Homeowners Consumer Protection

On top of finding out that a contractor botched a home improvement project and is not returning calls, clients are often sadly surprised to learn that there is no insurance coverage for bad “workmanship”. Typically, insurance companies only insure contractors for damages they cause to their customers’ property, but that kind of damage does not include the very thing that the contractor was building or fixing. Example: the contractor builds a retaining wall costing $4,000 in labor and materials. It falls down because it was not installed securely. Bricks are broken and strewn all over the yard. It will cost $5,000 to clean it up and rebuild properly. There is no coverage, because it is all “workmanship” and no damage to other property. However, if one of the bricks should fall on your toe, and you suffer an injury, or it breaks a vase or other piece of property, the insurance will typically cover those losses as negligent damage to property.

But what if the contractor breaks no toes or vases, and simply has no coverage for the wasted work that was done, and what if you signed your contract with the contractor’s company, but not himself or herself personally? 
In June, 2010, Katz & Dougherty took such a claim to the Appellate Division and won a decision which makes the owners of companies personally liable (whether insured or not) when they cause such problems even if you signed the contract with the contractor’s corporation or LLC. In Allen v. V & A Bros.,Inc. ... NJ Super. (App. Div., 201)) the court ruled that all it takes is evidence that the owners or other principal operators of the company participated in the work. They cannot commit violations of the home improvement practices regulations and escape personal liability simply because they used a corporation as the “signing party”.