[WSBARP] Contractor bond question

Fri Dec 10 12:35:36 PST 2021

I came to a different conclusion than Ms. Fordham. I think the bond still provides coverage, or is at least meant to, but it’s usually only $12k. You can look up any contractor’s bond status on the Labor & Industries website<https://secure.lni.wa.gov/verify/>. It’ll show any claims against the contractor’s bond and provide a phone number for an L&I rep you can call. It will also list the bond party and a bond number, so you can call the insurance company and ask about a specific policy.
The “surety insurer” should still hold the policy until cancelled. RCW 18.27.040(3) spells out the process for filing a claim against a contractor’s bond (superior court, surety issuer of the bond shall be named as a party). The excerpts below highlight some of the violations. 18.27.005 says the chapter shall be strictly enforced.
RCW 18.27.020<http://app.leg.wa.gov/RCW/default.aspx?cite=18.27.020>
Registration required—Prohibited acts—Criminal penalty—Monitoring program.
(1) Every contractor shall register with the department.
(2) It is a gross misdemeanor for any contractor to:
(a) Advertise, offer to do work, submit a bid, or perform any work as a contractor without being registered as required by this chapter;
(b) Advertise, offer to do work, submit a bid, or perform any work as a contractor when the contractor's registration is suspended or revoked…

RCW 18.27.200<http://app.leg.wa.gov/RCW/default.aspx?cite=18.27.200>
Violation—Infraction.
(1) It is a violation of this chapter and an infraction for any contractor to:
(a) Advertise, offer to do work, submit a bid, or perform any work as a contractor without being registered as required by this chapter;
(b) Advertise, offer to do work, submit a bid, or perform any work as a contractor when the contractor's registration is suspended or revoked;
(c) Transfer a valid registration to an unregistered contractor or allow an unregistered contractor to work under a registration issued to another contractor;
(d) If the contractor is a [plumbing] contractor as defined in RCW 18.106.010<http://app.leg.wa.gov/RCW/default.aspx?cite=18.106.010>, violate RCW 18.106.320<http://app.leg.wa.gov/RCW/default.aspx?cite=18.106.320>; or
(e) Subcontract to, or use, an unregistered contractor.
(2) Each day that a contractor works without being registered as required by this chapter, works while the contractor's registration is suspended or revoked, or works under a registration issued to another contractor is a separate infraction. Each worksite at which a contractor works without being registered as required by this chapter, works while the contractor's registration is suspended or revoked, or works under a registration issued to another contractor is a separate infraction.

Stephen DeShazo
In-House Counsel
Direct:   206.413.6359
Office:   206.737.9700
Fax:        206.260.1339
Email:    steve.deshazo at isolahomes.com<mailto:steve.deshazo at isolahomes.com>
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From: wsbarp-bounces at lists.wsbarppt.com <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of Inge Fordham
Sent: Friday, December 10, 2021 12:23 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] Contractor bond question

The bond wouldn’t be triggered absent an occurrence during the bond period.  It sounds like the client may be out of luck with respect to the bond.  Unfortunately, even if the contractor was insured, the CGL policy wouldn’t provide coverage absent property damage caused by an occurrence within the policy period.  It wouldn’t provide coverage for theft (or conversion) of funds.  It may still be worth going after the contractor to obtain a judgment as they are good for 10 years and can be renewed for 10 year periods thereafter.  If the contractor owns real property, you can record a judgment lien.  If the client proceeds with a lawsuit, I would also plead fraud as a fraud judgment cannot be discharged in bankruptcy (but a judgment for a general breach of contract or conversion could).

Best of luck!  I always feel horrible for clients in this scenario.  It’s so important to verify licensure, bond, and insurance when hiring a contractor.  But then hindsight is always 20/20.

[uc%3fexport=download&id=1W3rEcChy0_E0cCfV5up02mkhwnL6eWIs&revid=0B4P5JoIHdbFaR29EbHlRWHFseFV5STZpSUVGeUNPWldkVDFVPQ]
Inge A. Fordham | Attorney
Fordham Law, PLLC
3218 Sixth Avenue | Tacoma, WA 98406
Office: (253) 348-2657 | Mobile: (206) 778-3131
www.fordhamlegal.com<http://www.fordhamlegal.com>

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From: <wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com>> on behalf of Craig Gourley <craig at glgmail.com<mailto:craig at glgmail.com>>
Reply-To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>>
Date: Friday, December 10, 2021 at 12:13 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>>
Subject: [WSBARP] Contractor bond question

Construction bond gurus.  I have a client with a contractor bond question that I hope someone has addressed previously and can share the knowledge.  Hapless homeowner hires sneaky contractor for a remodel.  Hapless pays the contractor in advance. Contractor works a couple of days and disappears.  Hapless would like to go after the bond.  So far a common and predictable outcome.  Now the fun part.  Contractor was suspended by L&I in April.  Contract was signed on June 8 for work to start June 16. Bond expired on June 13th.   Nutshell, unlicensed contractor signs a contract while the bond is in effect but starts work after it expired.  Any bond coverage?   Why does this feel like a bar question?

B. Craig Gourley
GOURLEY LAW GROUP
THE EXCHANGE CONNECTION
SNOHOMISH ESCROW
P.O. Box 1091
Snohomish, WA 98291
PH:  (360) 568-5065 (800) 291-8401
Fax: (360) 568-8092

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