Browse all questions

CGL policies typically exclude the cost of repairing the insured contractor's own defective work (the 'your work' exclusion), while covering resulting third-party bodily injury and property damage plus defense costs. Faulty-work repair is a business risk, not an insured peril.

Commercial auto responds to liability and physical damage arising from the contractor's owned, hired, and non-owned vehicles. (a) is builder's risk, which insures the work itself. (c) is inland marine or a tools and equipment floater. (d) is workers' compensation. The overlap worth knowing: when an employee is hurt driving for work, the employee's own injury is a workers' compensation claim while the other driver's injuries are the auto liability claim — one accident, two policies.

Civil Code §8460(a) requires the claimant to commence an action to enforce the lien within 90 days after the claim of lien is recorded, and provides that the lien otherwise expires and is unenforceable; four months is past the deadline. (c) uses a real figure from the wrong subdivision: §8460(b) extends the deadline only where the claimant and owner agreed to extend credit and recorded notice of it, and even then no later than one year after completion. (a) and (d) invent conversions the statute does not provide — a judgment lien needs a judgment, and a stop payment notice is a separate remedy that must be given while undisbursed funds remain.

Civil Code §8416 makes service of the lien on the owner and inclusion of a proof of service affidavit conditions of enforceability. Failure to serve the owner and attach proof of service renders the recorded lien unenforceable regardless of actual knowledge.

Risk flows upward in construction insurance: the owner and general contractor are named as additional insureds on the subcontractor's policy, so that liability arising from the sub's work is answered by the sub's insurer. A sub asking to be added to the prime's policy asks for the reverse. (a) is simply false — a CGL policy can carry many additional insureds by endorsement. (b) confuses being on the same job with being on the same policy. (c) is a category error; the mechanics lien statute says nothing about insurance.

Labor Code §3700 requires every employer except the state to secure the payment of compensation, either by insuring with a carrier authorized to write it in California or by obtaining a certificate of consent to self-insure from the Director of Industrial Relations; one employee is enough, and there is no small-employer exception. For licensed contractors the license law adds to that: B&P §7125 requires a current certificate of workers' compensation insurance or of self-insurance on file, and even a licensee with no employees must carry it if it holds a C-8, C-20, C-22, C-39 or D-49 classification. From January 1, 2028 (SB 216, as postponed by SB 1455 (Stats. 2024, ch. 485)) every licensee must, except a joint venture licensed under §7029 that employs nobody. (c) is a threshold some other states use and California does not. (a) and (d) invent categories the statute has never drawn.

A stop payment notice traps money the owner or lender has not yet paid out, so the claimant is paid from the construction fund instead of having to sue to foreclose on and sell the owner's property. (a) is half-true and therefore the best trap: a notice given to the OWNER under §8520 needs no bond, and §8522(a) obliges the owner to withhold on receipt, but a notice that binds a construction lender must be accompanied by a bond of 125 percent of the claim under §8532. (b) is wrong — the same preliminary notice that preserves lien rights conditions the stop payment notice. (d) overstates the remedy: it reaches the fund, and an owner who has already properly disbursed everything has nothing left to withhold.

A certificate of insurance is evidence of what was in force on the day it was issued; it is not part of the policy, it does not bind the insurer, and its own text usually says so. If the policy was properly cancelled, there is no coverage whatever dates the certificate carries. (c) is the 30-day notice-of-cancellation term that appears in contracts and in some endorsements — a promise to tell the holder that coverage is ending, not a promise of 30 more days of it, and not a rule of law. (a) is the certificate-as-contract error. (d) confuses the holder's own program with the contractor's; nothing transfers between policies.

Civil Code §8180(a) lists the completion events: actual completion; occupation or use by the owner accompanied by cessation of labor; cessation of labor for a continuous period of 60 days; and recordation of a notice of cessation after labor has stopped for 30 days. Here the second applies, and because no notice of completion was recorded, §8412 gives the direct contractor 90 days from completion and §8414 gives every other claimant 90 days from it. (a), (b) and (c) are all real dates in the project record, and none of them starts a lien clock — which is why a claimant who counts from the last payment or from signing records too late.

The performance bond protects the obligee against non-completion; the payment bond protects subcontractors, laborers, and suppliers, and so protects the owner indirectly from claims against the property — and under Civil Code §8600 an owner who files the direct contract and records a payment bond of at least 50 percent of the price before work begins may have lien enforcement restricted to the bond. (a) confuses security for performance with the contract that creates the obligation. (c) reverses cause and effect: bonds are underwritten on the contractor's credit and do not reduce insurance premiums. (d) is a separate statutory duty under B&P §7125 and Labor Code §3700.

The indemnitor is the promisor: it agrees to assume, defend, or reimburse the indemnitee's specified losses. (c) is the indemnitee, and reversing the pair is the whole substance of this item. (a) is the insurer, which performs a comparable economic function under a policy rather than under the construction contract, and which is often what stands behind the indemnitor's promise. (b) belongs to the lien law. How far the promise can go is limited by Civil Code §2782, which makes indemnity for the promisee's sole negligence or willful misconduct void and unenforceable in a construction contract.

Civil Code §8204(a) lets a claimant who missed the 20 days give the notice later, but then limits the lien, stop payment notice, and payment bond claim to work provided within the 20 days before service and at any time afterwards. Serving at the start therefore protects the whole claim, and the value of doing so only becomes visible once a dispute arises over early work. (a) confuses the notice with the recording deadlines in §8412 and §8414, which the notice does not move. (c) invents a pre-contract requirement; the clock starts at first furnishing. (d) treats the notice as a substitute for the lien, when it is a precondition to it under §8410.

Suretyship is a three-party arrangement — the principal whose obligation is guaranteed, the surety that guarantees it, and the obligee or statutory beneficiaries who may claim — and a surety that pays a valid claim has a right of indemnity against the principal and any indemnitors. (a) reverses the roles: the principal is the party guaranteed against, not the party protected. (b) counts two parties and then mislabels the instrument as insurance. (c) describes insurance, where premium income absorbs losses and the insurer has no claim back against its insured. In the license context, B&P §7071.11(e) requires the surety to notify the Registrar within 30 days of any payment on the bond.

Under Civil Code §8414, once a notice of completion is recorded, a claimant other than the direct contractor must record within 30 days. Counting 30 days from July 1 lands at the end of July. Only the direct contractor would get 60 days.

The 'your work' exclusion keeps the cost of tearing out and redoing the insured's own faulty workmanship outside the liability policy, on the principle that quality is a business risk the contractor controls rather than a fortuity — that risk belongs to warranties, retentions, and performance bonds. Damage the faulty work causes to other property or to people can still be covered, subject to the policy's terms, which is why (b) and (c) remain insured losses and (a) is the defense duty that comes with them.

A mechanics lien attaches to the work of improvement and to the interest of the owner who caused it to be constructed, which is what makes foreclosure and sale of that interest the claimant's ultimate remedy. (b) describes the target of a bonded stop payment notice, not a lien, and the two remedies are deliberately separate. (c) confuses a lien with an assignment of contract proceeds. (d) is the title-retention idea from sales law: once material is incorporated into the improvement, the claimant's security is the lien on the property, not the material.

Additional insured status comes from an endorsement issued by the insurer, because only the parties to the policy can change who it insures. (b) evidences coverage and expressly confers no rights. (c) obliges the contractor to obtain the endorsement, so a broken promise leaves the owner uninsured while it believes itself covered. (d) is a promise between the contracting parties that never touches the policy: it depends on the indemnitor's solvency, and Civil Code §2782 voids it to the extent it would indemnify a party for its own sole negligence or willful misconduct.

Labor Code §3700.5 makes the failure to secure the payment of compensation, by someone who knew or should reasonably have known of the obligation, a misdemeanor punishable by up to one year in the county jail, or by a fine of up to double the premium that would have been due but not less than $10,000, or by both — with the §3722 penalty assessments, a stop order, and suspension of the license under B&P §7125.2 on top. (a) understates the grade of the offence. (c) is the catch-up belief: paying the premium later does not undo the period of non-coverage, during which §3706 and §3708 exposure also attached. (d) invents a headcount exemption §3700 has never contained.

Civil Code §8522(a) requires an owner served with a stop payment notice to withhold from the direct contractor, or from anyone acting under the direct contractor's authority, a sufficient amount due or to become due to pay the claim stated in the notice. §8522(b) lets an owner that had already recorded a payment bond under §8600 decline to withhold, provided it notifies the claimant within 30 days and encloses a copy of the bond. (a) invents a recording duty; a stop payment notice is served, not recorded. (b) turns withholding into payment — the owner holds the money, and entitlement is settled later between the claimant and the direct contractor, with §8550 requiring the claimant's action no earlier than 10 days after giving the notice and no later than 90 days after the notice period closes. (d) imports the §8532 bond, which is required only for a notice that binds a construction lender. Note also that the allowance for the withholder's litigation costs is the PUBLIC works rule in §9358(a), not the private-works rule here.

A payment bond gives lower-tier claimants a solvent surety to pursue in addition to the mechanics lien and the stop payment notice; §8608 gives that right to claimants who provided work to the direct contractor, directly or through subcontractors, and §8610 requires an action on a bond recorded before completion within six months after completion. (b) is the fatal shortcut: §8612(a) requires the same preliminary notice for a bond claim, with only the narrow late route in §8612(b). (c) overstates §8600, which lets a court restrict lien enforcement to the bond only where the owner filed the direct contract and recorded a bond of at least 50 percent of the price before work began. (a) misreads §8608 entirely.

Civil Code §8424(b) sets the lien release bond at 125 percent of the claim of lien, or 125 percent of the amount the lien allocates to the property being released, executed by an admitted surety and conditioned on payment of any judgment and costs the claimant recovers; on recordation the property is released from the lien and from any action to enforce it, and §8424(d) requires notice to the claimant, who must then sue on the bond within six months. (a) leaves nothing for the costs and interest the 25 percent margin is there to cover — 100 percent is the measure of the different bond in B&P §7071.17, which equals the unsatisfied judgment. (d) is the 50 percent ratio §8600 uses for an owner's recorded payment bond. (b) appears nowhere in this part; the other 125 percent figure is the bond that accompanies a stop payment notice to a lender under §8532.

Civil Code §8018 defines the direct contractor as a contractor that has a direct contractual relationship with an owner, and provides that a reference elsewhere to a 'prime contractor' means a direct contractor. The tier decides the rules that follow: §8412 gives the direct contractor 90 days after completion or 60 days after a recorded notice of completion to record a lien, while §8414 gives every other claimant 90 or 30; §8200(e)(2) excuses a claimant with an owner contract from serving anyone but the construction lender; and §8520 lets only claimants OTHER than the direct contractor give the owner a stop payment notice. (b) describes the tier below. (c) is a material supplier, which has a lien right under §8400(c) but no owner contract. (d) points at the public works title, where §9100(b) bars a direct contractor from the stop payment notice and the payment bond altogether.

A claims-made policy is triggered by the claim: it responds when the claim is first made against the insured and reported while the policy, or an extended reporting period, is in force, whatever the date of the underlying event. (b) is the occurrence trigger, and separating the two is the point of the item — an occurrence policy answers for injury that happened during its period even if the claim arrives years later. (c) is a condition of every policy rather than a coverage trigger. (d) transplants a mechanics lien step into insurance, where notice of a claim is governed by the policy's own conditions.

An occurrence policy is triggered by when the bodily injury or property damage happened: if the damage occurred during the policy period, the policy responds even if the claim surfaces years after that policy expired. (a) states the claims-made trigger, which is the genuine alternative and the reason this distinction matters when a contractor switches policy forms. (b) is the completed-operations idea in the wrong place — completed operations describes what kind of exposure is covered, not when coverage attaches. (d) states a reporting condition, which is a duty under the policy and not the coverage trigger.

The lender is served so the claimant can later serve a bonded stop payment notice and trap loan funds the lender has not paid out; missing the lender forfeits that fund-based remedy. (b) survives if the owner and direct contractor were properly served, because the lien depends on notice to them. (c) never depended on any preliminary notice — contract rights against your own customer are unaffected. (d) is the closest trap: bond rights do track lien-notice requirements, but it is notice to the owner and direct contractor that supports them, not notice to the lender.

Subrogation lets an insurer that has paid its insured's loss stand in the insured's place and recover from whoever caused it, which is why construction contracts so often include a mutual waiver of subrogation. (a) is cancellation, a separate policy right. (b) is additional insured status, which concerns who is protected rather than who may be pursued afterwards. (c) is the deductible, a retention borne by the insured. Each is a genuine insurance term, which is the point: the item tests whether the candidate can place them.

Subrogation is the insurer's right, after paying its own insured, to step into the insured's shoes and recover from whoever caused the loss. A mutual waiver gives up that recovery, so an insured loss stays with the insurer that was paid to carry it and the project participants do not litigate against each other; it is commonly paired with builder's risk coverage. (c) is the misreading that matters: the coverage still responds, and it is only the insurer's onward claim that is waived. (a) and (b) waive substantive rights a subrogation clause does not touch, and a lien waiver in particular is valid only in the statutory form.

Civil Code §8422 makes a claim of lien void to the extent it includes work not provided or is willfully overstated, and the claimant can lose the lien altogether and face liability for the owner's resulting damages. (a) is the widespread and costly assumption that padding is free because a judge will simply trim it. (b) treats the consequence as a fee. (d) invents a transfer between remedies — overstating a lien does not move the surplus onto a bond, and a willfully false bond claim carries its own exposure.

The $25,000 bond required by B&P §7071.6 is a suretyship for the benefit of the people listed in §7071.5 — homeowners and property owners damaged by a violation, anyone damaged by a willful violation or fraud, and employees owed wages or fringe benefits. (a) reverses the direction of the protection, and in fact the surety may seek indemnity from the contractor after paying. (b) describes a performance bond, which is project-specific and sized to the contract. (c) describes commercial general liability insurance, which the license bond does not replace.

The $25,000 bond required by B&P §7071.6 is a condition of licensure that runs to the beneficiaries listed in §7071.5 and stands behind everything the licensee does, in a fixed amount that has nothing to do with any contract's size. A performance bond is bought for one project, sized to that contract, and runs to that project's obligee, guaranteeing the job gets finished. (b) and (c) simply swap the two. (d) misses both differences that matter — the source, statute versus contract, and the scope, all work versus one job.

Civil Code §8106 allows notice under this part by personal delivery, by mail in the manner §8110 prescribes, or by leaving the notice and mailing a copy as Code of Civil Procedure §415.20 provides; §8110 defines that mail as registered or certified mail, express mail, or overnight delivery by an express service carrier, and §8118 governs proof of notice. (a) confuses service with recording: the preliminary notice is served on the owner, direct contractor, and lender, while the claim of lien is what gets recorded. (b) is a substituted-service device this part does not use. (d) is outside the permitted means no matter what receipt the sender keeps.

Certificate holder is an address line: it identifies who was given the document. It confers no rights under the policy. (b) is the status the general contractor actually wants, and it comes only from an additional insured endorsement — mistaking the certificate for the endorsement is the classic and expensive error. (c) goes further still; a named insured is a party to the contract of insurance, which the general contractor is not. (d) is a property-insurance role concerned with who gets paid for damaged property, and it has no bearing on liability coverage.

A private-work payment bond adds a surety to pursue; it does not by itself extinguish lien rights, and a claimant may hold both remedies while recovering the debt only once. The real qualification is Civil Code §8600: where the owner in good faith files the direct contract with the county recorder and records a payment bond of at least 50 percent of the contract price before work commences, the court shall, where equitable, restrict lien enforcement to the bond. (a) states that outcome as though it were automatic, which it is not. (b) is double recovery, which no remedy permits. (d) misreads who may claim on the bond: §8608 gives the right to claimants who provided work to the direct contractor, directly or through subcontractors.

A recorded notice of cessation has the same effect as a notice of completion: Civil Code §8414 cuts claimants other than the direct contractor to 30 days after recording, and §8412 gives the direct contractor 60 days. (b) swaps the two figures, and reversing them is the most common error on this pair. (c) is the rule when nothing is recorded — 90 days after completion for everyone — and is exactly what the recording is meant to shorten. (d) confuses this with the §8460 outer limit for bringing a foreclosure action after a lien is recorded.

Completed operations responds to bodily injury and property damage arising out of the contractor's work after that work is finished and turned over — the coverage that answers latent defects surfacing years later. (a) is workers' compensation and employers' liability, a different policy entirely. (b) is business income coverage, a first-party time-element loss. (d) is the hardest distractor and the most valuable to get right: the CGL's business-risk exclusions generally leave the cost of repairing your own faulty work uninsured, even though the resulting damage to other property may be covered.

Until January 1, 2028, B&P §7125(b) as amended by SB 1455 (Stats. 2024, ch. 485) lets a licensee with no employees skip the policy by filing a statement, on the Registrar's form, certifying that it employs no one subject to the workers' compensation laws — provided it holds no C-8, C-20, C-22, C-39 or D-49 classification. A Class B sole owner with no employees qualifies (b). (a) is the rule SB 216 wrote: from January 1, 2028 only a §7029 joint venture with no employees will be exempt and this sole owner will have to carry coverage. SB 1455 moved that date from 2026, so material that calls it current is out of date. (c) inverts the list: adding a C-39 roofing classification is exactly what takes the exemption away. (d) is misclassification, not exemption: Labor Code §2750.5 presumes a worker performing licensable work is an employee, and paying on a 1099 changes the paperwork rather than the status.

Civil Code §8460 requires an action to enforce a lien within 90 days after recording, unless a notice of credit is recorded extending the time — and in no event may the action be brought more than one year after recording. (a) transfers the claim without touching the deadline; an assignee inherits the same clock. (c) confuses the amount with the time limit, and inflating a lien invites the §8422 overstatement problem. (d) imports a debt-acknowledgement rule from the statute of limitations, which does not restart the mechanics lien deadline.

If a subcontractor has no workers' compensation coverage, its injured workers can be treated as employees of the hiring contractor, whose own policy then pays and whose experience rating carries the loss. Requiring each sub to insure its own people keeps that exposure where it belongs. (a) overstates the licensing rule: under B&P §7125(b) a licensee with no employees may still file an exemption unless it holds one of the excluded classifications. (c) is false — a contractor's policy covers its own construction employees. (d) mixes workers' compensation with the lien statute, which says nothing about it.

Civil Code §8532 makes the bond the price of forcing a lender, a stranger to the dispute, to freeze loan funds: if the claim turns out to be bad, the bond answers the lender's resulting damages and costs. (a) confuses it with the §7071.6 license bond, which is a licensing condition unrelated to any project. (c) reverses the beneficiary — the bond protects the lender against the claimant, not the claimant against the borrower. (d) is the misconception that a bond can cure a missed notice; it cannot, and a claimant who never noticed the lender has nothing to serve.

On a performance bond, the obligee is the party protected by the guarantee of completion — typically the project owner. The contractor is the principal and the bonding company is the surety. Subs and suppliers are protected instead by the payment bond.

Civil Code §8416 requires the claimant to serve the owner or reputed owner with a copy of the lien and the statutory Notice of Mechanics Lien, and to record a proof of service affidavit with the lien; failure makes the lien unenforceable. (b) borrows the 20-day preliminary notice rule, which is a different notice served before the lien exists. (c) conflates service with the §8460 deadline for filing suit. (d) treats a recording condition as an evidentiary detail, which is precisely the mistake §8416 was written to punish.

Civil Code §2782 voids a construction contract clause purporting to indemnify a party for its own sole negligence or willful misconduct, and §2782.05 further restricts indemnity by subcontractors for the active negligence of the general contractor. (b) inverts the statutes, which reach residential work rather than exempting it. (c) is the pre-statute common-law position, which clear drafting no longer rescues. (d) is a real and important distinction stated as an equivalence — additional insured coverage is subject to policy terms and limits, and does not do the work of an indemnity clause.

Civil Code §2782(a) makes void and unenforceable, as against public policy, a construction contract provision purporting to indemnify the promisee against liability for death or bodily injury, injury to property, or any other loss arising from the promisee's own sole negligence or willful misconduct, or from defects in design furnished by the promisee. §2782.05 goes further inside subcontracts, voiding a subcontractor's indemnity of the general contractor for the general contractor's active negligence, subject to the exceptions the section lists. (a), (b) and (d) are ordinary commercial risks that parties remain free to allocate by contract — which is why the item turns on fault, not on inconvenience.

Primary and noncontributory means the subcontractor's policy answers first for claims arising out of the subcontractor's work, and does not ask the additional insured's own insurer to share the loss — which is what makes the risk transfer real rather than nominal. (c) is the excess or umbrella position, the exact inverse of what the requirement buys. (a) describes where the general contractor stands with no additional insured endorsement at all. (d) is workers' compensation, a coverage no liability endorsement supplies.

When no notice of completion or cessation is recorded, Civil Code §8412 and §8414 give every claimant 90 days after actual completion to record a mechanics lien. The 30/60-day distinctions apply only once such a notice is recorded.

A payment bond gives unpaid subcontractors and suppliers a solvent source other than the owner's real property, which reduces the owner's exposure to liens and to paying twice for the same work. (b) describes the performance bond, which answers non-completion — the two bonds are issued together and protect against different failures. (c) misunderstands surety pricing: the premium is earned, and in any case it is a cost the contractor carries into the contract price. (d) is unrelated, since retention is governed by the contract and by Civil Code §8811.

Contractor's inland marine — the equipment floater and installation floater — covers movable property while it travels and while it sits at a jobsite, which ordinary fixed-location property policies will not follow. (a) is the owner's permanent property insurance, which takes over where builder's risk ends. (b) is workers' compensation; the tools are incidental to who was hurt. (c) is commercial general liability. The common thread among the wrong answers is that each is a real policy a contractor carries, which is what makes placing the loss the skill being tested.

Civil Code §8400(d) gives an equipment lessor a lien right, but §8410 makes enforcement depend on having given the preliminary notice, and §8200 sends that notice to the owner, the direct contractor, and the construction lender, no later than 20 days after first furnishing under §8204(a). (a) is the automatic-lien belief: the right exists and is unenforceable without the notice. (b) serves only the party upstream, which is the most common fatal error — the lessor has no contract with the owner, so the owner is exactly who must be told. (d) records too early: §8414 allows the claim of lien only after the claimant ceases to provide work, and before the earlier of 90 days after completion or 30 days after a recorded notice of completion.

A certificate is a verification document: it lets a hiring party confirm, before work starts, that the other side carries the coverages and limits the contract demands. (a) requires an additional insured endorsement, and the certificate only reports one if it exists. (b) reads the cancellation-notice box as an enforceable promise, when most modern forms expressly disclaim it. (d) describes what the underlying insurance requirement and indemnity clause are meant to accomplish — the certificate merely evidences that the machinery is in place.

Labor Code §3600 provides benefits without regard to fault for injuries arising out of and in the course of employment, and §3602 makes those benefits the employee's exclusive remedy against the employer — the bargain at the centre of the system. (b) and (c) describe the tort regime workers' compensation replaced, where the worker had to prove negligence and litigate fault. (d) imports contributory negligence, which is exactly what the no-fault rule abolishes; an employee's ordinary carelessness does not forfeit benefits.