Who Pays After a Loss?

The August 2026 floods in Indiana, Ohio and Kentucky inundated thousands of homes – and damaged hundreds of construction projects. On many projects, work will have to be torn out and replaced. After a loss like that, the question will always be, Who pays? The owner or the contractor? My October 11, 2024 blog sketched the general rule: Any portion of the work completed belongs to the owner. If damaged, it’s the owner’s loss. My blog post suggested good ways to protect yourself when the cause of damage is obvious.

But what if cause of the damage isn’t obvious? Say a fire of suspicious origin destroys the project. Contractors are usually considered to have control of the job site during construction. Would that make a contractor liable for any damage? That was the claim in a recent Florida case: Berman Construction v. Carnaval Home LLC.

Case in Point

The owner sued the contractor and several subcontractors for damage caused by fire. Source of the fire was not certain. Counsel for the owner claimed faulty wiring by a sub ignited a fire in the attic. The fire started shortly after electrical work was completed. A carpenter testified that lights in the kitchen and family room stopped working some time between 5:00 p.m. and 8:00 p.m. The fire started later that night.

The contractor had a different suggestion: arson. Traces of gasoline were detected in the ashes. An unusual burn pattern on the first floor was consistent with use of an accelerant. Expert opinion was that the fire had multiple points of origin. That’s a sign of arson.

After a jury verdict, the owner was awarded $928,850.

Counsel for the contractor appealed. Grounds? Instructions to the jury were defective. The jury should have been required to consider contract language on risk of loss:

Owner shall bear the risk of loss, costs and damage to the Work caused by natural disasters, vandalism, arson, insect infestation and perils beyond Contractor’s reasonable control.

Counsel for owner didn’t object to owner liability if arson caused the fire. But the contractor did not mount an arson-specific defense. The jury did not conclude that arson was the cause. Counsel for owner argued the doctrine of negative implication (expressio unius est exclusio alterius). Mention of one thing in a contract implies exclusion of others. If the cause wasn’t arson, a jury verdict on the risk of loss clause wasn’t essential.

Court Decision

The appellate court didn’t agree. Negative implication depends on context. Not every positive statement of rights or obligations carries a negative implication on other rights or obligations. The Ninth Amendment to the U.S. Constitution is an example. “The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.”

Plus, the final clause in the risk of loss paragraph (“and perils beyond Contractor’s reasonable control”) is expansive. Where the text contains a broad catchall provision at the end of a list of specific items, expressio unius cannot be applied without rendering the catchall mere surplusage. The appellate court returned the case for a new trial.

This is a perfect example. Thoughtful contract drafting pays dividends. There’s no better contract drafting tool than Construction Contract Writer. The trial version is free.

 

“Lending” a License in Indiana

Sharon Leibengood-Chavez wanted to add a sunroom and deck to her Cedar Lake, Indiana home. Filip Zivkovic of Ark Supplies, Inc. agreed to do the work. There was no written contract. Worse, Ark Supplies wasn’t registered to do construction in Cedar Lake. That meant Ark couldn’t apply for a building permit. No problem. Ark got Michael Vaidik of Castle Construction to apply for the permit. Castle had a license in Cedar Lake. Vaidik listed Castle as contractor on the job and certified his application as true and correct. But Ark did all the work.

Sharon, the owner, knew nothing about Castle’s role in her job. If that seems deceptive to you, I agree.

When finished, Ark’s work passed inspection. But Sharon wasn’t happy. She filed a complaint for damages against Ark – and Castle. Her attorney claimed both Castle and Ark violated Indiana’s Home Improvement Contractor Act (HICA) and Indiana’s Deceptive Consumer Sales Act (DCSA). Sharon claimed treble damages and attorney fees. The trial court granted Sharon’s request for a summary judgment. Arc and Castle appealed.

I should add, nothing in this case suggests Castle got paid for "lending" their license. Ark reimbursed Castle for cost of the permit. But that was all. I’m going to assume the loan was gratis, not part of a business deal. If Castle was paid to take out the permit, I believe that changes everything.

How would you decide this case?

Does “lending” a license make a contractor liable for defective work? Does “lending” a license give a contractor an interest in the job?

Not according to the May 29, 2026 opinion in Castle Construction Corp v. Leibengood Chavez. Writing for the majority, Judge Foley concluded that Castle was not a “supplier” under Indiana’s HICA. Because Castle was not a supplier under HICA, Castle could not be held liable as a supplier under the DCSA. The Court reversed the summary judgment and directed that judgment be entered in favor of Castle.

Even though identified as the “contractor” on the permit, Castle never contracted with Sharon, never communicated with her and never did any work on the job. Sharon was entirely unaware of Castle's involvement. On that basis, Castle should get a free pass under both HICA and DCSA, at least according to Judge Foley.

OK. Are we to understand? Indiana’s Home Improvement Contractor Act and Indiana’s Deceptive Consumer Sales Act don’t apply if your role in the job is kept secret. Don’t solicit the job. Don’t sign anything. Don’t let the owner know what you’re doing. Think of the possibilities.

Is this what the Indiana Legislature intended when enacting HICA and DCSA? You decide.

I like the dissent by Chief Judge Tavitas. Castle became a “supplier” under HICA when Castle supplied the building permit. Without that, the project wasn’t going anywhere. If Castle was a supplier, Sharon was entitled to an award of damages and attorney fees.

I don’t recommend “loan” of a license. If you have little or no role on a job, don’t go on record as the contractor. In most counties and cities, any misrepresentation about who will do the work earns penalties. In Cedar Lake:

• A fine of $300 to $2,500 per violation per day.
• Stop‑work authority.
• Permit revocation.

One more point.

Every good construction project starts with a good contract. If Sharon had insisted on a written contract, that agreement would show the contractor’s name and license number. That would have saved Sharon thousands in legal fees and several years in Indiana courts. No matter the site, no matter the type of work, you won’t find a better contract drafting tool than Construction Contract Writer. The trial version is free.