Contractors Must Be Registered, Bonded, and Insured

In Washington, construction contractors must be registered with the state’s Department of Labor and Industries. As part of the registration requirements, contractors must have a general liability insurance policy in the amount of $200,000 in public liability and $50,000 in property damage, and a $250,000 combined single limit. Contractors must also obtain a bond that could be used to pay out any claims against the contractor. General contractors must post a bond of $12,000, while specialty contractors must post a bond of $6,000. The requirements are spelled out in Washington’s contractor registration statute, chapter 18.27 RCW.

There are penalties if a contractor is not registered. Advertising, bidding, or working as a contractor without being properly registered is a gross misdemeanor crime that could be prosecuted. The state Department of Labor and Industries could also fine and penalize unregistered contractors.

There are other ramifications for not being properly registered as well. Pursuant to RCW 18.27.080, a contractor cannot bring a lawsuit against a customer to collect amounts owed for the contractor’s work unless the contractor can prove that it was validly registered at the time it contracted for performance of the work. This includes maintaining a valid bond. A Washington Court of Appeals case in February 2021 ruled that because the contractor’s bond had lapsed at the time it contracted and performed the work, its registration was automatically suspended. The Department of Labor and Industries did not need to take any affirmative actions to suspend the contractor’s registration once the bond expired. Thus, as soon as the bond expired, the contractor was automatically not properly registered and could not maintain a lawsuit against a customer that owed it money for work performed. Abacus Fine Carpentry, LLC v. Wilson, 16 Wn. App. 2d 112, 480 P.3d 433, 2021 Wash. App. LEXIS 238 (Wash. Ct. App. Div. 1, Feb. 8, 2021). The ruling in the case would also apply if a contractor’s insurance expires, is canceled, or is revoked, which also automatically suspends a contractor’s registration.

This case is a good reminder for construction contractors in Washington to make sure your registration is up-to-date, accurate, and valid, and that you always maintain your bond and insurance. If you let your bond or insurance expire or get canceled, you may not be able to collect amounts owed from clients with whom you have contracted for work.