Storm Damage, and the Pitfalls of Hiring an Unlicensed Contractor

We are in the midst of severe weather season here in Minnesota.  In the past month, my own home narrowly missed out on damaging wind and hail not once, but twice.

Had I not been so fortunate, repairing my storm damage would have been a hassle, but not as stressful as it could be.  Why?  Because I’ve been through it before.

Dealing with your insurance company on a storm damage claim can be an extremely stressful process.  We have a running joke in the office that an insurance adjuster would be more properly called an “injuster” because of the injustice wrought by many adjusters in denying even the most straightforward of claims (actually, the “injuster” phrase was coined by a client of our firm who simply misspoke when he meant to say “adjuster”; we all assumed that it was a Freudian slip).

Dealing with your insurance company requires an experienced, knowledgeable storm damage repair contractor.  Unfortunately too many homeowners go with an unlicensed contractor hoping to save some money (and usually because they have been promised payment of their deductible).  The result?  These homeowners typically end up in my office, seeking legal redress for substandard work or, even worse, a company absconding with the insurance proceeds without performing the contracted-for work.

A recent StarTribune story featured Charlie Durenberger, the chief enforcer of Minnesota’s contractor licensees at the Minnesota Department of Commerce.  You can read the article here; suffice it to say, Mr. Durenberger has seen his share of contractor complaints, and he talks briefly about the reasoning behind using unlicensed contractors and why such a decision is a mistake.

If you experience storm damage this summer and are in the process of hiring a contractor to do the repairs, here are just a few legal tips as to why it is important to hire a licensed contractor:

1. Only a licensed contractor can obtain proper permits from your city.  Most city codes provide that storm damage repair work (such as siding, roofing and window replacements), like many exterior home improvement projects (decks, additions, and the like) requires a permit be obtained from the city.  No permit means that the work has been performed in violation of city codes and could subject the homeowner to fines and other penalties.  Note:  some unlicensed contractors will encourage the homeowner to obtain the permits (which is the only other alternative to the contractor pulling them).  If this is suggested, you should consider yourself warned that you are dealing with someone without a license.

2. Licensed contractors are insured.  The Minnesota Department of Labor and Industry  – the state agency charged with overseeing contractors – require its licensees to carry a bevy of insurance coverages – workers compensation, general liability and the like.  This insurance covers injuries to workers as well as damage to your home.  In the event of such an occurrence, the insurance takes care of any claims.  An unlicensed contractor likely will not carry such insurance and, as a result, you as a homeowner might find yourself the target of lawsuits and/or claims against your homeowners policy for workplace injuries.  Worse yet, in regards to shoddy work, you could find yourself in a position of having a great claim against the company who performed the work but no means of recovering from them.  That is what we attorneys call chasing a “hollow judgment.”

3. Minnesota’s Contractor Recovery Fund only pertains to LICENSED contractors.  The Department of Labor and Industry’s Contractor Recovery Fund  compensates owners or lessees of residential property in Minnesota who have suffered an actual and direct out-of-pocket loss due to a licensed contractor’s fraudulent, deceptive or dishonest practices, conversion of funds or failure of performance.   The Fund is funded through fees paid by licensed contractors and there is a maximum amount of $75,000 allowed to be paid out relative to any single contractor.  Obviously, a homeowner with such a claim against an unlicensed contractor will not be able to avail themselves of the Fund.

In short, trying to save money by using an unlicensed contractor to repair storm damage on your home often times leads to a more expensive problem at a later date.   Homeowners who cut corners in this manner typically find themselves the victims of poor quality work and/or other scams.  Unfortunately, by the time these homeowners end up in my office, it is too late for me to do anything to help them.  So let me give you the advice that I wish that I could have given them:  HIRE A LICENSED CONTRACTOR TO DO ANY WORK ON YOUR HOME.