Contractor not licensed but insured

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whodatheads
Posts: 54
Joined: Thu Apr 18, 2013 10:09 am

Contractor not licensed but insured

Post by whodatheads »

Never really understand what licensed/insured/bonded mean when hiring a contractor.

I'm currently looking to hire a contractor to pave a concrete patio with drainage. Got three quotes $6000, $7200, and $7500. The lowest is not licensed but insured. It's small but do have a reasonably good website and appears to be legit. The other two are much bigger and fully everything. I usually don't have problem paying a little more to have a peace of mind. The problem is, besides the higher price, there will be a 2-3 months wait for the bigger two (apparently, economy is good here locally). The cheapest one can start the job next week.

So what could possibly go wrong with an unlicensed contractor? Does that mean the contract won't have much legal bite? Paving a concrete patio isn't exactly a rocket science....
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Quasimodo
Posts: 1357
Joined: Thu May 03, 2007 1:58 pm

Re: Contractor not licensed but insured

Post by Quasimodo »

Thought I'd post a reply to get your question moved up on the forum.

Here is a website that discusses some of the issues with unlicensed contractors:

http://www.angieslist.com/articles/what ... ractor.htm

I have no personal experience with this. Maybe someone with first hand knowledge will offer you advice.

John
Many wealthy people are little more than janitors of their possessions. | | Frank Lloyd Wright, architect (1867-1959)
nyjetfan
Posts: 59
Joined: Mon Nov 25, 2013 1:25 pm

Re: Contractor not licensed but insured

Post by nyjetfan »

Have you done any investigation as to what are the requirements that require licensing? For example, I live in NC and if you are doing construction projects under $30k, you do not have to be a licensed general contractor. So there are some smaller operations that do renovations and do solid work that aren't "licensed" by the state, but they have all the insurance, etc and are extremely skilled at what they do.

So it could be the case that your two bigger companies take on larger jobs which put them into a different classification requiring the licensing. Again, this is just an example that applies where I live, so it would be worth checking to see if it may be a similar situation in your case as well.
BillyG
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Joined: Sat Nov 17, 2012 8:02 pm
Location: DC, USA

Re: Contractor not licensed but insured

Post by BillyG »

You should ask to see their other jobs and speak with previous clients before you go forward. This is the best insurance YOU can have.

Insurance doesn't insure you will like the job -- it is more for personal liability and you should ask to see the certificate and confirm it. A bond doesn't mean jack. By the time you get paid by the bonding authority (if ever) that will be the least of your worries.

There's no way to tell which contractor(s) will be good without you seeing their work and talking with their clients, and making sure you have the same foreman that handled the jobs you saw.

Good luck!
Billy
derosa
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Re: Contractor not licensed but insured

Post by derosa »

Back in the old days no one needed a license to do anything.

And the reason licensing started being required?

Because people were doing crappy work. So to protect consumers who don't have a clue - certain occupations require people to be licensed. That is they have taken some schoolinging and testing to prove that they have an idea of what needs to be done and how to do it correctly.

So what do you know about patios?
asterix0
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Re: Contractor not licensed but insured

Post by asterix0 »

How good is your insurance? Is this worth taking the ris of being sued?
Professor Emeritus
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Re: Contractor not licensed but insured

Post by Professor Emeritus »

The key is whether being unlicensed is the same thing as unlawful. It is unlawful for unlicensed physicians,lawyers, barbers etc to offer professional services. However as an example it is not always unlawful for unlicensed engineers to offer professional services . What is the licensing structure?
ralph124cf
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Re: Contractor not licensed but insured

Post by ralph124cf »

asterix0 wrote:How good is your insurance? Is this worth taking the ris of being sued?
The license will not stop you from being sued. If there is a slip and fall on the new patio due to improper construction, there might be a question about your negligence in using an unlicensed contractor. That is what your homeowners and umbrella insurance is for.

Reference bonding: That is to protect you in the event the contractor takes your money but does not do the work. Just don't pay until the work is done. If he says that he needs the money for materials, offer to buy the materials directly, and arrange for delivery to your property.

Small contractor are typically short of cash, so show him the courtesy of paying promptly.

Ralph
Mitchell777
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Joined: Mon May 21, 2007 6:32 am

Re: Contractor not licensed but insured

Post by Mitchell777 »

What type of insurance do they have? Is it both liability and workers' compensation. I had some work done recently. Although not construction, the amount of the job was about the same as you are paying. The companies were all relatively small, yet in business for many years, and I was suprised at how many did not have insurance. Almost none had workers' comp and one or two did not have liability.
Leemiller
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Re: Contractor not licensed but insured

Post by Leemiller »

I would make sure your homeowner's covered unlicensed contractors. For workman's comp and liability, if you ask and they say they are insured but aren't how can you check that? Also, does homeowners cover you in those cases usually?
Saving$
Posts: 2518
Joined: Sat Nov 05, 2011 8:33 pm

Re: Contractor not licensed but insured

Post by Saving$ »

Different types of insurance.
1. General Liability - contractor should have. Covers insurable events for which the contractor is liable. Does not cover contractual disputes. But lets say the contractor stacks material, and the stack falls and injures someone not the contractors employee, you claim under contractor's GL.
2. Auto - contractor should have. Covers insurable events for which contractor is liable such as their car runs into another car.
3. Workers Comp - Contractor should have. Covers events such as above listed stack of material injuring contractor's employee.
4. Builders Risk - Either Contractor or Owner should have. Covers theft of material from jobsite, damage to work by fire, etc. Should probably be carried by homeowner if work is adjacent to your home - what if they cut something, spark flies and existing house (not part of contractors scope) catches fire?
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XtremeSki2001
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Location: New York

Re: Contractor not licensed but insured

Post by XtremeSki2001 »

IMHO, the smaller unlicensed group being able to start almost immediately should tell you something ... they're not in demand. Why is that?
A box of rain will ease the pain and love will see you through
dgdevil
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Joined: Sun Feb 20, 2011 12:42 pm

Re: Contractor not licensed but insured

Post by dgdevil »

Go back to the expensive two, see if they will come down in price, especially as they are keeping you waiting for 2-3 months -- or, if they'll throw in some extras. And/or, go to the previous work sites of the cheap guy, and talk to his clients - which is a hassle, I admit.

Licensing is ostensibly to protect the consumer, but it ends up creating a closed shop that allows providers to jack up prices, especially taxi drivers at airports and in NYC where Medallions sell for million of dollars. And this is why they're angry about competition from Uber and Lyft. According to this Economist article 30% of Americans are in jobs that require licensing vs. 13 percent in UK. And these cover the range from doctors and lawyers (no problem there) down to barbers and interior decorators.

http://www.economist.com/node/18678963
sscritic
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Re: Contractor not licensed but insured

Post by sscritic »

Will your state come to your house and arrest the contractor in front of all your neighbors?
Tuesday, Jan. 21, 2014 - 9:23 pm
A recent undercover sting operation in Rancho Murieta indicates that the statewide drought has provided illegal contractors with a new angle in approaching conservation-minded property owners, according to the Contractors State License Board.

The agency’s Statewide Investigative Fraud Team, with assistance from the state Department of Consumer Affairs Division of Investigation, netted 11 people accused of illegal, unlicensed home improvement contracting during the sting operation conducted Thursday in the gated community.

A $3,800 bid was given to investigators for drought-resistant landscaping by an unlicensed operator, a bid that far exceeded the legal limit of $500 in combined labor and materials charges for unlicensed contractors working in the construction industry, according to a Contractors State License Board news release.
http://www.sacbee.com/2014/01/21/609104 ... rieta.html
Note the $500 limit for unlicensed contractors in construction.

I like the 10 most wanted list:
Alex Pike Mitchell
Convicted Unlicensed Contractor


VIOLATIONS:

Grand Theft
Theft by False Pretense
Contracting without a License
Failure to Secure Workers' Compensation Insurance

Mitchell, who has a number of prior convictions for contracting without a license, has new convictions against him in both San Diego and Santa Cruz Counties. During the week of March 24, 2014 a San Diego County Superior Court Judge issued two no bail arrest warrants for Mitchell, after Mitchell failed to appear in court for sentencing. Mitchell may have as many as five arrest warrants at this time. Even so, CSLB has evidence Mitchell continues ripping off unsuspecting consumers in San Diego and Riverside Counties.

Mitchell often targets the elderly or homeowners with long driveways. He commonly tells them he is working in the area and has leftover paving material at a good price, writes a contract and collects down payments of $1,000 to $2,500, and then never returns to do the work. He may also claim to seal coat asphalt, repave with asphalt, or pour concrete.
Ah, the old driveway scam and the no concrete concrete scam. What was that you were doing?
tibbitts
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Joined: Tue Feb 27, 2007 5:50 pm

Re: Contractor not licensed but insured

Post by tibbitts »

derosa wrote:Back in the old days no one needed a license to do anything.

And the reason licensing started being required?

Because people were doing crappy work. So to protect consumers who don't have a clue - certain occupations require people to be licensed. That is they have taken some schoolinging and testing to prove that they have an idea of what needs to be done and how to do it correctly.

So what do you know about patios?
It's not just for people who "don't have a clue." Some types of work are very difficult for even an expert to analyze after it's completed, especially if the expert can't be present 24x7 while the work is being done - which most people usually can't. For example, some work is buried in the ground, or sealed in walls/floors. Or is something like concrete, where you can't tell the quality (psi, etc.) by just looking at it.
rixer
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Joined: Tue Sep 11, 2012 4:18 pm

Re: Contractor not licensed but insured

Post by rixer »

Being insured and being licensed and insured is two different things. Just having liability insurance means that if he damages your property or if anyone gets hurt because of his actions, his insurance will likely cover it. It doesn't cover workmanship.

Now because he isn't a licensed contractor, if anything goes wrong with the workmanship, you don't have much recourse. If he is licensed, you have better options available and you also know that he has met certain requirements and is more likely to be legit. At least he will be more accountable.
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