Edward H. Cross is a California lawyer who has dedicated his 21-year legal career to fighting for the rights of the restoration industry — along the way, recovering millions of dollars for California contractors. He contributed to the IICRC S500 and S520 standards and earned certifications in water damage restoration and indoor air quality consulting. He has written hundreds of restoration contracts, and has the industry’s only online “legal store” (edcross.com/contracts) with standardized restoration packages.
1. WHAT ARE THE KEY LEGAL AND RISK-MANAGEMENT ISSUES IMPACTING RESTORATION CONTRACTORS TODAY?
In some states, including California, removal of carpet, baseboards and cabinetry for more than $500 requires a contractor’s license. All workers doing work that requires a license must be covered by workers’ compensation and either be licensed, or be a W2 employee of a licensed contractor. Failure to comply results in automatic suspension of the license and forfeiture of compensation over $500 for labor and material furnished during the suspension. The rule applies regardless of the inequities.
2. DO YOU HAVE ANY ADVICE FOR HOW RESTORERS CAN BEST WORK WITH MORTGAGE COMPANIES?
Find out if the law in your jurisdiction prohibits mortgage companies from withholding funds from contractors, like it does in California. They cannot apply the insurance proceeds to a balance due on the loan, even if it is in arrears. Record a mechanic’s lien, fill out their forms, facilitate inspections and pester them until they pay. If that doesn’t work, have your lawyer notify them that you can and will take legal action against the mortgage company to disgorge those funds. For more, see “Untangling the Red Tape,” article (p. 20) in the March/April 2011 issue of C&R.
3. FROM YOUR UNIQUE PERSPECTIVE, CAN YOU COMMENT ON THE RELATIONSHIP BETWEEN INSURERS AND RESTORERS AND WHAT MAY NEED TO HAPPEN TO NARROW THIS DIVIDE?
David has to kill Goliath. Restorers will continue to be abused by the insurance industry until [restorers] get some laws passed in their favor, which is impossible without a significant lobbying presence.
4. WHAT ARE SOME LEGAL TRENDS RESTORATION CONTRACTORS NEED TO KEEP ON THEIR RADAR?
More customers are skipping town with insurance proceeds. The restorer must formally tender the assignment of benefits to the insurer to improve the chance of getting named on the check. Watch out for more stringent contractor license laws, special license requirements for remediators and more disciplinary actions against licenses. Sting operations are underway to catch and criminally prosecute unlicensed contractors. Be mindful about the rules in your jurisdiction about payment of referral fees. California says that a restorer who gives a gift or pays a referral fee to a plumber has paid an illegal “kickback,” which is a crime. It’s also a crime that this is the law, but without a lobbyist, it will remain. I know of one restorer who had to pay hundreds of thousands in fines.
5. WHAT IS UNIQUE ABOUT PRACTICING LAW WITHIN THE RESTORATION SPACE?
I have the honor of representing the hardworking men and women who keep California buildings clean and habitable, and to help them get paid for restoring normalcy after people have suffered great loss.