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.
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Fraud Shouldn’t Pay
Post 5396
See the video and at https://rumble.com/v7ctgmq-the-great-jewel-theft.html at https://youtu.be/aRbQ2sJfGwA
This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection 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.
The Insured purchased, for the first time in his life, a policy of Personal Articles Floater Insurance (PAF) scheduling $125,000 worth of ladies jewelry. He advised the insurer that the jewelry was always kept in a class E safe at his residence. He also told the insurer that he was employed full time as the owner of a gasoline service station and that he had never been canceled or suffered a previous loss.
One month after the policy was ...
To Prove Fraud Material False Statements Must be Proved
Post number 5389
Posted on July 8, 2026 by Barry Zalma
See the video at and at
Materiality Must Be Judged Objectively.
In People Of The State Of California Ex Rel. Heath & Yuen, APC v. Silver Bird Auto Leasing, LLC et al., B342847, California Court of Appeals, Second District, Eighth Division (June 5, 2026) Heath & Yuen, APC defended a tour van driver and related defendants in an underlying auto-collision action brought by Silver Bird Auto Leasing, LLC after a low-speed collision involving Silver Bird’s McLaren and a tour van.
Silver Bird alleged the McLaren was making a legal turn and sought damages including repair costs, loss of use, and diminution in value. The defendants’ insurer later became insolvent, and CIGA took over the defense and ultimately paid $25,000 to settle the underlying action.
After settlement, Heath & Yuen filed a ...
To Prove Fraud Material False Statements Must be Proved
Post number 5389
Posted on July 8, 2026 by Barry Zalma
See the video at and at
Materiality Must Be Judged Objectively.
In People Of The State Of California Ex Rel. Heath & Yuen, APC v. Silver Bird Auto Leasing, LLC et al., B342847, California Court of Appeals, Second District, Eighth Division (June 5, 2026) Heath & Yuen, APC defended a tour van driver and related defendants in an underlying auto-collision action brought by Silver Bird Auto Leasing, LLC after a low-speed collision involving Silver Bird’s McLaren and a tour van.
Silver Bird alleged the McLaren was making a legal turn and sought damages including repair costs, loss of use, and diminution in value. The defendants’ insurer later became insolvent, and CIGA took over the defense and ultimately paid $25,000 to settle the underlying action.
After settlement, Heath & Yuen filed a ...
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Post number 5395
Posted on July 16, 2026 by Barry Zalma
In Vivian Maritza Triana Marin, Sebastian Arroyave Penagos, and Daniel Arroyave Penagos v. Marc J. Paynter and Transport Marc Paynter Inc., No. 23-CV-6498, United States District Court, E.D. New York (July 10, 2026) Plaintiffs sued Defendants in diversity after a rear-end collision on the Whitestone Expressway in Queens, New York. Plaintiffs were in a Subaru driven by Vivian Maritza Triana Marin, while Defendant Marc J. Paynter drove a Transport Marc Paynter Inc. tractor-trailer.
Facts:
Dashcam footage from Defendants’ vehicle showed Plaintiffs’ vehicle braking suddenly in the left lane despite an open roadway ahead. Marin could not identify a specific reason for braking, the passenger plaintiffs did not know why she braked, and a non-party witness testified that Plaintiffs’ vehicle stopped abruptly for no apparent reason.
The Accident occurred when ...
Swoop & Squat Fails
Posted on July 16, 2026 by Barry Zalma
The Only Solution to Fraud is to Take the Profit Out of the Crime
It Takes Courage to Fight the Fraudster
Post number 5395
In Vivian Maritza Triana Marin, Sebastian Arroyave Penagos, and Daniel Arroyave Penagos v. Marc J. Paynter and Transport Marc Paynter Inc., No. 23-CV-6498, United States District Court, E.D. New York (July 10, 2026) Plaintiffs sued Defendants in diversity after a rear-end collision on the Whitestone Expressway in Queens, New York. Plaintiffs were in a Subaru driven by Vivian Maritza Triana Marin, while Defendant Marc J. Paynter drove a Transport Marc Paynter Inc. tractor-trailer.
Facts:
Dashcam footage from Defendants’ vehicle showed Plaintiffs’ vehicle braking suddenly in the left lane despite an open roadway ahead. Marin could not identify a specific reason for braking, the passenger plaintiffs did not know why she braked, and a non-party witness testified that Plaintiffs’ vehicle stopped abruptly for no apparent reason.
The ...
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
Posted on July 15, 2026 by Barry Zalma
ZIFL Volume 30, Issue 14
Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th 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/
This issue contains the following articles about insurance fraud:Zalma’s Insurance Fraud Letter – July 15, 2026
Posted on July 15, 2026 by Barry Zalma
ZIFL Volume 30, Issue 14
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th 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/
This issue contains the following articles ...
