I was wondering this too, and am frankly appalled the concept is legal anywhere.
The way I see it, if you contract with someone to build something for you - and you pay them for it - then it is not, and should not be, your problem if the contractor took the money to Vegas after completing the job instead of paying their suppliers for the timber and nails and so on.
The problem for the homeowner is, it IS usually part of the contract you signed with the company that did the actual work. Effectively you cosigned for credit for the contractor to buy those materials. Just like if you cosign for a car loan and your buddy you cosigned for skips town and never returns your calls. The supplier does not care why the money did not appear but they go after who has the materials.
If the contractor does this and leaves you hanging you can go after his bond, and you will win, and hes pretty much screwed for working legally in the future barring freaky circumstance like wife looted the accounts and ran off to Monaco with the tennis instructor.
My post from last year stands - I’m appalled that’s considered a conscionable thing to have in a building contract.
If you read the wikipedia article, there are processes for homeowners to follow to make sure they don’t have to pay twice.
And bear in mind that secured credit is cheaper: in other words, if suppliers have no financial security they will, one way or another, tend to allow in their pricing for the cost of having to write off more bad debts, and the homeowner will end up paying more.