Contractor claims

Start with the licensing board, if your state has one

Some states license contractors and give a state board power to investigate complaints against them. California's Contractors State License Board (CSLB) accepts complaints for poor workmanship, abandonment of a project, failure to pay subcontractors or suppliers, and building code violations.

"Complaints within the board's jurisdiction involve failure of a licensed contractor to fulfill the terms of an agreement. Failures include poor workmanship; abandonment of a project; failure to pay subcontractors, material suppliers or employees; or building code violations."

Source: How the Complaint Process Works, California Contractors State License Board

CSLB investigates using a clear and convincing evidence standard, the highest a licensing board typically applies, and can issue citations carrying civil penalties of up to $30,000. Depending on the dispute amount, the board offers mandatory arbitration for claims under $25,000 and voluntary arbitration between $25,000 and $50,000. Even so, the board says plainly that it cannot promise you will get any money back.

Whether your state licenses contractors at all, and what a licensing board can and cannot do, varies. Texas, for example, has no general statewide contractor license. Confirm what regulatory body, if any, covers contractors in your state.

A negligence claim depends on your state's economic loss rule

A lawsuit against the contractor for negligence runs into a doctrine called the economic loss rule. In states that apply it strictly, such as Florida, the rule blocks a negligence claim when a defect damages only the work itself, with no injury to a genuinely separate piece of property.

"The 'economic loss' rule is a court-created doctrine which prohibits the extension of tort recovery for cases in which a product has damaged only itself and there is no personal injury or damage to 'other property'."

Source: Economic Loss Rule: The "Integral Part" Approach to the "Other Property" Exception, The Florida Bar Journal

Colorado runs the opposite direction. Its supreme court held that the rule does not bar an association's negligence claims against a builder, because a builder owes homeowners an independent duty of care that exists apart from any contract.

"The economic loss rule does not apply to negligent construction claims against homebuilders because homebuilders have an independent duty of care to act without negligence in the construction of homes."

Source: A.C. Excavating v. Yacht Club II Homeowners Ass'n, Inc., Colorado Supreme Court

Whether a negligence claim against your contractor survives the economic loss rule depends entirely on your state. Ask counsel how your state treats it before assuming either outcome.

The contractor's own insurer usually won't pay to fix the contractor's work

Even a winning claim needs a pocket to pay it from, and that pocket is often the contractor's commercial general liability (CGL) policy. Standard policy language excludes property damage to the contractor's own completed work.

"the policy will not cover: 'Property damage' to 'your work' arising out of it or any part of it and included in the 'products-completed operations hazard.'"

Source: General Contractors and Construction Managers Can Get Insurance Coverage for Construction Defect Claims, Anderson Kill P.C.

There is one carve-back worth knowing: this "your work" exclusion drops away if a subcontractor, not the contractor itself, performed the defective work on the contractor's behalf. Outside that carve-back, the policy's products-completed operations hazard covers damage the finished work causes elsewhere, away from the project, which is a different question from paying to repair the defect itself. The fuller picture, including additional insured status and subrogation, is covered in Insurance considerations.