A bill that would further limit the time frame for condo owners to pursue developers for construction defects flew through the Oregon House of Representatives but faces more scrutiny in the Senate.

House Bill 3746 would reduce the statute of limitations for construction defect actions for planned community or condo units to seven years.

Supporters argue that the threat of lawsuits has essentially halted condo construction in Oregon.

“Oregon is facing an affordable homeownership crisis,” Kevin Cronin, policy and advocacy director of Housing Oregon, stated in written testimony. “Condominiums are a vital part of the solution, but outdated liability laws have virtually eliminated their production.”

The bill is among a wide range of legislation from Oregon Democrats intended to spark housing production.

The House voted 46-10 on April 22 to pass the bill. A public hearing was held on Monday by the Senate Housing and Development Committee, and another is scheduled for May 12, followed by a work session on May 19.

The bill has broad support from housing activists and some cities. In written testimony, city of Hillsboro lobbyist Ariel Nelson stated that the bill would encourage housing production.

“If Oregon does not address condo defect liability reform, a key component of entry-level homeownership opportunities will remain underrepresented in our state’s housing mix and out of reach for too many families,” Nelson wrote.

The insurance industry is mounting opposition to the bill. Sara Eanni, a board member of the Community Associations Institute‘s Oregon chapter and an insurance agent, said the bill would not produce more housing.

“This bill is looking to not reduce risk, as it states; it’s to just shift risk onto the homeowners themselves,” Eanni said in an interview. “Ultimately, that’s not going to create affordable housing.”

The bill would reduce the window for condo owners to pursue a defects suit from 10 years to seven.

“Developers aren’t being held to a higher standard to create less defective product; they are just wanting to shift the risk onto the owners to say it is now your responsibility if there is a defect,” Eanni said. “And if you don’t catch it in a timely manner … we’re not going to be held accountable anymore. And that’s just not right for the consumer.”

Other states that have limited construction defect lawsuits, such as Colorado and Nevada, have not seen lower insurance rates, Eanni said.

Eli Spevak, a Portland developer of small condominium projects, testified that the bill could make it easier to build large-scale condo projects at the expense of smaller ones.

HB 3746 would require condo boards to have independent moisture inspections conducted two and six years after construction completion. Such inspections would cost from $4,600 to $6,000 depending on the size of the project, Spevak stated, citing quotes he obtained from an inspection company.

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At this time last year, Oregon building industry professionals were preparing to keep an eye on legal issues that included a move to eliminate from job applications a question asking applicants if they had ever been convicted of a felony as well as a plan to create a statewide mandatory sick leave policy. With those two laws now in place, construction company officials have at least begun to wrap their heads around them. So, what are the legal issues in construction and general business that people in the industry should keep an eye out for in 2016? Two Portland-area attorneys weigh in on some of the trends and issues they anticipate seeing emerge during the coming year.

Construction defects

While construction defect claims have become a regular occurrence these days both for firms in the building industry and attorneys that deal with construction law, the fast-and-furious rise of multifamily projects in Oregon – and across the country – coupled with a shortage of skilled construction labor may be laying the groundwork for a future spike in defect claims, warns Jeremy Vermilyea, a shareholder with Schwabe, Williamson & Wyatt.

Vermilyea says he hasn’t yet seen or heard of any definite problems, but current conditions remind him of the early 2000s, when construction defect claims spiked sharply. An emergence of new building materials combined with a slew of condo projects constructed by crews that had little to no training in procedures for handling those new products led to a long list of problems – and lawsuits – when moisture and mold problems resulted from improper installation.

Fast-forward to 2016, and companies are trying to keep up with a mad rush of multifamily projects; they often are forced to tap into a less experienced workforce. The dearth of skilled workers is the result of both baby boomers retiring and the fact that many construction workers who were laid off during the recession have failed to return to the industry.

“Now it’s a different source, but it’s basically the same result,” Vermilyea said. “Some (companies) are hiring anybody. As a result, the product could be more subject to potential problems … five, 10 years down the road. That’s a lot of speculation … but still.”

Material matters

Vermilyea says he also anticipates that the cost of building federally funded projects could begin to rise this year due to a new interpretation of the Buy American Act handed down late last year by the U.S. District Court in the District of Columbia.

In the past, going as far back as 1983, the Federal Highway Administration has interpreted the act as only requiring that steel and iron products used on the projects it funds be manufactured or produced in the United States.

Last year, however, the district court overturned that interpretation.

“On all federally funded projects going forward, the full act will apply,” Vermilyea said. “All products must be manufactured in the U.S.”

He sees that decision having possibly significant ramifications.

“It has the impact of probably increasing the cost of (federally funded) projects,” Vermilyea said.

Then there’s the chance that contractors not aware of the new ruling could be caught off guard and use materials that fall outside the parameters of the court’s decision.

“It’s a possible ‘gotcha,’ ” Vermilyea said.

Exempt or not

Rich Meneghello, a partner in the Portland office of Fisher & Phillips, advises that employers be on the lookout for new regulations related to overtime pay that the U.S. Department of Labor is expected to finalize sometime this year.

“We anticipate it coming as soon as (spring) or as late as late summer,” he said.

In simple terms, the regulations are expected to shrink of the number of employees that employers will be able to exempt from overtime pay, according to Meneghello. The regulations also are expected to increase the salary threshold that employers will have to meet in order to qualify an employee as exempt. Current speculation is that the threshold will rise from $23,600 per year to around $50,000, but the definite amount isn’t set yet.

“We don’t know what the final version will look like, but it will impact how employers can classify workers exempt from overtime,” Meneghello said. “We’re expecting employers will need to review everybody on exempt status to meet new rules.”

A fight for $15

The push to raise Oregon’s minimum wage from $9.25 per hour to $15 per hour was a topic of discussion – though no agreement was reached – during last year’s legislative session.

Meneghello doesn’t expect the conversation to go away in 2016. Minimum-wage workers eventually will be successful in their bid to earn that earmarked amount.

“It a matter of when, not if,” Meneghello said.

What’s less certain, though, is how quickly that increase will begin to occur.

Earlier this year, Gov. Kate Brown rolled out a plan that she considered a compromise to demands for an immediate increase of the state’s minimum wage to $15 per hour. Her stepped approach not only gradually increases the rate over time but also differentiates the rate of implementation between rural and urban areas.

But Brown’s proposal may not be enough to appease advocates for action immediately.

“Even if it does pass, a lot of people are already decrying it, saying it doesn’t move quickly enough,” Meneghello said. “They’re saying they’re going to put it on the November ballot.”

The post Four legal issues for employers in 2016 appeared first on Daily Journal of Commerce.

Many construction contractors who have worked in the industry for any appreciable amount of time have faced litigation, often as defendants in what are commonly termed “construction defect” lawsuits. Frequently, these lawsuits arise out of projects that have long been completed and forgotten. A common refrain among construction contractors is: “How can I be sued for something that happened nearly 10 years ago?”

Understanding the time limitations governing construction defect lawsuits is an important step in protecting against older claims.

There are two types of time limitations governing most lawsuit types. The first is the more commonly known statute of limitations. The statute of limitations provides a specific amount of time in which a lawsuit must be filed. Unless the statute specifies otherwise, it will not begin to run until the claim is “discovered.”

In the context of construction defect tort claims, this means the time period will not start until an owner becomes aware of defective work, often long after project completion. Consequently, a two- or six-year limitation can still result in lawsuits being initiated nearly 10 years after completion. Statutes of limitations may also be “tolled” or suspended for a variety of reasons, including fraud or concealment, incompetency of a party, or through agreement.

The lesser-known time limit governing lawsuits is the statute of repose. This is a much stricter time period and, essentially, provides a hard outside limit for initiating any lawsuit. For construction defect claims, this time period is 10 years, which begins to run either at the time of substantial project completion or when allegedly defective work is performed.

A statute of repose operates to bar claims that are not discovered until long after completion of a project. In other words, if defective construction is not discovered until the 10 years has elapsed, the statute of repose “trumps” the statute of limitations and bars the suit.

Construction defect lawsuits often include claims for both breach of contract and negligence. The statute of limitations for breach of contract is six years, which begins to run from the date of the alleged breach. Surprisingly, the statute of limitations governing negligence and other tort claims arising out of defective construction is currently unsettled in Oregon. There are two competing Oregon statutes, one mandating a two-year limitation and the other a six-year limitation, both subject to a discovery rule.

Unfortunately, due to conflicting appellate authority, some of Oregon’s circuit courts are applying the two-year statute while others are applying the six-year statute. Application varies widely among the different counties (and often among judges within each county). Currently, this issue is pending before Oregon’s Court of Appeals, which will hopefully result in resolution and uniform application in the near future.

So, what can contractors do to reduce their exposure? Regardless of the time limitations imposed by Oregon law, parties are permitted to shorten the applicable time period through contract provisions, provided that the contract provision is not “unreasonable.” Of course, “unreasonable” is a somewhat nebulous term left open to interpretation by Oregon’s courts.

In several instances, the Court of Appeals has upheld a one-year limitation as reasonable. The court also has ratified shorter time periods, some as short as 90 days. However, in the event of litigation, each contract will be reviewed in light of its specific language and application to specific facts of the case. Therefore, there is no hard and fast rule that any one period of time is “reasonable.”

If electing to use a contractual limitation, there are three important considerations.  First, as discussed above, the time period must not be unreasonable. According to our courts, one year is likely safe in most instances. Keep in mind that courts are extremely loath to approve any contract that is fundamentally unfair. If utilizing a shorter time period, it should be in clear, unambiguous language and prominently featured in the contract.

Second, the provision should address when claims accrue – that is, when the statute of limitations begins to run. In order to avoid late discovery of claims (potentially allowing a one-year limitation to extend much longer), parties may elect to mark the time of accrual as no later than the date of substantial completion. This is a relatively easy date to identify and provides much more security than a discovery date.

Finally, a contractual statute of limitations should make clear that it governs all claims relating to work performed. Because contractors can be sued for both breach of contract and tort at the same time, failure to specify that the limitations period applies to all claims could discharge contractual liability while still leaving a contractor open to a negligence suit. Appropriate language should be incorporated that leaves no room for interpretation, such as “all claims” and “any applicable statute of limitations.”

If electing to utilize a contractual statute of limitations, the provision should be carefully crafted, with appropriate legal advice, keeping in mind all circumstances in which it will be utilized.

Jason A. Gardner is a partner in Portland law firm Bodyfelt Mount LLP, where he defends clients in construction defect disputes and other liability matters. Contact him at 503-243-1022 or gardner@bodyfeltmount.com.

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A contractor’s work on a project may not be done until an architect signs off on it, according to a recent ruling by the Oregon Court of Appeals.

Sunset Presbyterian Church in 2009 filed a lawsuit against Oregon City-based Brockamp and Jaeger, claiming that the company’s exterior work for a 1999 church addition was faulty. In response, Brockamp and Jaeger stated that the 10-year limit of the statute of repose had expired.

However, the court ruled that the statute did not apply in this case because of a specific contract clause; it stated that the general contractor had to obtain a certificate of completion from the project’s architect for the statute to activate.

As a result, Brockamp and Jaeger – as well as the project’s subcontractors – may have to pay for exterior work at the church 14 years after the original effort wrapped up.

“If you want to enforce a contract timing limitation clause, you have to follow all the contract steps,” said Dan Goldstein, a Ball Janik attorney who represented the church for the appeal. “The contractor never asked the architect to come out (or) gave formal notice that (they were) going to try to establish a date of completion.”

The ruling is a reversal of a previous court decision that the case be dismissed because the church’s claims were time-barred. Now the case is likely to be decided by a jury in a trial court.

The church believes the case is clear-cut. Four years ago, it began to experience problems related to some of the paneling and windows on the addition. It determined that the problems resulted from careless construction.

The project’s contract stated that any applicable statute of limitations would begin upon “substantial completion” of the project, according to court documents.

Brockamp and Jaeger argued that substantial completion occurred when the church occupied and used the building for services. The court disagreed, noting that the contract included a clause requiring written certification from the architect for substantial completion.

“It outlines a pretty specific procedure for obtaining that certificate, and it just was never followed,” Goldstein said.

The ruling was a matter of contract stipulation; however, an “industry standard” American Institute of Architects contract was used for the project. The form can be downloaded for free at the AIA website.

Contractors and project owners across the country commonly use AIA contracts as a way to save time and money, so the ruling could apply to many projects, Goldstein said.

A representative of Brockamp and Jaeger declined to comment on the ruling, but said that the company’s insurance company is contemplating taking the case to the Oregon Supreme Court.

If the petition were to go through, the company may try to assert that other documents, such as a construction warranty agreement, should be able to stand in place of written certification – an argument that Goldstein has heard before.

However, Goldstein does not believe this is the type of case that would be chosen by the Oregon Supreme Court.

“It’s not a broader issue of Oregon law,” he said. “It’s pretty narrow on a contract question.”

Goldstein also believes that even if it were chosen, a warranty should not be able to serve as an adequate substitute for written certification.

“I don’t think when you don’t follow the right procedures that you should be able to supplant some other document that is easier to get,” he said. “The contract really defines it specifically as this certificate by the architect.”

The ruling also applied to the project’s six subcontractors, even though not all of them worked specifically on the siding. The subcontractors argued that certification should apply only to the general contractor, a claim the court rejected.

“People will think something is wrong with what you’ve done, even though there’s nothing wrong,” said Dan Frakes, superintendent for Anderson Roofing, which worked on the project. “It’s unfortunate we get dragged into a lawsuit for something (the roof) that’s actually going to benefit the church for the next 20 years or so.”

Frakes does not blame Brockamp and Jaeger. He blames the state contracting system, which requires that one contract be used for all subcontractors.

“It seems to be just a revenue-generating type of process for some consultant more than it is something that is just,” he said.

The ruling stated that subcontractors must be under one contract to prevent multiple, competing statutes of repose.

A decision is expected next month on whether the case will go before the Oregon Supreme Court. If not, the case will go to a trial court later this year.

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Homeowners may have less time to file negligence claims against developers and homebuilders because of a seemingly insignificant part of a court finding from earlier this year.

In a construction defect case in March, the Oregon Supreme Court included a footnote in its decision stating that a two-year statute of limitations applies to cases of negligent construction. Prior to that decision, the statute of limitations was understood to be six years. Since March, some trial court judges are following the footnote, and others are following the previous statute, but a forthcoming decision from the appellate court may break the tie.

“I’m kind of dumbfounded,” said Crystal Lewis, an attorney representing the plaintiff in a case, Liberty Oaks HOA v. Liberty Oaks LLC, et al, that was dismissed in June because of the footnote mentioning the two-year statute. “Right now it just depends on who your trial judge is.”

But Lewis’ case, which pits a Tualatin homeowners’ association against a developer and other contractors, is going through the appeals process and has piqued the interest of many people involved in construction defect litigation. The appellate court’s ruling on the Liberty Oaks Homeowners Association’s claim could finally clarify whether negligence claims are subject to two- or six-year limitations.

If homeowners have only two years to file a negligence claim after discovering problems caused by faulty construction, Lewis contends that properties maintained by homeowners associations – condominiums and townhomes – will especially be at risk.

Most of the defect claims handled by Lewis are based on building envelope problems caused by improper waterproofing. Volunteer homeowners associations might be informed about a leak or two, but not realize there is an underlying problem for years.

“You can’t tell that’s happening from just looking at the building,” she said. “Six years gives a much more comfortable cushion to figure out the problem and act on it.”

But other lawyers are defending the use of the two-year statute.

Attorney Jonathan Henderson argues that trial courts should have been applying the two-year statute of limitations even prior to the March decision of Abraham v. T. Henry Construction Inc., the case in which the footnote appears.

“People were lulled into complacency, but the defense bar still felt the two-year statute applied,” said Henderson, who is representing several of the defendants in the Liberty Oaks appeal. “Now the odds are pretty good that the appellate courts will stand by the Abraham �ڴǴdzٲԴdzٱ�.”

If they do stand behind the footnote, Henderson said the ruling will provide a limitations defense for many contractors and developers and will cut off “quite a few claims.” Breach-of-contract claims are still subject to a six-year statute of limitations, however.

“The end result is favorable for those in the construction industry,” he said. “If there is a winner, it’ll be contractors and developers.”

But Lewis contends that insurance companies will benefit most.

“The big winners so far are the insurance carriers for contractors,” she said. “It ends up on them to foot the bill for repairs … and a lot of property owners are not going to be able to hold developers and builders accountable for damages caused by construction defect” (if the two-year statute of limitations is upheld).

The appeals process could take many months, but the court will decide the matter one way or the other. Until then, some plaintiff attorneys are scrambling to readjust their schedules now that they may not have as much time to file their claims.

But some attorneys say a bright side may exist for homeowners.

Attorney Hunter Emerick said an increase in construction defect litigation has caused contractors to become more educated. And now that homeowners may have less time to make certain types of claims, maybe they will become more educated too, he said.

“Homeowners and building owners need to become more aware of maintenance and taking care of their own buildings and catching problems early on,” said Emerick, whose practice is based in Salem. “They should use this as a wake-up call to be more proactive.”

Although the appellate court will decide the Liberty Oaks case, the losing party could appeal to the Oregon Supreme Court.

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The Salem courthouse will remain vacant after a second round of testing strengthened the claim that the $34 million building completed in 2000 isn’t structurally safe enough for public workers to occupy it.

The newest strength tests, completed by Professional Services Industries Inc., confirmed tests done earlier this year by Carlson Testing Inc. Both tests found the concrete floor slabs to not be up to initial design specifications. The concrete was supposed to be able to support a minimum of 5,000 pounds per square inch, but both tests measured pounds per square inch from 3,000 to 4,600.

“We had another firm run the second set of tests just to confirm that the problem exists,” said Dave Henderson, Marion County’s business services director, “and it confirmed what we thought.”

The building, which is owned by both Marion County and the Salem-Keizer Transit District, has had structural issues since 2002 when the building was settling. The issues weren’t considered dangerous until this summer when a cable in one of the building’s concrete floors ruptured. When the county looked into the problem, officials noticed that 33 to 35 of the building’s 220 columns were bearing a weight that is more than code allows.

Both the county and the transit district moved employees out immediately. The county signed a handful of three-year leases around town.

But, as Henderson pointed out, the new tests haven’t determined the fate of the building, yet. The county expects the results of a petrographic analysis – a microscopic analysis of the concrete’s void spaces – and a few other tests within the next ten days.

“There’s a bunch of different avenues we could go down here,” Henderson said. “They range from a demolition of an entire block to some minor repair work.”

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Shortly after completing a $3.3 million chip-seal project, which covered 40 miles of road on Oregon Route 138 and parts of U.S. Route 199, the Oregon Department of Transportation began to get complaints – 1,279 complaints, to be exact.

More than $1 million in claims alleged the new chip seal completed last fall was crumbling, sending loose rocks flying into cars and damaging windshields and paint.

The fix for the problem, which ODOT said was caused by an incorrect mixture of oil and gravel applied to the road surface, isn’t limited to ODOT picking up the cost to repair the damage to cars. The agency also will have to spend an estimated $600,000 to fix the chip seal along with a undetermined amount to restripe the highway.

Traditional chip seals consist of coated gravel added to an oil mixture, which is spread on the road. Pressure is then applied to the mixture to form a cap. A certain amount of loose gravel is common in this type of road construction, but the number of complaints concerning Oregon Route 138 led ODOT to take a closer look.

An inspection showed that the mixture ratio had been calculated incorrectly, resulting in an insufficient amount of oil applied to keep the rocks in place, ODOT spokesman Jared Castle said. As a result, the rocks in the chip seal began to flake off the seal and onto the surface of the road, where car tires kicked them up into the air and into contact with windshields.

ODOT has not determined how the mixture miscalculation occurred, Castle said.

After inspecting the road, ODOT took credit for the faulty chip seal, according to Castle. The agency took core samples from the road to determine what parts need to be replaced but had to wait for warmer weather until it could fix the four miles of road surface that were affected, Castle said. In the meantime, one lane of the highway was closed to traffic, and caution signs were set up in an attempt to cut down on the amount of damage done by loose rocks on the road.

At the beginning of this month, crews began grinding out the defective sections of chip seal.  After all of the faulty chip seal was removed, Castle said new chip sealed inlays were put in place to bridge the gap and strengthen the road ways, a similar process used to repair potholes. Crews plan to restripe the area and open it to traffic before this weekend.

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In the aftermath of the housing boom, there has been an increase in construction defect litigation, especially for condominium projects. Those claims frequently involve water intrusion resulting from improper construction methods, or the use of defective siding, roofing, windows or other materials.

So, how can a building owner best protect against these issues? After all, most contractors don’t have the financial means to remedy substantial construction defects.

Insurance would seem like the logical answer, provided it actually covered the loss; however, seemingly obvious problems may not be covered.

There are insurance programs, such as the so-called “wrap policies,” designed specifically for condo projects. Under a wrap policy, all parties – including the owner, the contractor and subcontractors – participate in a single insurance program controlled by the owner or the contractor.

This can be an efficient way to manage insurance on a project, but the policy is only as good as its coverage. Too often, those who participate don’t actually take the time to understand the limitations on coverage. And those limitations can make the policy frustrating.

One reason why some folks don’t take time to understand the policy is because the document may be up to an inch thick, double-sided, and contain fine print from beginning to end. Navigating through a policy may seem like it requires some kind of special training or doctorate degree. To most people, insurance policies are just that: a tedious, boring and tough read.

The first step in understanding the scope of coverage is to realize that an insurance policy is like an onion. It starts with a set of documents that call out various definitions and coverages in the generic, all-inclusive form. Then a second set of documents known as the “exclusions” limit the very types of coverages expected from the first set of documents.

The concept is not much different than an average auto or homeowner’s policy, which most readers will admit they regularly renew despite not having read it or reviewed it in years (or ever). Slowly but surely, layers of coverage can be peeled away to reveal the policy’s scope. Trying to determine what is left after applying the exclusions is an art that neither insureds nor insurers have been able to master given the flood of insurance litigation in the construction defect world.

So, are construction defects covered? That depends on whether the issue constitutes an “occurrence” and “property damage” as defined in a policy. And identifying “property damage” can be trickier than one may initially think.

For example, a construction defect may result in excessive noise traveling between condo walls. The defect does not physically impact real estate, but does it constitute “property damage”? A case could be argued either way. The good news from the insured’s perspective is that if the definition in the policy is ambiguous, the case law holds that the language of the policy will be construed against the insurer.

But even assuming the damage qualifies as an “occurrence,” there will be other hurdles to overcome before coverage is triggered – i.e., the exclusions.

For example, a “completed work exclusion” may provide, in essence, that insurance does not guarantee the contractor’s workmanship.

Then there may be a so-called “ongoing work” exclusion that excludes coverage for damage caused to property while the work is being performed. So, if testing of the portion of the work (e.g., acoustical testing) during construction indicates that work is defective, the owner may not be able to trigger insurance to fix the problem.

In addition, there could be a “cross-claims exclusion,” which, under a wrap policy, prevents plan participants from suing one another for issues that otherwise would be covered by insurance. In other words, there must be damage to – and a claim from – a third party for coverage.

While this may seem counterintuitive (defective construction is defective construction no matter who is damaged or brings a claim, right?), this is how the insurance game is played. And in some cases, building owners don’t understand what their policy actually covers until it is too late.

So, how does a building owner stay protected from damages resulting from shoddy construction work?

First, perform due diligence on the contractor to determine its reputation and financial backing. For obvious reasons, some contractors (and owners, too) form “shell” entities with no assets for a particular project, leaving the owner with a judgment against a contractor worth less than the paper the judgment is written on.

Second, procure and maintain insurance, but be sure to understand what coverage is being purchased. At least take time to sit down with an insurance broker, an attorney or a knowledgeable friend who can give a layperson’s translation of what the policy actually covers.

Then denial-of-coverage letters won’t arrive unexpectedly. And there will be no need to ask an insurance broker: “Why did I spend all that money on insurance if it doesn’t really cover what I thought it would cover?”

Marcus Eyth is a construction law and government contracts attorney in the Portland office of Davis Wright Tremaine LLP. Contact him at marcuseyth@dwt.com or 503-241-2300.

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The residential building bubble burst in 2008, but the preceding wave of construction left another small boom in its wake: construction defect repairs.

The supply of poorly built homes needing repairs will last for years, said Sean Gores, owner of Sean Gores Construction, which focuses exclusively on fixing defects. “With the building boom, everybody and your brother became a contractor,” he said.

“Your landscaping guys became your roofers. The guy who was just putting on Sheetrock now is putting in your siding.”

In Oregon, most construction defect work stems from water damage. Water can get into homes many ways, and repair contractors see them all.

Andrew Leisman, project manager for Aspen Siding, said contractors sometimes neglect to install water barriers or flashing. Other times, they just install them incorrectly.

When repair contractors examine the original work, they often find the self-adhered membranes or water-resistive-barrier paper installed upside down or backward, Leisman said.

“Envision a bare wall that you need to wrap with paper,” he said. “Imagine starting at the top and working down instead of starting at the bottom.” Instead of draining water off the house, it drains water into the house.

Gores said he’s seen the same thing on a larger scale: the siding of a house tucked into the poured-concrete wall. “The best way to describe it is: if I’m wearing a raincoat, and it goes over my pants, I’m good to go. But if I tuck the raincoat into my pants, where’s the rain going to go?”

Because construction defect cases usually go through litigation, Gores said he was cautious about wading into that territory. “It was a learning curve for me,” he said.

“Now I have to teach attorneys about construction and teach their experts,” Gores said. “I don’t want to see the homeowner get screwed.”

Despite the prevalence of construction defect lawsuits, Gores said he doesn’t see homeowners fattening their pockets from litigation. “It’s never happened,” he said. “It would be a miracle.

“To the contrary, we’ve done close to 1,200 projects, and probably 800 have been in litigation. I’ve only had a handful where the homeowner comes back whole again.”

Attorney Jill Schneider, a shareholder at Schwabe, Williamson & Wyatt who defends construction defect cases, agreed. “Very seldom does a plaintiff run off with a huge betterment,” she said. “It just doesn’t happen.”

More often, the amount a plaintiff asks for is whittled down. “If they say it’s going to cost $100,000 to repair, the defendants have their experts who do an independent cost estimate,” Schneider said.

State laws help keep what could be runaway litigation in check, she said. An Oregon statute requires an owner to give the original contractor an opportunity to fix the problem before filing legal action.

“Oftentimes, the contractor says, ‘No, this is not a simple fix,’ ” Schneider said. “But at least notice must be given.”

There have always been shady contractors, Gores said, but he’s never seen an era of construction with more problems than he sees now. “Most contractors in the last 15 to 20 years were more budget-driven and schedule-driven than quality-driven,” he said.

“Contractors took their time building things,” Gores said. “Then, when you have an order to build five houses instead of one, you end up getting a huge influx of trades that aren’t very well trained.”

Although 10 years of poor construction will keep Aspen Siding busy for a while, Leisman said, the worst boom-era construction defects show up quickly and then taper off. “I think it will fall out here pretty soon,” he said. “It won’t be as busy in the next couple years.

“But there will always be people who do things wrong,” Leisman said. “There are still people who don’t want to spend the money to wrap the house correctly.

“They don’t want to realize that we live in Oregon.”

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