Claims against a contractor's $25,000 license bond total far more than $25,000: a residential homeowner claims $40,000, an unpaid framer claims $8,000 in wages, and a commercial property owner claims $30,000. Under Bus. & Prof. Code §7071.11, how is the bond distributed?
Explanation
B&P §7071.11(a) is explicit: if the bond is insufficient to pay all claims in full, its sum is distributed to all claimants in proportion to the amount of their respective claims. The same subdivision caps the surety's aggregate liability on wage and fringe-benefit claims at $4,000, so the framer cannot draw more than that from the bond however large the wage claim. (a) is the widespread belief that the bond is a consumer-priority fund — §7071.5 does list homeowners among the beneficiaries, but being a beneficiary is not the same as having priority. (c) applies a first-in-time rule the section does not use. (d) is the most tempting wrong answer, because the section does single out wage claims — but it caps them, it does not prioritise them.
Law Reference: Bus. & Prof. Code §7071.11(a)This topic, taught in full in the CSLB Law & Business guide. CSLB Law & Business — Complete Study Guide (2026) — PDF + EPUB, $24.99 · 14-day refund →
Practice all 1632 questions free — no signup required.
Own the complete CSLB Law & Business guide — PDF + EPUB, $24.99 →
Related questions on this topic
- A material supplier delivers $40,000 of lumber to a private construction project on July 1. To fully preserve mechanics' lien, stop payment notice, AND payment bond claim rights, the supplier must serve a preliminary notice under Civil Code §8200 on the owner, direct contractor, and construction lender no later than:
- On a PUBLIC works project, a subcontractor with unpaid invoices serves a 'stop payment notice' on the public entity under Civil Code §9358 (formerly known as a 'stop notice'). The effect is to:
- An owner wants to remove a $60,000 mechanics' lien recorded against the property so the property can be sold or refinanced. Under Civil Code §8424, the owner may obtain a release of the lien by recording a lien release bond in the amount of:
- A subcontractor's commercial general liability (CGL) policy provides 'additional insured' status to the prime contractor for the sub's negligent work. If a third party is injured and sues both the sub and prime, under California law:
- An unpaid framing subcontractor furnished labor and materials to a private remodel. Who is entitled to record a mechanics lien?
- On a private project with NO notice of completion or cessation recorded, within what period after completion of the work of improvement must a direct (prime) contractor record its mechanics lien?
Last reviewed: · editorial process