Solar Company Contracts, Licenses, Bonds to Check

A solar installation company usually runs on a state contractor license with a named qualifier, customer and financing contracts with insurance terms inside, permits and utility approvals on every job, and bonds on some licenses and larger projects. In a sale, many of these are reissued or re-underwritten, not handed over. This guide is for the buyer who wants to know what to check before and after closing. Licensing differs by state and sometimes by city, so confirm yours with your licensing authority and deal counsel.

The short answer

There is no single national solar license. States license solar work in different ways, some require an electrical license for the connection work, and some regulate solar salespeople separately.
Commercial customers and project owners commonly ask for certificates, additional insured status, primary wording, waivers and umbrella limits. Homeowner contracts are shaped more by state consumer rules.
Whether a license, its qualifier, surety bonds and permits move to the buyer depends on the deal, the issuer and state law, so confirm each one before closing.
A certificate of insurance is not the policy. Match each contract clause to an endorsement actually on the policy.
Ask deal counsel and your accountant about legal and tax questions, including credit-related contract language.

What paperwork does a solar installation company run on?

A solar company's paper trail is longer than most trades because the customer, the lender and sometimes a system owner all sign something. This table lists the documents a buyer inherits and what to check. Terms vary by contract and state.

Documents a solar installation company runs on, who is on the other side and what to check after closing
Document	Who is on the other side	What to check
Contractor license and qualifier	State licensing board	Scope of the classification, who qualifies it, and what happens if that person leaves
Homeowner sales contract	Residential customer	State disclosure and cancellation rules, permit language, output or savings statements
Commercial or developer installation agreement	Business owner, general contractor or developer	Insurance clauses, indemnity, warranty terms, termination rights, and any wording tied to tax credits
Lease or power purchase agreement (PPA) installation contract	A financier or system owner, and its lenders	Insurance, warranty and indemnity terms, and who owns the system
Financing partner or dealer agreement	A lender or dealer	Holdbacks, chargebacks and when the lender pays the company
Building permits and utility interconnection approvals	City, county and utility	Open permits, inspections and pending approvals on every job
Sales representative registrations	State regulator	Whether reps are registered where the state requires it
Bonds	A surety and the obligee	Which bonds exist, who signed the indemnity, and what the surety must be told
Loan documents	Acquisition lender	Insurance clauses, loss payable wording and covenants
Assignment and change of control clauses	Every counterparty above	Whether a stock or an asset purchase needs the customer's, financier's or dealer's consent, and whether any contract can be ended when ownership changes

Before closing, read each assignment and change of control clause. A stock purchase can trigger a consent requirement even though the contracting company stays the same, and an asset purchase usually needs the other side to agree to a new or assigned contract. These are legal questions for deal counsel. The insurance point is that the insurance clause and certificate holder must be right before the contract moves.

The broader process is in licenses, permits and registrations when buying a business and buying a business in a licensed trade.

What insurance do customers, developers and financiers ask for?

Commercial customers, general contractors and developers commonly ask a solar installer for a certificate of insurance, additional insured status on general liability for both ongoing and completed operations, primary and noncontributory wording, a waiver of subrogation, workers' compensation, commercial auto, umbrella limits and sometimes professional or pollution liability. Each is added by a specific endorsement, and an indemnity clause may be broader than the policy. Limits vary by contract, so none is given here. Ask each customer for the clause, then ask the carrier whether the policy matches.

Systems owned by a financier add a layer: the owner and its lenders would be expected to ask for insurance, warranties and indemnity from the installer. Homeowners usually do not set insurance terms, but state consumer rules shape the contract. California, for example, requires a standardized disclosure document at the front of residential solar contracts and says buyers can cancel without penalty within three business days.

Some states limit what a customer can push to a contractor through an indemnity clause, and government contracts can set their own insurance minimums. Read contracts that require coverage you do not have, additional insured, waiver and primary wording for new owners and certificates for a general contractor.

Which promises in a solar contract do liability policies usually not cover?

Several solar contract terms sit outside liability insurance, and a policy generally does not stand behind them. Read the contract for each:

Output promises. A promise that a system will produce a set amount of energy is a contract risk, so look for caps and disclaimers.
Lender payments. If a financing partner pays the company before the work is done, a delayed or failed job can leave the company repaying the lender or finishing the work at its own cost. Read the holdback and chargeback terms, and check how lien releases from subcontractors and suppliers are collected, and given to customers, before each payment.
Permit and utility duties. A contract that says the company will pull every permit and finish utility approval creates a duty that insurance does not perform for you.

Open contracts are also where tax-credit timing shows up. Ask which signed jobs were sold on the strength of a federal credit, what each contract says if the customer cannot get it (cancellation right, repricing, a financing condition), and, for commercial or third-party-owned projects, what records show when construction began. These are legal and tax questions for deal counsel and your accountant, but the answers decide how much of the backlog is firm. Insurance does not pay for a cancelled or repriced job.

See coverage gaps in a solar installation company you bought for the insurance side of output promises.

Which licenses and registrations matter, and do they move with the sale?

It depends on the state. California's licensing statute does not provide for a license to be transferred in a sale, and a successor may need its own license, so confirm your deal structure with the Contractors State License Board in writing. Other states differ, so confirm with your own licensing board. These examples are not a survey of fifty states.

The Contractors State License Board (CSLB) reports that in fiscal years 2022 and 2023 it received 2,263 solar complaints and investigated 1,625, finding that 1,232 involved workmanship or abandonment and 323 involved misrepresentation or fraud (data through August 30, 2023). These are licensing complaints, not insurance claims, but they show why sales practices belong in diligence. Read when the seller holds the contractor license.

California.
- License class. CSLB licenses solar as classification C-46, defined as installing, modifying, maintaining and repairing thermal and photovoltaic (PV) solar systems.
- Batteries. A C-46 licensee may install a battery only as incidental and supplemental to a PV installation, up to 80 kilowatt-hours. Several other classifications can install solar too.
- Sales. Solar sales representatives generally must be registered as home improvement salespeople.
- Bond, insurance and qualifier. A $25,000 contractor bond is required and one individual qualifies the license. If the buyer holds the license through an LLC, the board also requires minimum liability insurance (at least $1 million for five or fewer listed personnel, rising with headcount) and a separate $100,000 employee and worker wage bond, so check both against the policy and the surety.
Florida. The statute defines a solar contractor as one who installs, alters, repairs or replaces solar panels for water heating, pool heating and photovoltaic systems. A business qualifies through an individual. When its only qualifier leaves, it has 60 days to employ a new one and, under the statute, may not contract in the meantime except under a temporary certificate for incomplete contracts.
Texas. A business generally may not perform or offer electrical work without an electrical contractor license, subject to exemptions. The Texas Department of Licensing and Regulation (TDLR) also runs a residential solar retailer program: businesses that sell or lease home systems must register, and the people who sell them must register as salespersons. TDLR has posted a schedule for resuming enforcement of two retailer rules (contract requirements and disclosures, and educational materials), so check the TDLR retailer page for the current status before you rely on either rule. Whether physical installation needs an electrical license is a question for TDLR.

A hypothetical example. A California company holding only a C-46 license signs a contract that includes a 100 kilowatt-hour storage system. The buyer should ask whether the license scope covers it, whether another classification or a subcontractor is needed, how that affects the contract, bond and insurance, and what happens if the board receives a complaint.

What do bonds do, and do they transfer?

A surety bond is a three-party arrangement: the company is the principal, the surety issues the bond, and the project owner or agency is the obligee. It is not insurance for the company, because the surety expects to be repaid by the principal and its indemnitors. Bonds appear in solar work as license bonds, such as California's $25,000 bond, and as contract bonds on public or large commercial projects. A change of ownership usually means the surety re-underwrites the account and new owners typically sign a new indemnity agreement, and whether the seller is released is a question for deal counsel and the surety. The Small Business Administration (SBA) backs a surety bond program that can help smaller contractors qualify for bonds, so ask a surety agent whether it applies to the jobs you hold. See do surety and license bonds transfer, surety bonds and surety bond vs liability insurance.

What does a certificate prove, and what do I check after closing?

A certificate of insurance is information about a policy at a point in time. It is not the policy, it does not change the policy, and it does not prove that an endorsement a contract needs is on the policy. So inherited certificates do not show that customer contracts are met.

List every open job and its contract, and mark its stage (signed, permitted, installed, waiting on utility approval). Mark each insurance clause: additional insured, primary wording, waiver, limits, notice.
For each clause, find the endorsement on the policy. If you cannot, ask the broker whether it can be added and what it costs.
Pull the seller's certificates and check dates, holders and descriptions. See certificates the seller issued.
Collect subcontractor and staffing certificates, and keep a tracker. See tracking certificates in the first month.
Confirm license status and the named qualifier with the state, and note renewal dates for the license, bonds and sales registrations.
Check permit and interconnection status for each open job, and who holds the permit.
Tell your lender and surety about material changes. See SBA lender insurance requirements.

For the insurance side of the same checks, see what insurance you need after you buy a solar installation company and coverage gaps in a solar installation company you bought. The certificate basics are at why a certificate is not coverage.

Morrow can compare the insurance clauses in your open contracts to the endorsements on the policies you inherited. Any new terms depend on carrier underwriting.

Keep reading

Frequently asked questions

Does the solar contractor license transfer when I buy the company?

It depends on the state. California's licensing statute does not provide for a license to be transferred in a sale, and a successor may need its own license. Other states differ. Ask the state licensing board and deal counsel before closing, and confirm who qualifies the license.

What if the person who qualifies the license leaves after closing?

Many states give a short window to name a replacement. In Florida a business has 60 days to employ a new qualifying agent, and during that period it generally cannot take on contracts, apart from a temporary certificate for incomplete work. Check your state's rule, and tell your lender and surety.

Do solar salespeople need to be registered?

Some states say so. California generally requires solar sales representatives to be registered as home improvement salespeople, and Texas runs a residential solar retailer and salesperson program. Check your state, because an unregistered sales team is an inherited risk.

What insurance do commercial solar customers usually require?

Commonly certificates, additional insured status, primary and noncontributory wording, waivers of subrogation, workers' comp, auto and umbrella limits. Limits vary by contract, so read each clause and match it to the policy.

Are surety bonds a form of insurance?

No. A bond protects the project owner or agency, and the surety expects the company and its owners to repay any claim. A bond is underwritten on finances and owners, so a sale usually triggers new underwriting and a new indemnity agreement. Ask deal counsel and the surety whether the seller is released.

References

Just bought a business? Get your insurance reviewed.

Send Morrow the declarations pages, loss runs and key contracts you inherited. Morrow can review them against the business you bought, flag gaps and request quotes where it makes sense. Any new terms depend on carrier underwriting.

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This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.

Contracts, Licenses and Bonds for a Solar Installation Company