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Insurance & Liens — California C-10 Practice Questions

28 questions · 12% of the Law & Business exam

Worked questions

1. Before paying a progress invoice, what release control is appropriate?

  • AIgnore subcontractor and supplier exposure
  • BUse an invented one-sentence waiver
  • Match the release to its payment period
  • DDemand release of work not yet performed

Why C is correct

California prescribes waiver and release forms and distinguishes progress from final payment and conditional from unconditional effect. Matching the form prevents accidental over-release or unprotected payment.

2. What is the general function of a stop-payment notice?

  • AIt cancels the contractor license
  • BIt replaces a safety citation
  • It can withhold project funds
  • DIt transfers property title

Why C is correct

A stop-payment notice reaches undisbursed construction funds rather than directly encumbering title. Eligibility, notice, service, timing, and bonding rules must be followed.

3. Why should preliminary-notice dates and recipients be tracked at project start?

  • Defective notice can impair remedies
  • BNotice automatically proves the debt
  • CNotice replaces every invoice
  • DRecipients never depend on contract tier

Why A is correct

Mechanics lien, stop-payment, and bond remedies have strict role, recipient, content, service, and timing requirements. Early tracking avoids trying to reconstruct facts after nonpayment.

4. A homeowner assumes the contractor's CSLB license bond will pay every defective-work claim and complete the project. Does the bond provide that blanket protection?

  • No; the bond covers defined claims only
  • BYes, it pays every loss without limit
  • CYes, it is workers’ compensation
  • DNo, because licensed contractors need no bond

Why A is correct

The best answer is: No; the bond covers defined claims only. Bonds and insurance have different obligees, conditions, limits, and claim processes. The contractor must understand each required or contractual risk-transfer instrument separately. The new fact pattern changes the setting, not the governing rule or management control. The other choices either skip a required step, apply a different rule, or fail to address the stated risk.

5. A project owner asks whether every type of loss by any person is payable from the license bond. How should the bond's reach be described?

  • AOnly equipment manufacturers
  • BEvery claimant for every business loss
  • Statutorily defined persons and losses
  • DOnly the contractor’s shareholders

Why C is correct

The best answer is: Statutorily defined persons and losses. The license bond is a statutory consumer and compliance protection with defined claimants, conduct, limits, and aggregate exposure. It is not unlimited business insurance. The new fact pattern changes the setting, not the governing rule or management control. The other choices either skip a required step, apply a different rule, or fail to address the stated risk.

23 more in the bank

Answers and explanations for these are in the app.

  • A liability policy expires when a project finishes, but property damage is discovered months later. What should the contractor examine?
  • A policy excludes the exact operation being subcontracted. What should the contractor do before work?
  • A subcontractor provides a certificate of insurance. What should the prime contractor understand?
  • Does a contractor license bond replace liability insurance or guarantee completion of every project?
  • May a claimant knowingly include unrelated disputed work from another project in a mechanics lien?
  • Payroll and employee classifications change substantially during the policy year. What insurance control is appropriate?
  • What license risk follows if a required contractor bond is cancelled and not replaced?
  • What risk does a public-works payment bond principally address?
  • When is a conditional waiver and release generally safer than an unconditional release?
  • Who may potentially benefit from a statutory contractor license bond?
  • Why is a claimant’s preliminary notice process important on a private project?
  • A claimant adds debt from an unrelated project to increase leverage in a mechanics-lien claim. Is that amount proper?
  • A material supplier begins deliveries without tracking the participants or deadline needed for its preliminary notice. Which future rights may be endangered?
  • A qualifying unpaid construction claimant wants funds held rather than released from the construction financing. Which remedy serves that function?
  • A required contractor bond terminates with no replacement on file. What can happen to license status?
  • A subcontractor emails a certificate showing general liability limits, but the listed policy excludes the subcontracted operation. What should the prime verify?
  • A subcontractor signs an unconditional progress release while the payment is still an unconfirmed electronic transfer. Which release approach better protects it?
  • A subcontractor waits until the first unpaid invoice to identify notice recipients and dates. Why should this information have been tracked at mobilization?
  • Before a subcontractor begins an excluded high-risk operation, what should the prime do about the known insurance gap?
  • Before issuing the next progress check, the prime wants releases covering the exact work and payment period already funded. Which control is appropriate?
  • Labor and material claimants on public work generally cannot lien public property. What principal risk is a public-works payment bond intended to address?
  • Midyear payroll and employee job classifications differ substantially from the estimates used to price workers' compensation coverage. What insurance control is appropriate?
  • Property damage from completed work is discovered months after the project and after one policy period ended. Which coverage features and dates require review?

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