Chapter 157 Oregon Laws 2001

AN ACT

HB 2185

Relating to construction contractor bonding; amending ORS 701.085.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 701.085 is amended to read:

701.085. (1) A person who wishes to obtain a license as a contractor or renew a license shall file with the Construction Contractors Board a surety bond with one or more corporate sureties authorized to do business in this state in the amount set forth in subsections (2) to (5) of this section, conditioned that the applicant, with regard to work subject to this chapter, will pay claims ordered paid by the board under ORS 701.140. Bonds filed under this subsection shall remain in effect for at least one year or until depleted by claims paid under ORS 701.140, unless the surety sooner cancels the bond. At the discretion of the surety the bond may be continued for an additional period by continuation certificate. Except as provided in subsection (6) of this section, the aggregate liability of the surety under the bond for claims against the bond shall not exceed the penal sum of the bond no matter how many years the bond is in force. Except as provided in subsection (6) of this section, no extension by continuation certificate, reinstatement, reissue or renewal of the bond shall increase the liability of the surety.

(2) A general contractor shall obtain a surety bond in the amount of $15,000.

(3) A specialty contractor shall obtain a surety bond in the amount of $10,000.

(4) A consultant shall obtain a surety bond in the amount of $10,000.

(5) The board may reduce the amount of the surety bond required by this section to $5,000 for a contractor upon a showing that the contractor does not perform work as a contractor exceeding $40,000 in gross annual volume and does not enter into contracts that exceed $5,000. These contractors shall be designated as limited contractors.

(6) The board, by rule, may require a licensee to obtain a new surety bond if, pursuant to a board order for payment of a claim described in ORS 701.140, the surety pays a claim out of the bond of the licensee. The new surety bond must be in the amount set forth in subsections (2) to (5) of this section unless a higher amount is required by a board condition or rule described in subsection (7) or (8) of this section. The board may allow a licensee to obtain, instead of a new bond, a certification that the surety remains liable for the full penal sum of the bond, notwithstanding payment by the surety on the claim.

[(6)] (7) If the amount the licensee must pay against the bond under this section exceeds the amount of the bond, the board shall suspend the contractor’s license until the amount owed is paid. The board, as a condition of ending the suspension, may require a contractor requesting reinstatement of a license to file a bond of an amount up to five times as much as the amount required ordinarily of a licensee under this section.

[(7)] (8) The board by rule may establish conditions for applicants or persons licensed under this chapter under which the applicant or licensee must file a bond of an amount up to five times as much as the amount required ordinarily of an applicant or licensee under this section. The board may reduce the amount of bond it would otherwise require if the contractor demonstrates satisfactory completion of approved elective classes on dispute resolution and prevention, basic accounting and record keeping or such other classes as the board may prescribe.

[(8)] (9) The bond required under this section is for the exclusive purpose of payment of final orders and arbitration awards of the board in accordance with this chapter.

[(9)] (10) Upon determination of a claim under ORS 701.140 against a contractor who holds a bond required under this section, the board shall notify the surety on the bond of the final order in a manner determined by the board by rule. The notification shall include a list of all claims upon which a final order has been issued.

[(10)] (11) No suit or action may be commenced against a surety on a bond required under this section until 30 days after the date that the surety is notified by the board under ORS 701.140 that payment is due on the claim.

[(11)] (12) In any action against a surety on a bond under this section that is based on the failure of the surety to pay a claim or on the denial of a claim by the surety, the court may award:

(a) Costs;

(b) Reasonable attorney fees to the prevailing party as part of the costs; and

(c) If the surety is ordered to pay a claim on the bond that the surety arbitrarily and capriciously refused to pay upon order of the board, twice the amount of damages against the surety as ordered by the board.

Approved by the Governor May 21, 2001

Filed in the office of Secretary of State May 21, 2001

Effective date January 1, 2002

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