MARK R. GORDON, Plaintiff/Appellant,
ARIZONA REGISTRAR OF CONTRACTORS, et al., Defendants/Appellees.
from the Superior Court in Maricopa County No. LC
2015-000451-001 The Honorable Patricia A. Starr, Judge
R. Gordon, Phoenix Plaintiff/Appellant
Arizona Attorney General's Office, Phoenix By Thomas C.
Raine Counsel for Defendants/Appellees
Jennifer B. Campbell delivered the opinion of the Court, in
which Presiding Judge Paul J. McMurdie and Judge Samuel A.
The Residential Contractors' Recovery Fund (the
"Fund") was established to provide a remedy to
homeowners injured by unethical or negligent contractors.
Mark Gordon seeks an award from the Fund based on the cost of
home repairs arranged under his home warranty policy. Because
breach of a home warranty contract is not a claim arising
from a violation of the regulations governing contractors, he
is not entitled to collect from the Fund. We affirm.
In 2008, Gordon purchased a home warranty policy from InHouse
Home Warranty, Inc. InHouse held two licenses: a license to
sell home warranty policies, issued by the Department of
Insurance ("DOI"), and a license for air system
repair and replacement, issued by the Registrar of
Contractors ("ROC"). The policy promised coverage
through 2012. Although InHouse's DOI license expired in
2009, Gordon continued to pay premiums through mid-2011.
The policy covered repairs on a wide range of household
systems. Gordon paid an annual premium plus a $45 fee for
each service call. After receiving service calls, InHouse
often arranged with independent contractors to complete the
actual work. An exception to this practice was for air system
repair, which InHouse performed under its ROC license. In
October 2011, InHouse stopped answering Gordon's calls
for service. Gordon filed a complaint with the ROC, accusing
InHouse of performing work outside the scope of its
ROC-issued license, aiding and abetting an unlicensed
contractor, operating as an insurance company without a
license, and failing to respond to new requests for service.
InHouse did not answer Gordon's complaint. The ROC deemed
all of Gordon's allegations admitted and issued a default
decision and order revoking InHouse's air system
license-the only license InHouse held subject to the
ROC's jurisdiction. Next, Gordon sought an award from the
Fund. See Ariz. Rev. Stat. ("A.R.S.")
§ 32-1132, amended by A.R.S. § 32-1132
(2019). The ROC denied Gordon's claim,
concluding that he was not eligible because the InHouse home
warranty policy was not a construction contract. The ROC also
concluded that damages claimed by Gordon did not result from
incomplete or defective workmanship - the only damages that
can be paid out of the Fund.
Gordon requested a hearing with an administrative law judge
("ALJ") to determine whether the policy was a
construction contract under A.R.S. §§ 32-1101 and
-1132. At that hearing, Gordon argued that payments he made
for each service call under the policy provided the
consideration necessary to create distinct construction
contracts with InHouse.
The ALJ concluded that "InHouse's main contract with
Mr. Gordon was a home warranty policy to cover the risk that
home repairs might be necessary in the future . . . [and] not
a construction contract to perform specific repairs for a
definite and fully liquidated consideration." The ALJ
noted that "[t]he only possible exception" was work
InHouse performed on the home's air system. The ROC
accepted the ALJ's conclusion, adopting it as the final
Gordon appealed to the superior court and the superior court
affirmed the ALJ's decision. The superior court explained
that the policy was a home warranty agreement regulated by
the DOI and not the ROC. The court also concluded that
Gordon's complaints relating to the air system
"stemmed from his belief that it should have been
covered by the home warranty, and not from any workmanship
issues." The court also ...