A contractor's license bond is called upon for a valid claim of $8,000. The bond amount was $15,000. After paying this claim, what action must the contractor take?
Correct Answer
D) Restore the bond to its full penal sum immediately
When a bond is impaired by a claim payment, it must be restored to its full penal sum immediately to maintain the license in good standing.
Why This Is the Correct Answer
California Business and Professions Code requires that when a bond is reduced by a claim payment, the contractor must immediately restore the bond to its full penal sum. The license is impaired the moment the bond falls below the required amount, so there is no grace window — restoration must be immediate to keep the license in good standing.
Why the Other Options Are Wrong
Option A: File a new bond application
Filing a new bond application is not the correct response. The existing bond simply needs to be restored (the surety increases coverage back to full value), not replaced with a brand-new application process. This option conflates initial bonding with bond restoration.
Option B: No action required until the bond is exhausted
Waiting until the bond is exhausted is never permissible. The license becomes impaired as soon as the bond is reduced below its required penal sum. Continuing to work under an impaired bond exposes the contractor to license suspension and disciplinary action.
Option C: Restore the bond within 60 days
A 60-day window to restore the bond does not exist under California law. The CSLB does not grant a grace period for bond impairment — restoration must occur immediately. The 60-day figure may be confused with other renewal or correction deadlines.
Memory Technique
Think of the bond like a fuel gauge — the moment it drops below the required level, the engine stops. 'Impaired bond = impaired license, and the fix must be immediate.' No grace, no waiting.
More California Questions
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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?
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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?
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A contractor's qualifying individual leaves the company. How many days does the contractor have to replace them before the license becomes invalid?
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