Burr & Forman

01.12.2015   |   Blog Articles, Business Litigation, Tennessee, Tennessee Business Litigation, Tennessee Consumer Protection Act

Recent Suits Highlight an Unlicensed Contractor’s Enhanced Liability

Contractors in three recent lawsuits face the possibility of increased liability because they performed work without a license. The courts in each case could find the contractors violated the Tennessee Consumer Protection Act simply because they did not have a contractor’s license. As a result, the unlicensed contractors could be liable for triple damages, attorney fees and litigation costs. In Reynar v. Harness[1], Spreng v. Glasgow[2], and Nuck v. Southern Home Impressions, LLC[3], the plaintiffs are property owners who hired the defendant contractors to construct or renovate their homes. In each case the owners sued the contractors for poor or incomplete work. They also claimed the contractors were not licensed as required by Tennessee law.[4] As a general rule, service providers can be liable for negligent work which injures the consumer. For example, a doctor will be liable for medical negligence which injures a patient, an accountant will be liable for accounting negligence which injuries a client, and a contractor will be liable for negligent construction which injures a property owner. Tennessee’s Consumer Protection Act[5] (“TCPA”) gives the consumer an additional claim when the service provider not only performs negligently, but also lies about its services or engages in a “deceptive act or practice” which misleads the consumer.[6] If the service provider violates the TCPA, it can be liable for three times the consumer’s actual damages and the consumer’s attorney fees and litigation expenses.[7] To get those enhanced damages, however, the consumer must prove the service provider engaged in harmful, deceptive conduct.[8] Unlicensed contractors have greater exposure to the TCPA’s enhanced damages than most other service providers because acting in the capacity as a contractor without a license is itself a violation of the TCPA.[9] While most TCPA claims require proof of a misrepresentation or other deceptive act, a contractor may be liable under the TCPA simply for performing home improvements or other construction work without a license. Hence, depending on the facts of each case, the defendant contractors in the three recent lawsuits could be responsible for three times the Plaintiffs’ actual damages and their legal costs simply because they did not have a contractor’s license. In addition to the TCPA’s enhanced damages, unlicensed contractors may also be personally liable to the property owner. In most circumstances, a business owner is shielded from individual liability for acts committed on behalf of the company (corporation, limited liability company, etc.). It is one of the primary reasons individuals form business entities. Under Tennessee law, however, an unlicensed contractor performing work on behalf of his or her company can be personally liable to the property owner for any damages, as if he or she was acting in an individual capacity.[10] Whether a property owner is a business or individual, they should always hire a licensed contractor for construction services. Though a license does not guaranty the work will be perfect, a license shows the contractor has met minimum requirements under state law to qualify for the license and is subject to oversight by the Tennessee Board for Licensing Contractors.[11] Likewise, contractors should never perform work without a license, unless exempted by state law. As the three cases mentioned above show, the liability for not having a license could destroy the contractor’s business.[12] [1] Knox County Circuit Court Docket No. 1-709-14. [2] Knox County Chancery Court Docket No. 188528-1. [3] Davidson County Chancery Court Docket No. 14-1738-IV. [4] See T.C.A. § 62-6-101, et seq. [5] T.C.A. § 47-18-101, et seq. [6] T.C.A. § § 47-18-104(b) and 109. [7] T.C.A. § § 47-18-109(a)(3)-(4) and (e)(1). [8] See, e.g., TPJI § 11.45. [9] See T.C.A. § 62-6-136(b). [10] T.C.A. § 62-6-136(c). [11] See T.C.A. § § 62-6-103 and 104, and http://www.tn.gov/regboards/contractors/ [12] In addition to enhanced damages under the TCPA and individual liability, unlicensed contractors cannot recover damages from a property owner, except actual documented expenses that can be shown by clear and convincing proof. Unlicensed contractors also lose the ability to enforce payment from the property owner through a lien on the property. See T.C.A. § § 62-6-103(5)(b)-(c).

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