SENATE BILL REPORT

SB 6854

BYSenator Lee

Relating to contractors' bonds and assigned accounts.

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):February 1, 1990

Senate Staff:Dave Cheal (786-7576)

AS OF JANUARY 31, 1990

BACKGROUND:

Both general contractors and specialty contractors are required to register with the Department of Labor and Industries annually.  Part of the registration process involves supplying either a surety bond of $6000 for general contractors or $4000 for specialty contractors, or provide an assigned savings account of the same amount.

The Court of Appeals recently decided that a claimant against the bond whose claim spanned more than one registration period was entitled to collect against both bonds because their claim exceeded the amount available during the first bond period.

The claim in that case was filed within the one-year statute of limitations with respect to both bond periods.  This collection of more than the amount available in one registration period is possible if the contractor has supplied a surety bond for the periods during which the claim arose.  In the same case, however, if the contractor had chosen the assigned savings account method, only a single registration amount, i.e., either $4000 or $6000, would be available.

Last summer following the Court of Appeals decision, the department determined that in order to provide equal opportunity among claimants who might sue contractors who have supplied an assigned savings account as opposed to those who have provided a bond, they would have to collect double the current statutory amounts.

The department later rescinded its demand of contractors that they double the assigned accounts pending an Attorney General Opinion as to whether their action was required by the statute and the decision.  The requested opinion has not yet been issued.

SUMMARY:

Each contractor who provides an assigned account instead of the surety bond is required to pay an assessment of $250.  These assessments are to be deposited in an account which will be used to cover a claim in which the court may find covers two registration periods.

An additional amount may be assessed if necessary to maintain sufficient funds to cover this exposure.

The fund created by the assessments is to be maintained in the office of the Treasurer and paid out as requested by the Director of the Department of Labor and Industries.

Appropriation:  none

Revenue:   yes

Fiscal Note:    requested