BILL REQ. #: S-0343.1
State of Washington | 60th Legislature | 2007 Regular Session |
Read first time 01/09/2007. Referred to Committee on Labor, Commerce, Research & Development.
AN ACT Relating to contractor's surety bonds; and amending RCW 18.27.040.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec. 1 RCW 18.27.040 and 2001 c 159 s 3 are each amended to read
as follows:
(1)(a) 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 thousand dollars if the applicant is a
general contractor and six thousand dollars if the applicant is a
specialty contractor.)) accordance with the following schedule:
(i) If the gross revenue of the applicant for the four quarters
preceding the date of application is more than seven and one-half
million dollars, the applicant shall furnish a bond of seventy-five
thousand dollars;
(ii) If the gross revenue of the applicant for the four quarters
preceding the date of the application is more than two million dollars
but less than or equal to seven and one-half million dollars, the
applicant shall furnish a bond of fifty thousand dollars; and
(iii) If the gross revenue of the applicant for the four quarters
preceding the date of the application is less than two million dollars,
the applicant shall furnish a bond of twenty-five thousand dollars.
(b) The department shall, beginning on July 1, 2007, adjust the
bond amounts required under (a) of this subsection on an annual basis
by use of the consumer price index compiled by the bureau of labor
statistics, United States department of labor for the state of
Washington.
(2) 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
registrant 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 labor or 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 negligent or
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))) (3) 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))) (4) Any person, firm, or corporation having a claim against
the contractor for any of the items referred to in this section may
bring suit upon 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. 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. Service of process in
an action against the contractor, 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
twenty 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 on the registrant and the surety for suit upon
the bond or deposit and the department shall transmit the summons and
complaint or a copy thereof to the registrant at the address listed in
the registrant's application and to the surety within two days after it
shall have been received.
(((4))) (5) 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 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 ((attorney's [attorneys']))
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))) (6) 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))) (7) 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 a construction contract, is entitled
to costs, interest, and reasonable attorneys' fees. The surety upon
the bond is not 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.
(((7))) (8) If a final judgment impairs the liability of the surety
upon the bond so furnished that there is not in effect a bond in the
full amount prescribed in this section, the registration of the
contractor is automatically suspended until the bond liability in the
required amount unimpaired by unsatisfied judgment claims is furnished.
(((8))) (9) In lieu of the surety bond required by this section the
contractor may file with the department a deposit consisting of cash or
other security acceptable to the department.
(((9))) (10) 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))) (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 six final judgments in actions under
this chapter involving a residential single-family dwelling on two or
more different structures.
(((11))) (12) The director may adopt rules necessary for the proper
administration of the security.