S-1990               _______________________________________________

                                         SUBSTITUTE SENATE BILL NO. 5656

                        _______________________________________________

State of Washington                               51st Legislature                              1989 Regular Session

By Senate Committee on Financial Institutions & Insurance (originally sponsored by Senators Lee, Smitherman, McMullen and Matson)

Read first time 2/20/89.

AN ACT Relating to surety liability; and adding new sections to chapter 19.72 RCW.

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

NEW SECTION. Sec. 1.  A new section is added to chapter 19.72 RCW to read as follows:

          (1) The liability of a surety on a bond shall not cumulate, no matter how many claims are brought, no matter how long that bond is in effect, and no matter how many premiums are paid or become payable.  "Cumulation" means liability for more than the full penal sum of one continuous bond.  "Bond" means any form of surety insurance as defined by RCW 48.11.080.

          (2) Where a statute or regulation requires licensing or registration for a certain interval of time with renewal thereafter, and licensing and renewal are conditioned upon filing a bond, whether a renewing surety uses a new bond (a reissuance), a continuation certificate, a rider or other form to renew, the surety shall only be liable for the penal sum of one continuous bond.

          (3) A surety bond that is renewed, continued, reinstated, reissued, or otherwise extended, replaced, or modified, including increases or decreases in the penal sum, shall be considered only one continuous bond no matter how many times the bond is renewed, continued, reinstated, reissued, or otherwise extended, replaced, or modified.  With respect to one continuous bond, in no event shall the penal sum, or any portion thereof, at two or more points in time be added together in determining the surety's liability.

          (4) If the penal sum of a bond that is renewed, continued, reinstated, reissued or otherwise extended, replaced, or modified is increased or decreased for any reason, no matter how many times, the surety's maximum liability shall be the single highest penal sum.  Furthermore, where the penal sum of a bond has been increased or decreased, the liability of the surety at any point in time when claims accrue shall be limited to the penal sum in effect at the time such claims accrue.

          (5) A surety's liability for all claims in the aggregate against one continuous bond shall not exceed the penal sum of the bond.

NEW SECTION. Sec. 2.  A new section is added to chapter 19.72 RCW to read as follows:

          Unless otherwise specifically provided by statute, whenever a governmental agency or instrumentality allows a cash deposit in lieu of a bond, such cash deposit shall be in an amount equal to the penal sum of the bond in lieu of which the deposit is allowed and shall not be increased because of the length of time of licensing or registration, or because of renewal, continuation, or extension of the period of licensing or registration.  Nothing in this section shall prohibit either:  (1) Cancellation or suspension of a license dependent upon the cash deposit if all or a portion of the cash deposit is exhausted and not replenished; or (2) a requirement that the exhausted portion of a cash deposit be replenished before a license or registration to do business is reissued or reinstated.