SALEM - Soaring construction liability insurance costs are causing contractors to raise house prices and even leave the business, builders say.

Insurance rates for contractors doing commercial construction also have surged, but insurance costs have more than tripled for general contractors and a wide range of sub- contractors building single-family homes and apartments.

The coverage, made mandatory in 1973, was intended to protect consumers when a construction accident or building problem damaged their property. Likewise, builders could fall back on their insurance to avoid crippling financial losses.

For many contractors, however, the increase in premiums comes despite having never made a claim to their insurance companies.

Adair Homes Inc., a Beaverton-based homebuilder, has never made a claim on its construction liability insurance, but premiums have skyrocketed, adding almost $1,000 to the price of homes to offset the insurance costs, said Chuck Day, company spokesman.

"Were going to lose a lot of small family businesses that aren't putting consumers at risk," said Craig Smith, administrator of the Construction Contractors Board, a state agency that regulates building contractors.

"They're building wonderful homes and they're being priced out of existence by this insurance mandate," Smith said.

At a recent Oregon Insurance Division hearing, Smith testified that the situation "constitutes an emergency" with an average liability insurance bill for a single-family homebuilder at about $8,000 per year.

A few of the state's largest residential contractors pay more than $1 million per year for liability coverage.

Some companies are forced to pass along the cost to their employees.

Pacific Renaissance, a Salem plaster and stucco contractor, decided it couldn't raise prices to cover insurance premiums. Instead, the company's workers are shouldering the burden.

"Guys will take a pay cut to keep working," said D.J. Thommen, Pacific Renaissance owner.

Sunco Homes and Remodeling was hammered with a 400 percent increase in its liability insurance premiums last year. When a buyer purchases one of the Salem builder's new homes, they will pay an extra $1,300 to offset the company's insurance costs.

Some builders blame the high cost on an increase in lawsuits, including mold and "sick-building syndrome" com- plaints.