A contractor prepares a home improvement contract for a $22,000 room addition. Under California law, which of the following disclosures regarding insurance must appear in the contract?
- AA statement listing the contractor's health insurance provider for all employees working on the project
- BA statement disclosing whether the contractor carries commercial general liability insurance and, if so, the policy information
- CA statement waiving the homeowner's right to file a claim against the contractor's insurance carrier
- DA statement guaranteeing that the homeowner's property will be fully covered under the contractor's personal auto insurance policy
Show answer & explanationAnswer & explanation
Correct answer: B. A statement disclosing whether the contractor carries commercial general liability insurance and, if so, the policy information
California law (Business and Professions Code Section 7159) requires that home improvement contracts disclose whether the contractor carries commercial general liability (CGL) insurance and, if so, provide the relevant policy information; if not, the contract must state that fact clearly. This protects consumers by informing them of the contractor's insurance coverage before work begins.
Why the other options are wrong
- A. Employee health insurance information is not a required contract disclosure.
- C. Contracts cannot waive a homeowner's legal rights, including rights related to insurance claims.
- D. Personal auto insurance is unrelated and not a required disclosure for home improvement contracts.
CGL Insurance Disclosure
Home improvement contracts must state whether the contractor carries commercial general liability insurance, and if so, provide policy details for the homeowner's reference.
- Required under Business and Professions Code Section 7159
- Must state insurance carrier and policy number if coverage exists
- If no CGL insurance, contract must clearly disclose that fact
Memory trick: No shield, no secret — the contract must show the insurance ticket.