Many times I hear from people who want to “save money” and serve as their own “owner-builder” under the exemption to the California Contractor’s Licensing law, which generally requires that any “construction” work over $500 to be performed by a licensed California contractor in the absence of an exemption.  (Bus. & Prof. Code section 7048).  I always remind them of the old adage “penny-wise and pound-foolish,” and suggest that they review the risks, including those “oh so helpful” resources on the Department of Consumer Affairs webpage for the Contractors State License Board, such as Owner-Builder Overview and Owner-Builder Risks.

Well, now I have yet another tale to tell about the “what-ifs” in such a situation as found in the recently published decision Regalado v. Callaghan, No. D069647 (Cal. Ct. App. Sept. 22, 2016).  Callaghan, who is a licensed concrete subcontractor, decided to act as his own “owner-builder” when building his “dream house” for his wife in sunny Southern California.  Under the exemption to licensing for building a home, Callaghan would obtain his own permits for the construction at his own home, and serve as the responsible person for the construction as if he was the general contractor.  While Callaghan performed his own concrete work, he did hire licensed subcontractors to complete the other work on the home and also kept track of the progress himself.  He was on site daily and called for county inspections after work was complete.  So far so good, it seems.

Sectional view of the poolCallaghan also decided to build a pool, and appears to have had some of the underground work pre-planned and performed, including a planned noise minimization design for the pool equipment by using an underground vault.  He also hired a plumbing subcontractor to run an underground line for the propane heater.  That subcontractor may or may not have warned Callaghan about the dangers of propane, including particularly the dangers associated with the use of a propane line in a vault.  Unfortunately, the pool was not installed by the original subcontractor, who was too busy when Callaghan was ready to complete that part of the project one year later.  The hired pool contractor, a friend and colleague of Callaghan’s, performed the work as requested by Callaghan, including installing the natural gas to propane conversion kit for the vault, and the design layout of the equipment in the vault.  Callaghan secured permits for the pool and spa, but did not know he was also required to secure permits for the vault itself and the propane line, or have the county inspect the vault.  In a series of unfortunate events, the employees of the pool subcontractor did not have experience in work in this area, nor did they (nor their supervisor) read the relevant instruction manuals that warned of the risk of explosion under the circumstances.  You guessed it – after another series of “I thought you” between the same inexperienced employee and his supervisor, the propane that had bled into the vault ignited when the employee (the plaintiff) turned on the propane heater.  Sadly, the plaintiff was severely burned and injured.

Following a jury trial, on appeal the court among other legal analysis affirmed the trial court’s exception to the general rule that employees of independent contractors, here the plaintiff working for the pool subcontractor, cannot sue the party that hired the contractor to do the work except “insofar as [the hirer’s] exercise of retained control affirmatively contributed to the employee’s injuries.’ [italics in original, citations omitted].”  Such “affirmative contribution” may also be in the omission of certain acts over which the hirer has retained control, including oversight and coordination of permits and inspections as an owner-builder.  Under the facts of the case, the jury found Callaghan’s oversight and failure to secure permits and inspections negligent enough to share in 40% of the verdict, or approximately $3 million.

A “lessons learned” aspect of this decision, among a number of legal issues, is that it normally does not pay from the risk management perspective for a homeowner – even a fairly knowledgeable licensed contractor presumably – to act as an owner-builder and assume all of the responsibility and liability for the project as the general contractor.  And, while not discussed in the case, the pragmatic issue is whether the individual owner-builder had proper and sufficient insurance coverage for conduct, actions and a role that he did not normally undertake in building his own home as the owner-builder.  If not, in seeking to collect on that affirmed judgment of $3 million, the plaintiff may look to the dream house that the owner-builder was intending for his wife.  Regalado v. Callaghan