The Borrowed License on a $65,000 Addition
A licensed contractor, Alan, agrees to let his unlicensed friend Brian use Alan's MHIC license number to sign a $65,000 room addition contract and pull the county permit. Brian pays Alan $3,000 for the use of the number. Brian has no general liability insurance and no workers' compensation policy. He hires two day laborers. The contract lists Alan's license number, but Brian signs as owner. The homeowner, Priya, pays Brian $30,000. Six months later, the foundation cracks and the county inspector issues a stop-work order because the permit was pulled under Alan's name but Brian did the work. Brian disappears. Priya files a complaint with MHIC. Alan says he never met Priya and is not responsible.
1. What licensing violations occurred, and who is subject to discipline?
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Brian engaged in unlicensed home improvement contracting by signing the contract and performing the work without his own MHIC license. Alan violated the licensing law by lending his license number, allowing Brian to pull a permit under Alan's name, and accepting $3,000 for that arrangement. Both are subject to MHIC discipline. Alan's license can be suspended or revoked, and he can face civil penalties for aiding unlicensed practice. Brian can be ordered to stop contracting and can face penalties for unlicensed activity. The fact that Alan never met Priya does not protect him; the contract and permit used his license, and he knowingly participated in the scheme. Priya should name both in her complaint and provide the contract, permit, payment records, and photos of the cracking foundation.
2. Analyze Priya's insurance and recovery options, including Alan's general liability policy and the Guaranty Fund.
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Brian has no general liability coverage, so Priya cannot look to his policy. Alan's general liability insurer may deny the claim because license lending and intentional misrepresentation are not covered, and the policy may exclude work by unlicensed subcontractors. Priya can still sue Alan for negligence, negligent supervision, and misrepresentation, and sue Brian for breach of contract. The Guaranty Fund presents a harder question. The Fund generally requires a licensed contractor, and the contract shows Alan's license. Priya can argue Alan was the contractor of record, but the Fund may deny if the transaction was fraudulent or if Alan did not actually contract with her. She should file the Fund claim only after documenting the license and permit misuse. The $20,000 cap applies, so she should also pursue Alan directly.
3. What should Priya and MHIC do about the stop-work order and the permit?
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Priya should not allow work to continue under the existing permit. The permit was pulled by Alan, but Brian performed the work, and the county has already found a problem. She should ask the county what is required to correct the foundation and obtain a valid permit. She will likely need to hire a properly licensed contractor who will pull a new permit in the correct name and correct the structural work. MHIC should investigate the license lending and permit misuse and may refer the matter for criminal or civil enforcement. Priya should keep the stop-work order, inspection reports, and all payment records. She should not pay Brian or Alan further until the scope and responsibility are clear.