Bonds, Liability Insurance, and Workers’ Comp: What the License Requires on File
"Bonds, Liability Insurance, and Workers’ Comp: What the License Requires on File" is lesson 3 of 8 in the Law & Business Learning Hub. It opens with "The License Bond Is Not a Job Bond" and works through 5 short steps, then a worked example you can check yourself against.
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Steps in this lesson
The License Bond Is Not a Job Bond
How the $25,000 Is Divided
Extra Security for LLCs
Workers’ Compensation and the Exemption
What Going Uninsured Costs
The worked example in the course applies this lesson to a realistic job in 7 steps, from "Contractor's bond" through "Workers' compensation".
What you'll be able to do
Explain the main idea of "Bonds, Liability Insurance, and Workers’ Comp: What the License Requires on File" in plain language you can use on the exam.
Apply this step with confidence: "Extra Security for LLCs".
Apply this step with confidence: "Workers’ Compensation and the Exemption".
Apply this step with confidence: "What Going Uninsured Costs".
Test yourself on the worked example and the quick-check quiz inside the classroom.
The diagram for this lesson, exactly as it appears in the Learning Hub.
The first steps of this lesson
Step 1: The License Bond Is Not a Job Bond
Every licensee must have a contractor's bond of $25,000 on file as a condition of issuance, reinstatement, reactivation, renewal, or continued maintenance of a license (B&P Code 7071.6(a)). It is executed by an admitted surety in favor of the State of California, and it protects homeowners damaged by a License Law violation, owners of single-family dwellings, people harmed by willful violations or fraud, and employees owed wages or fringe benefits (7071.5). The Reference Book (Section III, Contractor License Bonds) separates it from performance, payment, and contract bonds, which are written for specific projects and usually cost one to two percent of the contract price. No license bond is required while a license is inactive (7071.6(c)).
Step 2: How the $25,000 Is Divided
Surety liability is capped for most claimants. B&P Code 7071.6(b): apart from homeowner claims under 7071.5(a), the surety's aggregate liability is $7,500, and bond proceeds above $7,500 are reserved exclusively for those homeowners (who may still claim the full bond). For wages and fringe benefits the surety's aggregate liability is $4,000, and if the bond cannot pay all claims it is distributed in proportion to the claims (7071.11(a)). No license can be renewed, reissued, or reinstated while a judgment or admitted claim above the bond amount stays unsatisfied (7071.11(b)). A disciplinary bond under 7071.8 is separate, starts at $25,000 and can be as much as 10 times the 7071.6 amount.
The remaining 3 steps, the worked example and the quiz are in the course. This is a preview. The full lesson, with the step-by-step explanations, a worked example and a quick-check quiz, is inside the classroom.
Independent exam preparation. Contractors Classroom is not affiliated with the Contractors State License Board, and no course can guarantee a passing result.
