A C-10 electrical contractor's license bond is $25,000. If a homeowner files a valid claim for $18,000 in damages and the surety pays out, what happens to the contractor's license?
Correct Answer
D) License is automatically suspended until bond is restored to full amount
When a contractor's license bond is impaired by a payout, the license is automatically suspended until the bond is restored to the full required amount per B&P Code Section 7071.6.
Why This Is the Correct Answer
Under California B&P Code Section 7071.6, when a contractor's bond is reduced by a claim payout, the license is automatically suspended. The suspension continues until the bond is restored to the full required amount ($25,000 in this case). The contractor must replenish the bond to reinstate the license.
Why the Other Options Are Wrong
Option A: License remains active with no additional requirements
The license does not remain active after a bond impairment. California law mandates that a contractor maintain the full bond amount at all times; a reduction triggers automatic suspension regardless of the payout amount.
Option B: Contractor has 30 days to pay a penalty fee
There is no 30-day penalty fee provision in B&P Code for bond impairment. The suspension is immediate and automatic, not subject to a grace period penalty payment.
Option C: License is revoked permanently
Permanent revocation is not the consequence of a bond payout. Revocation is a more severe disciplinary action reserved for serious misconduct. Bond impairment leads to suspension, which is curable by restoring the bond.
Memory Technique
Bond goes down → License goes down. Think of the bond and license as connected balloons — when the bond deflates, the license deflates too, and you must re-inflate the bond to bring the license back up.
More California Questions
A Class C-10 electrical contractor has annual gross receipts of $3.2 million. What is the required bond amount under current California law?
Under B&P Code Section 7125.4, what is the fee for initial Home Improvement Salesperson registration?
According to B&P Code Section 7125, what is the maximum penalty the CSLB can impose for contracting without a license?
A home improvement contract for $8,500 requires a 3-day right to cancel notice. The contract is signed on Tuesday at 2 PM. When does the cancellation period expire?
A contractor employs 15 workers across multiple job sites. The total annual payroll is $850,000 with a workers' comp rate of 4.1%. If they self-insure with a deposit requirement of 125% of estimated annual premium, what deposit is required?
A C-10 electrical contractor wants to perform plumbing work valued at $8,000 as part of a larger electrical project. Is this permissible under CSLB regulations?
A homeowner discovers that an unlicensed contractor performed $25,000 worth of work on their property. Under B&P Code Section 7031, what remedy is available to the homeowner?
A Class B general building contractor wants to perform electrical work valued at $750. According to the B&P Code, this contractor:
A contractor's qualifying individual leaves the company. How many days does the contractor have to replace them before the license becomes invalid?
According to B&P Code Section 7031, what happens to a contractor's right to payment if they perform work while unlicensed?
People Also Study
Business & Financial Management
120 questions · 70% to pass
Contract Administration
60 questions · 70% to pass
Project Management
60 questions · 70% to pass