InvestigatorsMatter for Mallory


Bill aims to protect homeowners by raising contractor liability insurance limit

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Posted at 6:00 AM, Mar 12, 2024
and last updated 2024-03-12 07:37:30-04

BALTIMORE — Home improvements are expensive, but the bills could cost even more if the contractor makes a mistake. And we’ve seen this happen many times before.

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Not only are homeowners left in bad spots, but if the contractor is unlicensed, it can be very difficult to recover their money.

“If you work with someone that's not licensed, your only recourse is to get a very good attorney, and make sure you have a physical address of this alleged contractor,” said Steve Klitsch, a home improvement contractor whose been in the industry since 1979.

Klitsch also teaches a course on obtaining your home improvement license and acts as an expert witness in legal disputes

“The risk is that we're in your home and there could be something that we do that may not be exactly right. We may be negligent. And therefore, we need liability insurance,” said Klitsch.

State law currently requires a minimum of $50,000 in liability insurance. Klitsch is now working with lawmakers on SB 808/HB 738 to raise the minimum limit to atleast $500,000 in liability insurance.

While most insurance companies won’t provide policies below $300,000, Klitsch believes more should be required with the median price of homes in Maryland approaching $400,000 and an average of more than $550,000, according to data.

“I think many of my peers have that million-dollar policy. My concern is the few that do not. And if there's an infraction in your home, then they're responsible. Do they have enough insurance to cover the cost to rebuild and fix what they may have been negligent in causing damage?” Klitsch asked.

Homeowners may have other options like filing a claim with the Maryland Home Improvement Commission Guaranty Fund, however, it can take 12 to 18 months to investigate a claim and receive a judgment. And the maximum recovery is $30,000 per claimant. If there are multiple complaints, recovery is capped at $100,000 per contractor.

“Even if he's doing a stone patio and he's got to do some excavation, what if he hits the gas pipe that's buried under the ground? There's liability there. Big liability, especially with a gas pipe,” Klitsch said.

He added that many of his peers are responsible, knowledgeable, and have many happy customers , but consumers need to be prepared for the worst. Even if you know the contractor and trust them, make sure you're protected and understand your rights.

“The current home improvement law says that I can only ask for one-third of the deposit to begin the work,” said Klitsch. “If a contractor asks you for half or full payment or if you pay me more now, I can double up my crew tomorrow and show up and start really getting into this thing, that's not appropriate. It's not legal, and it's not in your best interest.”

The bill has made it through the House and is now in the Senate. It only applies to licensed contractors.

It's easy to check on the state's website by looking up the individual's name or business. Click here to do a contractor search. And click here for additional information on how to file a complaint with the Maryland Home Improvement Commission Guaranty Fund.