Zalma on Insurance
Education • Business
Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
Interested? Want to learn more about the community?
September 18, 2024
Unlicensed Contractor Cannot Enforce Contract

Lack of Workers’ Compensation Insurance Voids Contractor’s License

Post 4892

Posted on September 18, 2024 by Barry Zalma

See the full video at https://rumble.com/v5fa86i-unlicensed-contractor-cannot-enforce-contract.html and at https://youtu.be/-x4MigCCmJo

As a condition precedent to the issuance of a contractor’s license, continued maintenance, or reinstatement of a contractor’s license, California law requires applicants and licensees to have on file at all times a current and valid certificate of workers’ compensation insurance.

In American Building Innovation LP v. Balfour Beatty Construction, LLC, et al., G062471, G062965, California Court of Appeals (September 3, 2024) the contractor was unable to recover the contract payments because it did its work without a license.

NO WORKERS’ COMPENSATION, NO LICENSE, NO RIGHT TO BE PAID

Failure to obtain or maintain the required coverage results in the automatic and immediate suspension of the contractor’s license by operation of law. In California a party who was not duly licensed at all times during the performance of its contracting work generally cannot bring or maintain an action to collect compensation for that work.

As a result of the policy cancellation, ABI’s contractor’s license was suspended mid-project. Fully aware it was unlicensed and uninsured; ABI nevertheless continued its work.

ABI sued to recover amounts allegedly owed for its work on the project. The Board accepted ABI’s representation and retroactively reinstated its contractor’s license under section 7125.1.

The Court needed to determine if ABI was duly licensed at all times during the performance of its work; if not, section 7031 bars ABI from bringing or maintaining the present action. In this case, the lapse in coverage was not beyond ABI’s control. The record demonstrates the policy cancellation occurred because ABI chose not to pay billed insurance premiums. The insurer’s retroactive reinstatement of the policy following that settlement was essentially meaningless because it occurred long after the statute of limitations ran on any workers’ compensation claims, rendering the coverage illusory.

STATEMENT OF FACTS

ABI was on the project from August 2017 through May 2018. ABI concedes that its work on the project required it to be licensed and that it had to maintain workers’ compensation insurance throughout the project in order to maintain its license.

When ABI began its work on the project in August 2017, it had a workers’ compensation insurance policy issued. ABI did not pay approximately $33,000 in outstanding premiums, which State Fund asserted were owed for ABI’s 2015-2016 policy based on an audit State Fund had performed in 2017.

ABI received State Fund’s notice of cancellation; it nonetheless failed to make payment. Accordingly, State Fund canceled ABI’s 2017-2018 policy on January 25, 2018.

As a result of the policy cancellation, ABI’s contractor’s license was suspended by operation of law on January 25, 2018. The record establishes that Vo, ABI’s principal, knew that ABI’s policy had been canceled, that its license had been suspended, and that ABI was therefore not to engage in construction activities.

As for the construction project, Balfour Beatty, the general contractor, refused to pay ABI for its work. The Board apparently accepted ABI’s representations, as it reinstated ABI’s license retroactively; the Board also revised ABI’s license history to remove the January 2018 suspension under section 7125.2.

The trial court issued a statement of decision finding in favor of Defendants on the 31st affirmative defense, concluding ABI was “not ‘a duly licensed contractor at all times during the performance’ of the contract” and therefore “may not ‘bring or maintain’ this action ‘or recover’ compensation for its work.” The court then entered judgment in favor of Defendants and against ABI. ABI filed a notice of appeal from the judgment.

DISCUSSION

The trial court concluded that section 7031 bars ABI from maintaining this action because it was not ‘”a duly licensed contractor at all times during the performance”‘ of its contract from July 2017 through May 2018.

The Court of Appeal concluded that ABI was not entitled to retroactive reinstatement of its license under section 7125.2. Because ABI applied for retroactive reinstatement of its license more than 90 days (in this case, nearly three years) after the effective date of the certificate of insurance, the Board could only reinstate the suspended license if “the failure to have a certificate on file was due to circumstances beyond the control of [ABI].” Neither the policy cancellation nor the continued failure to have insurance on file were outside ABI’s control.

ABI’s representations were false. State Fund canceled the 2017-2018 policy effective January 25, 2018, because ABI made a considered decision not to pay the premiums due on the previous policy.

When ABI elected not to pay the premium due or procure workers’ compensation insurance elsewhere, ABI compromised the safety and security of its workers. It was not until over two years later, when faced with Defendants’ motion for summary judgment, that ABI agreed to pay the 2015-2016 policy premium so that its 2017-2018 policy would be retroactively reinstated.

The legitimacy of the public policies underlying California’s licensing laws and the validity of section 7031 are well established. Section 7031 applies despite injustice to the unlicensed contractor. Section 7031 represents a legislative determination that the importance of deterring unlicensed persons from engaging in the contracting business outweighs any harshness between the parties. The result is a stiff all-or-nothing penalty for unlicensed work.

The judgment and postjudgment order were affirmed.

ZALMA OPINION

The key to the public policy requiring contractors to be licensed is the protection of the public. The statute is Draconian but fair. If you do construction work without a license you cannot enforce the right to be paid for your work. ABI refused to pay the premium charged by the workers’ compensation insurer, who appropriately cancelled the policy, notified the licensing board who immediately suspended the license. ABI’s efforts to reinstate its license, by presenting false testimony, was ineffective because at the time ABI did the work it was unlicensed.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Subscribe to my substack at https://barryzalma.substack.com/subscribe

Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/account/content?type=all; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg

Go to the Insurance Claims Library – https://lnkd.in/gwEYk

00:11:10
Interested? Want to learn more about the community?
What else you may like…
Videos
Posts
19 hours ago
Duty to Defend Is Not Without Limit

Courts Must Never Speculate About Facts Not in Evidence

Post 5192

See the full video at https://rumble.com/v6z2r2s-duty-to-defend-is-not-without-limit.html and at https://youtu.be/3hhYFmKmGmA, and at https://zalma.com/blog plus more than 5,150 posts.

Injuries to Others at McDonald’s Do Not Provide Duty to Defend Suit by Employee Who Did Not Incur Bodily Injury

in McdDonald’s Corporation, et al v. Homeland Insurance Company Of New York, No. 23 C 16297, United States District Court, N.D. Illinois, Eastern Division (September 10, 2025) McDonald’s Corporation and McDonald’s USA LLC (collectively, “McDonald’s”) sued Defendant Homeland Insurance Company of New York (“Homeland”) challenging Homeland’s denial of coverage under a commercial general liability insurance policy.

BACKGROUND

A McDonald’s franchisee operated the McDonald’s restaurant (“Restaurant”) located in Chicago, Illinois. (hereinafter, “PRSOF”). From March 1, 2015 through March 1, 2018, the franchisee maintained a ...

00:07:50
September 16, 2025
There is no Excuse for Lying to an Insurer

Breach of Material Condition for Monitored Fire Alarm Voids Coverage

See the full video at https://rumble.com/v6z0zh4-there-is-no-excuse-for-lying-to-an-insurer.html and at https://youtu.be/6PhLIpzBnQw, and at https://zalma.com/blog plus more than 5150 posts.

No Monitored Fire Alarm: No Coverage
Post 5191

In Northfield Insurance Co. v. Michigan 32, LLC, No. 24-CV-12822, United States District Court, E.D. Michigan, Southern Division (September 10, 2025) Defendant Michigan 32, LLC’s (MI 32) moved the court for reconsideration of the Court’s Opinion and Order granting summary judgment to Plaintiff Northfield Insurance Company (Northfield).

The matter arose out of a commercial insurance coverage dispute wherein Northfield denied MI 32’s fire loss claim. The Court granted summary judgment in favor of Northfield on its Declaratory Judgment action.

THE ORIGINAL DECISION

The Protective Safeguard Endorsement

The Court held that MI 32’s admitted failure to comply with its Policy’s Protective Safeguard Endorsement...

00:07:35
September 15, 2025
Zalma’s Insurance Fraud Letter – September 15, 2025

THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL

Post 5190

ZIFL Volume 29, Issue 18

See the full video at https://rumble.com/v6yuis6-zalmas-insurance-fraud-letter-september-15-2025.html and at https://youtu.be/64CobaRmzd0, at https://zalma.com/blog, and https://zalma.com/blog/wp-content/uploads/2025/08/ZIFL-09-01-2025-1.pdf.

Posted on September 15, 2025 by Barry Zalma
ZIFL Volume 29, Issue 18

THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL

Subscribe to the e-mail Version of ZIFL, it’s Free!
Post 5190

See the full video at https://rumble.com/v6yuis6-zalmas-insurance-fraud-letter-september-15-2025.html and at https://youtu.be/64CobaRmzd0

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/
The Contents of the September 15, 2025 Issue of ZIFL Includes:
...

00:09:09
September 09, 2025
The Dishonest Chiropractor/Physician

How a Need for Profit Led Health Care Providers to Crime
Post 5185
Posted on September 8, 2025 by Barry Zalma

See the full video at https://lnkd.in/gePN7rjm and at https://lnkd.in/gzPwr-9q

This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers.

The Dishonest Chiropractor/Physician

How a Need for Profit Led Health Care Providers to Crime

See the full video at and at

This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime.

How Elderly Doctors Fund their ...

placeholder
September 08, 2025
The Dishonest Chiropractor/Physician

How a Need for Profit Led Health Care Providers to Crime
Post 5185
Posted on September 8, 2025 by Barry Zalma

See the full video at https://lnkd.in/gePN7rjm and at https://lnkd.in/gzPwr-9q

This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers.

The Dishonest Chiropractor/Physician

How a Need for Profit Led Health Care Providers to Crime

See the full video at and at

This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime.

How Elderly Doctors Fund their ...

placeholder
September 03, 2025

Barry Zalma: Insurance Claims Expert Witness
Posted on September 3, 2025 by Barry Zalma
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit

© 2025 Barry Zalma, Esq., CFE

When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.

On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive ...

post photo preview
See More
Available on mobile and TV devices
google store google store app store app store
google store google store app tv store app tv store amazon store amazon store roku store roku store
Powered by Locals