A Class C-10 electrical contractor has a bond claim filed against them for $8,000. The contractor's license bond amount is $25,000. If the claim is valid and paid, what happens to the contractor's license status?
Correct Answer
D) License is automatically suspended until bond is restored
Under B&P Code Section 7071.8, when a bond claim is paid, the license is automatically suspended until the full bond amount is restored.
Why This Is the Correct Answer
Under B&P Code Section 7071.8, when a valid claim is paid from a contractor's license bond, the license is automatically suspended — regardless of how much bond coverage remains. The suspension takes effect immediately and the license remains suspended until the contractor restores the bond to its full required amount. The fact that $17,000 remains in the bond does not prevent suspension — any paid claim triggers automatic suspension.
Why the Other Options Are Wrong
Option A: License remains active with no additional requirements
The license does not remain active after a bond claim is paid. B&P Code Section 7071.8 is clear that automatic suspension follows any paid bond claim. Believing the license stays active because significant bond coverage remains is a fundamental misunderstanding of how bond claims affect license status.
Option B: Contractor has 90 days to restore the bond or license becomes invalid
There is no 90-day grace period to restore the bond before the license becomes invalid. The suspension is immediate and automatic upon payment of the claim. The license status changes the moment the bond is reduced, not after a waiting period.
Option C: License is revoked permanently
Permanent revocation is far too severe a consequence for a bond claim payment. Revocation is reserved for serious misconduct findings after a disciplinary hearing. A bond claim results in automatic suspension — which is correctable by restoring the bond — not permanent revocation.
Memory Technique
Remember: 'Bond claim paid = license suspended, full stop.' Think of the bond like a balloon — if any air escapes (any claim is paid), the balloon (license) deflates immediately. To re-inflate it (restore active status), you must pump it back to full pressure (restore the full bond amount). Partial coverage is not enough.
More California Questions
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