Contractors To Be Required To Report Civil Action Judgments and Settlements To The Licensing Board
Posted October 8, 2018

The Contractors’ State License Board (CSLB) is tasked with protection of the public through the exercise of its licensing, regulatory, and disciplinary functions. Current law requires a licensed contractor to report to the CSLB the conviction for any felony or any other crime substantially related to the qualifications, functions, and duties of a licensed contractor. This must be done within 90 days.

Effective January 1, 2019, SB 1465 now also requires a licensed contractor to report to the registrar within 90 days of knowledge, any civil action resulting in a final judgment, executed settlement agreement, or final arbitration award in an action in which the licensed contractor is named as a defendant or cross-defendant and meets all of the following criteria:

  1. The action 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.
  2. The amount or value of the judgment, settlement payment, or arbitration award for which the licensee is named as a defendant or cross-defendant, is one million dollars ($1,000,000) or greater, not including investigative costs or prior repairs performed by the licensee.
  3. The action is the result of a claim for damages to a property or person that allegedly resulted in a failure or condition that creates a substantial risk of a failure in the load bearing portions of a multifamily rental residential structure.
  4. The action is the result of a claim for damages to a property or person that was allegedly caused by a licensee’s construction, repair, alteration to, subtraction from, improvement of, moving, wrecking, or demolishing of, any part of a multifamily rental residential structure, either personally or by or through others.
  5. The action, if a civil action, has been designated by a court of competent jurisdiction as a “complex case” pursuant to rules 3.400 to 3.403, inclusive, of the California Rules of Court because it involves a claim of construction defect or insurance coverage arising out of a construction defect claim, pursuant to paragraph (2) or (7) of subdivision (c) of Rule 3.400 of the California Rules of Court.

If more than one contractor was named as a defendant or cross-defendant, each of the contractors apportioned more than $15,000 in liability must report the action. Insurers would be required to submit a similar report to the CSLB within 30 days of making some or all of the payout in such cases. This bill stems from a situation at Berkeley, in which a Berkeley apartment complex collapsed on June 16, 2015, killing six people and seriously injuring seven of their friends. After an investigation, it was revealed that the company that constructed the apartment complex had paid $26.5 million in construction defect lawsuit settlements in the three years before the Berkeley balcony gave way. But the state board that licenses contractors did not know about the cases because the law does not require contractors to report such settlements. At the time, the CSLB’s enforcement chief, David Fogt, now the CSLB Registrar, said that had the board known, “we would have absolutely taken action.” Such knowledge, he emphasized at a later hearing in the Capitol, “would have triggered an investigation.”

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