CSK Construction Division -- January 2012

CSK Construction Division - January 2012 Legal Spotlight

Happy New Year!  This Month's Construction Law Email Blast will focus on recent changes to Florida's licensure requirements applicable to mold assessors and remediators and contractors in general.

FLORIDA LEGISLATURE CRACKS DOWN ON UNLICENSED

PRACTICE OF MOLD ASSESSORS AND MOLD REMEDIATORS

Starting on July 1, 2011, the Florida Legislature began the full enforcement of the unlicensed practice of mold assessors and mold remediators.  This means that anyone holding themselves out to be a mold assessor or mold remediator needs to be licensed through the Department of Business and Professional Regulation (“DBPR”) before he or she can engage in this type of business practice.  As set forth in Chapter 468 of the Florida Statutes, the legislature intends to prevent damage to real and personal property to avert economic injury to residents in Florida, and to regulate persons and companies that hold themselves out to the public as qualified to perform mold-related services.  See § 468.84, Florida Statutes.

The requirements mandated by the DBPR for licensure under this Statute include, but are not limited to: (i) applicants passing a licensing examination; (ii) applicants producing documented training in water, mold, and respiratory protection; (iii) applicants submitting proof of continuing education requirements for application renewal, and (iv) applicants maintaining insurance requirements for both mold assessors and mold remediators.  A mold assessor is required maintain general liability and errors and omissions for both preliminary and post-remediation mold assessment insurance coverage of at least $1 million, and mold remediators are required to maintain a general liability insurance policy in an amount not less than $1 million, that includes specific coverage for mold-related claims.  See § 468.8421, Florida Statutes.

Unlike § 489.128, Florida Statutes, which provides that contracts entered into on or after October 1, 1990 by unlicensed contractors are unenforceable in law or in equity, this statute does not specifically preclude unlicensed assessors and remediators from recovering in law or in equity.  However, the statute does create a basis for a common law defense against unlicensed mold assessors and remediators. Because the statute subjects unlicensed mold assessors and remediators to criminal penalties, one can argue that the unlicensed assessor or remediator is engaged in illegal activity under § 468.8419(3), Florida Statutes, and, therefore, should be denied any legal or equitable relief.

The licensing statute and common law defense are important to defense counsel and liability carriers for at least two reasons.  First, in underwriting, it is important to verify the licensure of the potential insured to minimize the insured risk.  Though the illegal activity of the unlicensed individual may not be covered, the negligence of the business entity in allowing the unlicensed individual to assess or remediate may be covered.

Second, for counsel defending an assessor or remediator, it is equally important to verify the insured’s licensure or become aware early in the representation of the insured’s unlicensed status and the implications for the defense.  Note that an unlicensed contractor may be barred from asserting legal or equitable defenses and pass through claims, in addition to being unable to recover money due for services rendered or work performed.

JUDICIAL AND LEGISLATIVE

LENIENCY ON UNLICENSED CONTRACTORS

In two recent decisions, Florida’s Third District Court of Appeal addressed the unlicensed contracting defense provided by Florida Statute Section 489.128(1) and the common law doctrine that one engaged in illegal activity may not benefit from it.

Section 489.128(1) generally provides that unlicensed contractors are precluded from recovery at law or in equity.  Prior to a 2009 amendment, the statute provided that lack of a state or local license precluded recovery.

Effective June 16, 2009, the Legislature amended the statute to remove the lack of a local license as a basis for the defense.  The Legislature specifically intended that the amendment apply retroactively to contracts entered into on or after October 1, 2000 and to “all actions pending when this act becomes a law.” See Ch. 2009–195.  In essence, the amendment means that the subcontractor’s lack of a local license no longer renders its subcontract unenforceable.

In MGM Construction Services Corp. v. Travelers Casualty & Surety Co. of America, et al., 57 So. 3d 884 (Fla. 3d. DCA 2010), the Third District Court of Appeal addressed the effect of the lack of a local license on a subcontractor’s ability to recover against a general contractor and its payment bond surety. The action was pending when § 489.128(1) was amended, eliminating the statutory defense. However, the subcontractor was also required by local ordinance to maintain a local license, and it did not.

At summary judgment, the contractor, Maleta Construction Co., its surety, Travelers Casualty & Surety Co. of America, and the University of Miami argued that the court must apply Florida Statutes Section 489.128(1)(a) (2008), which provided, in pertinent part, “[f]or purposes of this section, if no state or local license is required for the scope of work to be performed under the contract, the individual performing that work shall not be considered unlicensed.”

In opposition, the subcontractor relied upon the recent amendment to Section 489.128(1)(a) in which the last sentence was amended to remove the “or local license” language.  Id at 886.  Despite the amendment, the trial court found the subcontracts were unlawful, pursuant to by the Miami-Dade County Code of Ordinances (“MDCO”), and therefore unenforceable.

On appeal, the Third District Court of Appeal held that the trial court erred in summarily determining that the subcontract was unenforceable based solely on the lack of a local license.  Unlike section 489.128, the ordinance was silent about the effect of a licensure violation on the enforceability of the underlying contract, though it did provide for civil, administrative, and criminal penalties for unlicensed contracting.

The Third District Court of Appeal summarily held that the amendment to § 489.128 prevented the defendants from relying on that statute.  With regard to the local licensure defense, the appellate court remanded and directed the trial court to consider, at a minimum, the following relevant and material factors to determine whether the subcontract was unenforceable: (i) whether the nature of the contracting parties’ relationship made the need to protect the public from shoddy workmanship; (ii) the extent to which the subcontractor’s violation of the MDCO was serious and deliberate; (iii) the quality of the work performed by the subcontractor; (iv) whether the Contractor knew the subcontractor was unlicensed; and (v) whether and to what extent injustice would result in preventing the subcontractor from any recovery.

The decision is a departure from the general doctrine that one who is required to have a license may not benefit from the illegal act of engaging in work without the license.  Notwithstanding the subcontractor’s violation of a local law, the appellate court held that subcontract was not automatically unenforceable.

In Austin Building Company v. Rago, Ltd., 63 So. 3d 31 (Fla. 3d DCA 2011), the general contractor’s assignee terminated a subcontractor, the subcontractor sued the successor for amounts allegedly owed, and the successor contractor filed a counterclaim for damages arising from subcontractor’s allegedly defective work. On cross motions for summary judgment, the trial court dismissed both claims on the ground that they were unenforceable because the parties were unlicensed contractors under Florida Statutes Section 489.128, and therefore, neither party could enforce the subcontract.  Id at 1.

The Third District Court of Appeal reversed the decisions on both motions for summary judgment finding genuine issues of material fact precluding summary judgment. The Court noted that in order to determine that a contract is unenforceable pursuant to Florida Statutes Section 489.128, the contractor shall be considered unlicensed only if the contractor was unlicensed on the effective dates of the original contract for the work, if stated therein, or, if not stated, the date the last party to the contract executed it, if stated therein.

The Court noted that pursuant to Florida Statutes Section 489.128, the critical dates for determining whether a contractor was unlicensed are 1) the effective date of the original contract, 2) the date the last party to the contract executed it, or 3) the first date upon which the contractor provided services, labor, or materials under the contract.

Further, the Court makes it clear that the language in Florida Statutes Section 489.128, which states in pertinent part, “…if a state license is not required for the scope of work to be performed under the contract, the individual performing that work is not considered unlicensed” does not only apply to “individuals,” rather, the statute applies to business organizations as well. The Court opined that the “statutory scheme of Chapter 489 demonstrates that a business organization’s ability to engage in contracting is inextricably reliant upon the licensure of the qualifying agent, who in turn, must be an individual person.” Austin Bldg. at 36.

In summary, while a subcontract entered into on or after October 1, 2000 by an unlicensed subcontractor may be deemed unenforceable, the Court must consider the relevant factors identified in MGM Construction Services Corp., as well as the pertinent dates identified in Florida Statutes Section 489.128, and further discussed in Austin Bldg. 
For the same reasons discussed in relation to unlicensed mold assessor and remediators, understanding the licensure status of the various participants in a construction dispute is important to an evaluation of the strengths and weaknesses of their liability positions.

·         George R. Truitt, Jr., (george.truitt@csklegal.com; 305-350-5331) or

·         David Salazar (david.salazar@csklegal.com; 305-350-5363)

Partners in Cole, Scott & Kissane, P.A.’s Construction Group.