All Forum Posts by: Philip Johnson

Reading the last couple posts is funny . First you arent hiring contractors  , you  are hiring labors . Contractors are businesses , legal and legit . Craigslist and home depot guys you find and hire , sure  they are cheaper than a professional , but when crap hits the fan and they get hurt or make a claim , you will lose BIG time . you can try to 1099 all you want , but when push comes to shove , you ARE THE EMPLOYER .  As a contractor , I could try to pay all my employees as subcontractors with a 1099 , once something happens guess who pays ?  Sure you may get away with it for years , but once someone gets injured , kiss your a$$ goodbye . Plain and simple . 

Licensed , insured contracting businesses cost a whole lot more . But its all about the money , thats called "penny wise and dollar foolish '.

One of my neighbors hired a "contractor" who was the cheapest by 60% . a 55 square roof replacement . Everything went well until the air compressor ran out of gas , a 17 year old was told to fill the gas tank . the kid spilled gas on the hot muffler , 3 degree burns on legs and torso .  " Contractor" had no license or insurance and barely spoke english . Neighbor is still in court and his legal fees defending himself are in the low 6 figures .

Here is where the homeowner screwed himself trying to save money , 1. he supplied the materials , paid for them and had them delivered on the roof . ( it was cheaper ) . He didnt have a written contract form the guys doing the work , certificates of insurance or copm , etc .  the homeowner lost he first round and has it on appeal .  He is also fighting with his insurance company who is denying coverage due to him hiring an unlicensed ' company' . 

This guy is dealing with real losses , 7  figures , just to save about $ 25 k on a roof of a million dollar house 

First, if the plumbing work required a permit, I wouldn't hire an unlicensed plumber, as they wouldn't be able to pull a permit (and I'll never try to get around pulling permits, as that's a liability risk I don't want to take)...

But, if we're talking about work that doesn't need to be permitted -- for example, replacing a trim kit on a faucet, replacing a toilet, etc. -- I'm happy to hire a handyman or a "plumber" who isn't licensed and/or isn't insured.  There is very little a plumber could do to injuring himself or create a serious liability in terms of bodily injury to a homeowner or tenant (liability for property damage is a risk I'm often willing to take).

As for electrical and HVAC, I nearly always want to have someone licensed and insured, as the liability is MUCH higher.  With electrical, there's a risk of the electrician injuring himself (electrocution) or killing an occupant (fire hazard from improper wiring).  With HVAC, there isn't much risk to the technician, but an improperly installed gas furnace can leak carbon monoxide, which can kill an entire family while they sleep.

If there's a chance of the contractor getting hurt -- and more importantly, if there's a chance of a homeowner or tenant getting hurt -- I want to be as free as possible from the liability of hiring an unlicensed contractor and as confident as possible that if there is a lawsuit, the contractor has insurance to protect himself and me.  Hiring an unlicensed/uninsured contractor makes for an easy argument of negligence against a rehabber -- that will pierce the corporate veil (i.e., your business won't protect you) and create bad-will from a judge and jury.

Thanks for detailed explation Joe. Exactly what I thought, but not what I wanted to hear. So, in other words, there is no safe way I can hire experienced painters who take on side jobs. I assume I could not obtain WC Ins on them as an owner/builder, since they are not licensed?? I believe WC Ins requires use of "licensed" contractors, unless the job is very petty. FYI... this property is in NV (not sure if regulations are the same as CA).

Liability carriers often have what is called an "action over" exclusion. This means that you cannot sue yourself. If you hire a contractor that does not have their own insurance (GL or WC) then you are 100% on the hook for that jobsite and your insurance carrier is not going to protect you from your own employees (they are not considered subs at that point because they do not have their own contractors license or insurance). WC is the sole remedy for injured employees and you are the employer. If you hired them directly... they are your respondsibility and they cannot waive that respondsibility. You either need to take the risk with your own GL and workers' comp or you need to hire subs with a legit contract that carry their own GL and WC. You can get a certificate of insurance from them naming you as additional insured. You can also check the CSLB for their WC carrier information. If you sign a contract with an unlicensed contractor and they screw something up... it is very unlikely your insurance company is going to come to the rescue as they have requirements on how you will hire your subs (which includes contracts and certs of insurance naming you as AI). If you are hiring a one man show with his own Contractors license and GL... he doesn't need to carry WC because he doesn't have employees.

@Matt Liu , I would guess that part (or maybe all) of the reason your PM doesn't want you to hire your own help is because that can introduce all kinds of problems for them (if they're going to have to manage them). There are some good handymen out there (I have one) but there are a LOT of bad ones! If your PM is going to have to manage your handyman, he's going to want to know that they aren't going to cause problems. It's probably a lot simpler for him to stick with his regulars. All that aside, if their price is too high, you might have to get a new PM. Just a thought.....

As far as the insurance goes...... I had a really interesting conversation with an insurance provider a few years ago (when I was a licensed contractor) that told me that I was actually at a HIGHER risk than the uninsured guys because lawyers follow the money. I still opted to carry the insurance but I was shocked to hear that. Now that I'm not an active contractor (I hire it out now), I carry a personal umbrella policy of $1M that only costs about $30 per month to cover anything unforeseen. I'm not sure that helps but I thought I'd throw it in.

Good luck!

Unless you have workers comp coverage like @Rob K. mentioned, your insurance WON'T cover you for any injuries that happen to any worker you hire to do a job. If the worker has liability insurance only, that still does not cover the worker for injuries on the job. Only workers comp covers injuries on the job. You can try to use a waiver form for the worker if the worker is a sole proprietor, but there are no guarantees that when injured the worker will not file a claim / lawsuit against you.

I have unlicensed and uninsured guys working for me. I purchased a workmans's comp policy in case one of them were to get hurt. As far as a license, they are supposed to be licensed to do this type of work. Nobody would ever check, but if so, I'm licensed and they could work under mine.

You can save a lot of money if you find the right people. I just had a guy paint a three bedroom bungalow with a dining room. He painted every surface including the basement walls and both staircases for $500 labor. It looks good too. Try finding a licensed and insured guy to do that. Would be more like $1,200.

Just a reminder, the Schluter needs to go under the tile in order to adhere correctly. You won’t be able to just slide it under after the tile is installed.