# COMAR Title 09 — Maryland Department of Labor

## Subtitle 08 — Home Improvement Commission

### Chapter 03 — Claims Against the Home Improvement Guaranty Fund

**Authority:** Business Regulation Article, §§8-207 and 8-405, Annotated Code of Maryland

**Administrative History:** Effective date:

**Administrative History:** Regulations .01—.05, Bonding, adopted as an emergency provision effective June 1, 1979 (6:14 Md. R. 1200); adopted permanently effective November 16, 1979 (6:23 Md. R. 1839)

**Administrative History:** Chapter revised effective July 5, 1982 (9:13 Md. R. 1350); repealed effective August 26, 1985 (12:17 Md. R. 1704)

**Administrative History:** Regulations .01—.03 adopted effective August 26, 1985 (12:17 Md. R. 1704)

**Administrative History:** Regulations .01—.03, Financial Responsibility, repealed effective September 5, 1988 (15:18 Md. R. 2145)

**Administrative History:** Regulations .01—.03, Claims Against the Home Improvement Guaranty Fund, adopted effective September 5, 1988 (15:18 Md. R. 2145)

**Administrative History:** Regulation .02A, E amended effective June 23, 2025 (52:12 Md. R. 599)

**Administrative History:** Regulation 02H adopted effective June 23, 2025 (52:12 Md. R. 599)

**Administrative History:** Regulation .03A amended effective July 7, 1993 (20:13 Md. R. 1046)

**Administrative History:** Regulation .03B, D amended effective January 19, 2015 (42:1 Md. R. 17); June 23, 2025 (52:12 Md. R. 599)

**Administrative History:** Regulation .03D amended effective April 3, 2000 (27:6 Md. R. 641); September 7, 2001 (28:17 Md. R. 1555)

#### Regulation .01 Scope.

*COMAR 09.08.03.01*

This chapter shall apply to all claims arising from transactions or events occurring on or after July 1, 1988.

#### Regulation .02 Processing of Claims.

*COMAR 09.08.03.02*

A. Filing of Claims. A claimant who seeks compensation from the Home Improvement Guaranty Fund (“Fund”) shall file a claim with the Commission on a claim form prepared by the Commission. This claim form shall contain at a minimum:

  (1) The amount claimed based on actual loss;

  (2) The facts and circumstances giving rise to the claim;

  (3) The address of the home where the claimant resides;

  (4) The address of each residential property, whether located within or outside of Maryland, owned by the claimant at any time from the date of the contract giving rise to the claim through the date of filing the claim, and the number of dwelling units at each property; and

  (5) An affirmation by the claimant that all statements in the claim are true.

B. Contractor's Response.

  (1) The Commission shall, upon receipt of a claim, forward a copy of the claim to the contractor alleged to be responsible for the claimant's loss.

  (2) A contractor to whom the Commission has forwarded a copy of a claim shall submit a written response to the allegations in the claim within 10 days of receipt of the claim.

C. Amending of Claims. Once a verified claim has been filed with the Commission, the claimant may not amend the claim unless the claimant can establish to the satisfaction of the Commission that either the:

  (1) Claimant did not know and could not have reasonably ascertained the facts on which the proposed amendment is based at the time the claim was filed; or

  (2) Claimant's proposed amendment would not prejudice the contractor whose conduct gave rise to the claim.

D. Review by Hearing Board.

  (1) The claim, along with any written response received from a contractor, shall be referred to a hearing board of the Commission for investigation and review.

  (2) Setting Claim Hearings.

    (a) Unless the hearing board determines that the claim is made in bad faith, is frivolous, or is legally insufficient, the hearing board shall set the claim for a hearing before either a hearing officer, a hearing board comprised of commissioners other than the commissioners on the hearing board which reviewed the claim, or the full Commission.

    (b) The hearing board may set the claim for a hearing:

      (i) Solely on the claim;

      (ii) On both the claim and any regulatory charges arising from the same events or transactions on which the claim was based; or

      (iii) On the claim and any other outstanding claims and regulatory charges against the contractor alleged to be responsible for the claimant's loss.

  (3) Dismissal of Claims by Hearing Board.

    (a) Claimant's Response.

      (i) If, upon initial review, the hearing board finds that the claim is frivolous, made in bad faith, or legally insufficient, the hearing board shall forward its finding, including the basis for its finding, to the claimant.

      (ii) The claimant shall have 30 days from the date of the hearing board's letter forwarding its finding to respond in writing to the hearing board.

    (b) Final Decision to Dismiss.

      (i) If the hearing board, after a review of any written response from the claimant, determines that the claim is frivolous, made in bad faith, or legally insufficient, the hearing board shall issue an Order dismissing the claim.

      (ii) Unless the Commission or any of its members determines within 15 days of the issuance by a hearing board of its Order that a full hearing by the Commission is required, the Order of the hearing board shall be a Final Order which may be appealed by the claimant directly to the circuit court where any party resides or has a principal place of business.

    (c) The hearing board may dismiss a claim as legally insufficient if the claimant has unreasonably rejected good faith efforts by the contractor to resolve the claim.

    (d) The hearing board may dismiss a claim as legally insufficient if the contractor was unlicensed when the contract was entered into but licensed during the performance of the contract unless:

      (i) The claimant establishes by a preponderance of the evidence that the claimant did not know that the contractor was unlicensed at the time the contract was entered into; and

      (ii) A substantial portion of the contractor's alleged misconduct occurred after the contractor became licensed.

E. Compulsory Binding Arbitration. When a contract between a claimant and a contractor requires that all contract disputes be submitted to binding arbitration, the claimant shall either:

  (1) Submit their dispute to binding arbitration as required by the contract; or

  (2) Provide evidence to the Commission that the claimant has made good faith efforts to bring the dispute to binding arbitration which the contractor has either rejected or not responded to. The Commission shall then give the contractor written notice that, if the contractor does not demonstrate to the Commission within 10 days of the date of the letter that it has engaged in the arbitration process and has paid its share of any fees necessary to commence the arbitration process, the Commission will deem the contractor to have waived the right to enforce the compulsory arbitration clause and process the claimant's claim pursuant to this chapter.

F. Final Decisions by Court or Arbitrator. If a claimant provides the Commission with a final unappealable and non-default decision by a court or arbitrator awarding the claimant money damages against a licensed contractor when the conditions precedent to recovery set forth in Business Regulation Article, §8-405(a) and (c), Annotated Code of Maryland, are met, the Commission shall:

  (1) Send a copy of the decision to the contractor and give the contractor 21 days to comment on the decision; and

  (2) Issue a Final Order to compensate the claimant from the Fund for any actual losses awarded to the claimant by the decision and not paid by the contractor, subject to the limitations set out in Regulation .03B(1) and D(2) of this chapter.

G. Time Limitation. A claim may not be brought against the Fund after 3 years from the date that the claimant discovered, or by exercise of ordinary diligence should have discovered, the loss or damage.

H. An owner is ineligible to make a claim against the Fund under Business Regulation Article, §8-405(f)(2)(ii), Annotated Code of Maryland, if they do not reside in the home as to which the claim is made and they simultaneously owned more than three residences or dwelling places, whether located within or outside of Maryland, at any time from the date of the contract underlying their claim through the date the claim was filed.

#### Regulation .03 Adjudication of Claims.

*COMAR 09.08.03.03*

A. Claim Hearings.

  (1) Parties.

    (a) The claimant who brought the claim, and the contractor alleged to be responsible for the monetary loss of the claimant, shall be parties in all claim hearings.

    (b) Assistant Attorneys General. Assistant attorneys general assigned to either represent the Fund on a claim, or present regulatory charges, shall participate as a party in the hearing and receive all appropriate notices.

    (c) The same assistant attorney general assigned to present the regulatory case may be assigned to represent the Fund.

  (2) Notice.

    (a) The Commission shall notify all parties to a claim hearing of the date, time, and place of the hearing.

    (b) This notice shall contain a statement of any regulatory charges brought against the contractor which will be heard at the claim hearing.

    (c) The notice shall be mailed so as to give at least 10 days notice of the claim hearing.

  (3) The burden of proof shall be on the claimant to establish the validity of the claim.

  (4) Conduct of the Hearing.

    (a) If a hearing does not involve regulatory charges, the order of presentation shall be as follows:

      (i) The claimant shall present the case for the claim;

      (ii) The contractor may submit any evidence against the claim;

      (iii) An assistant attorney general representing the Fund may submit evidence concerning the claim; and

      (iv) Any party in the hearing may cross-examine any witnesses and submit rebuttal evidence and closing arguments.

    (b) If a hearing involves regulatory charges and a claim arising from the same event or transaction, the order of presentation shall be as follows:

      (i) The assistant attorney general representing the State shall present the case for the regulatory charges against the contractor;

      (ii) The claimant shall present the case for the claim;

      (iii) The contractor may submit evidence against the charges and the claim;

      (iv) An assistant attorney general representing the Fund may submit evidence concerning the claim; and

      (v) Any party in the hearing may cross-examine any witnesses and submit rebuttal evidence and closing arguments.

    (c) When a hearing involves regulatory charges and a claim arising from the same event or transaction, all evidence submitted at the hearing concerning that event or transaction shall be considered in determining the validity of the charges and the claim.

B. Measure of Awards from Guaranty Fund.

  (1) The Commission may not award from the Fund any amount for:

    (a) Consequential or punitive damages;

    (b) Personal injury;

    (c) Attorney's fees;

    (d) Court costs;

    (e) Interest;

    (f) Payments made to a person who does not hold a contractor license to correct or complete a deficient home improvement unless the work performed by the unlicensed person did not require a contractor license or was performed by a person who was not required to hold a contractor license under Business Regulation Article, §8-301(c)(4)-(6), Annotated Code of Maryland; or

    (g) Estimated costs to correct or complete a deficient home improvement based on the estimates of a person who does not hold a contractor license unless the estimated work did not require a contractor license or the unlicensed person was not required to hold a contractor license under Business Regulation Article, §8-301(c)(4)-(6), Annotated Code of Maryland.

  (2) The Fund may only compensate claimants for actual losses they incurred as a result of misconduct by a licensed contractor.

  (3) Unless it determines that a particular claim requires a unique measurement, the Commission shall measure actual loss as follows:

    (a) If the contractor abandoned the contract without doing any work, the claimant's actual loss shall be the amount which the claimant paid to the contractor under the contract.

    (b) If the contractor did work according to the contract and the claimant is not soliciting another contractor to complete the contract, the claimant's actual loss shall be the amount which the claimant paid to the original contractor less the value of any materials and services provided by the contractor.

    (c) If the contractor did work according to the contract and the claimant has solicited or is soliciting another contractor to complete the contract or correct the contractor’s poor work, the claimant's actual loss shall be the amounts the claimant has paid to or on behalf of the contractor under the original contract, added to any reasonable amounts the claimant has paid or will be required to pay another contractor to repair poor work done by the original contractor under the original contract and complete the original contract, less the original contract price. If the Commission determines that the original contract price is too unrealistically low or high to provide a proper basis for measuring actual loss, the Commission may adjust its measurement accordingly.

  (4) The Commission may not award from the Fund an amount in excess of the amount paid by or on behalf of the claimant to or on behalf of the contractor against whom the claim is filed.

C. Determinations.

  (1) Hearing Officers.

    (a) If the claim hearing is held before a hearing officer, the provisions of COMAR 09.01.03 shall be applicable.

    (b) A hearing board comprised of commissioners other than commissioners who initially reviewed the claim shall adopt, reject, or modify the hearing officer's recommendations pursuant to COMAR 09.01.03.

  (2) Unless the Commission or any of its members determines within 15 days of its issuance that a full hearing by the Commission is required, a hearing board's decision on a claim shall be a Final Order of the Commission which may be appealable by any aggrieved party to the circuit court where any party resides or has a principal place of business.

  (3) If the claim hearing is held before the full Commission, the Commission shall issue a decision on the claim which shall be a Final Order which may be appealed by an aggrieved party to the circuit court where any party resides or has a principal place of business.

D. Payments.

  (1) Upon the issuance of a Final Order that a claim is valid, with all appeals to court exhausted, the Commission shall pay the claim from the Fund subject to the limitations in §§B(1) and D(2) of this regulation.

  (2) The Commission may not award from the Fund:

    (a) To any one claimant more than the amount authorized in Business Regulation Article, §8-405(e)(1), Annotated Code of Maryland, for acts or omissions of one contractor; or

    (b) More than the amount authorized in Business Regulation Article, §8-405(e)(2), Annotated Code of Maryland) to claimants on account of the conduct of any one licensee, unless, after the Commission has paid out that amount on account of the conduct of one licensed contractor, that contractor has repaid the full amount.

  (3) If the aggregate amount of the approved claims to be paid from the Fund involving one contractor exceeds the maximum payout amount authorized in Business Regulation Article, §8-405(e)(2), Annotated Code of Maryland, the Commission may either:

    (a) Pay the approved claims in the order filed until the maximum payout is reached; or

    (b) Prorate the approved claims by awarding each claimant the same percent of their approved claim which the maximum payout amount is of the total amount of the approved claims.

  (4) For purposes of this regulation, the term “approved claim” means the amount which the Commission has approved to be paid from the Fund which cannot exceed the amount authorized in Business Regulation Article, §8-405(e)(1), Annotated Code of Maryland.