AB505 - Revises provisions relating to constructional defects. (BDR 3-1144)

A.B. 505 - *AB505* ASSEMBLY BILL NO. 505–COMMITTEE ON JUDICIARY MARCH 24, 2025 ____________ Referred to Committee on Commerce and Labor SUMMARY—Revises provisions relating to constructional defects. (BDR 3-1144) FISCAL NOTE: Effect on Local Government: No. Effect on the State: No. ~ EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted. AN ACT relating to constructional defects; requiring a written response to a notice of a constructional defect to include certain information; requiring a contractor, subcontractor and certain related professionals to maintain a policy of insurance which covers liability for constructional defects; revising provisions relating to certain settlement offers concerning constructional defects; clarifying certain provisions relating to the recovery of damages proximately caused by a constructional defect; revising provisions relating to certain required mediation; revising the definitions of certain terms related to actions resulting from constructional defects; and providing other matters properly relating thereto. Legislative Counsel’s Digest: Existing law authorizes an owner of a residence or appurtenance and certain 1 other persons to commence a civil action against a contractor, subcontractor, 2 supplier or design professional for certain constructional defects in the residence or 3 appurtenance. (NRS 40.610, 40.640, 40.645) Under existing law, before a claimant 4 commences an action or amends a complaint to add a cause of action for a 5 constructional defect, the claimant must give written notice to the contractor and 6 the matter must be submitted to mediation unless mediation is waived in writing. 7 (NRS 40.645) Existing law also requires a contractor, subcontractor, supplier or 8 design professional who receives notice of a constructional defect to send a written 9 response to the claimant within 90 days after receiving the notice. (NRS 40.6472) 10 Section 3 of this bill: (1) requires the written response to state whether the 11 contractor, subcontractor, supplier or design professional has elected to enter into 12 mediation or waive mediation in writing; and (2) provides that failure to include 13 such a statement shall be deemed a written waiver of the requirement to submit the 14 – 2 – - *AB505* matter to mediation. Section 3 also requires the written response to include certain 15 additional information if the contractor, subcontractor, supplier or design 16 professional has elected to repair the constructional defect. Section 8 of this bill 17 revises provisions governing the mediation required by existing law by: (1) 18 providing that such mediation must be waived in writing on or before the deadline 19 for the submission of the written response required by section 3; and (2) removing 20 language prohibiting the total fees for each day of mediation from exceeding $750. 21 Existing law authorizes, but does not require, a contractor, subcontractor, 22 supplier or design professional who receives written notice of a constructional 23 defect to present the claim to an insurer. (NRS 40.649) Section 4 of this bill 24 requires a contractor, subcontractor, supplier and design professional to: (1) 25 maintain a policy of insurance which covers liability for constructional defects; and 26 (2) present the claim to the insurer that issued the policy. 27 Existing law establishes a procedure by which a claimant and a contractor, 28 subcontractor, supplier or design professional may agree to have a judgment 29 entered before the claimant commences a civil action for the constructional defect 30 or amends a complaint to add a cause of action for the constructional defect. (NRS 31 40.652) Sections 5 and 10 of this bill revise this procedure and eliminate certain 32 penalties for the rejection of a settlement offer for consistency with Rule 68 of the 33 Nevada Rules of Civil Procedure and certain other provisions of existing law 34 relating to settlement offers. Sections 6 and 7 of this bill make conforming changes 35 by removing references to the provision repealed by section 10 and certain related 36 language. Section 6 also clarifies that any interest recoverable as damages in a 37 cause of action for a constructional defect must be provided by statute for damages 38 otherwise recoverable by the claimant. (NRS 40.655) 39 Sections 1 and 2 of this bill revise the definitions of certain terms applicable to 40 actions resulting from constructional defects. 41 THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS: Section 1. NRS 40.615 is hereby amended to read as follows: 1 40.615 “Constructional defect” means a defect in the design, 2 construction, manufacture, repair , alteration or landscaping of a 3 [new] residence [, of] or appurtenance or a defect in an [alteration 4 of or] addition to [an existing] a residence [, or of an appurtenance 5 and includes, without limitation, the design, construction, 6 manufacture, repair or landscaping of a new residence, of an 7 alteration of or addition to an existing residence,] or [of] an 8 appurtenance: 9 1. Which presents an unreasonable risk of injury to a person or 10 property; or 11 2. Which is not completed in compliance with any applicable 12 building code and in a good and workmanlike manner in 13 accordance with the generally accepted standard of care in the 14 industry for that type of repair and [proximately] : 15 (a) Proximately causes physical damage to the residence, an 16 appurtenance or the real property to which the residence or 17 appurtenance is affixed [.] ; or 18 – 3 – - *AB505* (b) Creates a substantial risk of causing the damage described 1 in paragraph (a). 2 Sec. 2. NRS 40.630 is hereby amended to read as follows: 3 40.630 1. “Residence” means any dwelling in which title to 4 the [individual units] unit is transferred to the owners. 5 2. As used in this section, “dwelling” includes a single-family 6 house. 7 Sec. 3. NRS 40.6472 is hereby amended to read as follows: 8 40.6472 1. Except as otherwise provided in NRS 40.670 and 9 40.672, a written response must be sent by certified mail, return 10 receipt requested, to a claimant who gives notice of a constructional 11 defect pursuant to NRS 40.645: 12 (a) By the contractor not later than 90 days after the contractor 13 receives the notice; and 14 (b) If notice was sent to a subcontractor, supplier or design 15 professional, by the subcontractor, supplier or design professional 16 not later than 90 days after the date that the subcontractor, supplier 17 or design professional receives the notice. 18 2. The written response sent pursuant to subsection 1 must 19 respond to each constructional defect in the notice and: 20 (a) Must state whether the contractor, subcontractor, supplier or 21 design professional has elected to [repair] : 22 (1) Repair the defect or cause the defect to be repaired. [If an 23 election to repair is included in the response and the repair will 24 cause the claimant to move from the claimant’s home during the 25 repair, the election must also include monetary compensation in an 26 amount reasonably necessary for temporary housing or for storage 27 of household items, or for both, if necessary.] 28 (2) Enter into mediation or waive mediation in writing 29 pursuant to NRS 40.680. Failure to include the statement required 30 by this subparagraph in the written response shall be deemed a 31 written waiver of the requirement to submit the matter to 32 mediation pursuant to NRS 40.680. 33 (b) [May] Except as otherwise provided in paragraph (a) of 34 subsection 3, may include a proposal for monetary compensation, 35 which may include contribution from a subcontractor, supplier or 36 design professional. 37 (c) May disclaim liability for the constructional defect and state 38 the reasons for such a disclaimer. 39 3. In addition to the requirements prescribed by subsection 2, 40 if an election to repair is included in the written response sent 41 pursuant to subsection 1, the written response must: 42 (a) Include a proposal for monetary compensation in an 43 amount reasonably necessary for temporary housing or for 44 – 4 – - *AB505* storage of household items, or both, if the repair will cause the 1 claimant to move from the claimant’s home during the repair; 2 (b) Specify in reasonable detail the: 3 (1) Defect to be repaired; 4 (2) Method to be used to repair the defect; and 5 (3) Nature and extent of the repair; and 6 (c) Reasonably identify the proximate location of the defect to 7 be repaired. 8 4. If the claimant is a homeowners’ association, the association 9 shall send a copy of the response to each member of the association 10 not later than 30 days after receiving the response. 11 [4.] 5. If the contractor, subcontractor, supplier or design 12 professional has elected not to repair the constructional defect, the 13 claimant or contractor may bring a cause of action for the 14 constructional defect or amend a complaint to add a cause of action 15 for the constructional defect. 16 [5.] 6. If the contractor, subcontractor, supplier or design 17 professional has elected to repair the constructional defect, the 18 claimant must provide the contractor, subcontractor, supplier or 19 design professional with a reasonable opportunity to repair the 20 constructional defect. 21 Sec. 4. NRS 40.649 is hereby amended to read as follows: 22 40.649 1. [If a] A contractor, subcontractor, supplier or 23 design professional shall maintain a policy of insurance which 24 covers liability for acts or omissions actionable pursuant to NRS 25 40.600 to 40.695, inclusive. 26 2. A contractor, subcontractor, supplier or design 27 professional who receives written notice of a constructional defect 28 [, the contractor, subcontractor, supplier or design professional may] 29 shall present the claim to [an] the insurer which has issued [a] the 30 policy of insurance [that covers all or any portion of the business of 31 the contractor, subcontractor, supplier or design professional. 32 2. If the contractor, subcontractor, supplier or design 33 professional presents the] required by subsection 1. 34 3. An insurer that receives a claim [to the insurer] pursuant to 35 [this section, the insurer:] subsection 2 must: 36 (a) [Must treat] Treat the claim as if a civil action has been 37 brought against the contractor, subcontractor, supplier or design 38 professional; and 39 (b) [Must provide] Provide coverage to the extent available 40 under the policy of insurance as if a civil action has been brought 41 against the contractor, subcontractor, supplier or design 42 professional. 43 [3. A contractor, subcontractor, supplier or design professional 44 is not required to present a claim to the insurer pursuant to this 45 – 5 – - *AB505* section, and the failure to present such a claim to the insurer does 1 not relieve the insurer of any duty under the policy of insurance to 2 the contractor, subcontractor, supplier or design professional.] 3 Sec. 5. NRS 40.652 is hereby amended to read as follows: 4 40.652 1. At any time after a claimant has given notice 5 pursuant to NRS 40.645 and before the claimant commences an 6 action or amends a complaint to add a cause of action for a 7 constructional defect against a contractor, subcontractor, supplier or 8 design professional, the claimant or any contractor, subcontractor, 9 supplier or design professional who has received notice pursuant to 10 NRS 40.645 or 40.646 may serve upon one or more other parties a 11 written offer to allow judgment to be entered without action in 12 accordance with the terms and conditions of the offer of judgment. 13 Except as otherwise provided in subsection 7, any such written 14 offer must be unconditional and for a set amount. 15 2. Except as otherwise provided in subsection 7, if, within [10] 16 14 days after the date of service of an offer of judgment, the party to 17 whom the offer was made serves written notice that the offer is 18 accepted, the party who made the offer or the party who accepted 19 the offer may file the offer, the notice of acceptance and proof of 20 service with the clerk of the district court. Upon receipt by the clerk, 21 the clerk shall enter a judgment according to the terms of the offer. 22 Any judgment entered pursuant to this section shall be deemed a 23 compromise settlement. The judgment, the offer, the notice of 24 acceptance and proof of service, with the judgment endorsed, 25 become the judgment roll. 26 3. If the offer of judgment is not accepted pursuant to 27 subsection 2 within [10] 14 days after the date of service, the offer 28 shall be deemed rejected by the party to whom it was made and 29 withdrawn by the party who made it. The rejection of an offer does 30 not preclude any party from making another offer pursuant to this 31 section. Evidence of a rejected offer is not admissible in any 32 proceeding other than a proceeding to determine costs and fees. 33 4. Except as otherwise provided in this section, if a party who 34 rejects an offer of judgment fails to obtain a more favorable 35 judgment in an action for a constructional defect, the court: 36 (a) May not award to the party any costs or attorney’s fees; 37 (b) May not award to the party any interest on the judgment for 38 the period from the date of service of the offer to the date of entry of 39 the judgment; 40 (c) Shall order the party to pay the taxable costs incurred by the 41 party who made the offer; and 42 (d) May order the party to pay to the party who made the offer 43 any or all of the following: 44 – 6 – - *AB505* (1) A reasonable sum to cover any costs incurred by the party 1 who made the offer for each expert witness whose services were 2 reasonably necessary to prepare for and conduct the trial of the case. 3 (2) Any applicable interest on the judgment for the period 4 from the date of service of the offer to the date of entry of the 5 judgment. 6 (3) Reasonable attorney’s fees incurred by the party who 7 made the offer for the period from the date of service of the offer to 8 the date of entry of the judgment. If the attorney of the party who 9 made the offer is collecting a contingent fee, the amount of any 10 attorney’s fees awarded [Text truncated for display. Full text available on LegiScan.]