You have several different issues here.
First, depending on the exact date of your contract, there is one of two statutes that control, either the Consumer Sales Practices Act if the contract was either for $25,000 or less or entered into prior to August 31, 2012. If it was on or after August 31, 2012 AND over $25,000 the Home Construction Service Suppliers Act Applies. There are very different remedies which may include three times your damages as a penalty under the statute and attorneys fees. The problem with this is that the contractor will be the one liable, not the insurance company or anyone else, so the contractor has to be solvent.
Second, his insurance company does not have an obligation to pay for negligently performed work, defective workmanship or breach of contract under an insurance policy, although they would be liable to you if they had provided a performance bond, which is unlikely in this circumstance. The insurance policy your contractor has is meant to cover "consequential damages" from faulty work, not the faulty work itself. As an example, if your contractor did a bad job installing a roof, which leaked and destroyed your furniture, your furniture would be covered.
Third, depending on your municipality, there MAY be another possible bond to recover from. Often municipalities will require contractors to be licensed and when they do that they often require the contractor to post a bond with then which may provide some relief. Often the trigger for these bonds is the municipality issuing code violations.
Without a bond, your ability to collect is probably limited because your contractor likely has little or no money if he is as unscrupulous as he sounds. It is likely that if he would do something like this to you, you weren't the first or last, so there are probably others suing him, too. Your attorney may be able to get through the "corporate shield" to impose personal liability on the owner of the company, but that will depend on the facts that you could prove in court.
I suggest that you contact a construction law attorney soon as you have legal time limitations on times to make claims. If you go past the time, you will not be able to win, even if you file suit. We offer free limited telephone consultations. If you would like to discuss your case please feel free to call me.
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