SB425 - Bonds: public entities as beneficiaries.

Amended IN Senate March 26, 2025 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Senate Bill No. 425 Introduced by Senator Rubio February 18, 2025 An act to amend Section 662 of the Insurance Code, relating to insurance. An act to add Section 995.450 to the Code of Civil Procedure, relating to bonds and undertakings. LEGISLATIVE COUNSEL'S DIGEST 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. Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. Section 995.450 is added to the Code of Civil Procedure, to read: 995.450. (a) Notwithstanding any other law, 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 Section 1100 of the Public Contract Code, in connection with the purchase, construction, expansion, improvement, or rehabilitation of any real or other tangible personal property, that bond is not effective unless, before the surety or principal assumes any liability, the beneficiary agrees to do both of the following: (1) Make all payments to the principal, or to the surety if the surety agrees to complete the work upon the principal’s default, pursuant to the terms of the contract. (2) Perform all necessary obligations owed to the principal under the contract. (b) For purposes of this section, “contract” means a written or oral contract, as defined in Section 1549 of the Civil Code, that obligates a principal to purchase, construct, expand, improve, or rehabilitate real or other tangible personal property. SECTION 1. Section 662 of the Insurance Code is amended to read: 662. (a) (1) A notice of cancellation of a policy shall not be effective unless mailed or delivered by the insurer to the named insured, lienholder, or additional interest at least 30 days prior to the effective date of cancellation. However, when cancellation is for nonpayment of premium, at least 10 days’ notice of cancellation after nonpayment of premium due by the specified due date accompanied by the reason for the cancellation shall be given. Unless the reason accompanies or is included in the notice of cancellation, the notice of cancellation shall state or be accompanied by a statement that upon written request of the named insured, mailed or delivered to the insurer not less than 15 days prior to the effective date of cancellation, the insurer will specify the reason for the cancellation. (2) A cancellation based on nonpayment of premium shall only be effective on the date specified in the notice if the insured has not cured the nonpayment of premium due identified in the notice by the end of the 10-day period. (b) This section shall not apply to nonrenewal. (c) Notices made to lienholders pursuant to this section may be done electronically with the consent of the lienholder.