Section 5009 - Bond Guarantee and Bond Line TermsThe terms and conditions of a Bond Guarantee or Bond Line shall be consistent with the resolution of the Corporation approving the Bond Guarantee or Bond Line and shall include all of the following:
(a) Provision that the Corporation promises to pay Losses up to ninety percent (90%) of the Bond, not to exceed five hundred thousand dollars ($500,000), subject only to the restriction that the Surety has not engaged in gross negligence, misrepresentation, fraud, or material breach of the terms of the Guarantee in writing, issuing, or servicing the Bond.(b) Guarantee shall expire two hundred and ten days (210) following final payment by the party requiring the Bond (Obligee) of all amounts owed to Principal pursuant to the contract bonded, so long as no notice of claims has been received by Surety and is pending as of that expiration date. In the event that a notice of claim is pending as of that expiration date, the Guarantee shall remain in effect until resolution of that claim.(c) A Corporation Bond Guarantee fee not to exceed two percent of the Guarantee amount. In the case of a Bond Line, the fee shall be charged for each Guarantee.(d) The terms and conditions of the Bond subject to a Guarantee which shall be in accord with those generally established and accepted by the Surety for the type of contract for which the Bond is required.(e) A statement that:(1) Surety would not provide the Bond without the Guarantee.(2) Consistent with Surety's underwriting and claims handling procedures, Surety shall take all reasonable action necessary to minimize risk of Loss, including but not limited to the taking of Collateral and obtaining personal guarantees, and Surety will pursue all possible sources of recovery.(3) If any suit is filed against Surety upon the Bond, Surety shall immediately inform Corporation of receipt of notice thereof and shall take charge of all suits or claims arising under the Bond and compromise, settle or defend such suit or claim. Surety shall take all steps necessary to mitigate the Loss resulting from Principal's default. Surety shall not join Corporation in any lawsuit to which Surety is a party unless Corporation has denied a Claim.(4) Liability of the Corporation under the Guarantee shall be reduced if the Guarantee requires Surety to take Collateral, and Surety fails to obtain and perfect the Collateral. In the event that the Surety fails to take or perfect Collateral required by the terms of the Guarantee, the liability of the Corporation pursuant to the Guarantee shall be reduced by the Guarantee percentage of the amount which could reasonably have been recovered by liquidating the Collateral.(5) The terms of the Guarantee shall not be waived, changed or altered unless both Corporation and Surety's authorized representative have signed and dated assent thereto.(6) Corporation shall have access to and the right to audit and inspect any and all documents maintained by the Surety related to the Bond. The audit shall be conducted in a reasonable manner during business hours or as otherwise agreed upon between Corporation and Surety.(7) The Guarantee is made exclusively for the benefit of Corporation and Surety and does not confer any rights or benefits to any other party. In the event of the Surety's insolvency, Corporation shall not be liable to the receiver or trustee of the insolvent estate except for any Loss.(f) In the case of a Bond Line, the document shall also specify the following:(1) The Bond Line shall only apply to Bonds issued by the identified Surety, to the specified Principal.(2) No Bond shall be guaranteed under the Bond Line if that Bond is dated either before the effective date of the Bond Line, or later than 365 days following the effective date of the Bond Line.(3) The Bond Line shall specify the guarantee percentage for the Guarantees issued under the Bond Line.(4) The Bond Line shall specify the maximum Guarantee authority, which shall not exceed $500,000. The combined Guarantee liability of all Bonds outstanding for a specific Principal shall not exceed $1,000,000, pursuant to the provisions in subsection 5002(b)(12). A Principal with a Bond Line shall obtain a Guarantee under the Line by sending a copy of the Bond to the Corporation, which shall sign and attach to the Bond a statement that the Bond is guaranteed by the Corporation pursuant to the terms of the Bond Line. This statement shall be signed so long as the Principal and Bond comply with the terms of the Bond Line.(5) It shall be the responsibility of the Surety to notify the Corporation when a Guarantee under a Bond Line has expired.Cal. Code Regs. Tit. 10, § 5009
1. New section filed 2-15-94 as an emergency; operative 2-15-94 (Register 94, No. 7). A Certificate of Compliance must be transmitted to OAL by 6-15-94 or emergency language will be repealed by operation of law on the following day.
2. Repealed by operation of Government Code section 11346.1(g) (Register 95, No. 7).
3. New section filed 4-17-95 as an emergency; operative 4-17-95 (Register 95, No. 16). A Certificate of Compliance must be transmitted to OAL by 8-15-95 or emergency language will be repealed by operation of law on the following day.
4. Certificate of Compliance as to 4-17-95 order transmitted to OAL 6-12-95 and filed 7-25-95 (Register 95, No. 30).
5. Amendment of subsections (a), (b) and (f)(4) and amendment of NOTE filed 7-29-2003 as an emergency; operative 7-29-2003 (Register 2003, No. 31). Pursuant to Corporations Code section 14024 a Certificate of Compliance must be transmitted to OAL by 1-26-2004 or emergency language will be repealed by operation of law on the following day.
6. Editorial correction of HISTORY 5 (Register 2003, No. 49).
7. Reinstatement of subsections (a), (b) and (f)(4) and reinstatement of NOTE as they existed prior to 7-29-2003 amendment by operation of Government Code section 11346.1(f) (Register 2004, No. 32).
8. Amendment filed 12-27-2004 as a deemed emergency pursuant to Corporations Code section 14024; operative 12-27-2004 (Register 2004, No. 53). A Certificate of Compliance must be transmitted to OAL by 6-27-2005 or emergency language will be repealed by operation of law on the following day.
9. Editorial correction of HISTORY 8 (Register 2005, No. 27).
10. Certificate of Compliance as to 12-27-2004 order, including amendment of subsection (b) and NOTE, transmitted to OAL 5-25-2005 and filed 7-7-2005 (Register 2005, No. 27). Note: Authority cited: Section 14024, Corporations Code. Reference: Sections 14002, 14055, 14070, 14071, 14072 and 14071.5, Corporations Code.
1. New section filed 2-15-94 as an emergency; operative 2-15-94 (Register 94, No. 7). A Certificate of Compliance must be transmitted to OAL by 6-15-94 or emergency language will be repealed by operation of law on the following day.
2. Repealed by operation of Government Code section 11346.1(g) (Register 95, No. 7).
3. New section filed 4-17-95 as an emergency; operative 4-17-95 (Register 95, No. 16). A Certificate of Compliance must be transmitted to OAL by 8-15-95 or emergency language will be repealed by operation of law on the following day.
4. Certificate of Compliance as to 4-17-95 order transmitted to OAL 6-12-95 and filed 7-25-95 (Register 95, No. 30).
5. Amendment of subsections (a), (b) and (f)(4) and amendment of Note filed 7-29-2003 as an emergency; operative 7-29-2003 (Register 2003, No. 31). Pursuant to Corporations Code section 14024 a Certificate of Compliance must be transmitted to OAL by 1-26-2004 or emergency language will be repealed by operation of law on the following day.
6. Editorial correction of History 5 (Register 2003, No. 49).
7. Reinstatement of subsections (a), (b) and (f)(4) and reinstatement of Noteas they existed prior to 7-29-2003 amendment by operation of Government Code section 11346.1(f) (Register 2004, No. 32).
8. Amendment filed 12-27-2004 as a deemed emergency pursuant to Corporations Code section 14024; operative 12-27-2004 (Register 2004, No. 53). A Certificate of Compliance must be transmitted to OAL by 6-27-2005 or emergency language will be repealed by operation of law on the following day.
9. Editorial correction of History8 (Register 2005, No. 27).
10. Certificate of Compliance as to 12-27-2004 order, including amendment of subsection (b) and Note, transmitted to OAL 5-25-2005 and filed 7-7-2005 (Register 2005, No. 27).