Richmond settles soil suit: State's biggest home builder agrees to pay for any repairs needed by 12,300 houses

Richmond to Repair 12,300 Homes

By Shelly Gonzales
Rocky Mountain News Staff Writer

DOUGLAS COUNTY – Richmond Homes has settled the largest class-action lawsuit over expansive soils, covering nearly every home it has built in Colorado Since 1986.

The settlement, reached late Monday, has no financial cap on it. The repair bill for the 12,300 houses covered could run into the tens of millions of dollars.

But Richmond, the state’s largest homebuilder, will create an insurance company to handle the claims. The new warranties established by the settlement will be funded by Richmond’s existing insurance and “will have no material adverse effect on us financially,” said David Mandarich, the company’s chief executive officer.

"While we deny the allegations contained in the lawsuits, we are very pleased that we have been able to reach this statewide agreement,” he said. “Because Richmond Homes is Colorado’s largest homebuilder, we felt it was important to resolve this matter in a manner productive for both our homeowners and our company.”

Scott Sullan, the homeowners’ lawyer, called the settlement a landmark case.

“This is without question the largest homeowner settlement in the nation,” he said. “It is fair and does exactly what the homeowners need-and that’s to have the assurance that any damage they suffer from these soils is going to be fixed.”

The settlement sprang from four class-action suits filed against the builder in the last two years, one in Boulder County and three in Douglas County. Richmond has large developments in the Parker area and in Highlands Ranch. It also is developing Rock Creek Ranch in Boulder County.

The lawsuits claimed Richmond built concrete slab basements atop swelling soils. The floors cracked and heaved, causing structural damage and causing doors and windows to stick.

Claylike expansive soils are found throughout the Front Range. They swell when wet and shrink as they dry.

Under the agreement, the builder will establish a new warranty to replace the HOW warranty originally issued to Richmond homebuyers to cover major structural damage. HOW went into receivership in October 1994 and has since had difficulty meeting eligible claims, in some cases paying only 50% of claims, according to the settlement.

Richmond will set up a new company, Lion Insurance, which will provide for the repair or replacement of structural defects, including foundations. Repairs could run the gamut from filling cracks to replacing concrete floor basements with wood-floor basements that are suspended above the heaving soils – a measure that could cost more than $20,000.

Richmond will extend its current warranty on slab-floor basements to six years from when the the house was built. Most homeowners’ slab basements are covered only for the first year.

Of the 12,300 covered houses, about 3,000 are in Douglas County where the bulk of soils problems have occurred.

But Sullan said hardly any area of Colorado is immune to swelling soils.

Mandarich said his company’s building practices “meet or exceed engineer’s recommendations.” In the last two years, the company has put more wood floors in the homes it builds, a trend that will continue in the industry, he said.

The Richmond settlement comes three months after Highlands Ranch developer Mission Viejo Co. was found negligent in building homes atop swelling soils by a Douglas County District Court jury. A second trial, in which damages will be awarded to the 960 affected Mission Viejo homeowners, is expected to begin this winter or early next year.

Ryland Homes settled a similar suit filed by 250 homeowners in Highlands Ranch for $2.6 million.

Sullan’s firm handled those cases and other class-action suits pending against Village Homes, Merit Homes and US Home Corp..