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If I’m Just Consulting, Do I Need a License?

Posted on May 29th, 2013

Probably, YES.  The new definition of “contractor” in Business and Professions Code section 7026.1 went into effect January 1, 2013.  It states that a contractor includes a consultant to an owner-builder on a home improvement project.  The pertinent language, found at section 7026.1(b), is as follows:

“(b) (1) Any person, consultant to an owner-builder, firm, association, organization, partnership, business trust, corporation, or company, who or which undertakes, offers to undertake, purports to have the capacity to undertake, or submits a bid to construct any building or home improvement project, or part thereof.

(2) For purposes of this subdivision, a consultant is a person, other than a public agency or an owner of privately owned real property to be improved, who meets either of the following criteria as it relates to work performed pursuant to a home improvement contract as defined in Section 7151.2:

(A) Provides or oversees a bid for a construction project.

(B) Arranges for and sets up work schedules for contractors and subcontractors and maintains oversight of a construction project.”

If you performed this kind of work before January 1, 2013, this revision should not affect that work.  However, from January 1, 2013 going forward, if you are performing this type of construction-manager-type consulting work in California, you will likely need a contractor’s license. 

There are severe penalties for performing contractor work without a license.  Business and Professions Code section 7031 provides that an unlicensed person performing work that requires a license does not have the right to be paid for the work and can be forced to return to the client all amounts paid for the work.  This seemingly draconian provision is meant to protect both the property owners and the contractors they hire.  Owners get an increased pool of contractors who meet certain basic requirements and standards. Properly licensed contractors end up losing less work to unlicensed persons who can be unqualified to do the work and who may have an unfair advantage by not dealing with licensing requirements and the attendant costs.

If you are unsure whether your work is covered by the new B&P Code § 7026.1 provisions, you should contact trusted counsel immediately to analyze your particular situation.


Howell and Luttrell – a One-Two Punch to Injury Plaintiffs Seeking Windfall Recoveries for Unpaid Medical Expenses

Posted on May 8th, 2013

The construction industry has its fair share of workplace injuries and accidents.  Some would say more than its fair share.  Construction companies are frequently faced with personal injury claims and the dollar amounts plaintiffs are seeking to recover climb higher with each passing year.  Even more poignant is the case where the injured person’s medical expenses were entirely paid – at a significant discount from the invoice amounts the worker is seeking to recover from you – by an insurer or public payor like Medicare or MediCal.  It seems unfair to many in the industry that a plaintiff whose expenses were paid at a hefty discount from the amounts actually billed, and who as a result has received treatment at no expense to him/herself, should be able to “recover” money that was never paid to anyone and for which (s)he is not liable by seeking the amount billed rather than the amount actually paid and accepted by the provider(s) as payment in full. 

Here is a typical construction injury scenario: 

  • Someone on the job site is injured (for simplicity, someone other than your own employee);
  • Injured person receives medical services and treatment;
  • Medical services and treatment provided to the injured person are paid 100% by insurance;
  • Payment accepted as payment in full by the providers is significantly less than the amounts billed by the providers, pursuant to an agreement with the payor(s); and
  • Injured person sues company operating the job site (among others, usually) to “recover” the entire invoiced amounts, despite the providers having accepted much less from the payor(s).

Prior to the California Supreme Court’s decision in Howell v. Hamilton Meats & Provisions, Inc.[1] , this situation often ended in the injured person actually getting a jury award for all of the invoiced amounts, or a significant portion thereof, over and above what was actually paid.   Defendants argued this was a pure windfall to the plaintiff.  The Howell court agreed with defendants and held that a plaintiff’s recovery is limited to the amount actually paid and accepted by the provider as payment in full.

Plaintiffs have not entirely given up, however, on seeking full invoice amounts.  Plaintiffs argue that, because Howell was decided in the context of a private insurer paying the medical providers, it does not apply when payments are made by a public source, such as Medicare or Medi-Cal.  They argue that, in this public payor situation, plaintiffs are still entitled to plead and recover the full amount of the provider’s invoice despite the provider having accepted a much lower amount as payment in full from the public payor.

Howell Rule Also Applies Where Expenses Paid By Medicare and Medi-Cal 

The latter situation has just been addressed by the California Court of Appeals, First District in its April 8, 2013 decision in Luttrell v. Island Pacific Supermarkets.[2]  Luttrell was the latter situation in which plaintiff’s medical providers were paid by a public payor.  Plaintiff argued, among other things, that he should be entitled to recover the full amount invoiced by his providers, notwithstanding the dramatically reduced amount accepted by his providers as payment in full, because the providers were paid by public payors Medicare and Medi-Cal, not a private insurer as in Howell.  Ruling that the analysis in Howell “plainly must” be applied in this situation, the Court reasoned that:

“[A] plaintiff in a tort action is not to be placed in a better position than he would have had if the wrong had not been done. (internal cite omitted) Thus, a plaintiff typically may not recover more than the actual amounts paid by him or on his behalf for past medical services, even though the amounts billed for those services were greater. [citing Howell  (plaintiff may recover as economic damages the lesser of the reasonable value of the medical services received and the amount paid by the plaintiff or private insurance on the plaintiff’s behalf, not the amount billed)[.]”

Luttrell Provides Guidance in Applying the Howell Cap in Conjunction With a Reduction for Failure to Mitigate Damages

Luttrell suffered a hip injury.  He also suffered a decubitus ulcer during his recovery.  The court found that Luttrell was 50% responsible for his own damages for failure to reasonably care for himself because the ulcer was much worse as a result. 

In the Trial Court

The total billed for medical services was $179,443.72 for the hip injury and another $511,105.21 for the decubitus ulcer.  Applying the Howell rule, the trial court capped Luttrell’s medical damages at $138,082.25 (the sum of $50,348.49 actually paid by Medicare on the hip injury and $87,733.76 actually paid by Medicare on the ulcer), which was the amount his health care providers accepted as full payment under their Medicare contracts.  The trial court also cut Luttrell’s recovery for ulcer-related treatment by 50 percent. Luttrell appealed the trial court’s ruling.

On Appeal

The appellate court ruled that, as had been done by the trial court, the Howell amount-paid-cap is applied first, then the reduction for failure to mitigate is applied to the remaining amount.  It reasoned that if, as plaintiff argued should be done, the reductions had been taken: 

“first from the amounts billed (reducing the $511,105.21 award to $255,552.60), and then the court applied the Howell cap equal to the amounts paid ($87,733.76), Luttrell would have recovered the entire amount paid ($87,733.76), and his failure to mitigate would have had no consequence whatsoever.  The result would have provided a windfall to Luttrell and imposed liability upon Island Pacific in excess of the damage it caused.”


[1] Howell v. Hamilton Meats and Provisions, Inc. (2011) 52 Cal 4th 541

 

[2] James Luttrell v. Island Pacific Supermarkets, Inc. (April 8, 2013 [filed], California Court of Appeals, First District, Division Five) A1354089 (Alameda County Superior Court No. RG09469504)


Subcontractor Liability for SB800 Repairs Limited by Civil Code § 916(e)

Posted on May 8th, 2013

As we all know, SB800[1] changed the way construction defect actions are handled in California, from pre-litigation claims all the way through settlement and/or judgment.  One of the more subcontractor-friendly provisions of the new law is the requirement of actual notice to subcontractors of the pre-litigation inspection and repair process, which is found at Civil Code § 916(e).

In a nutshell, the provision virtually eliminates the previously all-too-common practice among builders to make the ‘repairs’ that claimants demand, then shift the cost to their subcontractors in later litigation. The cost of repair then becomes their evidence of damages suffered, with no way for the subcontractor to disprove that the ‘repairs’ were necessary.  In stark contrast to that practice, section 916(e) requires the builder to provide the subcontractor a notice providing sufficient time to attend the inspection(s) and to participate in the repair process.[2]  If such notice is not provided, the general contractor will not be able to hold subcontractors or others liable for the repair costs.

Be careful how you use this provision, however.  In Greystone Homes, Inc. v Midtec, Inc. (2008) 168 Cal.App.4th 1194, a plumbing fitting manufacturer sought to avoid liability under the builder’s cross-complaint for equitable indemnity and negligence by asserting the economic loss rule.[3] The courts have held that the economic loss rule explained in the Aas decision was abrogated by the legislature’s enactment of SB800.  The manufacturer lost on a summary judgment motion, and appealed.  The crucial argument — that the builder failed to comply with the pre-litigation notice requirement of Civil Code § 916(e) — was not adjudicated on appeal because the manufacturer did not raise them issue in its summary judgment motion.  The court’s comments in rejecting the argument seem to telegraph a likelihood that the issue would have been decided in the manufacturer’s favor if the argument had been made at the trial court level. We will have to wait for an opinion decided directly on this provision of the statute to be sure.


[1] SB 800 was codified at California Civil Code sections 895 to 945.5.

[2] If a builder intends to hold a subcontractor, design professional, individual product manufacturer, or material supplier, including an insurance carrier, warranty company, or service company, responsible for its contribution to the unmet standard, the builder shall provide notice to that person or entity sufficiently in advance to allow them to attend the initial, or if requested, second inspection of any alleged unmet standard and to participate in the repair process. The claimant and his or her legal representative, if any, shall be advised in a reasonable time prior to the inspection as to the identity of all persons or entities invited to attend. This subdivision does not apply to the builder’s insurance company. Except with respect to any claims involving a repair actually conducted under this chapter, nothing in this subdivision shall be construed to relieve a subcontractor, design professional, individual product manufacturer, or material supplier of any liability under an action brought by a claimant.”  CA Civil Code § 916(e).

[3] See Aas v. Superior Court (2000) 24 Cal 4th 27