As 2015 comes to a close, we thought we’d round up a collection of this year’s biggest and best (worst?) stories of contractor insurance blunders. Some of these noteworthy reports are a case of a contractor just not thinking, like the TV celebrity who tops our list at #1. And others are simply cases of devious developers who got caught. So gather around and get comfy, because these are the biggest insurance frauds, fails, and cautionary tales that you will want to avoid in the coming year.
#1: TV “Master” Learns a License Lesson in Oregon
The Oregon Construction Contractors Board fined the star of Animal Planet’s popular show, Treehouse Masters, $5,000 for building a single-family treehouse. Pete Nelson, the owner of Washington based Nelson’s Treehouse and Supply, received the fine for building the arboreal “residence” without an Oregon contractor’s license. A spokesperson for Nelson’s company says they are licensed, bonded, and insured in the state of Washington, and had supplemental workers’ comp insurance for the project.
Nonetheless, if you are going to build in Oregon, take a lesson from the Master… be sure you have the right licenses, bonds, and construction insurance in place.
#2. Contractor Accused of Stealing Insurance Money from Seniors in Rhode Island
Some guys just can’t be trusted. A senior couple hired a contractor to help with home repairs, and got a bit more than they contracted for. The “smooth-talking” charlatan tore apart the elderly couple’s home, but failed to make any improvements. When an insurance check arrived in the mail, the contractor is accused of taking the money and running. A local investigative news team discovered this wasn’t his first attempt at criminal behavior either; five other victims have filed complaints about work that was negligent or never completed. They also found that the crooked contractor’s registration had been suspended earlier in the year by the contractor’s license board, something the victims apparently hadn’t been aware of.
#3: Contractor Gets Busted Allegedly Damaging Roof to Get the Repair
He may have thought he was getting high marks for creativity, but his criminal behavior only led to him being arrested, instead. A contractor in GA allegedly damaged the roof of a home “significantly,” and then solicited the homeowners to do the repairs on the damage he caused.
The scheme would have ended with insurance fraud, but the contractor was caught in his own trap first. What he didn’t realize was the home has been inspected three days earlier, and no damage was found at that time. His plan to scam the homeowners and the insurance company was an epic fail that lead him straight into a pair of handcuffs.
#4: Unregistered Roofer Faces Felony Jail Time for Failing to Provide Workers’ Comp
When your state requires workers’ compensation insurance, failing to provide it can mean more than just stiff fines. A Washington state roofing contractor who failed to provide workers’ comp for his employees had his contractor’s registration suspended. However, he continued to work for at least two customers after the suspension. When the contractor got caught, his penalty included jail time in addition to fines.
#5: Restoration Company Scams for Seasonal Storm Repairs
More than forty residential customers received insurance money for home repairs after seasonal storms damaged their homes in Indiana. Each contracted with a restoration company who fraudulently collected more than a quarter of a million dollars of insurance funds, but never completed a single repair. The contractor is now in jail, and facing a lawsuit filed by the Indiana Attorney General.
#6: Contractor Using Phony Bonds to Gain Contracts Faces Felonies and Fines
The owner of several construction companies was using forged documents, including security bonds, to win government contracts worth millions. Investigators say the contractor allegedly used the funds to buy jetskis, snowmobiles, and luxury vehicles. A lavish life of crime didn’t pay off for this contractor, who is being indicted on five counts of wire fraud, four counts of transactional money laundering, two counts of mail fraud, and two counts of concealment of bankruptcy assets.
#7: California Contractor Pleads Guilty To Workers’ Comp Fraud
Workers’ comp insurance is required by law in California, where one roofing contractor attempted to save some cash by misclassifying employees and under-reporting his payroll to lower his premium rates. The scheme caught up to the Marin county contractor, who pled guilty to workers’ compensation insurance premium fraud, unemployment insurance fraud, and filing false income tax returns for the nearly $1.4 million in combined losses.
#8: Misclassification Scheme Misfires for Contractor
A Pennsylvania drywall contractor has been busted for allegedly cooking up a scheme to avoid paying taxes and workers’ comp insurance premiums. In an elaborate attempt to save a few bucks on worker’s comp, the contractor paid out nearly $900,000 to middlemen who then paid off-the-books cash to his employees. The under-the-table scam backfired, and the contractor is now facing charges from the District Attorney.
#9: California Contractor Found Guilty of Workers’ Comp Fraud and Misclassification
A contractor in Vacaville, California learned the hard way that calling your employee an “independent contractor” doesn’t necessarily make them one. When the electrical contractor took an unlicensed worker out to do a job, he found himself facing charges of workers’ compensation fraud for not having insurance for his “employee.”
#10: Man Sentenced in $100 Million Fraudulent Construction Surety Bond Scheme
A Florida man operating a multi-million dollar surety bond fraud scheme was sentenced to prison, but not before his efforts led to construction delays and financial losses all across the country for legitimate construction businesses. Construction firms who unwittingly purchased the fraudulent bonds lost hundreds of thousands of dollars in premiums paid to the scheming surety scammer.
From small scale schemes to big time fraud, to a case of mistaken license requirements, construction insurance fails lit up our newsfeed this past year. Luckily, each story can teach a valuable lesson for the rest of us. Keep up to date on licenses, bonds, and insurance requirements, and always verify that companies providing insurance and bonds to you are legitimate.