New Jersey Contractor Registration Includes Insurance Requirement

The New Jersey Senate has given approval to the “Contractor Registration Act,” (A-2052) providing statewide registration of home improvement contractors through the Department of Community Affairs. The law, which also would require contractors to provide proof of general liability insurance of at least $500,000 per occurrence, would preempt any municipal ordinance or regulation for licensing contractors.

The new required registration would enable people to call the Consumer Affairs Division and find out whether a contractor is registered and whether complaints had been filed against that person. The bill quickly made its way through the Assembly last month and now sits on the desk of New Jersey Gov. James E. McGreevey, who is expected to sign it.

The bill garnered extended support as confirmed by Patrick O’Keefe, executive vice president and chief executive officer of the New Jersey Builders Association, and Jeanne Heisler, president of the Ronan Agency and government affairs representative for the Independent Insurance Agents & Brokers of New Jersey. The support was driven by the high number of consumer complaints regarding unfinished or substandard work by contractors.

Despite the insurance requirement, agents do not expect a boom in sales. “From an insurance standpoint, I really don’t see a major negative or a positive,” Heisler said. “We don’t see it as a major positive in the sense that insurance agents who write small commercial liability already write for contactors. And we also don’t see it as a negative in the sense that it is going to drastically tighten the market. It’s not a mandatory take all comers; companies can still use their underwriting to determine whether or not they want to write the risk.”

She added, “If the person can’t secure coverage in the voluntary market, there is an excess and surplus lines market that will write contractors liability. We really don’t see this bill having much affect at all on the marketplace because we feel that most people who are going to be in this business and have been in this business already purchase liability insurance. The New Jersey market is tough right now, but not impossible. Certainly someone who is a legitimate contractor will be able to get liability insurance.”

New Jersey Assemblyman Paul A. Sarlo, Woodbrige-D, along with Senator Wayne Bryant, D-Camden, introduced the bill on Jan. 13. It emerged from committee on March 1 and passed on March 29.
“It’s a consumer protection bill is what it is,” Heisler said. “What this bill is trying to resolve is the problem of home improvement contractors who, among other things, take deposits for work and never return to complete it.

“If there is an issue that comes up, they have someone to go to with a valid address and phone number which can be used to contact the person responsible. People often complain to the Better Business Bureau or the Department of Consumer Affairs but many times are unable to find the perpetrator.”

The addition of the new registration process for contractors seems to have satisfied all parties involved—contractors, legislators, consumers and the insurance industry.

“Everyone got basically what they needed,” said, Neil Cohen, a Union Democrat who has introduced versions of the bill since he was first elected to the Assembly in 1990.

“It’s amazing, … it took just three months to get through both houses in the Legislature,” Sarlo said, according to the Website, HousingZone.com. “I feel good about it, there are a lot of con artists out there preying on people investing a small fortune on remodeling.”

Complaints against contractors have been growing over the last several years. The state Division of Consumer Affairs received around 2,000 complaints in 2001, around 2,100 in 2002, and under 2,600 last year.