AN ACT Relating to contractor bonds; and amending RCW 18.27.010, 18.27.040, and 18.27.080.

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

Sec. 1. Section 1, chapter 77, Laws of 1963 as last amended by section 1, chapter 153, Laws of 1973 1st ex. sess. and RCW 18.27.010 are each amended to read as follows:

A "contractor" as used in this chapter is any person, firm or corporation who or which, in the pursuit of an independent business undertakes to, or offers to undertake, or submits a bid to, construct, alter, repair, add to, subtract from, improve, move, wreck or demolish, for another, any building, highway, road, railroad, excavation or other structure, project, development, or improvement attached to real estate or to do any part thereof including the installation of carpeting or other floor covering, the erection of scaffolding or other structures or works in connection therewith or who installs or repairs roofing or siding; or, who, to do similar work upon his own property, employs members of more than one trade upon a single job or project or under a single building permit except as otherwise provided herein. ((A "general contractor" is a contractor whose business operations require the use of more than two unrelated building trades or crafts whose work the contractor shall superintend or do in whole or in part; the term "general contractor" shall not include an individual who does all work personally without employees or other "specialty contractors" as defined herein. The terms "general contractor" and "builder" are synonymous. A "specialty contractor" is a contractor whose operations as such do not fall within the foregoing definition of "general contractor".))

"Department" as used in this chapter means the department of labor and industries.

"Director" as used in this chapter means the director of the department of labor and industries.

Sec. 2. Section 4, chapter 77, Laws of 1963 as last amended by section 18, chapter 2, Laws of 1983 1st ex. sess. and RCW 18.27.040 are each amended to read as follows:

(1) Each applicant shall, at the time of applying for or renewing a certificate of registration, file with the department a surety bond issued by a surety insurer who meets the requirements of chapter 48.28 RCW in a form acceptable to the department running to the state of Washington ((~~if a general contractor, in the sum of six thousand dollars; if a specialty contractor, in the sum of four thousand dollars,~~)).

The amount of the bond shall be determined by the maximum amount of labor, materials, and equipment the contractor chooses to be eligible to contract for under the following table:

!tp2,1 !ttMaximum amount to contract for:!tlAmount of !ttbond

!tlup to $50,000 !w× !tr$!sc ,0025,000

!tl$50,000 to $250,000 !w× !tr10,000

!tlover $250,000 !w× !tr20,000

!te For the purposes of this section, the amount contracted for by a contractor shall include all labor, materials, and equipment supplied by a contractor where: (a) The labor, materials, and equipment are supplied to legally separate parcels of real estate owned by the same person; (b) the legally separate parcels of real estate are adjacent to one another or are only separated by lands for common, public, or utility use; and (c) construction work upon the parcels of real estate is not interrupted for a period exceeding ninety days.

For the purposes of this section, the amount contracted for by a contractor shall also include all labor, materials, and equipment supplied by the contractor where the contractor is also the owner of the property and where the contractor attempts to sell the property before completion or within twelve months after completing the construction work.

(2) 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 negligent or improper work or breach of contract 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) Any contractor registered as of ((~~the effective date of this 1983 act~~)) August 23, 1983, who maintains such registration in accordance with this chapter shall be in compliance with this chapter until the next annual renewal of the contractor's certificate of registration. At that time, the contractor shall provide a bond, cash deposit, or other security deposit as required by this chapter and comply with all of the other provisions of this chapter before the department shall renew 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 such bond in the superior court of the county in which the work is done or of any county in which jurisdiction of the contractor may be had. Action upon such bond or deposit shall be commenced by filing the complaint with the clerk of the appropriate superior court within one year from the date of expiration of the certificate of registration in force at the time 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 completed. Service of process in an action upon such bond shall be exclusively by service upon the department. Three copies of the complaint and a fee of ten dollars to cover the handling costs shall be served by registered or certified mail 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 ten-dollar fee and three copies of the complaint. Such service shall constitute service on the registrant and the surety for suit upon the bond and the department shall transmit the complaint or a copy thereof to the registrant at the address listed in his application and to the surety within forty-eight hours 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 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) Labor, including employee benefits;

(b) Claims for breach of contract by a party to the construction contract;

(d) Taxes and contributions due the state of Washington;

(e) Any court costs, interest, and attorney's fees plaintiff may be entitled to recover.

((~~(5)~~)) (6) In the event that any final judgment shall impair the liability of the surety upon the bond so furnished that there shall not be in effect a bond undertaking in the full amount prescribed in this section, the department shall suspend the registration of such contractor until the bond liability in the required amount unimpaired by unsatisfied judgment claims shall have been furnished. If such bond becomes fully impaired, a new bond must be furnished at the increased rates prescribed by this section as now or hereafter amended.

((~~(6)~~)) (7) 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.

((~~(7)~~)) (8) Any person 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.

((~~(8)~~)) (9) The director may promulgate rules necessary for the proper administration of the security.

Sec. 3. Section 8, chapter 77, Laws of 1963 as amended by section 3, chapter 118, Laws of 1972 ex. sess. and RCW 18.27.080 are each amended to read as follows:

No person engaged in the business or acting in the capacity of a contractor may bring or maintain any action in any court of this state for the collection of compensation for the performance of any work or for breach of any contract for which registration is required under this chapter without alleging and proving that he was a duly registered contractor and held a current and valid certificate of registration at the time he contracted for the performance of such work or entered into such contract.

Any person entitled to bring suit under this section shall not seek recovery for payment for labor, materials, and equipment supplied by the contractor which exceeds the maximum amount the contractor is authorized to contract for as determined by the amount of the bond, cash deposit, or security deposit filed with the department by the contractor under RCW 18.27.040. This section does not limit the amount of the contractor's recovery for any other cause of action.