In an unpublished opinion filed April 3, 2018, in HNS, Inc. v. Eagle Rock Quarry, et al., Cause No. 34695-1-III, Division Three of the Washington Court of Appeals dismissed a contractor collection action finding that the contractor failed to substantially comply with the requirements of Washington’s contractor registration act, RCW 18.27, which is a prerequisite to filing suit.

Eagle Rock Quarry, Inc., located in Mesa, Washington, entered into an oral agreement with HNS Inc., an Oregon company, for HNS to blast and stockpile gravel at its Washington location. Eagle Rock made a number of payments to HNS under the agreement, but suddenly stopped paying HNS’s monthly invoices in September 2015. Four months later, HNS sued Eagle Rock for its failure to pay.

Despite expressing sympathy for HNS having performed work without payment, the trial court granted Eagle Rock’s motion to dismiss the Complaint on the basis that HNS was not duly registered as required under RCW 18.27, which is a prerequisite to filing suit.

RCW 18.27 requires every contractor engaging or offering to engage in services in Washington to register with the Department of Labor and Industries (L&I). In any action to collect compensation for work or to enforce a contract, a contractor must prove that it was duly registered at the time it entered into the contract or performed the work. The statute states that a court may not find a contractor in substantial compliance with the registration requirements unless:

  1. L&I has on file the registration information prescribed in RCW 18.27.030,
  2. The contractor had at all times in force a current bond or surety as required by RCW 18.27.040, and
  3. The contractor had at all times in force a current insurance as required by RCW 18.27.050.

HNS had formerly been licensed in Washington, but failed to renew its license in 2010. The Court of Appeals reasoned that by virtue of its previous registration, L&I likely had on file much but not all of the information required by RCW 18.27.030. However, the Court found that HNS’s $75,000 surety bond did not qualify as a bond required by RCW 18.27.040 because it named the State of Oregon as obligee. RCW 18.27.040 requires the contractor’s bond to name the State of Washington as obligee. To this point, the Court of Appeals quoted the trial court’s comments at oral argument that “the purpose of the statute is to protect against damage claims … [for] people that work here. People that have accidents that occur here.” (Emphasis added).

Further, HNS could not demonstrate that it possessed the required insurance because it provided only premium notices, rather than a copy of the policy, or other evidence that the insurance in place covered its operations with Eagle Rock in Washington.

Accordingly, while similarly sympathetic to HNS's situation, the Court found that HNS did not substantially comply with RCW 18.27.080 in the manner required to enjoy access to Washington courts, and affirmed the trial court’s dismissal of the action. This case emphasizes the importance of strict compliance with the Washington contractor registration act, especially for out-of-state contractors.