Under Michigan Act 299, what happens if a licensed contractor fails to maintain required insurance coverage?
Correct Answer
A) The license may be suspended or revoked
Under Michigan Act 299, failure to maintain required insurance coverage can result in license suspension or revocation.
Why This Is the Correct Answer
Michigan Act 299 treats insurance maintenance as an ongoing condition of licensure, not merely a one-time requirement at application. Failure to continuously maintain required coverage (general liability and workers' compensation where applicable) gives LARA (Department of Licensing and Regulatory Affairs) authority to suspend or revoke the license immediately — there is no grace period built into the statute for this violation.
Why the Other Options Are Wrong
Option B: The contractor must pay a fine only
A fine-only outcome would not adequately protect consumers or enforce the public safety purpose of insurance requirements. Act 299 empowers the state to take the stronger action of suspension or revocation, not merely impose a monetary penalty.
Option C: The contractor receives a warning letter
A warning letter is an informal administrative response that does not reflect the seriousness with which Michigan treats insurance lapses. Act 299 allows immediate license action — warnings are not the statutory consequence.
Option D: The contractor has 90 days to obtain coverage
A 90-day cure period would undermine consumer protection during the gap in coverage. Act 299 does not provide a statutory 90-day window to obtain coverage before action is taken — the license is at risk immediately upon the lapse.
Memory Technique
Insurance = License lifeline. Let it lapse → License lapses too. Michigan Act 299 is strict: no insurance, no license.
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Under Michigan Act 299, which violation would result in immediate license suspension?
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