Calif. Hands Down Convictionsfor Violating Contractor Licensing Laws
Fraud Roundup
Ventura County, Calif., District Attorney Gregory Totten reported that the office’s Consumer and Environmental Protection Division recently obtained two convictions for violation of the California Contractors State Licensing Laws.
On Dec. 13, 2005, Manuel Francisco Galan was placed on probation and ordered to pay $161,578 in restitution to seven Ventura County families. Galan was also ordered to pay $19,589 in fines and fees, and to serve 30 days in the county jail.
The charges and conviction were based on investigations conducted by the California Contractors State Licensing Board (CSLB) in 2003 and 2004.
The complaint alleged that Galan had undertaken eight home improvement jobs without possessing a contractor’s license authorizing him to do so. All contractors doing business in California, on jobs costing $500 or more, are required to be licensed by the CSLB. Each violation of the licensing law is a misdemeanor, subject to a sentence of jail, fines, and restitution.
The CSLB’s investigation reportedly revealed numerous instances of Galan demanding excessive down payments from the homeowners; performing work below industry standards; performing work without obtaining required county permits, bonds or insurance; and of ultimately abandoning jobs before the work had been completed.
In the second case, on Dec. 20, 2005, the court ordered Ram to pay $18,000 in restitution to a Ventura County family. Gaon was also ordered to serve 60 days in the county jail, to be suspended for one year, pending full payment of restitution.
An investigation reportedly revealed the contractor had used a license not belonging to him; had performed contracting work well below industry standards; had done construction without the required county permits, bond or insurance; and had abandoned the job without completing it.
Nevada Court Cancels Construction
Defect Award
A multimillion-dollar construction defects award was erased by a unanimous Nevada Supreme Court decision that held the case had been improperly given class-action status by a lower court judge. The high court ruling favors Beazer Homes Holding Corp. and went against homeowners who sued the company after finding cracks in foundations, walls and driveways at their North Las Vegas properties allegedly caused by expansive soil conditions.
During arguments before the Supreme Court, a Beazer attorney said a defect lawsuit involving The Villages at Craig Ranch homes should never have been made a class-action case, and that a $7.3 million jury verdict should be overturned. With interest, costs and attorneys fees, the total value of the case is about $15.6 million.
Lawyers for 200 Craig Ranch Village homeowners said class-action status was appropriate because the damages suffered were predominantly related to concrete pads that did not conform to the subdivision’s soil conditions. The homeowners had sought nearly $24 million.
The case involving Atlanta-based Beazer, which built the homes between 1994 and 1999, resulted in one of the longest and largest construction defect trials in Nevada history. The trial that began in 2002 lasted three months.
The Supreme Court ruling calls for new trials on all issues in the case. Beazer attorneys have said a retrial of each case would be best for both the court system and the individuals with claims.
In the trial that ended in February 2003, a jury cleared Beazer of any violations of implied or expressed warranties and found contributing negligence by both the class-action members and Beazer – 7 percent on the part of the homeowners and 93 percent by the builder.
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IRC: Insurance Fraud, Buildup Add Some $400M to Calif. Auto Injury
A recent Insurance Research Council (IRC) study of auto injury insurance claims puts a hefty price tag on the cost of claim abuse in California.
In 2002, between $319 million and $432 million in bodily injury liability (BI) payments in the state were attributable to claim fraud and buildup, the IRC estimates. Those amounts represent approximately 11 to 15 percent of all California BI payments that year.
The appearance of fraud, or the misrepresentation of key facts of claims, was found in almost one in 10 paid California BI claims (9 percent). The appearance of buildup was more common and was found in more than one in five paid California BI claims (22 percent). “Buildup” refers to the inflation of otherwise legitimate auto injury claims. Buildup can occur through the exaggeration of injuries, the application of excessive medical treatment, or the intentional inflation of lost wages.
While the report shows that claim abuse in California is a significant financial problem, the percentage of claim fraud found among California BI claims was comparable to the percentage found nationwide. The prevalence of BI claim buildup in the state was four percentage points higher than the corresponding national percentage.
Los Angeles demonstrated higher percentages of BI claim fraud and buildup: increased claim abuse is typical in many large metropolitan areas.
More than one in 10 BI claims in Los Angeles (12 percent) contained the appearance of fraud, compared to 8 percent in the rest of the state. Also, nearly three in 10 BI claims in Los Angeles (29 percent) contained the appearance of buildup, compared to 19 percent in the rest of the state. The percentage of BI claim buildup in Los Angeles was 7 percentage points higher than the percentage found among all metropolitan areas countrywide.
The recently released IRC study, “Fraud and Buildup in California Auto Injury Insurance Claims,” examined detailed claim information from 72,354 claims that closed with payment in 2002.
Thirty-two U.S. insurers, representing 58 percent of the 2002 private passenger auto insurance market, participated in the study. The number of closed California BI claims in the sample totaled 4,034. The study asked the insurers to indicate whether any elements of fraud or buildup appeared to be present in the claims.
Because the study did not include claims closed without payment, the results do not reflect claims that were denied payment because of clear evidence of claim abuse.