Bonding in Washington

A surety bond is a 3-party promise. The contractor (the principal) pays a surety company for a bond that a customer, subcontractor, or the state (the obligee) can draw against if the contractor breaks the rules the bond covers. The surety pays valid claims up to the bond face value. The contractor then owes the surety for what the surety paid out. A bond protects the public. It is not insurance for the contractor. Washington uses bonds in 3 distinct places, and contractors regularly confuse them. Keep them separate. 1. L&I contractor registration bond. Washington Department of Labor & Industries (L&I) administers contractor registration under RCW 18.27. Every registered contractor must file a continuous surety bond with L&I: $30,000 for a general contractor, $15,000 for a specialty contractor, per RCW 18.27.040. In place of a surety bond, an applicant may file an assignment of account in the same amount with a Washington financial institution. The bond is payable to the state and covers unpaid judgments related to construction work, wage claims from employees, and claims by material suppliers and subcontractors, in the order of priority set by statute. Electrical contractors carry a separate $4,000 bond under RCW 19.28.041 as part of the electrical contractor license issued by L&I, in addition to the RCW 18.27 contractor registration bond. Plumbing contractors carry a separate $6,000 bond under RCW 18.106.410 as part of the plumbing contractor license, in addition to the RCW 18.27 contractor registration bond. A contractor with a final residential-construction judgment in the prior five years can be required to post up to three times the standard plumbing bond amount under RCW 18.106.410(11). 2. Public works payment and performance bonds (Little Miller Act). RCW 39.08, the Washington Little Miller Act, requires a contractor on a public works contract with the state or a municipality to execute a bond to the state before starting work. The bond secures payment to laborers, material suppliers, and subcontractors and the faithful performance of the contract. On contracts of $150,000 or less, the statute allows the contractor and public body to agree that the public body will retain 50% of the contract amount for 30 days after final acceptance in lieu of the bond. These project bonds are not the L&I registration bond. 3. Liability insurance is a separate requirement, not a bond. L&I requires every registered contractor to carry general liability insurance at $200,000 public liability and $50,000 property damage, or $250,000 combined single limit. L&I must be listed as a certificate holder. Insurance is not a bond, and a bond does not satisfy the insurance rule. Premium math. A surety charges an annual premium, typically 1% to 3% of the bond face value for a contractor with strong credit and no prior claims. Weaker credit, tax liens, prior surety losses, or a new business can push the rate to 5% to 10% or more. A $30,000 general contractor bond at 2% is $600 per year. A $15,000 specialty bond at 2% is $300 per year. A $4,000 electrical bond or $6,000 plumbing bond at 2% is $80 to $120 per year. Public works payment and performance bonds are priced per job, usually 0.5% to 3% of the contract price. What claims look like. For the L&I registration bond, a claimant with a final court judgment related to the contracting work files a certified copy of the judgment with L&I within one year of entry, and L&I notifies the surety. If the judgment is within the bond's coverage, the claimant can seek recovery from the bond in the statutory priority order. The surety pays, then pursues the contractor. Bond, insurance, and workers' compensation are separate requirements. A Washington contractor carries the L&I registration bond under RCW 18.27, any trade-specific bond (electrical under RCW 19.28 or plumbing under RCW 18.106), general liability insurance at L&I minimums, and workers' compensation coverage through L&I's state fund. Confirm each requirement against the current L&I guidance before you assume you are compliant.