The Abandoned Deck and the $20,000 Guaranty Fund Cap
Robert signs a $30,000 contract to replace a deck. The contract shows the contractor's MHIC license number, which is active on the signing date. Robert pays $22,000: $10,000 at signing and $12,000 when footings were poured. The contractor demolishes the old deck, installs four footings, then stops answering calls. Robert gets an estimate of $15,000 to finish the deck and $2,500 for temporary stairs required by the county inspector. He also missed two weeks of work, losing $4,000 in wages, and says he is owed something for stress. The contractor's license expired three months after the contract, and the contractor has no assets. Robert has the contract, canceled checks, photos, and texts. He files a Guaranty Fund claim for $21,500.
1. Is Robert's claim eligible for the Guaranty Fund? Address license status, documentation, and the type of loss.
Read the worked answer
Robert's claim is likely eligible because the contractor held an active MHIC license when the contract was signed. The later expiration does not automatically disqualify the claim; the key question is whether the contractor was licensed for the transaction that caused the loss. Robert is the homeowner, has a written contract, canceled checks, photos, and texts showing abandonment, and suffered actual loss from incomplete and defective work. The Fund generally covers actual loss from unworkmanlike work or abandonment, not every claimed expense. The $4,000 lost wages and the stress claim are not ordinary home improvement losses and are likely excluded. The $2,500 for inspector-required temporary stairs may be recoverable if it was necessary to protect the property or comply with the stop-work situation. Robert should document why each cost was necessary.
2. Calculate the maximum amount the Fund could pay and explain what is excluded.
Read the worked answer
The Fund pays actual loss subject to a statutory cap of $20,000 per claimant. On these facts, Robert's net completion loss is roughly $7,000: $15,000 to finish minus the $8,000 he still owed on the $30,000 contract. Add $2,500 for the inspector-required temporary stairs, and the documented loss is about $9,500. The $4,000 in lost wages and the stress claim are not recoverable because they are not direct costs of correcting or completing the home improvement. Even if the Fund calculated the loss differently, it could not exceed $20,000. Robert's $21,500 demand is therefore overstated. The Fund may also consider the value of the footings already installed; that value should not be counted as a loss if it remains usable.
3. What steps must Robert take, and what happens to his rights against the contractor if the Fund pays?
Read the worked answer
Robert should file a written complaint with MHIC, not just a Fund claim. He should submit the contract, checks, photos, texts, the completion estimate, the inspector's temporary-stair requirement, and a clear timeline. MHIC will investigate and may inspect the work. If the claim is approved and the Fund pays, Robert will likely have to assign his rights against the contractor to the Fund. That means the Fund can pursue the contractor for repayment and MHIC can discipline the license. Robert cannot collect twice for the same loss. He should also preserve evidence and avoid signing a release without understanding whether it covers only the assigned claim or also waives unrelated rights.