The Contractors’ State License Law provides for the licensure, regulation, and discipline of contractors. Protection of the public is the highest priority for the Board in exercising its licensing, regulatory, and disciplinary functions.
Extant law requires licensees to report their conviction for any felony or any other crime substantially related to the qualifications, functions, and duties of a licensed contractor to the State Registrar of Contractors within 90 days after the licensee learns of the conviction.
On September 18, 2018, Sections 7071.20, 7071.21 and 7071.22 were added to the California Business and Professions Code. A licensee, and its insurers are now required to report to the Registrar certain final judgments, executed settlement agreements, and final arbitration awards within 90 days.
Licensees and their insurers now must report civil judgments, settlements and awards that arise in an action that alleges fraud, deceit, negligence, breach of contract or express or implied warranty, misrepresentation, incompetence, recklessness, wrongful death, or strict liability by the act or omission of a licensee while acting in the capacity of a contractor, whether as a general contractor or as a specialty contractor; the amount or value of the judgment, settlement payment, or award is $1,000,000 or greater, even though apportioned among contractors; is the result of a claim for damages to a property or person allegedly caused by specified construction activities of a licensee on any part of a multifamily rental residential structure; and is a designated “complex case” because it involves a claim of construction defect or insurance coverage arising out of a construction defect claim.
The new Business and Profession Code section requires the Registrar review the reports, keep or return them to the licensee, and take no further action if, upon review, the registrar or a designee determines the facts of the reportable event would not substantiate an allegation that the licensee has violated the Contractor’s State License Law; or there are reasonable grounds to believe that the public interest is sufficiently served by the existing resolution or disposition of the reportable event as reached by the parties to the action or by the court; or it is determined disciplinary action is unnecessary. Each returned report is conclusively determined to be a complaint resolved in favor of the licensee. For those not returned, the Licensing Board may impose discipline. Failure of a licensee to report to the Registrar in the time and manner required is also grounds for disciplinary action.
It is far, far better to resolve contractor disputes before a civil action early, especially before a determination is made as to whether the action is a “complex case.” Once a civil action is filed, the Contractor risks having to report the judgment, settlement or award and face possible disciplinary actions by the Contractor’s State License Board.
It is imperative the Contractors immediately respond to and resolve complaints before any determination that the case is “complex.” If successfully resolved before the Court designates the civil action a “complex case”, Contractors can avoid the new reporting requirement.
Contractors should try to resolve issues as they arise and, if settlement is not possible prior to litigation, seek alternative dispute resolution well before a Court can decide whether the case is a “complex case.” Such strategies require competent legal counsel to navigate the intricacies of contractor-related claims. If you are a Contractor and an issue does arise make sure your attorney is on speed dial.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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