Iowa Attorney General Sues Contractor For Fraud

The Des Moines Register  has reported that the Iowa Attorney General’s office has sued an Iowa contractor for fraud.  Here is a link to the story:

http://www.desmoinesregister.com/article/20110603/NEWS/110603012/Register-exclusive-Iowa-AG-sues-central-Iowa-contractor-for-fraud

The target of the suit is IQ Renovation.  The attorney general seeks an injunction preventing IQ Renovation and its owners “from soliciting any more contracting and renovation business through advertising, telemarketing, and trade shows.”

According to the Register “the company’s fliers promise that its work is ‘100 percent guaranteed’ and licensed and insured.  Customers are typically required to sign purchase agreements and make down payments of 50 to 100 percent.”

This lawsuit highlights a number of issues that I’ve encountered in individual construction defect lawsuits.  The “100% guarantee” is absolutely meaningless because, like any other construction defect case, you still have to prove at your expense that the guarantee was not met.  And, as I’ve noted in other posts, Iowa law already imposes a “guarantee” in the form of the implied warranty of workmanship.  So the 100% guarantee is simply marketing fluff designed to get your attention.

The promise of insurance is also a problem.  First, even if a contractor has insurance and submits your claim to its insurer, the insurance company, not the contractor, has the sole authority to decide whether the claim will be covered and in what amount.  The insurance company could deny coverage or contest liability or the amount of your claim.   Second, many contractors lie about having insurance coverage.  If the contractor does not have insurance coverage despite a promise to the contrary, there’s really not much you can do besides sue the contractor for even more money and hope that it can pay any judgment you get.

The same is true for false claims of licensing.   That doesn’t add anything to your legal claims — you’re still stuck suing the contractor for defective work.  The lack of a license may add to your claims of defective construction, but you can’t really get any extra money for the false licensing representation, although that claim, or any false claims about insurance, could bring you under the private consumer fraud statute, which would at least allow you to recover attorney fees, assuming your contractor has the ability to pay them.

The bottom line is that it’s best to do everything you can to protect yourself in advance.  Research any contractor you are considering hiring.  Check the attorney generals office, the Better Business Bureau, and Iowa Courts Online to see whether the contractor or any of its owners have had any problems.  Check the federal courts’ online resources to see if the company or any of its owners have ever declared bankruptcy.  Check the Iowa Secretary of State’s corporate information web page to make sure that the contractor is a legitimate, licensed business and not some HyVee bulletin board here today, gone tomorrow outfit.  Find out if any of the contractor’s owners has a serious criminal record.  Honestly, if you get a hit on any of that you should look elsewhere for your contracting needs.

If it’s a small contractor, you should inquire about the owner’s direct involvement and supervision.  You should also demand to see proof to back up any claims of insurance or licensing.

Don’t pay too much up front — leaving little or nothing for the contractor to come back for only ensures that you will be the last project on the contractor’s to-do list and the job won’t be done very well.  What does the contractor care since it already has your money?   If the contractor insists on too much in advance, remind it that, unlike you, it is protected if you fail on your end of the deal because it can always file a mechanic’s lien and force the sale of your house if you don’t pay.  If the contractor still insists on more than 50% up front, call someone else.

I hope that this information helps and enables you to protect yourself before problems arise.  But if you do have a construction defect law issue with a contractor, feel free to give me a call and I’ll see if I can give you a hand.

 

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