop them (windows) off and someone else installs them. Here's how it's affected me though: Some of the builders have put on stipulations for insurance to bid their job," Reasbeck said. "They have imposed such high requirements, and they want everybody to have the same insurance, and I can't afford a $40,000 to $50,000 policy just to deliver windows, I can't meet the insurance requirements."

He said the net effect is even though he has 21 years' worth of experience and the qualifications, it makes it very difficult to do business.

"They have taken the fun out of doing business anymore," Reasbeck said. "It used to be you'd go to a job, do a job and do it right."

Lockhart said the practice of listing every subcontractor that ever walked onto the job site -- even if they had nothing to do with the alleged defect -- is a big part of the problem.

"The insurance carrier has to file (for the contractor) to be released from the suit, and premiums go up whether the contractor was at fault or not," she said.

Jim Wadhams, former insurance commissioner and a lobbyist for Nevada's insurance companies, said the system continues to need fine-tuning. Wadhams said on the construction defect and contractor insurance issues, he represents the Southern Nevada Home Builders Association.

"I think we need to get the system refined where each homeowner, not clumps of them that may or may not know they are involved, has the right to make their own decision as to whether they are in a lawsuit with their contractor or not," he said.

Wadhams said it is still too soon to see if the new law will have any effect because new cases are working their way through the system.

"The sad thing is they (insurance companies) aren't watching at all -- they don't care," Wadhams said. "They have no reason to lose money here when they could make money elsewhere."

Jennifer Shubinski covers real estate and development for In Business Las Vegas and its sister publication, the Las Vegas Sun. She can be reached at (702) 259-8832 or by e-mail at js@lasvegassun.com