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Section 6 of 7

CSLB Insurance Requirements Practice Questions

10 free practice questions on insurance requirements, part of the Public Works section (about 5% of the exam). Try each one, then open the answer: every choice is explained and the law is quoted.

Questions and answers

  1. Public Works

    1. A contractor is awarded a public works contract. Under Labor Code section 1861, when must it sign and file the workers' compensation certification with the awarding body (the public agency that awarded the contract)?

    • A. Before it submits its bid on the project
    • B. Before it performs the work of the contract
    • C. Within 30 days after it starts the work
    • D. Before the awarding body makes final payment
    Show answer

    Correct answer: B

    • A. Before it submits its bid on the project

      The certification is filed after the contract is awarded, not with the bid. Section 1861 requires it before the contractor performs the work of the contract.

    • B. Before it performs the work of the contract

      Correct answer

      Section 1861 says each contractor awarded a public works contract must sign and file the certification with the awarding body before performing the work of the contract.

    • C. Within 30 days after it starts the work

      Within 30 days after work starts is too late. Section 1861 requires the certification before the contractor performs the work.

    • D. Before the awarding body makes final payment

      Final payment is too late. Section 1861 requires the certification to be filed before the contractor performs the work of the contract.

    Explanation

    Labor Code section 1861 says each contractor awarded a public works contract must sign and file a certification with the awarding body prior to (before) performing the work of the contract. In the certification, the contractor states it knows Labor Code section 3700 requires workers' compensation insurance or self-insurance, and that it will comply before it starts the work. The certification is filed after the award, not with the bid. Filing it after work starts or at final payment is too late.

    Source

  2. Public Works

    2. A contractor on a public works job knew it had to secure workers' compensation for its employees, but it did not. It is convicted for the first time under Labor Code section 3700.5. If the court orders a fine, what is the LOWEST fine allowed?

    • A. $1,000
    • B. $5,000
    • C. $10,000
    • D. $50,000
    Show answer

    Correct answer: C

    • A. $1,000

      $1,000 is far too low. For a first conviction under section 3700.5, the fine cannot be less than $10,000.

    • B. $5,000

      $5,000 is below the minimum. For a first conviction under section 3700.5, the fine cannot be less than $10,000.

    • C. $10,000

      Correct answer

      For a first conviction, the fine can be up to double the premium that would have been due, but not less than $10,000. So $10,000 is the lowest fine allowed.

    • D. $50,000

      $50,000 is the lowest fine for a second or later conviction, not a first one. A first conviction has a $10,000 minimum.

    Explanation

    Labor Code section 3700.5 makes it a misdemeanor (a crime) to fail to secure workers' compensation when the employer knew, or should have known, of the duty. For a first conviction, the fine can be up to double the premium that would have been due, but not less than $10,000. The court can also order up to one year in county jail. $50,000 is the lowest fine for a second or later conviction, not a first one.

    Source

  3. Public Works

    3. A city requires its public works contractor to buy insurance for damage to the work caused by acts of God. Under Public Contract Code section 7105, when must the contractor give the city evidence of this insurance?

    • A. Before it submits its bid for the project
    • B. Within 30 days after the work starts
    • C. Before the contract is executed (signed)
    • D. Before the city makes the final payment
    Show answer

    Correct answer: C

    • A. Before it submits its bid for the project

      Section 7105 does not require evidence of the insurance with the bid itself. The evidence is due before the contract is executed.

    • B. Within 30 days after the work starts

      Waiting until 30 days after the work starts is too late. The evidence must be furnished before the contract is executed.

    • C. Before the contract is executed (signed)

      Correct answer

      Section 7105 says the contract must require the contractor to furnish evidence of satisfactory insurance coverage to the public agency prior to execution (signing) of the contract.

    • D. Before the city makes the final payment

      Waiting until final payment is too late. The evidence must be furnished before the contract is executed.

    Explanation

    Public Contract Code section 7105 says that when act of God insurance is required, the contract must require the contractor to furnish evidence of satisfactory insurance coverage to the public agency prior to execution of the contract. Execution means signing the contract. Waiting until after the work starts, or until final payment, is too late. The section does not require the evidence with the bid itself.

    Source

  4. Public Works

    4. A magnitude 3.2 earthquake damages work on a city project. The work was built to the plans. Under Public Contract Code section 7105, does the 5 percent limit protect the contractor from these repair costs?

    • A. Yes, because every earthquake counts as an act of God
    • B. No, because only earthquakes over magnitude 3.5 count
    • C. Yes, because the work was built to the plans
    • D. No, because earthquakes never count as an act of God
    Show answer

    Correct answer: B

    • A. Yes, because every earthquake counts as an act of God

      Not every earthquake counts. Under section 7105, only earthquakes over magnitude 3.5 on the Richter Scale (and tidal waves) are acts of God.

    • B. No, because only earthquakes over magnitude 3.5 count

      Correct answer

      Correct. Only earthquakes over magnitude 3.5 count as acts of God under section 7105, and a 3.2 earthquake is below that level, so the 5 percent limit does not protect the contractor.

    • C. Yes, because the work was built to the plans

      Building to the plans is also needed, but it does not turn a small earthquake into an act of God. A 3.2 earthquake is below the 3.5 level the section requires.

    • D. No, because earthquakes never count as an act of God

      Earthquakes can count as acts of God. Section 7105 includes earthquakes over magnitude 3.5; this one simply is not large enough.

    Explanation

    Public Contract Code section 7105 limits the contractor's cost for act of God damage to 5 percent of the contract amount. For this section, acts of God include only earthquakes in excess of magnitude 3.5 on the Richter Scale and tidal waves. A magnitude 3.2 earthquake is below that level, so the limit does not protect the contractor. Building to the plans is also needed, but it does not make a small earthquake an act of God. Larger earthquakes do count.

    Source

  5. Public Works

    5. A contractor is awarded a public works contract. It must sign the workers' compensation certification in Labor Code section 1861. With whom must it file this certification?

    • A. The Contractors State License Board
    • B. The awarding body for the contract
    • C. The Department of Industrial Relations
    • D. The office of the Labor Commissioner
    Show answer

    Correct answer: B

    • A. The Contractors State License Board

      The certification is not filed with the CSLB. Labor Code section 1861 says it is filed with the awarding body.

    • B. The awarding body for the contract

      Correct answer

      Correct. Section 1861 says each contractor awarded a public works contract must sign and file the certification with the awarding body, the public agency that awarded the contract, before performing the work.

    • C. The Department of Industrial Relations

      The certification is not filed with the Department of Industrial Relations. Section 1861 says it goes to the awarding body.

    • D. The office of the Labor Commissioner

      The certification is not filed with the Labor Commissioner. Section 1861 says it goes to the awarding body.

    Explanation

    Labor Code section 1861 says each contractor awarded a public works contract shall sign and file the certification with the awarding body, which is the public agency that awarded the contract. In the certification, the contractor says it knows it must have workers' compensation and will comply before starting the work. The certification is not filed with the CSLB, the Department of Industrial Relations, or the Labor Commissioner.

    Source

  6. Public Works

    6. A contractor is convicted under Labor Code section 3700.5 and is charged the costs of investigation. It also owes benefits to a worker injured on its public works job. Under that section, what must be paid before the costs of investigation?

    • A. The premium for a new workers' compensation policy
    • B. The benefits owed to the injured worker
    • C. The fees owed to the contractor's own lawyer
    • D. The unpaid bills owed to the contractor's suppliers
    Show answer

    Correct answer: B

    • A. The premium for a new workers' compensation policy

      A premium for a new policy is not on the list. Section 3700.5(c) puts benefits owed to injured workers ahead of the costs of investigation.

    • B. The benefits owed to the injured worker

      Correct answer

      Correct. Section 3700.5(c) says the costs of investigation are paid only after any benefits owed to injured workers are paid.

    • C. The fees owed to the contractor's own lawyer

      The contractor's own lawyer fees are not on the list. The section puts benefits owed to injured workers, reimbursement owed to the director, and other penalty assessments ahead of investigation costs.

    • D. The unpaid bills owed to the contractor's suppliers

      Supplier bills are not on the list. The section puts benefits owed to injured workers, reimbursement owed to the director, and other penalty assessments ahead of investigation costs.

    Explanation

    Labor Code section 3700.5(c) says the costs of investigation shall be paid only after the payment of any benefits that may be owed to injured workers. The same rule also puts reimbursement owed to the director and other penalty assessments ahead of the investigation costs. A new policy premium, the contractor's lawyer, and its suppliers are not on that list.

    Source

  7. Public Works

    7. A school district arranges a wrap-up insurance policy for a new school project. Under Insurance Code section 11751.82, what does a wrap-up insurance policy cover?

    • A. Risks of one contractor on all of its projects
    • B. Risks of the owner only, not of any contractor
    • C. Risks of one project for two or more contractors
    • D. Risks of the general contractor only on one project
    Show answer

    Correct answer: C

    • A. Risks of one contractor on all of its projects

      A wrap-up policy is tied to one work of improvement, not to one contractor's work on all of its projects.

    • B. Risks of the owner only, not of any contractor

      A wrap-up policy must cover two or more of the contractors or subcontractors on the project, so it is not limited to the owner.

    • C. Risks of one project for two or more contractors

      Correct answer

      Correct. Section 11751.82 defines a wrap-up policy as one written to cover risks of a work of improvement and covering two or more of the contractors or subcontractors on it.

    • D. Risks of the general contractor only on one project

      Covering only the general contractor does not fit; the policy must cover two or more of the contractors or subcontractors on the project.

    Explanation

    Insurance Code section 11751.82 defines a wrap-up insurance policy as a policy, or series of policies, written to cover risks associated with a work of improvement (a construction project). It must cover two or more of the contractors or subcontractors that work on that project. So it is tied to one project and covers several contractors. A policy for one contractor on all its jobs, or for only one party, does not fit this definition.

    Source

  8. Public Works

    8. A general contractor gets a wrap-up insurance policy (one policy that covers many contractors) for a public works project. The project was put out for bid in 2026. Subcontractors must give a credit (a price reduction) toward the premium. Under Civil Code section 2782.96, where must the amount or method of calculating this credit be clearly shown?

    • A. In the bid documents for the project
    • B. In the final payment request for the project
    • C. In the notice of completion for the project
    • D. In the certificate of insurance for the project
    Show answer

    Correct answer: A

    • A. In the bid documents for the project

      Correct answer

      Correct. Section 2782.96 says the total amount or method of calculating any premium credit required from a subcontractor must be clearly delineated in the bid documents.

    • B. In the final payment request for the project

      The final payment request comes at the end of the job, too late; the law names the bid documents.

    • C. In the notice of completion for the project

      The notice of completion comes at the end of the job, too late; the law names the bid documents.

    • D. In the certificate of insurance for the project

      A certificate of insurance only shows that coverage exists; the law requires the credit to be shown in the bid documents.

    Explanation

    Civil Code section 2782.96 says the total amount or method of calculation of any premium credit required from a subcontractor must be clearly delineated (shown) in the bid documents. This lets subcontractors know the cost before they bid. A final payment request and a notice of completion come at the end of the job, which is too late. A certificate of insurance only shows that coverage exists; the law names the bid documents.

    Source

  9. Public Works

    9. Under Labor Code section 1860, what clause must the awarding body put in every public works contract?

    • A. A clause that the contractor must carry general liability insurance
    • B. A clause that the contractor must buy builder's risk insurance
    • C. A clause that the contractor must name the agency as an additional insured
    • D. A clause that the contractor must secure workers' compensation for its employees
    Show answer

    Correct answer: D

    • A. A clause that the contractor must carry general liability insurance

      An agency may ask for general liability insurance in its own contract terms, but section 1860 is only about workers' compensation.

    • B. A clause that the contractor must buy builder's risk insurance

      An agency may ask for builder's risk insurance in its own contract terms, but the clause section 1860 requires is about workers' compensation.

    • C. A clause that the contractor must name the agency as an additional insured

      Section 1860 is only about workers' compensation. It requires a clause that every contractor must secure the payment of compensation to its employees.

    • D. A clause that the contractor must secure workers' compensation for its employees

      Correct answer

      Section 1860 says the awarding body must put in every public works contract a clause that, under section 3700, every contractor must secure the payment of compensation to its employees.

    Explanation

    Labor Code section 1860 says the awarding body must put a clause in every public works contract. The clause says that, under Labor Code section 3700, every contractor must secure the payment of compensation (workers' compensation) to its employees. An agency may ask for other insurance, such as general liability or builder's risk, in its own contract terms. But section 1860 is only about workers' compensation.

    Source

  10. Public Works

    10. In 2026, a contractor signs a construction contract with a county. One clause says the contractor must pay for losses caused by the county's own active negligence (careless acts). Under Civil Code section 2782, is this clause enforceable?

    • A. Yes, because the contractor signed the contract
    • B. No, because the clause is void and unenforceable
    • C. Yes, but only if the contractor has liability insurance
    • D. Yes, but only if the contract is over $25,000
    Show answer

    Correct answer: B

    • A. Yes, because the contractor signed the contract

      Signing the contract does not make the clause valid. Under section 2782, a clause putting liability for the public agency's active negligence on the contractor is void and unenforceable.

    • B. No, because the clause is void and unenforceable

      Correct answer

      Section 2782 says a clause in a public agency construction contract entered into on or after January 1, 2013, that puts liability for the agency's active negligence on the contractor is void and unenforceable. This 2026 county contract falls under that rule.

    • C. Yes, but only if the contractor has liability insurance

      The contractor's insurance does not change the rule. The clause is void and unenforceable whether or not the contractor has liability insurance.

    • D. Yes, but only if the contract is over $25,000

      The contract amount does not change the rule. Section 2782 makes the clause void and unenforceable without any $25,000 condition.

    Explanation

    Civil Code section 2782 covers construction contracts with a public agency entered into on or after January 1, 2013. A clause that puts liability for the public agency's active negligence on the contractor, or relieves the agency of it, is void and unenforceable. Signing the contract does not make the clause valid. The contractor's insurance and the contract amount do not change this rule.

    Source

    • Civ. Code §2782(b)(2)

      provisions, clauses, covenants, or agreements contained in, collateral to, or affecting any construction contract with a public agency entered into on or after January 1, 2013, that purport to impose on any contractor, subcontractor, or supplier of goods or services, or relieve the public agency from, liability for the active negligence of the public agency are void and unenforceable.

      View source: Civ. Code §2782(b)(2)Official site for Civ. Code §2782(b)(2) (opens in a new tab)

Keep studying

Read the Section 6 study notes: Public Works

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