Insurance & Liens

The rule

One employee is enough: coverage has to be in force before that person’s first day, and on the day a contractor’s policy lapses the CSLB license is suspended by operation of law.

When it applies — and when it does not

• –Labor Code §3700 reaches every employer except the state, and part-time, seasonal and temporary workers all count.
• –Coverage may come from an admitted insurer or from a Certification of Self-Insurance issued by the Director of Industrial Relations.
• –A licensee with no employees may file an exemption statement with the board instead, but not if the license carries a C-8, C-20, C-22, C-39 or D-49 classification.
• –An inactive license needs neither a certificate nor an exemption while it stays inactive.

Worked contrast

Common mix-ups

• –The suspension is automatic on the lapse date; it does not wait for a hearing, a complaint or a claim.
• –The 90-day figure that people attach to this rule is the claim-denial presumption in the workers’ comp system, not a grace period to keep working uninsured.
• –C-10 is often named as a classification that can never take the exemption; the classifications the statute actually lists are C-8, C-20, C-22, C-39 and D-49.

The rule

Being unlawfully uninsured is a misdemeanor with a fine floor of $10,000, and the penalty assessments on top of it run to $10,000 per employee once an injured worker’s claim is found compensable, capped at $100,000.

When it applies — and when it does not

• –The crime reaches an employer who knew, or from experience should reasonably have known, of the duty to secure payment of compensation.
• –The §3722(a) assessment is issued together with the stop order, before any injury has happened.
• –The $100,000 ceiling in §3722(f) covers the assessments in this section but does not limit the §3722(b) assessment for a period of being uninsured.

Worked contrast

Common mix-ups

• –$7,000 was the ceiling in Labor Code §6431 before the annual CPI adjustments began in 2018; the figure printed in the statute today is $12,471 and it moves every January.
• –Labor Code §3550 creates the posting duty and makes failure to post a misdemeanor and prima facie evidence of noninsurance, but it names no dollar amount — the money is in §6431.
• –$100,000 is a ceiling on the total of the §3722 assessments, not the penalty for a single employee.

The rule

Liability for workers’ compensation exists “without regard to negligence,” and in exchange the compensation claim is the employee’s sole and exclusive remedy against the employer.

When it applies — and when it does not

• –Both employer and employee must be subject to the division, and the injury must arise out of and in the course of the employment.
• –Section 3600(a) withholds benefits where the injury came from the employee’s intoxication, was intentionally self-inflicted, or arose from an altercation the employee started.
• –Section 3602(b) opens a civil action for a willful physical assault by the employer, fraudulent concealment of the injury, or a defective product the employer made and sold.
• –If the employer never secured payment of compensation, §3706 lets the injured worker sue at law as if the division did not apply.

Worked contrast

Common mix-ups

• –No-fault is about who caused the injury, not about whether the worker was blameless — a partly at-fault worker still collects.
• –The exclusive remedy runs against the employer. It does not bar a claim against a negligent third party.
• –Benefits are the employer’s liability, paid through its carrier or self-insurance, not a payment from the state.

The rule

The employer has one working day to hand the worker the DWC-1 claim form, and one working day after that form is filed to authorize treatment, with liability capped at $10,000 until the claim is accepted or rejected.

When it applies — and when it does not

• –The form duty is triggered by an injury that causes lost time beyond the shift or medical treatment beyond first aid.
• –The $10,000 is a ceiling on the employer’s liability while the claim is pending, not a cap on the worker’s medical benefits.
• –Treatment provided under §5402(c) does not give rise to a presumption that the employer is liable.
• –If liability is not rejected within 90 days after the claim form is filed, the injury is presumed compensable.

Worked contrast

Common mix-ups

• –The presumption clock is 90 days, and 75 days for the listed presumptive injuries. There is no 30-day presumption here.
• –The $10,000 is spent before anyone decides the claim, which is the whole point of it — it is not what the worker gets after the claim is accepted.
• –One working day is counted from notice of the injury for the form, and from filing of the form for the treatment authorization.

The rule

Liability insurance answers for injury to other people and damage to other people’s property, and by statute it does not include workers’ compensation or vehicle insurance, so the claim goes to whichever policy matches who was hurt and what was damaged.

When it applies — and when it does not

• –Your own employee is hurt on the job: that is workers’ compensation, which Ins. Code §108(a) expressly excludes from liability insurance.
• –A vehicle used in the business is involved: that is the commercial auto policy, also excluded from the §108(a) definition of liability insurance.
• –The thing damaged is the unfinished project itself: that is builder’s risk, a property cover on the work, not a liability cover.
• –The loss is purely financial and comes from a design or advice error: that is errors and omissions, which a standard CGL policy usually excludes.

Worked contrast

Common mix-ups

• –The license bond is not the contractor’s insurance. It protects the customer, and the surety collects back from the contractor what it pays out.
• –Builder’s risk is property coverage on the work itself. It is not the policy that answers a lawsuit brought by an injured third party.
• –A personal auto policy generally excludes vehicles used for business, so the company truck needs the commercial auto policy.

The rule

A design professional who is not paid may record a lien on the site even though the work of improvement never started, but only if a building permit or other governmental approval was obtained using those services.

When it applies — and when it does not

• –“Design professional” under §8014 means a licensed architect, licensed landscape architect, registered professional engineer, or licensed land surveyor.
• –The services must have been furnished under a written contract with the landowner.
• –The landowner who contracted for the services must still own the site when the claim of lien is recorded.
• –The lien is for the contract fee or the reasonable value of the services, whichever is less, reduced by any deposit or prior payment.

Worked contrast

Common mix-ups

• –Civil Code §8484 is the list of allegations a petition for a release order must contain. It is not the design professionals lien.
• –This lien exists precisely because nothing was built, so there is no improvement for an ordinary mechanics lien to attach to.
• –A permit or other governmental approval is a condition of the lien, not a formality — without one the chapter creates no lien.

The rule

On a private job the lien window is 90 days after completion of the work of improvement, cut short to 60 days for the direct contractor and 30 days for every other claimant once the owner records a notice of completion or cessation.

When it applies — and when it does not

• –Whichever of the two dates comes earlier controls — both §8412 and §8414 are written as “before the earlier of the following.”
• –A subcontractor or supplier must first have served the preliminary notice, due not later than 20 days after it first furnished work (§8204(a)).
• –The shortened 30-day and 60-day windows start only if a notice of completion or cessation is actually recorded.
• –The direct contractor may not record until after it has completed its direct contract (§8412).

Worked contrast

Common mix-ups

• –The 60-day figure lives in §8412 and the 30-day figure in §8414. Citing §8414 for the direct contractor’s 60 days points at the wrong section.
• –Civil Code §8800 is the 30-day progress-payment duty and §8812 the 45-day retention duty. Neither is a deadline to record a lien.
• –90 days shows up twice on the same job: as the outer window to record the lien, and again under §8460 as the window to sue after it is recorded.

The rule

Both bonds in this area are set at 125 percent: a lien release bond of 125 percent of the claim of lien takes the property out from under the lien, and a bond of 125 percent of the claim makes a stop payment notice binding on a construction lender.

When it applies — and when it does not

• –The release bond must be executed by an admitted surety insurer and may be recorded before or after an action to enforce the lien is started.
• –On recordation the real property is released from the claim of lien, and the claimant pursues the bond instead of the land.
• –A recorded lien still has to be enforced by filing suit within 90 days of recordation, or it expires and is unenforceable.
• –The percentage is measured against the claim — the claim of lien, or the amount allocated in it to the property released — never against the project value.

Worked contrast

Common mix-ups

• –125 percent is the figure for both bonds. 100 percent, 150 percent and “the lien plus interest” are not the rule for either of them.
• –Recording a release bond does not extend the §8460 90-day clock on the lien. It moves the claim onto the bond, which carries its own six-month limit under §8424(d).
• –Civil Code §8506 says how a stop payment notice must be given, and to whom. The 125 percent bond that obligates a lender is §8532.