BILL REQ. #:  S-2033.1 

READ FIRST TIME 02/25/09.   

     AN ACT Relating to improving residential real property construction by creating a home construction consumer education office, strengthening warranty protections applicable to residential real property construction, creating municipal liability, requiring third-party inspections, enhancing contractor registration requirements, establishing worker certification standards, and enhancing bonding requirements; amending RCW 4.16.310, 64.50.010, 18.27.030, and 18.27.040; adding a new section to chapter 43.10 RCW; adding new sections to chapter 64.50 RCW; adding a new section to chapter 18.27 RCW; creating new sections; and providing an expiration date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   A new section is added to chapter 43.10 RCW to read as follows:
     (1) The office of consumer education for home construction is created in the office of the attorney general to be the primary point of contact for consumers in matters related to residential construction.
     (2) The office of consumer education for home construction shall:
     (a) Educate consumers about contracting for residential construction services, including the requirements of chapter 18.27 RCW and methods available to protect themselves against loss;
     (b) Produce written and electronic consumer education materials about contracting for residential construction services and legal resources available to consumers;
     (c) Create a pamphlet explaining a homeowner's legal rights and remedies and provide contractors and other construction professionals with a downloadable version of the brochure to attach to contracts for purchase and sale of new residential real property or the substantial remodel of existing residential real property. The office shall periodically update this pamphlet;
     (d) Identify and work collaboratively with agencies and organizations who are already engaged in consumer education efforts in the area of residential construction, such as the department of labor and industries, the department of licensing, local governments, the construction industry, financial institutions, and other interested organizations and individuals, to increase outreach to consumers;
     (e) Share consumer education materials with and serve as a resource for agencies and organizations who are already engaged in consumer education;
     (f) Develop a uniform manner of receiving, cataloging, analyzing, and responding to consumer complaints about residential construction against duly registered and bonded construction professionals or construction professionals that a consumer reasonably believed was duly registered and bonded at the time services were rendered;
     (g) Develop a process for the public to have access to consumer complaints;
     (h) Identify which agencies and organizations are already receiving complaints and coordinate with them to ensure that all agencies and organizations are requesting the same information from complaining consumers and that all consumers are referred to the office;
     (i) Enter into data-sharing agreements with the department of labor and industries, local governments, and other agencies with enforcement duties in residential construction to increase assistance to consumers and enforcement of construction-related laws; and
     (j) Report to the legislature on an annual basis the total number of complaints, the nature of the complaints, the monetary value of the complaints, whether complaints have been resolved, and any other information that the office deems relevant. The first report is due on January 1, 2010, and subsequent reports are due on November 1st of each year thereafter.

NEW SECTION.  Sec. 2   A new section is added to chapter 64.50 RCW to read as follows:
     (1) The legislature intends by this section to modify the common law implied warranty of habitability to provide that this warranty may not be contractually disclaimed, waived, modified, or limited. The legislature does not intend to modify any other aspect of the common law implied warranty of habitability as developed through case law.
     (2) The common law implied warranty of habitability may not be disclaimed, waived, modified, or limited by contractual agreement. A provision of any contract for the purchase or sale of newly constructed residential property that purports to disclaim, waive, modify, or limit the implied warranty of habitability is void and unenforceable.

NEW SECTION.  Sec. 3   A new section is added to chapter 64.50 RCW to read as follows:
     (1) A construction professional involved in the construction of new residential real property, or the substantial remodel of existing residential real property, warrants that the work, and any part thereof, will be suitable for the ordinary uses of real property of its type and that the work will be:
     (a) Free from defective materials;
     (b) Constructed in accordance with sound engineering and construction standards;
     (c) Constructed in a work-like manner; and
     (d) Constructed in compliance with all laws then applicable to the improvements.
     (2) If a construction professional breaches a warranty arising under this section and the breach results in damage to any portion of the residential real property, the current owner of the residential real property may bring a cause of action for damages against the construction professional. Absence of privity of contract between the owner and the construction professional is not a defense to the enforcement of a warranty arising under this section.
     (3) In a judicial proceeding for breach of a warranty arising under this section, the plaintiff must show that the alleged breach has adversely affected or will adversely affect the performance of that portion of the property alleged to be in breach. To establish an adverse effect, the person alleging the breach is not required to prove that the breach renders the property unfit for occupancy. As used in this subsection, "adverse effect" must be more than technical and must be significant to a reasonable person.
     (4) Proof of breach of a warranty arising under this section is not proof of damages. Damages awarded for a breach of a warranty arising under this section are the cost of repairs. However, if it is established that the cost of repairs is clearly disproportionate to the loss in market value caused by the breach, damages are limited to the loss in market value.
     (5)(a) A judicial proceeding for breach of a warranty arising under this section must be commenced within four years after the cause of action accrues. This period may not be reduced by either oral or written agreement, or through the use of contractual claims or notice procedures that require the filing or service of any claim or notice prior to the expiration of the period specified in this section.
     (b) Except as provided under (c) of this subsection, a judicial proceeding for breach of a warranty arising under this section accrues, regardless of the owner's lack of knowledge of the breach:
     (i) In the case of the purchase of newly constructed residential real property, on the date the initial owner enters into possession of the property; or
     (ii) In the case of the substantial remodel of existing residential real property, on the date of substantial completion of construction or termination of the construction project, whichever is later.
     (c) A cause of action for breach of a warranty arising under this section that is based on a latent structural defect or a latent water penetration defect accrues when the claimant discovers or reasonably should have discovered the latent structural defect or latent water penetration defect.
     (d) An action for breach of warranty under this section is subject to the time limitations provided in RCW 4.16.310.
     (6) If a written notice of claim is served under RCW 64.50.020 within the time prescribed for the filing of an action under this section, the statute of limitations in this section and any applicable statute of repose for construction-related claims are tolled until sixty days after the period of time during which the filing of an action is barred under RCW 64.50.020.
     (7) The warranties provided under this section are in addition to any other rights or remedies available under statutory law or common law or provided for under contract. The warranties provided under this section may not be waived, disclaimed, modified, or limited.
     (8) In a judicial proceeding under this section, the court may award reasonable attorneys' fees and costs to the prevailing party.
     (9) This section is not intended to create an independent right to maintain a class action against any construction professional.
     (10) This section does not apply to condominiums subject to chapter 64.34 RCW.
     (11) This section does not affect the application of the notice and opportunity to cure requirements and procedures imposed under RCW 64.50.010 through 64.50.050.
     (12) An action for breach of a warranty created under this section is subject to any requirements for mandatory arbitration imposed under chapter 7.06 RCW or state or local court rules.
     (13) For the purposes of this section:
     (a) "Construction professional" means an architect, builder, builder vendor, contractor, subcontractor, engineer, or inspector, performing or furnishing the design, supervision, inspection, construction, or observation of the construction, of any improvement to residential real property, whether operating as a sole proprietor, partnership, corporation, or other business entity.
     (b) "Residential real property" means a single-family home, a duplex, a triplex, or a quadraplex.
     (c) "Substantial completion of construction" means the state of completion reached when an improvement upon real property may be used or occupied for its intended use.

Sec. 4   RCW 4.16.310 and 2002 c 323 s 9 are each amended to read as follows:
     (1) All claims or causes of action as set forth in RCW 4.16.300 shall accrue, and the applicable statute of limitation shall begin to run only during the period within six years after substantial completion of construction, or during the period within six years after the termination of the services enumerated in RCW 4.16.300, whichever is later. The phrase "substantial completion of construction" shall mean the state of completion reached when an improvement upon real property may be used or occupied for its intended use. Any cause of action which has not accrued within six years after such substantial completion of construction, or within six years after such termination of services, whichever is later, shall be barred: PROVIDED, That this limitation shall not be asserted as a defense by any owner, tenant or other person in possession and control of the improvement at the time such cause of action accrues. The limitations prescribed in this section apply to all claims or causes of action as set forth in RCW 4.16.300 brought in the name or for the benefit of the state which are made or commenced after June 11, 1986.
     If a written notice is filed under RCW 64.50.020 within the time prescribed for the filing of an action under this chapter, the period of time during which the filing of an action is barred under RCW 64.50.020 plus sixty days shall not be a part of the period limited for the commencement of an action, nor for the application of this section.
     (2) Actions and claims for fraud arising from including, but not limited to, construction, alteration, repair, design, planning, survey, and the engineering of improvements upon real property are not subject to the time limitations under subsection (1) of this section. Such actions and claims are governed under RCW 4.16.080.

Sec. 5   RCW 64.50.010 and 2002 c 323 s 2 are each amended to read as follows:
     Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.
     (1) "Action" means any civil lawsuit or action in contract or tort for damages or indemnity brought against a construction professional to assert a claim, whether by complaint, counterclaim, or cross-claim, for damage or the loss of use of real or personal property caused by a defect in the construction of a residence or in the substantial remodel of a residence. "Action" does not include any civil action in tort alleging personal injury or wrongful death to a person or persons resulting from a construction defect.
     (2) "Association" means an association, master association, or subassociation as defined and provided for in RCW 64.34.020(4), 64.34.276, 64.34.278, and 64.38.010(1).
     (3) "Building enclosure" has the same meaning as in RCW 64.55.010.
     (4) "Building enclosure design documents" has the same meaning as in RCW 64.55.010.
     (5) "Claimant" means a homeowner or association who asserts a claim against a construction professional concerning a defect in the construction of a residence or in the substantial remodel of a residence.
     (((4))) (6) "Construction professional" means an architect, builder, builder vendor, contractor, subcontractor, engineer, or inspector, including, but not limited to, a dealer as defined in RCW 64.34.020(((12))) (13) and a declarant as defined in RCW 64.34.020(((13))) (14), performing or furnishing the design, supervision, inspection, construction, or observation of the construction of any improvement to real property, whether operating as a sole proprietor, partnership, corporation, or other business entity.
     (((5))) (7) "Homeowner" means: (a) Any person, company, firm, partnership, corporation, or association who contracts with a construction professional for the construction, sale, or construction and sale of a residence; and (b) an "association" as defined in this section. "Homeowner" includes, but is not limited to, a subsequent purchaser of a residence from any homeowner.
     (((6))) (8) "Qualified building inspector" has the same meaning as in RCW 64.55.010.
     (9) "Residence" means a building, including a single-family house, duplex, triplex, quadraplex, or a unit in a multiunit residential structure in which title to each individual unit is transferred to the owner under a condominium or cooperative system, and shall include common elements as defined in RCW 64.34.020(6) and common areas as defined in RCW 64.38.010(4).
     (((7))) (10) "Serve" or "service" means personal service or delivery by certified mail to the last known address of the addressee.
     (((8))) (11) "Stamped" has the same meaning as in RCW 64.55.010.
     (12) "Substantial remodel" means a remodel of a residence, for which the total cost exceeds one-half of the assessed value of the residence for property tax purposes at the time the contract for the remodel work was made.

NEW SECTION.  Sec. 6   A new section is added to chapter 64.50 RCW to read as follows:
     (1) Any person applying for a building permit for construction of a residential building or substantial remodel shall submit building enclosure design documents to the appropriate building department prior to the start of construction or substantial remodel. If construction work on a building is not a substantial remodel because the cost of thereof does not exceed one-half of the assessed value of the residence for property tax purposes at the time the contract for the remodel work was made, the person applying for a building permit shall submit to the building department a letter so certifying. Any changes to the building enclosure design documents that alter the manner in which the building or its components is waterproofed, weatherproofed, and otherwise protected from water or moisture intrusion must be stamped by the architect or engineer and must be provided to the building department and to the person conducting the course of construction inspection in a timely manner to permit such person to inspect for compliance therewith, and may be provided through individual updates, cumulative updates, or as-built updates.
     (2) The building department shall not issue a building permit for construction of the building enclosure of a residential building or a substantial remodel unless the building enclosure design documents contain a stamped statement by the person stamping the building enclosure design documents in substantially the following form: "The undersigned has provided building enclosure documents that in my professional judgment are appropriate to satisfy the requirements of sections 6 through 12 of this act."
(3) The building department is not charged with determining whether the building enclosure design documents are adequate or appropriate to satisfy the requirements of this section and sections 7 through 12 of this act. This section and sections 7 through 12 of this act do not require a building department to review, approve, or disapprove enclosure design documents.

NEW SECTION.  Sec. 7   A new section is added to chapter 64.50 RCW to read as follows:
     All residential buildings must have the building enclosure inspected by a qualified inspector during the course of initial construction and during a substantial remodel.

NEW SECTION.  Sec. 8   A new section is added to chapter 64.50 RCW to read as follows:
     (1) A qualified building enclosure inspector:
     (a) Must be a person with substantial and verifiable training and experience in building enclosure design and construction;
     (b) Must be free from improper interference or influence relating to the inspections; and
     (c) May not be an employee, officer, or director of, or have any pecuniary interest in, the declarant, developer, association, or any party providing services or materials for the project, or any of their respective affiliates, except that the qualified inspector may be the architect or engineer who approved the building enclosure design documents or the architect or engineer of record. The qualified inspector may, but is not required to, assist with the preparation of the design documents.
     (2) This section does not alter the requirements for licensure of any architect, engineer, or other professional, and does not alter the jurisdiction, authority, or scope of practice of architects, engineers, other professionals, or general contractors.

NEW SECTION.  Sec. 9   A new section is added to chapter 64.50 RCW to read as follows:
     (1) An inspection required under this chapter must include, at a minimum, the following:
     (a) Water penetration resistance testing of a representative sample of windows and window installations. These tests must be conducted according to industry standards. Where appropriate, tests must be conducted with an induced air pressure difference across the window and window installation. Additional testing is not required if the same assembly has previously been tested in situ within the previous two years in the project under construction by the builder, by another member of the construction team such as an architect or engineer, or by an independent testing laboratory; and
     (b) An independent periodic review of the building enclosure during the course of construction or rehabilitative construction to ascertain whether the residential building has been constructed, or the substantial remodel has been performed, in substantial compliance with the building enclosure design documents.
     (2) Subsection (1)(a) of this section does not apply to substantial remodels if the windows and adjacent cladding are not altered in the substantial remodel.
     (3) For the purposes of this section, "project" means one or more parcels of land in a single ownership, which are under development pursuant to a single land use approval or building permit, where window installation is performed by the owner with its own forces, or by the same general contractor, or, if the owner is contracting directly with trade contractors, is performed by the same trade contractor.

NEW SECTION.  Sec. 10   A new section is added to chapter 64.50 RCW to read as follows:
     Upon completion of an inspection required under this chapter, the qualified inspector shall prepare and submit to the appropriate building department a signed letter certifying that the building enclosure has been inspected during the course of construction or substantial remodel and that it has been constructed or reconstructed in substantial compliance with the building enclosure design documents, as updated under section 6 of this act. The building department shall not issue a final certificate of occupancy or other equivalent final acceptance until the letter required under this section has been submitted. The building department is not charged with and has no responsibility for determining whether the building enclosure inspection is adequate or appropriate to satisfy the requirements of this chapter.

NEW SECTION.  Sec. 11   A new section is added to chapter 64.50 RCW to read as follows:
     (1) This chapter is not intended to and does not:
     (a) Create a private right of action against an inspector, architect, or engineer based upon compliance or noncompliance with this chapter; or
     (b) Create an independent basis for liability against an inspector, architect, or engineer.
     (2) The qualified inspector, architect, or engineer and the developer that retained the inspector, architect, or engineer may contractually agree to the amount of their liability to the developer.

NEW SECTION.  Sec. 12   A new section is added to chapter 64.50 RCW to read as follows:
     A qualified inspector's report or testimony regarding an inspection conducted under this chapter is not entitled to an evidentiary presumption in any arbitration or court proceeding. This chapter does not restrict the admissibility of the qualified inspector's report or testimony, and questions of the admissibility of the report or testimony are determined under the rules of evidence.

NEW SECTION.  Sec. 13   (1) The legislature finds that there is inadequate protection for consumers in the area of residential construction. The legislature further finds that a significant amount of the problems in the construction of new residential real property, or the substantial remodel of existing residential real property, pertain to water intrusion and unstable foundations and develop from poor installation of roofing, siding, framing, foundations, doors, and windows. The legislature recognizes that it is important to assure consumers that those doing construction work are properly trained. The legislature, therefore, intends to establish a worker certification requirement for those doing construction work in the areas of roofing, siding, framing, foundations, doors, and windows.
     (2) The department of labor and industries shall contract for consultant services to develop recommendations to the legislature on the education, experience, and examination requirements of the program to certify workers engaged in the installation of roofing, siding, framing, foundations, doors, and windows. In developing the recommendations, the consultant and the department shall closely involve and consult with stakeholders. The recommendations must be submitted to the legislature by November 1, 2009.
     (3) This section expires December 31, 2009.

Sec. 14   RCW 18.27.030 and 2008 c 120 s 1 are each amended to read as follows:
     (1) An applicant for registration as a contractor shall submit an application under oath upon a form to be prescribed by the director and which shall include the following information pertaining to the applicant:
     (a) Employer social security number.
     (b) Unified business identifier number.
     (c) Evidence of workers' compensation coverage for the applicant's employees working in Washington, as follows:
     (i) The applicant's industrial insurance account number issued by the department;
     (ii) The applicant's self-insurer number issued by the department; or
     (iii) For applicants domiciled in a state or province of Canada subject to an agreement entered into under RCW 51.12.120(7), as permitted by the agreement, filing a certificate of coverage issued by the agency that administers the workers' compensation law in the applicant's state or province of domicile certifying that the applicant has secured the payment of compensation under the other state's or province's workers' compensation law.
     (d) Employment security department number.
     (e) Unified business identifier (UBI) account number may be substituted for the information required by (c) and (d) of this subsection if the applicant will not employ employees in Washington.
     (f) Type of contracting activity, whether a general or a specialty contractor and if the latter, the type of specialty.
     (g) Type of work performed, whether residential, commercial, or both.
     (h) The name ((and)), address, social security number, date of birth, and driver's license number of each partner if the applicant is a firm or partnership, or the name ((and)), address, social security number, date of birth, and driver's license number of the owner if the applicant is an individual proprietorship, or the name ((and)), address, social security number, date of birth, and driver's license number of the corporate officers and statutory agent, if any, if the applicant is a corporation, or the name ((and)), address, social security number, date of birth, and driver's license number of all members of other business entities. The information contained in such application is a matter of public record and open to public inspection.
     (i) The registration numbers and unified business identifier account numbers of previously or currently registered businesses involving the same owner, principal, or officer as the applicant.
     (j) Disclosure of any bankruptcy proceedings filed by or against the applicant.
     (k) Information about any construction licenses, certifications, or registrations that have been issued to the applicant by other states. The applicant shall also provide details about any denials, suspensions, revocations, or any enforcement actions related to construction against the applicant by other states.
     (2) The department may verify the workers' compensation coverage information provided by the applicant under subsection (1)(c) of this section, including but not limited to information regarding the coverage of an individual employee of the applicant. If coverage is provided under the laws of another state, the department may notify the other state that the applicant is employing employees in Washington.
     (3)(a) The department shall deny an application for registration if: (i) The applicant has been previously performing work subject to this chapter as a sole proprietor, partnership, corporation, or other entity and the department has notice that the applicant has an unsatisfied final judgment against him or her in an action based on work performed subject to this chapter or the applicant owes the department money for penalties assessed or fees due under this chapter as a result of a final judgment; (ii) the applicant was an owner, principal, or officer of a partnership, corporation, or other entity that either has an unsatisfied final judgment against it in an action that was incurred for work performed subject to this chapter or owes the department money for penalties assessed or fees due under this chapter as a result of a final judgment; (iii) the applicant does not have a valid unified business identifier number; (iv) the department determines that the applicant has falsified information on the application, unless the error was inadvertent; ((or)) (v) the applicant does not have an active and valid certificate of registration with the department of revenue; or (vi) the department has determined that a different state has taken enforcement action against the applicant for activities that would be a violation of this chapter if they had occurred in Washington state.
     (b) The department shall suspend an active registration if: (i) The department has determined that the registrant has an unsatisfied final judgment against it for work within the scope of this chapter; (ii) the department has determined that the registrant is a sole proprietor or an owner, principal, or officer of a registered contractor that has an unsatisfied final judgment against it for work within the scope of this chapter; (iii) the registrant does not maintain a valid unified business identifier number; (iv) the department has determined that the registrant falsified information on the application, unless the error was inadvertent; ((or)) (v) the registrant does not have an active and valid certificate of registration with the department of revenue; (vi) the department has determined that a different state has taken enforcement action against the registrant for activities that would be a violation of this chapter if they had occurred in Washington state; or (vii) the department has determined that the registrant failed to reasonably supervise employees, agents, or subcontractors or performed negligently or in breach of contract so as to cause injury or harm to the public.
     (c) The department may suspend an active registration if the department has determined that an owner, principal, partner, or officer of the registrant was an owner, principal, or officer of a previous partnership, corporation, or other entity that has an unsatisfied final judgment against it.
     (4) The department shall not deny an application or suspend a registration because of an unsatisfied final judgment if the applicant's or registrant's unsatisfied final judgment was determined by the director to be the result of the fraud or negligence of another party.

NEW SECTION.  Sec. 15   A new section is added to chapter 18.27 RCW to read as follows:
     A registered contractor, by or against whom a petition in bankruptcy has been filed, shall notify the department of the proceedings in bankruptcy, including the identity and location of the court in which the proceedings are pending, within ten days of the filing.

Sec. 16   RCW 18.27.040 and 2007 c 436 s 4 are each amended to read as follows:
     (1) Each applicant shall file with the department a surety bond issued by a surety insurer who meets the requirements of chapter 48.28 RCW in the sum of ((twelve)) twenty-four thousand dollars if the applicant is a general contractor and ((six)) twelve thousand dollars if the applicant is a specialty contractor. If no valid bond is already on file with the department at the time the application is filed, a bond must accompany the registration application. The bond shall have the state of Washington named as obligee with good and sufficient surety in a form to be approved by the department. The bond shall be continuous and may be canceled by the surety upon the surety giving written notice to the director. A cancellation or revocation of the bond or withdrawal of the surety from the bond automatically suspends the registration issued to the contractor until a new bond or reinstatement notice has been filed and approved as provided in this section. The bond shall be conditioned that the applicant will pay all persons performing labor, including employee benefits, for the contractor, will pay all taxes and contributions due to the state of Washington, and will pay all persons furnishing material or renting or supplying equipment to the contractor and will pay all amounts that may be adjudged against the contractor by reason of breach of contract including improper work in the conduct of the contracting business. A change in the name of a business or a change in the type of business entity shall not impair a bond for the purposes of this section so long as one of the original applicants for such bond maintains partial ownership in the business covered by the bond.
     (2) At the time of initial registration or renewal, the contractor shall provide a bond or other security deposit as required by this chapter and comply with all of the other provisions of this chapter before the department shall issue or renew the contractor's certificate of registration. Any contractor registered as of July 1, 2001, who maintains that registration in accordance with this chapter is in compliance with this chapter until the next renewal of the contractor's certificate of registration.
     (3) Any person, firm, or corporation having a claim against the contractor for any of the items referred to in this section may bring suit against the contractor and the bond or deposit in the superior court of the county in which the work was done or of any county in which jurisdiction of the contractor may be had. The surety issuing the bond shall be named as a party to any suit upon the bond. Action upon the bond or deposit brought by a residential homeowner for breach of contract by a party to the construction contract shall be commenced by filing the summons and complaint with the clerk of the appropriate superior court within two years from the date the claimed contract work was substantially completed or abandoned, whichever occurred first. Action upon the bond or deposit brought by any other authorized party shall be commenced by filing the summons and complaint with the clerk of the appropriate superior court within one year from the date the claimed labor was performed and benefits accrued, taxes and contributions owing the state of Washington became due, materials and equipment were furnished, or the claimed contract work was substantially completed or abandoned, whichever occurred first. Service of process in an action filed under this chapter against the contractor and the contractor's bond or the deposit shall be exclusively by service upon the department. Three copies of the summons and complaint and a fee adopted by rule of not less than fifty dollars to cover the costs shall be served by registered or certified mail, or other delivery service requiring notice of receipt, upon the department at the time suit is started and the department shall maintain a record, available for public inspection, of all suits so commenced. Service is not complete until the department receives the fee and three copies of the summons and complaint. The service shall constitute service and confer personal jurisdiction on the contractor and the surety for suit on claimant's claim against the contractor and the bond or deposit and the department shall transmit the summons and complaint or a copy thereof to the contractor at the address listed in the contractor's application and to the surety within two days after it shall have been received.
     (4) The surety upon the bond shall not be liable in an aggregate amount in excess of the amount named in the bond nor for any monetary penalty assessed pursuant to this chapter for an infraction. The liability of the surety shall not cumulate where the bond has been renewed, continued, reinstated, reissued or otherwise extended. The surety upon the bond may, upon notice to the department and the parties, tender to the clerk of the court having jurisdiction of the action an amount equal to the claims thereunder or the amount of the bond less the amount of judgments, if any, previously satisfied therefrom and to the extent of such tender the surety upon the bond shall be exonerated but if the actions commenced and pending and provided to the department as required in subsection (3) of this section, at any one time exceed the amount of the bond then unimpaired, claims shall be satisfied from the bond in the following order:
     (a) Employee labor and claims of laborers, including employee benefits;
     (b) Claims for breach of contract by a party to the construction contract;
     (c) Registered or licensed subcontractors, material, and equipment;
     (d) Taxes and contributions due the state of Washington;
     (e) Any court costs, interest, and attorneys' fees plaintiff may be entitled to recover. The surety is not liable for any amount in excess of the penal limit of its bond.
     A payment made by the surety in good faith exonerates the bond to the extent of any payment made by the surety.
     (5) The total amount paid from a bond or deposit required of a general contractor by this section to claimants other than residential homeowners must not exceed one-half of the bond amount. The total amount paid from a bond or deposit required of a specialty contractor by this section to claimants other than residential homeowners must not exceed one-half of the bond amount or four thousand dollars, whichever is greater.
     (6) The prevailing party in an action filed under this section against the contractor and contractor's bond or deposit, for breach of contract by a party to the construction contract involving a residential homeowner, is entitled to costs, interest, and reasonable attorneys' fees. The surety upon the bond or deposit is not liable in an aggregate amount in excess of the amount named in the bond or deposit nor for any monetary penalty assessed pursuant to this chapter for an infraction.
     (7) If a final judgment impairs the liability of the surety upon the bond or deposit so furnished that there is not in effect a bond or deposit in the full amount prescribed in this section, the registration of the contractor is automatically suspended until the bond or deposit liability in the required amount unimpaired by unsatisfied judgment claims is furnished.
     (8) In lieu of the surety bond required by this section the contractor may file with the department an assigned savings account, upon forms provided by the department.
     (9) Any person having filed and served a summons and complaint as required by this section having an unsatisfied final judgment against the registrant for any items referred to in this section may execute upon the security held by the department by serving a certified copy of the unsatisfied final judgment by registered or certified mail upon the department within one year of the date of entry of such judgment. Upon the receipt of service of such certified copy the department shall pay or order paid from the deposit, through the registry of the superior court which rendered judgment, towards the amount of the unsatisfied judgment. The priority of payment by the department shall be the order of receipt by the department, but the department shall have no liability for payment in excess of the amount of the deposit.
     (10) Within ten days after resolution of the case, a certified copy of the final judgment and order, or any settlement documents where a case is not disposed of by a court trial, a certified copy of the dispositive settlement documents must be provided to the department by the prevailing party. Failure to provide a copy of the final judgment and order or the dispositive settlement documents to the department within ten days of entry of such an order constitutes a violation of this chapter and a penalty adopted by rule of not less than two hundred fifty dollars may be assessed against the prevailing party.
     (11) The director may require an applicant applying to renew or reinstate a registration or applying for a new registration to file a bond of up to three times the normally required amount, if the director determines that an applicant, or a previous registration of a corporate officer, owner, or partner of a current applicant, has had in the past five years a total of three final judgments in actions under this chapter involving a residential single-family dwelling on two or more different structures.
     (12) The director may adopt rules necessary for the proper administration of the security.

NEW SECTION.  Sec. 17   Part headings used in this act are not any part of the law.