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  • Kristen Shields

"Licensed & Insured" - Misuse Beware

Famous words by contractors and tradesmen.... I'm "licensed and insured."


Hopefully, the insured portion is more self-explanatory, but the "licensed" part gets people into trouble. If you merely have a local or county business license or even have a business registered with the Secretary of State, this is not the same thing as having the proper contracting-related licenses. When you hold yourself out as a tradesman or contractor, and let's say your truck has magnets or is branded with your information also reading "Licensed & Insured," this can give off the impression that you possess certain licensure that in actuality, you may not have.


Every state has a Consumer Protection Act that prohibits deceptive or unfair business practices. It can be deemed deceptive to advertise or give the impression that you have contracting licenses if you only have a business license. If a client or other contractor you seek to do business with asks, you must be perfectly clear of your status, and do not reply that you are "licensed and insured." There is a gray area surrounding this, and misuse beware! If you think to yourself, "How can I be responsible for what other people think?" You absolutely can be, and if you project the wrong impression, you may find yourself hurting.


If you are owed for work and don't carry the proper licensure, you're opening yourself up to a potential counterclaim by pursuing any claim for payment in the first place. It is too easy for a claim to be made against you for not having correct licensure or giving off the impression that you do possess a particular license. Consumers have a right to know your qualifications, or lack thereof. These such claims would likely be brought under your state's Consumer Protection Act and carry serious penalties.


For a quick comparison, Kentucky has a less stringent Consumer Protect Act than its neighboring state of Tennessee (in my opinion). As an example, if you contract with a property owner as "Licensed & Insured," and there is an issue or defect in your work, the owner can bring claims under the Tennessee Consumer Protection Act, under which contracting without the proper licensure carries civil penalties and is a misdemeanor criminal offense. (I didn't know is no excuse in the civil or criminal world on this point - if you do it, you've violated.) In addition, you can face 3x the damages AND be responsible for the other party's legal fees. Not to mention, you can encounter issues with the state licensing board.


It is a slippery slope to go down, so please be careful of the impressions you give and how you advertise because there can be serious consequences.

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