The Expired License, the Injured Helper, and the Missing Insurance
Craig owns a remodeling business. His MHIC license expired on March 1; he renewed online but the new certificate has not arrived. On March 10 he signs a $12,000 bathroom contract and advertises MHIC Licensed #12345 on his truck and website. He has a $50,000 general liability policy but no workers' compensation policy because his only helper, Luis, works part-time, about 30 hours a week. Luis falls from a ladder while installing drywall, breaks his wrist, and incurs $28,000 in medical bills. The GL insurer denies the claim, saying employee injuries are excluded. The homeowner, Karen, learns about the expired license and wants out of the contract. Craig has completed demolition and purchased $3,000 of materials.
1. Was Craig required to carry workers' compensation insurance for Luis? Explain the consequences of the denial.
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Yes. Maryland generally requires workers' compensation coverage for employers with one or more employees, and part-time status does not create an exemption. Luis was working regularly, about 30 hours per week, and was injured on the job. Craig's lack of coverage is a violation that can lead to penalties and an uninsured employer claim. Luis can file a workers' compensation claim with the Commission, and the Uninsured Employers' Fund may pay benefits and then seek reimbursement from Craig. The general liability denial is expected because employee injuries are typically excluded from GL policies. Craig should not assume the GL policy will cover the medical bills; he needs to address the workers' compensation exposure separately.
2. What are the consequences of signing the contract while his license was expired, and can Karen cancel?
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Craig's license expired on March 1, and renewing online does not extend the license while the certificate is pending. Signing a $12,000 home improvement contract on March 10 while unlicensed violates Maryland law. The contract may be unenforceable, and Karen has strong grounds to cancel and file an MHIC complaint. Advertising an MHIC license number while unlicensed is also a violation. Craig should stop work, provide Karen with a written accounting, and refund any unearned payments. He should not continue demolition or installation under the expired license. He may argue for payment for materials or work already provided, but a court may be reluctant to enforce an unlicensed contract, so he should resolve the matter carefully rather than demand the full price.
3. How should Craig handle the $3,000 of materials and the partial work?
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Craig should stop work immediately and document the materials, receipts, and the value of the demolition already performed. Because the contract was signed while he was unlicensed, he cannot safely rely on the contract to collect the full $12,000. He should give Karen a written accounting and negotiate a fair resolution, such as leaving usable materials on site or removing them if Karen does not want them. He should not threaten to abandon the job in a way that leaves the home unsafe. If Karen cancels, he should refund any unearned money and keep evidence of any agreed offset. He should also correct his advertising immediately and confirm his renewal status before signing any new contract.