Bonds: public entities as beneficiaries.

Plain English Breakdown

The official source material does not provide details on enforcement or penalties for non-compliance with these new rules.

Bonds: Public Entities as Beneficiaries and Insurance Cancellation Notices

This law changes rules for bonds given to public entities and extends the notice period car insurance companies must give customers before canceling a policy.

What This Bill Does

• Specifies that if a statute provides for a bond to be given to or in favor of a beneficiary that is a public entity, as defined, in connection with property projects, the bond is not effective unless the beneficiary agrees to make all payments to the principal or surety and perform necessary obligations under the contract.
• Extends the notice period car insurance companies must give customers from 20 days to 30 days before canceling a policy.

Who It Names or Affects

• Public entities receiving bonds for property projects
• Insurance companies providing automobile insurance

Terms To Know

public entity

An organization such as a city, county, or state government that serves the public.

surety

A person or company who guarantees payment if another party fails to meet their obligations.

Limits and Unknowns

• The bill does not specify what happens if a beneficiary refuses to agree to the terms.
• It is unclear how insurance companies will implement the extended notice period for cancellations.

Official Summary Text

SB 425, as amended, Rubio.
Automobile insurance: notice of cancellation.
Bonds: public entities as beneficiaries.
Existing law, the Bond and Undertaking Law, prescribes procedures for a bond or undertaking that is executed, filed, posted, furnished, or otherwise given as a security pursuant to any statute, except as specified. Unless a statute providing for a bond indicates that the bond becomes effective at a different time, a bond is effective at the time it is given or, if the statute requires that the bond be approved, at the time it is approved.
This bill would specify that if a statute provides for a bond to be given to or in favor of a beneficiary that is a public entity, as defined, in connection with the purchase, construction, expansion, improvement, or rehabilitation of any real or other tangible personal property, that bond is not effective unless the beneficiary agrees to (1) make all payments to the principal, or to the surety if
the surety agrees to complete the work upon the principal’s default, and (2) perform all necessary obligations owed to the principal under the contract for the work.
Under existing law, a notice of cancellation of an automobile insurance policy is not effective unless mailed or delivered by the insurer to the named insured, lienholder, or additional interest at least 20 days prior to the effective date of cancellation.
This bill, instead, would require the notice of cancellation to be mailed or delivered by the insurer at least 30 days prior to the effective date of cancellation to be effective.

Current Bill Text

Download Bill PDF