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California legally requires a variety of individuals, contractors, and organizations to secure surety bonds to conduct business across the public service industry. Apply for a California Surety Bond today! Single Source Insurance is a leading California bonding company providing bonds with a convenient online application system. Browse the most common types of bonds in this state, or contact us for a full list.
California is one of the states that has not adopted its own version of the federal Miller Act requiring contractors to purchase performance and payment bonds before being awarded a public works contract. Instead, California has its own requirement for contractor payment bonds for public construction projects.
A payment bond gives subcontractors and suppliers the right to file a claim against a contractor who has not paid them according to the terms of their contractual agreement.
Contractors working on state or county construction projects valued above $25,000 are required under the California Civil Code to purchase a California payment bond. The amount of the bond must be at least equal to 100% of the amount payable to subcontractors and suppliers under the public works contract.
The surety bond agreement for a payment bond is a legally binding contract that brings together three parties:
When an unpaid subcontractor or supplier files a claim against a California payment bond, the surety will first verify that the claim is valid and will then attempt to negotiate an amicable settlement. It�s not always possible to arrive at a settlement that all parties can live with. When that�s the case, the surety will go ahead and pay the claim on behalf of the principal.
The principal is legally obligated to reimburse the surety in full for any such advance payments. However, that repayment doesn�t have to be made in one lump sum.
A surety bond effectively serves as a line of credit that the surety extends to the principal, to be drawn against as needed to pay valid claims against the bond. Repayment often is done in installments over a period of time.
The annual premium the principal will pay for a California payment bond is a small percentage of the required bond amount. The surety determines the premium rate for each payment bond based primarily on the principal�s personal credit score, although other factors may enter into the calculation as well.
A principal�s credit history is a good indication of the risk the surety is taking on in issuing a payment bond�both the risk of claims being incurred and the risk of difficulty getting reimbursed for claims paid on behalf of the principal.
Request a convenient online quote today, or discuss your California payment bond needs with one of our experienced surety bond specialists.
