An upcoming hearing in Louisiana illustrates why door and window contractors must make sure their bonding and insurance coverage is adequate before beginning a job.

The Pittsburgh Post-Gazette reports that the Louisiana State Licensing Board for Contractors has subpoenaed officials from 84 Lumber to appear in Baton Rouge for a hearing on Aug. 20 about the building supply company’s handling of federal contracts to rebuild in the wake of Hurricane Katrina. The licensing board believes 84 Lumber may not have provided bonding and insurance coverage for two minority contractors, according to the newspaper.

“The company had representatives go to the Louisiana NAACP to recruit minority contractors to participate in a minority contractor’s program,” New Orleans attorney La Koshia Roberts told the newspaper. Roberts represents Addie Mills and Maurice Hurst, who claim their companies were ruined by their dealings with 84 Lumber on three reconstruction projects following Hurricane Katrina.

“It was presented in a way that the contractors would be comfortable with 84 assisting them in obtaining bonds,” Roberts said. “But 84 Lumber ultimately attempted to take over the minority contractors’ business.”

Mills claims 84 Lumber had registered the bonds in its own name, not her company’s, and charged her more for the bonds than it paid for them. Hurst claims the company pulled the bonds when he refused to have the state pay 84 Lumber directly.

License and permit bonds are usually required for door and window installers when they apply for building permits or a contractor’s license, according to Insureon, a small-business insurance agency. They’re a contract with an insurance company and a government agency, such as a state licensing board.

The contract says you’ll buy a bond from the insurance company, adhere to the conditions of your permit or licensing application, and follow all regulations. If you don’t, the insurance company may have to pay the state or local government the amount of the bond you purchased.

License bonds are generally renewed annually. They may be required for a contractor to keep his or her license. A permit bond is one that’s required for a specific building permit. It guarantees that if there is a problem with the job, your insurance company may have to step in and cover any damages.

The requirements for license or permit bonds vary by state and municipality, according to Insureon. They also vary in costs.

Some permits and licenses also require indemnity guarantees to be built into the bond.

Leave a Reply

Your email address will not be published. Required fields are marked *