Insurance and Liens practice

All 21 free insurance and liens questions

1. A private job reaches completion. How late after that date may the owner still record an effective notice of completion?

   • A Within 10 days after completion
   • B Within 15 days after completion Correct
   • C Within 20 days after completion
   • D Within 30 days after completion

   Civil Code section 8182 permits an owner to record a notice of completion on the date of completion or within 15 days after it, so a notice recorded later does not comply and never shortens anyone's time to record a claim of lien.

   Civ. Code s. 8182(a)

2. Labor has stopped on a private job. How long must that stoppage run, and still be running, for a notice of cessation to be available?

   • A At least 10 days
   • B At least 20 days
   • C At least 30 days Correct
   • D At least 60 days

   Civil Code section 8188 requires a continuous cessation of labor for at least 30 days before the recording, and the cessation must still be running on the day the notice is recorded, so work that restarts on day 28 resets the count.

   Civ. Code s. 8188(a)

3. An owner has just recorded its notice of completion. How quickly must it deliver copies to the direct contractor and to claimants that gave preliminary notice?

   • A 10 days after it is recorded Correct
   • B 15 days after it is recorded
   • C 20 days after it is recorded
   • D 30 days after it is recorded

   Civil Code section 8190 gives the owner 10 days from the date the notice is filed for record to deliver copies to the direct contractor and to every claimant that served preliminary notice, because those are the people whose lien deadlines the notice shortens.

   Civ. Code s. 8190(a)

4. Before recording a claim of lien, giving a stop payment notice, or asserting a claim against a payment bond, a claimant must give preliminary notice to whom?

   • A Owner, direct contractor, and construction lender Correct
   • B Owner, county recorder, and construction lender
   • C Direct contractor, lender, and permit agency
   • D Owner and direct contractor only

   Civil Code section 8200 names three recipients, the owner or reputed owner, the direct contractor the claimant works under, and the construction lender if there is one, and compliance is a prerequisite to a valid lien claim or stop payment notice.

   Civ. Code s. 8200(a)

5. Which of the following is given a lien right by the Civil Code list of persons that provide work?

   • A The construction lender funding the job
   • B The building inspector who inspected it
   • C A broker who lists the property
   • D An equipment lessor on the job Correct

   Civil Code section 8400 gives a lien right to any person that provides authorized work and names the direct contractor, subcontractor, material supplier, equipment lessor, laborer and design professional, so lessors and design professionals count alongside suppliers.

   Civ. Code s. 8400

6. An owner properly records and serves a notice of completion. How much time does the direct contractor then get to record its claim of lien?

   • A 20 days after the owner records the notice
   • B 30 days after the owner records the notice
   • C 60 days after the owner records the notice Correct
   • D 90 days after the owner records the notice

   Civil Code section 8412(b) closes the direct contractor's window 60 days after the owner records a notice of completion or cessation, and that shortened date controls because the section runs to the earlier of it and 90 days after completion.

   Civ. Code s. 8412(b)

7. An owner disputes a recorded claim of lien and wants the property released by recording a lien release bond. What must that bond be?

   • A 100 percent, admitted surety insurer
   • B 125 percent, admitted surety insurer Correct
   • C 150 percent, two individual sureties
   • D 200 percent, admitted surety insurer

   Civil Code section 8424 requires a lien release bond of 125 percent of the claim of lien, or of the amount the claim allocates to the property being released, and it must be executed by an admitted surety insurer.

   Civ. Code s. 8424(b)

8. A claimant has recorded a valid claim of lien. Within what time must it commence an action to enforce that lien?

   • A Within 30 days after recording
   • B Within 60 days after recording
   • C Within 90 days after recording Correct
   • D Within 120 days after recording

   Civil Code section 8460 requires the enforcement action within 90 days after the claim of lien is recorded, and the claim expires and becomes unenforceable if the claimant lets that date pass.

   Civ. Code s. 8460(a)

9. Under the license law a current workers' compensation certificate must be on file at all times. That requirement is a condition precedent to what?

   • A Issuance of the license only
   • B Issuance and renewal only
   • C Issuance, reinstatement, reactivation, renewal, and maintenance Correct
   • D Renewal and continued maintenance only

   Section 7125 of the Business and Professions Code (B&P Code), in the version in force since January 1, 2025, makes the certificate a condition precedent at all five moments, so a licensee must have one on file at all times and not only when the license is first issued.

   Bus. & Prof. Code s. 7125(a)

10. How may an employer other than the state secure the payment of workers' compensation in California?

    • A Insure, or pay claims from operating funds
    • B Insure, or obtain a self-insurance certificate Correct
    • C Self-insure, or post a surety bond
    • D Insure, or carry general liability cover

    Labor Code section 3700 gives an employer two lawful routes, insurance written by one or more insurers authorized to write compensation insurance in this state or a certificate of consent to self-insure from the Director of Industrial Relations, so paying claims as they come in is not securing compensation.

    Lab. Code s. 3700

11. What does a payment bond on a construction project assure the property owner?

    • A That the project is completed as specified
    • B That no liens will be filed Correct
    • C That completion and payment are both guaranteed
    • D That every job the contractor takes is covered

    A payment bond stands behind the money owed for labor and materials, so it assures the owner that the people who supplied them will be paid and will not file liens against the property.

    CSLB Law Book 2026, p. 42

12. A contractor names the contractor's bond it must file in its advertising. What does the license law make of that reference?

    • A Nothing, because the bond is genuine
    • B Permitted where the amount is stated
    • C A ground for suspending the license Correct
    • D Permitted outside paid advertisements

    Any reference to a bond the license law requires, made in advertising, soliciting or other presentments to the public, is itself a ground for suspension, so naming that bond in an advertisement puts the license at risk even though the bond is genuine.

    Bus. & Prof. Code s. 7071.13

13. A mechanics lien has priority over a mortgage, deed of trust or other encumbrance on the property that attached after which date?

    • A The date the claim of lien was recorded
    • B The date the claimant first furnished work
    • C The date the work of improvement commenced Correct
    • D The date the direct contract was signed

    Priority is measured from commencement of the work of improvement, so a lien outranks any mortgage, deed of trust or other encumbrance that attached after work started on the site, which is why a lender wants its deed of trust recorded before anything happens there.

    Civ. Code s. 8450(a)

14. Under a California workers' compensation policy, what is the insurer's liability to a proper claimant for compensation the employer owes?

    • A Direct and primary liability Correct
    • B Liability only after the employer fails to pay
    • C Liability capped at the premium paid
    • D Liability to the employer alone

    Every compensation policy is conclusively presumed to contain the clauses this article requires, and one of them makes the insurer directly and primarily liable to any proper claimant, so the claimant does not have to chase the employer first.

    Ins. Code s. 11651

15. How far ahead of the end of the policy period must a workers' compensation insurer give notice of nonrenewal?

    • A At least 10 days before expiry
    • B At least 30 days, not more than 120 Correct
    • C At least 60 days before expiry
    • D At least 30 days, with no maximum

    The insurer must give notice of nonrenewal and its reasons at least 30 days but not more than 120 days before the policy period ends, so a notice sent five months out is as defective as one sent a week out.

    Ins. Code s. 11664(c)

16. What effect does the insured's bankruptcy have on a liability insurer's duty to pay damages for a loss during the policy?

    • A None; the insurer still pays Correct
    • B It releases the insurer entirely
    • C The bankruptcy trustee takes the proceeds
    • D Coverage ends on the filing date

    A liability policy is read as providing that the insolvency or bankruptcy of the insured does not release the insurer from paying damages for injury or loss occurring during the life of the policy, so cover follows the loss rather than the contractor's finances.

    Ins. Code s. 11580(b)(1)

17. A claimant backing a stop payment notice to a construction lender with a bond must post a bond of what amount?

    • A 100 percent of the claim
    • B 125 percent of the claim Correct
    • C 150 percent of the claim
    • D Double the amount claimed

    A claimant may give a construction lender a stop payment notice accompanied by a bond equal to 125 percent of the claim, and that bond answers for the costs and damages the owner, direct contractor or lender suffers if the claimant loses.

    Civ. Code s. 8532

18. A payment bond was recorded before the work of improvement was completed. When must an action on the bond be commenced?

    • A Within 90 days after completion
    • B Within six months after completion Correct
    • C Within one year after completion
    • D Within four years after completion

    Where a payment bond is recorded before the work of improvement is completed, the statute bars an action to enforce liability on the bond later than six months after completion, so a claimant that waits longer loses the bond claim.

    Civ. Code s. 8610

19. What happens to a license when the licensee fails to maintain a sufficient bond required by the bonding article?

    • A It is subject to suspension or revocation Correct
    • B A fine is imposed, nothing more
    • C A citation issues, nothing more
    • D It continues until the renewal date

    If a licensee fails to maintain a sufficient bond required by the article, the license is subject to suspension or revocation, so a lapsed bond puts the license status itself at risk rather than drawing a money penalty.

    Bus. & Prof. Code s. 7071.15

20. What penalty follows a failure to observe a workers' compensation stop order served on an employer?

    • A Up to 60 days and $10,000 Correct
    • B A civil penalty and nothing more
    • C Up to one year and double the premium
    • D No penalty until the hearing occurs

    Failing to observe a stop order is a misdemeanor punishable by imprisonment in the county jail not exceeding 60 days or a fine not exceeding $10,000, or both, so working through the order carries its own criminal penalty.

    Lab. Code s. 3710.2

21. Whose bodily injury does commercial general liability insurance protect a contractor against liability for?

    • A The public, excluding the contractor's employees Correct
    • B The contractor's own employees
    • C Employees and the public alike
    • D Only the property owner and their family

    Commercial general liability insurance protects the insured contractor against liability to the public, employees excepted, for bodily injury, property damage or personal injury, because injury to an employee belongs to the workers' compensation line instead.

    CSLB Law Book 2026, p. 43