ABC Construction holds a Class B license with a $25,000 bond. They abandon a project causing $30,000 in damages. The property owner files a bond claim. What is the maximum recovery from the bond?
Correct Answer
B) $25,000
Bond recovery is limited to the bond amount of $25,000, even though damages exceed this amount.
Why This Is the Correct Answer
A surety bond only covers claims up to the bond's face value. The bond is $25,000, so regardless of actual damages ($30,000), the maximum any claimant can recover from the bond is $25,000. The remaining $5,000 in damages must be pursued through other legal means (e.g., civil lawsuit against the contractor).
Why the Other Options Are Wrong
Option A: $30,000
$30,000 is the actual damage amount, but bond recovery is capped at the bond's face value. A surety bond is not an insurance policy that pays actual damages — it pays up to the bond limit.
Option C: $15,000
$15,000 has no basis in this scenario. There is no provision to split or prorate the bond claim to half the bond amount. The full $25,000 bond is available to satisfy the claim.
Option D: $35,000
$35,000 exceeds both the damages and the bond amount, making it impossible. Bonds cannot pay more than their face value, and claimants cannot recover more than their actual damages.
Memory Technique
The bond is a bucket — it can only hold $25,000. If the spill is $30,000, the bucket fills to the top at $25,000 and the extra $5,000 goes uncaptured. You can never get more water than the bucket holds.
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