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How Hiring an Unlicensed Contractor Can Cost You $750,000

By April 23, 2019Blake Truline
Unlicensed Contractor TruLine Painting

A recent rain storm caused a leak which damaged several interior walls inside your home and now needs repair. The deductible on your policy is $5,000, which you decide is too expensive, so you reach out to your neighbor, Andy, who is an unlicensed contractor. Andy agrees to repair the walls for $1,000, and everything appears to be ok. Six months later, when you decide to sell your home, an inspection finds that there is $750,000 in structural damages caused by the leak. You call your insurance company to make a claim, but they deny you coverage because an unlicensed contractor did the initial repairs, thus voiding your homeowner’s policy.

You are now on the hook for $750,000 repair all because you decided to hire an unlicensed contractor.

Why You Should Not Hire An Unlicensed Contractor 

  • Hiring an unlicensed/insured contractor can place you at fault for any injuries caused on the job site (even in your own home).
  • Unlicensed contractors cannot get permits, so their work is not inspected and may not be up to local code.
  • An unlicensed contractor is not liable for any damages caused to your home or for any incomplete work.
  • Hiring an unlicensed contractor could void your home insurance policy
  • Hiring an unlicensed contractor may diminish your home value should you ever decide to sell it
  • It is against the law to hire an unlicensed contractor to perform any service above $500
  • Unlicensed contractors advertise a “too good to be true price” but often cut corners to give you that price.

Now that you know the dangers of hiring an unlicensed contractor let’s take a more in-depth look into what each of the benefits a licensed/insured painting contractor like TruLine Painting can provide.

Is Hiring an Unlicensed Contractor in California Illegal? 

Yes, hiring an unlicensed contractor in the state of California is illegal if the work performed is above $500. All contracting jobs in the state of California above $500 require that the acting contractor have a valid license from the Contractors State Licensing Board (CSLB)

The California Contractor’s State License Law protects homeowners against unlicensed contractors. It is illegal for an unlicensed person to perform contracting work on any project valued at $500 or more in combined labor and material costs.

Furthermore, according to Business and Professions Code section 7028: “Contractors caught performing work of $500 or more without a license are likely to appear before a Superior Court judge to answer to misdemeanor charges that can carry a potential sentence of six months in jail and/or a $5,000 fine, as well as administrative fines of $200 to $15,000.” – while these fines may not be passed along to you, it is still against the law and something to strongly consider.

Workers Compensation

The most significant risk when hiring an unlicensed or uninsured contractor is liability. Unlicensed contractors do not carry workers compensation or liability insurance.

Unlicensed contractors put their clients at risk if someone’s injured on the job.

California state law, under Insurance Code §2750.5, states that “an unlicensed worker performing services for which a license is required is not an independent contractor.”

As a result, an unlicensed contractor is legally considered to be the employee of the homeowner, as well as any subcontractors hired for the project.

It is then the homeowner’s responsibility to comply with California OSHA safety regulations (which trust us, are quite a lot and something you don’t want to deal with). If the contractor or subcontractor is injured, they can file a lawsuit against the homeowner for breaking the law by hiring an unlicensed contractor, and for providing an unsafe workplace. Your homeowner’s insurance will likely not cover you and the injured worker’s medical bills, plus coverage for their lost wages can be financially devastating to a homeowner.

Take this example

In June of 2016, Dave Jorgensen of Tulsa, Oklahoma, hired Mike Polaski an unlicensed painting contractor, to paint the exterior of his home. In the middle of the project, Mike was 12 feet up on a ladder when suddenly the ladder collapsed, causing Mike to fall to the ground, breaking his arm. Because Mike was unlicensed and uninsured, he was technically an employee of Mr. Jergensen, and therefore Mike was able to sue him for damages. Furthermore, because he was uninsured, there was no workers compensation policy and Mike was able to go after Mr. Jergensen for lost wages while recovering and for pain and suffering costs.

 They’re Not Liable for ANY Damages

An unlicensed contractor will not carry liability insurance nor are they bonded. You could end up paying twice to have someone come and fix their shoddy work – which ultimately negates any price savings you may have recognized by hiring an unlicensed contractor. Failure to be bonded also does not protect you in the case that the contractor does not finish the work or fails to pay subcontractors and suppliers.

Imagine this: You want to save some money on your house remodel, so you decide to hire an uninsured San Diego painting company to remove the popcorn ceiling in your living room. He ends up dropping a massive tool off his ladder and onto your coffee table, causing a massive chip in the wood. Unfortunately, there would be no recourse for the damage in this situation. (liability insurance will protect you if a contractor causes damage to your home).

Void Your Insurance Policy

Most home insurance policies have strict guidelines that all repairs and maintenance must be carried out by a licensed contractor. Should you hire an unlicensed contractor, and something goes wrong causing you to make a claim, you could lose coverage.

Here’s an example

A recent rain storm caused a leak which damaged several interior walls inside your home and now needs repair. The deductible on your policy is $5,000, which you decide is too expensive, so you reach out to your neighbor, Andy, who is an unlicensed contractor. Andy agrees to repair the walls for $1,000, and everything appears to be ok. Six months later, when you decide to sell your home, an inspection finds that there is $750,000 in structural damages caused by the leak. You call your insurance company to make a claim, but they deny you coverage because an unlicensed contractor did the initial repairs, thus voiding your homeowner’s policy. You are now on the hook for $750,000 repair all because you decided to hire an unlicensed contractor.

It could diminish your home value should you ever decide to sell it

Because an unlicensed painting contractor cannot obtain the necessary permits needed for specific jobs, it could impact you should you choose ever to sell your home. You will have to disclose this information to the potential buyers, which can ultimately diminish the value of your home. Failure to disclose this information can leave you liable if the work in question is later found not to be up to code.  This would likely reduce the dollar amount you would receive on any offer if the new buyer knows they will have to spend money on repairs to bring their house up to code.

 But what about the cost savings you might ask?

You may notice some unlicensed painting contractors advertising prices that seem to be far less than any competitor. Often this comes at the cost of “cutting corners,” not to mention all the reasons listed above. A telltale sign is a “too good to be true” price. This is also a result of the fact that these unlicensed contractors are not paying for the costs of proper insurance and licensing – which is an investment that every reputable painting contractor must invest in.

So How Do You Protect Yourself?

Property owners should always request proof of a license and Certificate of Insurance (COI) with Blanket AI (Additionally Insured) and workers compensation. You have the right to call their insurance company and verify their insurance is valid. You can also check their contractor’s license with the California Contractors State Licensing Board and additionally it will show if they are in good standing. It will also explain the contractor’s workers compensation insurance policy.

Check if they are bonded too. Bonding is also necessary because it protects the homeowners if the contractor performs poor work, doesn’t complete the project or decides not to pay subcontractors and suppliers.

If any painting contractor or house painter tries to brush off the subject or does not willingly comply, walk away, a failure to show proof of insurance and license conveys that they do not care about you as a customer.

Looking for a Licensed Painting Contractor?

Look no further than TruLine Painting. As a top San Diego Painting Contractor, we are licensed, insured, and bonded, providing you with 100% peace of mind. We specialize in both residential painting and commercial painting. All of our award-winning work is backed by a 100% satisfaction guarantee. We offer warranties on our work and never leave a project until our customer is 100% satisfied with the results. We believe every customer is entitled to a 5-Star Customer Experience, as you can see from all of our outstanding Google, Yelp, and Angie’s List Reviews, and we invite you to take a look at our past reviews and gallery of projects.

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Blake Imperl

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