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CALIFORNIA COURT OF APPEAL

When a contractor’s  workers’ compensation coverage is cancelled because the contractor refuses to pay outstanding premiums due, is this due to circumstances beyond its control? 

Business & Professions Code

American Building Innovations v. Balfour Beatty Construction (2024) _ Cal.App.5th _ , 2024 WL 4020024: The Court of Appeal affirmed the trial court’s decision, following a bench trial on one of defendant’s affirmative defenses, concluding that plaintiff was not “a duly licensed contractor at all times during the performance” and therefore could not bring or maintain this action or recover compensation for its work. Plaintiff had workers compensation coverage when it began working on a project, but the carrier cancelled the policy when plaintiff refused to pay outstanding premiums charged on a prior policy. Plaintiff’s contractor’s license was suspended mid-project, but plaintiff continued performing its work. Plaintiff later sued for its work on the project and settled its old premium dispute with its workers’ compensation insurer and had the canceled policy retroactively reinstated as part of the settlement. Plaintiff then applied to the Contractors’ State License Board (the Board) for retroactive reinstatement of its contractor’s license, asserting that its failure to file a certificate of workers’ compensation coverage had been due to circumstances beyond its control, in that the policy had been canceled unbeknownst to plaintiff. (Bus. & Prof. Code, 7125.1(b)). The Board accepted plaintiff’s representation and retroactively reinstated its contractor’s license under section 7125.1. The trial court properly determined that plaintiff was not duly licensed at all times during the performance of its contracting work and could not bring or maintain an action to collect compensation for that work. (Bus. & Prof. Code, 7031(a)). The lapse in coverage was not beyond plaintiff’s control. The policy cancellation occurred because plaintiff chose not to pay billed insurance premiums. Plaintiff learned of the policy cancellation days after it took effect, yet plaintiff did not procure replacement coverage until years later when it settled the premium dispute with its insurer. The insurer’s retroactive reinstatement of the policy following that settlement was essentially meaningless because it occurred long after the statute of limitations ran on any workers’ compensation claims, rendering the coverage illusory. (C.A. 4th, September 3, 2024.)