Unlicensed contractors are the reason someone came up with the old saying "there is a high price to the low bid." Hiring an unlicensed contractor usually results in problems. Steer clear of hiring these individuals and the chances of problems on the job are reduced. Importantly, unlicensed contractors are invariably the low bidder primarily because they don't pay for insurance, they don't pay taxes, and they cut every corner that they can find. Moreover, they typically don't have the experience and knowledge to be considered worthy of license, or worse, they have lost their license due to non-compliance with the existing laws.
An uninsured contractor can cause serious problems for consumers if a project goes haywire, an employee or worker gets injured on the job, or the contractor flees the job before finishing. Property damage due the defective installation of materials is typically a covered claim under a commercial general liability policy. If a project gets completed and subsequently leaks and property damage arise there will be no insurance coverage. The consumer is stuck going after the unlicensed individual who is usually judgment proof.
Similarly, if an employee or worker of the unlicensed contractor gets injured on the job the homeowner policy will sometimes pick up the coverage and the homeowner will be have the unintended consequences of increased premiums and possibly other civil penalties from a lawsuit by the injured individual. California has a very drastic remedy for consumers who hire unlicensed contractors. That is unlicensed contractors are required to disgorge all monies paid to consumers pursuant to Business and Professions Code 7031(b), even if the consumer knew the contractor was unlicensed.
The Bottom Line
Please check out your contractor prior to hiring. It could be very simple telephone calls, checking online licensing websites, or asking for referrals. The time you spend being diligent can save you thousands down the road.
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