Information on Ohio's Consumer Laws from Attorney Daniel Myers, Myers Law, LLC, not legal advice
In its September 8, 2016 decision, a unanimous Eighth District Court of Appeals panel handed Ohio consumers a big victory. The Court held for the first time that contractor bonds are intended to protect homeowners and consumers from harm. This may seem like common sense to consumers (that’s why you protect yourself by hiring a licensed, bonded, and insured contractor, right?), but the courts had never actually decided whether homeowners could make claims directly against a contractor’s bond. The opinion of the Court can be found here.
In this case, Western Surety Company (aka CNA Surety) argued that homeowners and consumers are not allowed to make bond claims against their contractor’s bonds because the bonds only benefit the cities, not consumers. Western Surety had been able to successfully obtain judgments in its favor on that very issue from many trial courts on that very issue.
Attorney Daniel Myers represented a Cleveland consumer and argued that contractor bonds are meant to protect consumers from harm when their contractors perform substandard work. Although the bond surety won in the trial court on this issue, the appellate court sided with consumers, and reversed the decision of the lower court.
“This is a significant decision protecting consumers.” Myers said. “Had the decision gone the other way, homeowners would find themselves in a hopeless situation when their contractor botches the job.”
According to Myers, “a lot of the contractors that end up being sued operate on a shoestring–they have a truck and some tools. When they perform shoddy work, or they damage someone’s property, they can’t afford to pay for the damages out-of-pocket.” Occasionally, the contractor’s insurance will cover some of the damages. However, under a 2012 Ohio Supreme Court decision, insurance companies may not be required to pay to correct all shoddy or defective work. “If homeowners were not allowed to make claims against a contractor’s bond, and their contractor was like 99% of residential contractors, homeowners would be stuck paying the thousands or tens of thousand of dollars in costs caused by the shoddy work under threat of criminal prosecution and jail time,” said Myers. Sometimes, shoddy work rises to the level of city maintenance code violations, and homeowners can be criminally prosecuted by their city if they fail to maintain their property in a safe manner.
Under today’s decision, homeowners can now turn to the contractor’s bond to seek compensation for repair costs and harm caused to them by unscrupulous contractors. The court noted that when a bond is payable or for the use of “any person,” homeowners and consumers are included in the group of intended third-party beneficiaries of these bonds, and therefore they are allowed to make their own claims against the bond. “Consumers no longer have to wait for cities to make a decision to go after the bond–a decision cities sometimes never make. Many cities are simply too busy to seek this compensation for their residents, leaving residents to pay these substantial costs,” according to Myers.
If you have had a bad experience with a contractor or tried unsuccessfully to make a claim against the contractor’s bond, feel free to share your story with others here. For more information about this decision or how it impacts your clients or your rights, contact Dan Myers.