At a hearing of the House Committee on Small Business's Subcommittee on Regulatory Reform and Oversight, Jo Wagner said that the increasing number of "frivolous" lawsuits in the construction industry is jeopardizing the future of America's small business. Wagner is president of CTO Inc., a commercial plumbing-heating-cooling contractor in Harlingen, Texas.

"Lawsuits threaten profitability and my company's ability to compete in the construction sector," she said. "Many of my fellow contractors are responding to the potential for legal action by reducing their workforce; simply, many contracting firms can't afford triple-digit increases in their general liability premiums; that is, if they're lucky enough to get coverage."

Wagner said the p-h-c industry is highly supportive of H.R. 2813, legislation sponsored by Reps. Steve Chabot (R-Ohio) and Ken Lucas (D-Ky.). Provisions of the bill's Section 104 that would limit non-economic liability to those liable or negligent are of special interest to PHCC.

Wagner pointed out that she recently has spent more time preparing for mediations and court appearances than on exploring new business opportunities. "I wish to return to a time when our industry focused on what we do best - build America - without the stress of wondering if we're going to get sued on a given project," she said.

She provided an example of how her company became involved in mold and construction defect claims related to a large school project in Texas. In this case, the school board sought $30 million from 26 contractors for a project that cost only $14 million to build. Even though various depositions cleared her company from any negligence and liability, she said CTO was still found "guilty," and forced, through insurance, to assist in covering costs.

She added that CTO has been named again in another lawsuit that involves 32 construction companies. Although again with no apparent liability, the company's share of this claim is estimated at $1.5 million, which could produce another triple-digit increase in its insurance rates.

"Until we see some return to normalcy, our firm has chosen to remove itself from performing work in the high risk trades, including air conditioning, as we cannot continue to operate under a veil of potential litigation," she said.

"In order for us to get back to doing what we do best, it is critical for us to get some real, common sense tort reform legislation passed in this country," Wagner said. "We need to secure passage of legislation like H.R. 2813 and assign liabilities in direct proportion to the percentage of responsibility of those negligent."

Publication date: 07/26/2004