Guidance For Contractor Dispute. Small Claims Vs Bond Vs Cslb

Location: Southern California

We had a contractor complete our bathroom remodel back in 2022 and had a very slow leak (over the course of 3 years) from failed shower waterproofing from the shower curb (we had initially thought it was from a faulty toilet seal). We had initially been in contact with the contractor when I noticed slight staining from the transition molding into the bedroom and the whole time we were gas lit by the contractor stating it was slight water running from the corners of the shower. It wasn't until the transition molding swelled up so much it created an upside down "U" that the contractor took us more seriously. At the same time, the contractor had a medical emergency that made him unable to come look, but he had sub-contractors come take a look. Once the drywall was opened up and black mold was found at the base boards behind the toilet (why we thought it was the toilet seal) was when the contractor told us he would not be taking any responsibility for the repair.

With the contractor telling us to F- off, we went through home insurance (was denied because the leak had been happening for more than 15 days). We ended up having to file with CSLB and are working with CSLB to get a determination and hopefully force the contractor into arbitration to pay us out. Our initial report to CSLB stated the toilet seal as the culprit. We had also hired multiple plumbers to come find evidence on how the leak started, but the findings were inconclusive, except that there was 100% an active leak. We had thought we needed to wait for CSLB to conduct their investigation, but we were finally directed to hire contractors to fix the bathroom as we also have a child at home (remove mold). We hired new contractors (tear out complete bathroom and re-do close to $30,000) and demo was done this past Monday. Through the demo process, it was found that the waterproofing for the shower curb failed because the contractors put screws into the waterproofing membrane for the brackets for the shower glass. The wood underneath the curb was completely rotted out and the water had traveled to the neighboring walls and wicked under the flooring. We finally have photo and video evidence that the damage stemmed from failed waterproofing.

Now the question: We are trying to determine which route to take. Small claims ($12,500 for California, Bond ($25,000), CSLB (arbitration up to $25,000). We filed against the contractor’s bond for the full $25,000, but was denied because date filed is out of statute (2 years). We made the latent defect argument, but that was shot down based on the hard cut off of 2 years from Bond company. If we were to go through small claims, we would waive the right to any other compensation. CSLB forced arbitration seems like the best way to go about this to re-coop the most amount we can, but from what CSLB has said, it seems like they don’t force the contractor to pay? I saw conflicting information where CSLB can force the contractor into arbitration by potentially revoking their license. We don’t really want to go through civil court as our costs of $30,000 don’t seem worth it after lawyer fees and time spent. Small claims caps out at $12,500, so it wouldn’t even cover half of the costs for repair. Are there any other options we are missing or any other way to go about this that is more effective? Appreciate any guidance and apologies for the wall of text.