Like so many trends, one that’s making problems for building contractors apparently started in California. “Lawyers started sending out teams of high school kids (to new housing developments), putting notices on doorknobs that ask if the houses have leaky windows or any other problems,” said Dan Kennedy, a vice president and account executive at Holmes Murphy & Associates Inc. insurance company. “Then they would bring a class-action lawsuit on behalf of the homeowners against any contractor involved in the development.”

After a few costly out-of-court settlements, insurers got skittish about residential construction policies. “Insurance companies were starting to non-renew housing contractors, and that created a ripple effect across the country,” Kennedy said.

Subcontractors, in particular, have been frustrated, often finding it impossible to buy an insurance policy for an apartment, townhome or condominium project. Usually, a subcontractor’s problem becomes the general contractor’s problem.

“If a subcontractor can’t get coverage for a particular project, we would go out and purchase a general liability policy that would cover all of the subs working on that project,” said Mike Tousley, president of Weitz Iowa. The Weitz Co., a general contractor based in Des Moines but with branches across the nation, hasn’t taken that step in Central Iowa yet, but Tousley said, “I think it’s just a matter of time and we’ll see it done here just as it’s been done elsewhere.”

Another option is for the building owner to take out a policy that covers the general contractor and all of the subcontractors. “That’s less popular here, probably more prevalent in other parts of the country,” Tousley said. “It comes down to who can get a better price on the policy.”

“Better” is a relative term; the policy on a residential project will be more expensive than comparable coverage on a commercial building project. “The cost of this insurance is ridiculous,” Tousley said. “I would venture to guess it’s four or five times more expensive than for a typical commercial project.”

It also can lead to a different set of problems. “Subcontractors aren’t always real happy with those arrangements,” Kennedy said. “They lose control of who comes onto the premises, and I’ve worked with subs in California who begin to hate the arrangement because they know the general contractor is starting to use insurance as a profit center.”

Iowa might be ripe for lawsuits, because owners of new buildings have 15 years to sue the builder over defects, an unusually long time span.

However, Kennedy said, “I really don’t see it becoming a problem here” because of the quality of the contractors in Central Iowa. “Earlier, on some condo work in Florida and California, you had contractors trying to throw condos up as fast as possible; it gave that type of construction a bad name.”

Tousley said Weitz is concentrating on business practices that make defect claims less likely. First, “we make sure the owner and the designer are qualified to do the projects they’re asking us to be involved in,” he said. “Someone doing their very first condo project has a lot to learn.”

For some projects, Weitz recommends that the owner get a third party to review design details and the construction process. “You don’t see it a lot around here,” Tousley said, “but we’re almost making it a requirement on condo jobs.”

The company also asks for the right to inspect defect claims before the owner files a lawsuit. That right has been made law in nearly half of the states, including California.

However, it hasn’t been embraced by everyone. When the Missouri legislature debated such a bill this year, one representative called it “the construction industry’s dream bill,” contending that it favored builders and would be difficult for homeowners to understand.