Download Handout - Professional Liability Fund

1/,/rT . 

... __ ."April 22 , 2011 

...•••...•..••.·.•• ,.to$:OOp.m. 

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..... ' pper~gRhesFerry Road 

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OR 97224

MCLE FORM 1: Recordkeeping Form (Do Not Return This Form to the Bar) 

Instructions: 

Pursuant to MCLE Rule 7.2, every active member shall maintain records of participation in accredited CLE activities. You may wish 

to use this form to record your CLE activities, attaching it to a copy of the program brochure or other information regarding the CLE 

activity. 

Do not return this form to the Oregon State Bar. This is to be retained in your own MCLE file. 

Name: 

Bar Number: 

Sponsor of CLE Activity: 

OSB Construction Law Section 

Title of CLE Activity: 

2011 OR and WA Constr. Law: Comparison and Contrast 

Date: 

Location: 

4/22/2011 OSB Center 

❑ ■ Activity has been accredited by 

the Oregon State Bar for the 

following credit: 

____ 7.5 General 

____ Prof Resp-Ethics 

____ Access to Justice 

____ Child Abuse Rep. 

____ Practical Skills 

❑ Full Credit. 

I attended the entire program and 

the total of authorized credits are: 

____ General 





❑ Partial Credit. 

I attended _________ hours of the 

program and am entitled to the 

following credits*: 

____ General 





*Credit Calculation: 

One (1) MCLE credit may be claimed for each sixty (60) minutes of actual participation. Do not include registration, 

introductions, business meetings and programs less than 30 minutes. MCLE credits may not be claimed for any activity that has 

not been accredited by the MCLE Administrator. If the program has not been accredited by the MCLE Administrator, you must 

submit a Group CLE Activity Accreditation application (See MCLE Form 2.) 

Caveat: 

If the actual program length is less than the credit hours approved, Bar members are responsible for making the 

appropriate adjustments in their compliance reports. Adjustments must also be made for late arrival, early departure or other 

periods of absence or non-participation. 

04/08:MCLE1

Event Schedule 

8:00-8:25 

On-Site Registration (Light Breakfast Included) 

8:25 

8:30 - 9:30 

9:30 -10:30 

10:30 - 10:45 

10:45 - Noon 

Noon -1:00 

1:00 - 2:15 

2:15 - 2:45 

2:45 -3:00 

3:00 - 4:00 

4:00 - 5:00 

5:00 

Robert O'Halloran 

Welcome/Opening Remarks 

Alan L. Mitchell 

Albert F. Schlotfeldt 

Oregon and Washington, Contractor Licensing vs. Registration 

Douglas R. Hookland 

Claims and Issues as to Washington/Oregon Contractor Bonds 

Break (with Refreshments) 

D. Gary Christensen 

Lisa C. Lui 

Contract Issues, Oregon and Washington 

Lunch (Included) 

Tara M. Mellom 

Jeremy T. Vermilyea 

Liens and Public Bond Claims 

Curtis A. Welch 

Washington Retainage Liens and Stop Notices 

Break (with Refreshments) 

Thomas A. Ped 

Peter J. Viteznik 

Construction Defect Claims and Pre-Claim Notice Requirements 

Michael E. Farnell 

James D. Mullins 

Insurance Issues Affecting Construction Disputes 

Robert O'Halloran 

Closing Remarks 

Oregon MCLE Credits Applied For: 7.0 (General) 

Washington MCLE Credits Applied For: 7.0 (General)

9rfitclie{{ Law Office, ££C 

Alan L. Mitchell* 

alan@mitchell-lawoffice.com 

*Licensed in OR and W A 

1333 SE Ankeny St #101, Portland, OR 97214 

PO Box 14247, Portland, OR 97293 

Phone: 503-238-7871 

Fax: 503-238-7873 

www.Mitchell-LawOffice.com 

Shari M. Persen 

Jill C. Rivers 

Legal Assistants 

Alan L. Mitchell Resume 

Alan is an attorney licensed in both Oregon and Washington. His practice focuses on 

construction and small business matters. 

Alan has worked in the construction industry in various capacities since 1976. He first 

worked as a laborer for a custom home builder in Tucson, Arizona. He then began working as a 

sole proprietor in the carpentry business, from framing to finish work and cabinetry. Alan next 

became a building inspector for the City of Tucson, Arizona, working in that position for almost 

seven years. After that, Alan spent two years as a building inspector and plans examiner for City 

of Plymouth, Minnesota. 

Alan went to law school at Lewis and Clark Law School in Portland, Oregon, graduating 

in 1996. He worked at the law firm of Scott Hookland LLP from 1995 until early 2007, when he 

formed Mitchell Law Office, LLC. 

Alan speaks and writes frequently on various aspects of construction law, including lien 

and bond claims, commercial collections, and Construction Contractors Board issues. He has 

worked closely with hundreds of small businesses, from formation through company ownership 

changes and dissolutions. 

Alan is a member of the Oregon State Bar, the Washington State Bar, and the U.S. 

District Court of Oregon. He has been the Editor of the newsletter for the Oregon State Bar's 

Construction Law Section since 1999. 

His volunteer work includes serving on the City of Tigard Building Appeals Board and 

the Executive Committee of the Oregon State Bar's Construction Law Section. Alan also 

volunteers as a hearings officer for the Multnomah County Animal Services agency. In addition, 

Alan and his dog Wally are regular volunteers in the Belmont Library's Read To The Dogs 

program. 

Page 1 of 1 - Mitchell Law Office, LLC

Oregon CCB Licensing 

Oregon & Washington Construction Law: Comparison & Contrast 

April 22, 2011 Seminar - Tigard, OR 

Prepared and Presented By: 

Alan L. Mitchell 

Mitchell Law Office, LLC 

Phone: 503-238-7871 

Email: alan@mitchell-lawoffice.com 

Web: www.mitchell-lawoffice.com 

CONTENTS: 

1. Who needs to be licensed 

2. Licensing exemptions 

3. When do you need to be licensed 

4. Consequences of not being licensed 

5. CCB Endorsements 

6. Specialty Contractors 

7. Continuing Education 

EXHIBITS: 

1. CCB Chart: Who Needs a CCB License 

2. CCB Licensing Endorsement Chart 

3. Continuing Education Requirements for Commercial Contractors 

4. Continuing Education Requirements for Residential Contractors 

This is general information only, and must not be construed as legal advice, or take the place of 

competent legal counsel. Its purpose is to provide general -- not specific -- information on SOME of 

the steps and precautions that should be considered in these matters. 

Oregon CCB Licensing - Page 1 of 5 

Alan L. Mitchell © 2011

CCB LICENSING ISSUES 

1. Who needs to be licensed 

General Rule: Anyone who, for compensation, performs construction activity involving 

improvements to real estate must first obtain a CCB license. 

Search the CCB's web site regarding your customers: www.oregon.gov/ccb. 

Also check the Secretary of State's web site: www.filinginoregon.com. 

For a list of activities that the CCB considers requiring a license, see OAR 812-002-0760. 

This includes "construction management," a term defined in OAR 812-002-0160. 

812-002-0160 "Construction management" is the coordinating of a construction project, 

including, but not limited to, selecting contractors to perform work on the project, 

obtaining permits, scheduling specialty contractors' work, and purchasing materials. 

"Construction management" does not include consulting work performed by a registered 

engineer or a licensed architect when operating as provided by ORS 701.010(7). 

Exhibit 1 is a chart showing examples of who needs a CCB license. 

Remember: 2010 House Bill 3689, which bars construction lien rights on owner-occupied 

residential projects when the lien claimant was hired by a contractor who was not 

properly licensed by the CCB. 

2. Licensing exemptions 

ORS 701.010 lists out specific exemptions from CCB licensing. 

Also, there is a "house flipper" exemption (701.101(6)) for owners of structures who hire 

licensed contractors for three or less projects in one year. However, if the work requires a 

building permit, then the owner must hire a general contractor in order to qualify for this. 



Another exemption is for "worker leasing companies" that supply personnel to licensed 

contractors (so long as the work is performed under the supervision ofthe contractor). 

Also, the CCB has a rule with a list of what it considers "work as a contractor": OAR 

812-002-0760. 

This is contrasted with the CCB's rule of what is considers "not work as a contractor": 

OAR 812-002-0780. 

3. When do you need to be licensed 

General rule: You must be licensed continuously from the time of bid until work 

completion. See ORS 701.131 and 701.021. 

Just having a CCB number does not mean the person is properly licensed. 

4. Consequences of not being licensed 

ORS 701.131: If you are not properly licensed and endorsed at all times, then you may be 

barred from filing a lawsuit, a CCB complaint, or any other procedure. 

There are rules that somewhat qualify that absolute bar. Don't rely on them. 

This rule does not apply to defending a "construction defect" lawsuit. 



5. CCB Endorsements 

As of 7/1/1 0, every contractor had to choose a license endorsement. See ORS 701.021. 

Two types, Residential and Commercial (See ORS 70 1.005 definitions): 

o 

o 

Residential: Can work on Residential or Small Commercial projects. 

Commercial: Can work on Large Commercial or Small Commercial projects. 

Can choose either or both (will need a separate surety bond for each). 

Exhibit 2 is a chart showing the two types of endorsements and their associated 

requirements. 

"Residential Project" definition (ORS 701.005(14) & OAR 812-002-0660): 

o 

Single-family dwellings (a house, a single condo unit, etc.) 

"Small Commercial Project" definition (ORS 701.005(16) & OAR 812-002-0675): 

o 

o 

o 

Nonresidential buildings that are less than 10,000 square feet in area and less than 

20 feet high (basically, two stories); 

Projects less than 12,000 square feet and less than 20 feet high (like a TI in a 

shopping mall) 

Entire project is under $250,000 (that amount includes the entire project) 

"Large Commercial Project" definition (ORS 701.005(10) & OAR 812-002-0430): 

o 

Anything not fitting into the above two categories. 

Working outside your endorsement is same as being completely unlicensed. 



6. Specialty Contractor Licensing 

Definition: a contractor that supervises or performs work involving the use of less than 

two unrelated business trades or crafts. See ORS 701.005(17) and 701.005(7) and OAR 

812-002-0677 . 

Example: An electrician has a specialty endorsement. He agrees to install an underground 

electrical vault. He hires an excavator and a concrete subcontractor. Those are more than 

two unrelated building trades. Thus, he needs to be a general contractor. 

Exception to that rule: The electrician works only on residential structures with contracts 

of $2,500 or less per contract. 

7. Continuing Education 

Applies to both residential and commercial endorsements. However, rules are different. 

Commercial contractors: 

o Must show compliance at time of first license renewal after 7/1/10. 

o 

o 

Education can involve the contractor's "key people" (a broad definition). 

The electricianlHV AC/plumber exception applies only for the commercial 

endorsement. 

Residential contractors: 

o Must show compliance as of 10/1/11. 

o 

Must take certain "core" classes. 

See the Exhibit 3 summary chart for contractors with a Commercial Endorsement 

See the Exhibit 4 summary chart for contractors with a Residential Endorsement 



Oregon Construction Contractors Board 

PO Box 14140 Salem, OR 97309-5052 

700 Summer St NE Suite 300 

P: 503-378~4621 I F: 503-373-2007 

Who needs a construction 

contractor's license 

For information on becoming licensed, or to report unlicensed construction activity visit the CCB website 

at www,oregon,gov/CCB, or call 503-378-4621, 

(fi/who needs Jicense02l1O) 

Exhibit 1 

Page 1 of 1

CCB LICENSING ENDORSEMENT CHART SEPTEMBER 2009 

(None) 116 hours & test I $20,000 $500;000 • Unlimited trades 

General (RGC) per occurrence • No dollar limit 

16 hours per 2 year license period 

·8 hours in specific topic areas (Core) 

"8 hours ill constructiol1lbusincss area(Elective) 

16 hours per 2 year license period 

Specialty (RSC) (None) 16 hours & test $15,000 $300,000 ·2 or fewer building trades OR 1"8 hours in specific topic areas (Core) 

per occurrence 

• 3 or more $2,500 contract limit ·8 hours in construction/business 

(None) 16 hours & test $10,000 $100,000 • Unlimited trades 

Limited (RLC) per occurrence • $5,000 per job limit 

• $40,000 sales per year limit 

(None) 1 (None) 1 $20,000 $500,000 • Owns the property 

Developer (RD) per occurrcncc • Hires general contractor to I (Nune) 

oversee and perform all work 

18 hours in specific topic areas (Core) within 2 

year license period 

General-l (CGC-I) 1 8 years 116 houTs & test 1 $75,000 $2 million aggregate • Unlimited trades ,.4 or less key employees = # of 

(level 1 ) 1 

• Workers comp required key employees X 8 hrs . 

• 2-year envelope warranty • 5 or more key employees = 40 hrs per 

year 

General-2 (CGC-2) I 4 years 116 hours & test 1 $20,000 $1 million aggregate • Unlimited trades .Any # of key employees = 16 hrs. per 

(level 2) 1 

• Workers comp. required year 

.2-year envelope warranty 

Specialty-l (CSC-I) 1 8 years 116 hours & test 1 $50,000 $1 million aggregate .2 or fewer building trades 1.4 or less key employees = # of key 

(level 1) 1 

• Workers compo required employees X 8 hrs. 

.5 or more key employees = 40 hrs. per 

year 

Specialty-2 (CSC-2) 4 years 16 hours & test $20,000 $500,000 .2 or fewer building trades • Any # of key employees = 16 hrs. per 

(leve12) per occurrence "Workers compo required year 

(CD) (None) (None) $20,000 $500,000 • Owns the property (None) 

'"d tnt 

per occurrence • Hires general contractor to 

~. (1) _. 5- oversee and perform all work 

cr' 

o :=;: IEndorsement Chart 4-08 (rev. 9/09) 

.....,1'0

Commercial Contractors: 

New Continuing Education for July 2010 

Beginning July 1, 2010, all commercially endorsed contractors must certify on their 

renewal that they have completed continuing education (CE). 

WHO: 

WHAT: 

WHEN: 

HOW: 

All CCB commercially endorsed contractors that renew a commercial 

CCB license. Training can be taken by any "key" employee of the 

business. 

Commercial Contractor CE is now part of the requirements for 

continued licensing with the CCB. 

Certification that a contractor has completed the required amount of 

CE hours begins with renewals on or after July 1,2010. 

Determine how much CE, who can take it for your business and what 

training qualifies. (See reverse side for more information.) 

How do I provide the CE information to the CCB 

You will be asked to declare that you have taken the training on your next CCB 

license renewal. You should keep records of all continuing education taken by your 

"key" employees. 

CCB will not ask you to provide proof of continuing education at the time of renewal, 

except for your written (promised) declaration that you completed the continuing 

education required for your business. 

(over) 

Exhibit 3 

""---"'----'=-~-'---'~'""-'-i Page 1 of 2

REQUIRED TRAINING FOR COMMERCIAL CONTRACTORS 

1. Topics may include construction means, methods, and business practices. The approved 

sources for continuing education topics are: 

• 

Community colleges, colleges, universities 

Trade schools 

Trade or business associations 

Professional societies 

Private companies 

Public agencies 

Product manufacturer training 

In-house training 

NOTE: At present, CCB does not have a list of CE providers. Over time, CCB plans to create a list, to be 

available on its website. 

2. The CE must be taken by key employees of the business. A "key employee" is an owner or 

employee who is one of the following: 

• Corporate officer 

• Manager 

• Superintendent 

• Foreperson 

• Lead person 

• Any other person who exercises management or supervisory authority 

over the construction activities of the business 

3. CE may be obtained by one key employee or by multiple key employees. The total number 

of hours required depends on how many key employees the business has. The following 

CE hours are required for each two-year licensing period: 

Commercial Contractor Level 1 5 or more Key Employees 80 Hours Required 

4 Key Employees 64 Hours Required 




Commercial Contractor Level 2 Any # of Key Employees 32 Hours Required 

4. Contractors must maintain records of their key employees' CEo 

5. CE requirements do not apply to: 

a. Licensed electrical or plumbing contractors, or contractors licensed to work on boilers 

and pressure vessels. 

b. Commercial Developers 

For more information, visit: www.oregon.gov/CCB

1. When do you need to take the Continued education 

Residentially endorsed contractors will begin meeting continuing education (CE) requirements with 

CCB license renewals on or after October 1, 2011. 

Check your renewal date. If: 

Renewal 

Your next renewal is between now and September 

30,2011. 

Your next renewal date is on or after October 1, 

2011. 

Obligation 

You do not have any CE obligation at this renewal. 

The law mandating CE requires the renewal date be 

on or after October 1, 2011. Your CE obligation will 

be required on your NEXT renewal date. 

At your renewal, you are obligated to have 

completed the required continuing education. 

2. How much CE do I need to have 

Residential contractors must complete 16 hours of continuing education during the two year 

license period. Eight hours must be in mandatory subject areas (Core) and eight hours are 

discretionary (Electives). Contractors can choose electives that are construction related, that the 

contractor determines is important for their business. 

Contractors endorsed as a Residential Limited Contractor (RLC) are required to complete the Core 

hours only. They are not required to complete the elective hours. 

3. What is "CORE" 

Core continuing education consists of: 

* 3 hours in Building Exterior Shell Training (BEST) 

* 2 hours in Building Codes or Green /Sustainable Building Practices 

* 3 hours in CCB Business Law and Practices 

The CCB approves providers and classes for BEST, Building Codes and Green/Sustainable Building 

Practices*. The CCB will deliver the training on CCB Business Practices and Law. 

*The agency continues to approve providers for the core Continuing Education. CCB's web site lists the 

"Core" education providers and classes currently approved. 

(over)

Construction Contractors Board 

RESIDENTIAL CONTINUING EDUCATION 

4. What is "ELECTIVE" 

The following may qualify as elective CE: 

• Any construction or construction related offering, or course that improves your business 

operations, given by colleges, universities, trade schools, trade associations, public agencies, 

business associations, professional societies, etc. 

• Attending training or demonstrations offered by building component manufacturers. 

• Classes attended to maintain another construction industry license (e.g. home inspection, architects, 

plumbing, electrical, etc. 

• Classes taken to fulfill CCB's Commercial Continuing Education (CCE) requirement. 

• Additional Core hours not used to meet the Core requirement. 

• PartiCipation as an officer of a construction trade or professional associations (limit of 2 hours) 

5. Who takes CE 

Continuing education can be taken by the owners, officers, members, employees or any 

combination. 

6. Who is exempt 

Contractors endorsed only as a Residential Developer (RD) are exempt from all continuing education 

requirements. 

7. Where do I get CE 

Core: 

Contractors can find the currently approved providers and courses on the CCB web site. Courses 

given by the CCB in Laws, Regulations and Business Practices are scheduled to be available early 

2011. 

Electives: 

Education that qualifies as electives is found in many places: Manufacturers offering installation 

training, trade associations having educational opportunities for members and nonmembers, 

colleges, education for other construction related licenses, etc. 

8. What if I have a Residential & Commercial endorsement 

Contractors having both endorsements must fulfill the requirements established for the residential 

continuing education requirement and the commercial requirement. The hours taken forthe residential 

obligation will apply towards the commercial obligation.

ALBERT F. SCHLOTFELDT 

CONSTRUCTION LAW 

REAL EsTATE LAW 

BUSINESS LAW 

e-mail: aschlotfeldt@dsw-Iaw.com 

Duggan 

Schlotfeldt 

&Welch PLLC 

Attorneys at Law 

900 Washington Street· Suite 1020 

Vancouvel; Washington· 98660 

360·699-IWI· 1-877-852-5375 

FAX 360-693-2911 

www.dugganlaw.com 

PRACTICE EXPERTISE 

Albert Schlotfeldt provides individual, corporate 

and institutional clients with services in construction 

law, real estate and business litigation. 

CONSTRUCTION LAW 

Albert represents public and private sector 

clients in all aspects of the construction process. 

He advises commercial contractors, developers, 

public entities and individuals. Albert has extensive 

experience ranging from drafting construction 

agreements to lien disputes and complex 

construction li6gation. 

REAL EsTATE LAW 

Albert provides clients with innovative, highquality 

legal advice designed to bring his clients' 

broad range of real estate transactions to completion. 

Routinely assisting clients in the areas of acquisitions 

and sales, development, leasing, property 

management and construction. He represents 

clients in real estate-related dispute resolution in 

state courts in Oregon and Washington and before 

administrative agencies. He has extensive trial 

experience in all types of real estate issues. Albert 

is also an experienced negotiator, arbitrator and 

mediator. 

BUSINESS LAW 

Albert has substan6al expertise in resolving a 

wide variety of general business disputes including 

business dissolutions, breach of contract and civil 

defense. He regularly assists clients in the formation 

of business entities. 

PROFESSIONAL EXPERTISE 

---------------- 

Since beginning his practice in 1989, Albert 

has concentrated in construction law, real estate and 

commercial litigation. He is a frequent lecturer on 

real estate and construction law topics. 

PROFESSIONAL AFFILIATIONS 

Albert is a member of the Washington State 

Bar Association Litigation, Creditor-Debtor and 

Construction Law Sections, and the Oregon State 

Bar Association Construction Law Section. He is 

a former president of the Clark County Young 

Lawyers Association. He is past President of the 

Building Industry Association of Clark County, 

and serves as a State Director of the Building 

Industry Association of Washington. Albert is a 

member of the Clark County Realtors 

Association. 

Albert is active in community affairs. He is a 

member of the Greater Vancouver Chamber of Commerce 

and is a graduate of Leadership Clark County. 

Admitted to practice law in Washington and 

Oregon and before the United States District 

Courts for the Eastern and Western Districts of 

Washington; the United States District Court for 

the District of Oregon and the Ninth Circuit Court 

of Appeals 

B.A., magna cum laude, University of Portland 

JD., Northwestern School of Law at Lewis & 

Clark College 

BUSINESS LiTIGATION I CONSTRUCTION; REAL ESTATE 1 INSURANCE LAW 

Exceptional legal advice for business and individuals in Washing/on and Oregon

CONTRACTOR REGISTRATION 

INWASmNGTON 

1. Governing Provisions and Agencies 

A. RCW 18.27 Registration of Contractors 

B. WAC 296-200A Contractor Certificate of Registration 

C. Washington Dept. of Labor and Industries, Contractor Registration Section 

D. Washington State Business Licensing 

II. 

Registration Required 

A. "Registration" vs. "Licensing" 

B. RCW 18.27.020 requires registration of "Contractors" 

1. RCW 18.27.010 defines "Contractor" 

• Undertakes, offers to undertake, submits a bid to, 

• Construct, alter, repair, add to, subtract from, improve, wreck or demolish, 

• For another, 

• Any building, highway, road, railroad, excavation or other structure, 

project, development or improvement, 

• Attached to real estate, 

• Including carpeting, floor covering, erection of scaffolding, roofing, or 

siding, 

• Also covers owners of property employing multiple trades 

2. RCW 18.27.020 

• Registration Required 

• Misdemeanor 

o Advertise, offer, bid, submit a bid or perfonn work 

o Each day worked is a separate violation 

• Exception for General Contractors who hire an unlicensed contractor 

whiie they were registered and later lapsed without notification 

CONTRACTOR REGISTRATION IN WA - 1 

Attomeys/AFS/CLE Outline for 4-22-11 CLE

3. Common exemptions to Registration, RCW 18.27.090 

• Government 

• Sale of finished products not becoming fixtures 

• Repair of personal property by owner 

• Homeowner 

• Furnishing materials 

• Under$500 

• Commercial employee maintenance 

III. 

Application and Denial of Registration 

A. RCW 18.27.030 requires: 

• Employer SS# 

• UBI 

• Workers compensation coverage 

• Employment security number 

• Excise tax registration number 

• Type of contractor 

• Name and address of partners/corporate officers 

B. Grounds for denial (added in 2001): 

• Unsatisfied final judgment or unpaid penalties or fees as a result of final 

judgment (unless discharged in bankruptcy) 

• Applicant principal or officer of partnership or corporation 

• No valid UBI # 

IV. 

Types of Registration 

A. General Contractor 

1. Numerous trades/crafts 

2. RCW 18.27.010(4) defined 

B. Specialty Contractors 

1. One trade or craft 

CONTRACTOR REGISTRA nON IN WA - 2 

Attorneysl AFS/CLE Outline for 4-22-11 CLE

2. RCW 18.27.01O(a) defined 

3. WAC 296-200A-016 defines specialty classifications (63 categories) 

V. How to Become a Contractor in Washington 

A. Steps (see sample guide) 

1. Detennine appropriate business structure 

2. Register wit..lJ. Secretary of State to form legal entity. 

• $180 fee 

• Website: www.sos.wa.gov/corps 

3. Master Business Application 

• Website: www.dol.wa.gov 

• City and county licensing 

4. IRS Employer ID if employees 

5. Application for contractor registration 

• Website: www.lni.wa.gov/tradeslicensinglcontractors 

6. Purchase Bond 

• $12,000 general 

• $ 6,000 specialty 

* Assigned account alternative 

7. Purchase liability insurance 

• $50,000 property damage and $200,000 public liability 

• Or $250,000 combined single limit 

8. Pay fee 

9. Submit to L&I 

Vi. 

Penalties for Not Being Registered 

A. Misdemeanor, RCW 18.27.020 

CONTRACTOR REGISTRA nON IN WA - 3 

Attomeys/AFS/CLE Outline for4-22-11 CLE

B. Inability to sue or lien. RCW 18.27.080 

C. Consumer protection violations, RCW 19.86 

D. Temporary lapses 

• Reinstatement fee $153.60 

E. Substantial compliance 

• Statutory minimums 18.27.080 

• Length of time 

• Bort v. Parker, 110 Wash.App. 561 (2002) 

• Lobak Partitions. Inc. v. Atlas Const. Inc., 50 Wash.App. 493 (1988) 

F. Unlawful advertisers, RCW 18.27.010 

VII. 

Renewals 

A. Requirements 

1. Contractor Registration 

OfficerslMembers 

Addendum 

2. Original bond or assignment account 

3. Original Certificate of Liability 

Insurance 

4. Payment to L&I 

$113.40 

CONTRACTOR REGISTRATION IN WA - 4 

Attorneys! AFS!CLE Outline for 4-22-11 CLE

Business Licensing Guide 

Guide Sheet 

You requested license Information on the following business activity: 

Construction 

To be conducted In: 

Vancouver (Clark County) WA 

Employees: 

Adults 

OWnership: 

Profit Corporation 

Sample Guide Sheet for a Profit Corporation 

Construction Contractor based in Vancouver WA. To 

obtain a Business Guide streamlined to your proposed 

business, go to: 

http://www.do/.wa.gov/businessi/icensing.html 

CITY AND COUNTY INFORMATION 

Please be advised that you should contact ANY county or incorporated city In which you perform your work to 

determine if additional licenses are needed. 

Vancouver (Clark County) WA 

Ucense Department 

Esther Short Building 

610 Esther st 

PO Box 8995 

Vancouver, WA 98668 USA 

Phone: (360) 619-1010 ext 3 

Fax: (360) 619-1083 

http://www.citvotvancouver.uslbusinesslicense 

Clark County, Washington 

Planning Division 

1200 Franklin Street 

Vancouver, WA 98660 USA 

Phone: (360) 397-2424 

Fax: (360) 397-2011 

htto:llwww.co.clark.wa.us/ 

Please remember: 

* Verify with the city or county that the location of the business is zoned for that activity. 

* Obtain a building permit for any construction or modification to a building. 

* Check local codes before making or ordering a sign for your business because cities often restrict location, 

size, etc. 

If you have questions about these requirements, please contact the City or County Planning and Building 

Department 

THE CITY OF VANCOUVER requires all businesses located within the city limits, or who conduct business 

within the city limits, to have a valid city business license or to file for an exemption, whichever applies. Certain 

restrictions may be imposed by the city if your business is conducted in your home. Approval of license may go 

through city police, planning, fire and building departments. Please contact the City of Vancouver directly to 

obtain more information. 

MUNICIPAl BUSINESS TAXES: Washington cities tax private businesses, municipal, and private utility 

companies within their boundaries. Contact each city in which business will be conducted. 

PROPERTY AND PERSONAL PROPERTY TAX: You must report your business property, furniture, eqUipment, 

supplies, etc., to the assessor of the county in which your business is located. 

Cla.rk County Assessor - (360) 397-2391 

http://www.clark.wa.qovlassessor/OfficeofAssessor.html 

MASTER LICENSE SERVICE 

https:llfortress.wa.gov/dol!mls/walilguidesheet.aspintTranld==1 0 11811 4/1412011


2 

Ucenses for the following state agencies are obtained through the Master Business Application. Contact the 

agency directly if you have regulatory questions. 

UNIFIED BUSINESS IDENTIFIER (UBI) NUMBER: A UBI number is a nine-digit number that registers you with 

several state agencies and allows you to do business in Washington State. A UBI number is sometimes called a 

tax registration number, a business registration number, and a business license number. 

Use the Master Business Application to apply for the UBI number. 

UNEMPLOYMENT INSURANCE AND INDUSTRIAL INSURANCE: You must have Unemployment Insurance 

and Industrial Insurance prior to the actual hiring of employees. You may apply for these registrations on the 

Master Business Application. 

ONLINE BUSINESS RESOURCE GUIDE- Check the Washington State Business Resource Guide produced by 

the Department of Licensing, Employment Security, Labor and Industries, Department of Revenue and the 

Office of the Secretary of state. 

The Business Resource Guide includes information about planning, starting and growing your bUSiness. Get 

your online guide at: 

http://www.dol.wa.gov/formslwabooklet.pdf 

OTHER STATE AGENCIES OR REGULATORY INFORMATION 

You must contact the following agencies directly to obtain their licensing information. 

Contractor Licensing: 

Department of Labor and Industries 

Contractor's Division 

7273 Linderson Way SW 1 st FI 

PO Box 44460 

Olympia WA 98504-4460 

(360) 902-5226 

1-800-647-0982 (TOil free - Washington State only). 

http://www.lni.wa.gov/ 

The activity that you selected may require an environmental permit. Please contact: 

Office of Regulatory Assistance 

Environmental Permitting Services 

300 Desmond Dr SE 

Lacey WA 98504 

Phone: (360) 407-7037 

or 1-800-917-0043 

711 (relay service) or 1-800-833-6388 (TTY) 

E-Mail: assistance@ora.wa.gov 

http://www.ora.wa.govltoday.asp 

To identify environmental permits your business may need, use the on-line questionnaire. 

http://apps.eey.wa.gov/opas/ 

SALES TAX INFORMATION: If your business provides a service to customers, you may be required to collect 

sales tax for that service. Contact the Washington state Department of Revenue for further information 

regarding sales tax at 1-800-647-7706 or visit their website at http://www.dor.wa.gov/ 

Washington State Secretary of State 

801 Capitol Way S 

PO Box 40234 

Olympia WA 98504--0234 

(360) 725-0377 

http://www.sos.wa.gov/corps/ 

FIRE PROTECTION SPRINKLER SYSTEM: Contractors engaging in installation of fire sprinkler systems or 

underground water supply to a fire sprinkler system must contact: 

Washington State Patrol 

Fire Protection Bureau 

General Administration Building Rm 121 

PO Box 42600 

Olympia WA 98504-2600 

(360) 59~3916 

http://www.wsp.wa.oovlfirelfiremars.htm 

https:llfortress.wa.gov/dol!mls/wali/guidesheet.aspintTranld= 1011811 4/1412011


3 

All employers are required to report all newly hired and rehired employees to the Division of Child Support 

(DCS): 

Department of Social and Health Services 

1-800-562-0479 

New Hire Reporting - http://w\\w1.dshs.wa.gov/newhirel 

You must also retain a completed Federal 1-9 form for every employee: 

U.S. Citizenship and Immigration Services 

815 Airport Way S 

Seattle WA 98134 

1-800-870-3676 

http://www.uscis.govlfiles/form/i-9·Pdf 

FEDERAL INFORMATION 

You must contact the following agencies directly to obtain their licensing information. 

FEDERAL TAX NUMBER: You need to obtain an Employer Identification Number (EIN) also known as federal 

tax identification number from the Internal Revenue Service. For more information or to apply online visit 

http://www.irs.govlbusinessesismali/index.htmlor call 1-800-829-4933. 

NAME USAGE: To avoid possible infringement on a reserved name, do a thorough search on all business 

names you will use. 

In Washington State, visit the Business and Professional Ucense Search website at: 

www.dol.wa.gov/businesslcheckstatus.htmland call the Trademark Division of the Secretary of State at (360) 

725-0377. Also contact the U.S. Patent & Trademark Office at 1-800-786-9199 (http://www.uspto.govl). 

FEDERAL FORMS: call the Internal Revenue Service at 1-800-82S-3676 to order the Publication 583 - Starting 

a Business and Keeping Records. Federal taxes may be paid by electronic transfer. In some cases, payment 

through electronic transfer is mandatory. Enrollment forms are available by calling either 1-800-555-44n or 1- 

800-945-8400. You may also file some of your federal tax returns electronically. Contact the IRS at 1-800-82S- 

1040 to obtain information on electronic filing. 

U.S. COPYRIGHT LAWS: If you use or intend to use live or recorded music at your place of business, be aware 

that all music used in this way is protected by U.S. copyright laws. For information contact the American Society 

of Composers, Authors & Publishers (AS CAP) at 1-800-505-4052, or Broadcast Music Incorporated (BMI) at 1- 

800-925-8451, or Sesac Incorporated at 1-800-826-9996. 

FORMS 

The following forms are available through the Master Ucense Service. Submit each to the address noted on the 

form. Additional forms may be required by regulatory agencies and jurisdictions previously listed on this letter. 

Please contact those agencies directly. 

Washlnmon State 

IOTYilForm Name 

D!APplication to Form a Profit Corporation 

Dlcontractor 

D 

Registration 

IiMaster Business Application and Ucense 

IIFee Sheet 

IIWeb Page Unk 

!lhttp://www.sos.wa.gov/ assets/corpslProfitArticles2010.pdij 

!lhttp://www.lnLwa.gov/Forms/pdfIF625-001-000.pdf I 

Ilhttp://www.dol.wa.gOv/formsl700028.htmll 

You may: 

• Click the web page links above to open and print each form individually. 

• Request the forms by fmb 

• Request the forms by mall. 

Start Over 

https:llfortress.wa.gov/dollmlslwalilguidesheet.aspintTranld=l 0 11811 4/14/2011

SPEAKER BIOGRAPHY 

DOUGLAS R. HOOKLAND is the managing partner in the law firm of Scott 0 

Hookland LLP. He practices substantially in the areas of creditor's rights and 

construction law where he represents owners, developers, design professionals, prime 

contractors, subcontractors and material and equipment suppliers, with an emphasis on 

subcontractors and suppliers. He has been admitted to practice in several states as 

follows: Oregon State Courts (since 1987), U.S. District Court of Oregon (since 1988), 

Washington State Courts (since 1988), Federal District Courts in Washington (since 

1989), Idaho State Courts and the Federal District Court ofIdaho (since 2003), the State 

Courts of Alaska (since 2003) and the Federal District Court of Alaska (2004). He 

received a Bachelor of Arts Degree in Political Science with honors in 1984 from 

California State University at Chico, and' in 1987 his law degree from the Willamette 

University College of Law. He is a member of the Construction Law Sections (or similar 

Section) and the Debtor/Creditor Sections (or similar Section) of the Oregon, 

Washington, Idaho and Alaska State Bars. He has been selected to Oregon Super 

Lawyers in 2009, 2010 and 2011. He is a frequent speaker and presenter of written 

materials to trade groups, legal assistants, and attorneys in the areas of construction law 

and creditor's rights.

TABLE OF CONTENTS 

CAUTION PAGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

I. 

OREGON LICENSE BOND CLAIMS ............................. .. 

A. OREGON: CONSTRUCTION CONTRACTORS BOARD ........ . 

2 

2 

l. 

2. 

3. 

4, 

5. 

6. 

7. 

Overview .......................................... . 

Requirements for All CCB Complaints .................. . 

CCB Complaint Process Depends On Residential 

or Commercial Classification of Both Structures and 

Contractor Endorsement. ...... " ..................... . 

"Administrative Process" (for Residential or Small 

Commercial Projects by Residential Endorsement 

Contractors) ....................................... . 

"Judicial Process" (For Small or Large Commercial 

Projects By Commercial Endorsement Contractors) ........ . 

General Complaint Issues - Update Addresses ............ . 

Suspending An Oregon Contractor's License ............. . 

2 

2 

6 

7 

11 

13 

14 

II. 

WASHINGTON REGISTRATION AND LICENSE BOND CLAIMS ..... . 

16 

WASHINGTON STATE CONTRACTORS REGISTRATION ACT. . . . . . . 16 

A. 

B. 

C. 

D. 

E. 

F. 

Overview ............................................... . 

Purpose ........................... " .................... . 

Definition of "Contractor" .................................. . 

Registration Require ...................................... . 

Insurance or Financial Responsibility Requirement .............. . 

Bond or Financial Responsibility Requirement. ................. . 

16 

16 

18 

19 

20 

20 

III. THE WASHINGTON BOND CLAIM PROVISION OF THE CRA. . . . . . . . 21 

A. 

B. 

C. 

D. 

Bond Requirement ....................................... . 

Bond Co~tinuous Until Cancelled ........................... . 

Conditions on Bond ...................................... . 

1. Labor Claims ..................................... . 

2. Tax and Contribution Claims ......................... . 

3. Claims by Persons Furnishing Labor or Materials or 

Renting or Supplying Equipment ...................... . 

4. Claims for Breach of Contract by a Party to the 

Construction Contract ............................... . 

Action Against the Contractor and Bond ...................... . 

i-CLAIMS AGAINST OREGON LICENSE BONDS AND 

WASHINGTON REGISTRA nON BONDS 

@ 2011 Scott. HookIand LLP 

21 

21 

22 

23 

25 

25 

27 

29

E. Claims Limitation Provision of the CRA. . . . . . . . . . . . . . . . . . . . . . . 31 

F. Bond Liability Limited to Penal Sum of Bond . . . . . . . . . . . . . . . . . . . 32 

G. Priorities Under the Bond. . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . .. . . 32 

H. Attorney's Fees Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 

I. Alternative Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 

SPECIAL CLAIMS ISSUES. .. . . .. . . . .. . . . . . .. . . .. . . .. . . . .. . . .. . . 34 

A. Surety Only Liable if Principal is Liable. . . . . . . . . . . . . . . . . . . . . . . . 34 

B. Negligence Claims. . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . 34 

C. Inspection Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 

D. Claims Incurred Outside ofthe State. . . . . . . . . . . . . . . . . . . . . . . . . . . 35 

E. Federal Projects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 

F. Privity of Contract Required in a Breach of Contract Case .. " . . .... 35 

G. Warranty Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 

H. Multiple Sureties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 

PRACTICE TIPS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 

A. Confirm The Contractors Registration and Information. . . . . . . . . . . . 37 

B. Necessary Contents of Complaint. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 

C. Service Through Contractor's Section. . . . . . . . . . . . . . . . . . . . . . . . . 38 

D. Forward Copy of Final Judgment To Contractor's Section. . . . . . . . . 38 

IV. 

CLAIMS AGAINST LICENSE BONDS OF ELECTRICAL 

CONTRACTORS AND TELECOMMUNICATION 

CONTRACTORS ............................................. . 39 

A. Asserting a Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 

B. Priority of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 

C. Rank of Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 

v. 

ADDITIONAL ASPECTS OF WASHINGTON REGISTRATION 

AND LICENSE BOND CLAIMS ................................ . 42 

A. No Job Site Address is Necessary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 

B. A Claim Against the Bond is a Good Negotiating Tool. . . . . . . . . . . . 42 

C. Attorney Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 

D. Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 

E. You Can Only Claim "Upstream". . . . . . . . . . . . . . . . . . . . . . . . . .. .. 46 

F. Things To Remember for Open Account Claims. . . . . . . . . . . . . . . . . 46 

G. Claims When Your Customer is Unregistered. . . . . . . . . . . . . . . . . . . . 47 

H. Suspending A Contractor's Registration. . . . . . . . . . . . . . . . . . . . . . . . 48 

ii - CLAIMS AGAINST OREGON LICENSE BONDS AND 

WASHINGTON REGISTRATION BONDS 

CLAIMS AGAINST OREGON LICENSE BONDS AND 

WASHINGTON REGISTRATION BONDS - April 22, 2011 

Douglas R. Hookland & Tara M. Mellom 1 

SCOTT • HOOKLAND LLP 

(503) 620-4540. FAX (503) 620-4315. TOLL FREE (800) 334-8986 

w-ww.scott-hookland.com 

• USE THIS INFORMATION WITH CAUTION + 

These materials contain general infonnation only, and must not be construed as legal 

advice, or take the place of competent legal counsel. Their purpose is to provide general -- not 

specific -- infonnation on SOME -- but not all -- of the steps and precautions that must be 

considered so that your Oregon and Washington license or registration bond c1aim(s) may be 

valid and enforced if necessary. The Oregon and Washington laws in this area are complicated 

and your procedures and follow-through on the preparation of any bond claim or defense thereto 

should be checked carefully! Also, the history of the construction lien and bond statutes suggests 

that they have been amended on a regular basis by the respective legislature and subject to 

constant interpretation by the courts. As such, the general information contained in these 

materials may be dated. Again, you should seek the advice of competent legal counsel for 

specific situations and advice as to the "then existing" status of the law . 

• Administrative Rules Change Often. 

The Oregon Administrative Rules ("OARs"), promulgated by the Oregon Construction 

Contractors Board ("CCB") and other Oregon administrative agencies, and the Washington 

Administrative Code e'WACs"), promulgated by the Washington Department of Labor & 

Industries ("L&I") and by other Washington administrative agencies, also change frequently. 

The OARs and WACs that are included here are those which the applicable agency made 

available at the time of publication. Changes may well have occurred since that time or at any 

time thereafter. Contact the relevant agency to obtain the most current OARs and WACs. 

1 The authors are grateful to Seattle attorney JeffYusen ofYusen & Friedrich. The portion of 

these written materials addressing Washington registration bond claims, with certain 

amendments and additions, were created and authored by Mr. Yusen on March 6, 2006 in a work 

entitled Suretyship & Liens in the Context of the Contractors Registration Act (RCW 18.27) and 

the Construction Lien Act CRCW 60.04) for the Washington State Bar Association Young 

Lawyers Division. Mr. Yusen has graciously granted his pennission to us to use his work in 

t.lJ.ese materials. 

PAGE 1 - CLAIMS AGAINST OREGON LICENSE BONDS AND 


(!> 2011 Scott. BooklaDd LLP

CLAIMS AGAINST OREGON LICENSE BONDS 

AND WASIDNGTON REGISTRATION BONDS 

I. OREGON LICENSE BOND CLAIMS 

A. Oregon: Construction Contractors Board 

1. Overview 

In order to obtain a license from the Oregon Construction Contractors Board ("CCB"), 

one of a contractor's obligations is to purchase a surety bond. The pmpose of the surety bond is 

to address complaints against a licensed contractor for negligent or improper work or for breach 

of contract. Such complaints may be brought by a property owner, licensed contractor, material 

or equipment supplier or employee. 

Depending on the contractor's endorsement type, the surety bond may range from 

$10,000 to $75,000. Depending on who is making the complaint, the recovery may be limited to 

a share of $3,000 to up the entire amount of the bond. In some limited circumstances, attorney 

fees and costs may be recovered. Generally, recovery on a final order is not limited by the 

complainant's recovery against the bond. A final order may be recorded to create a lien and may 

be filed and enforced as a judgment after following certain procedures. See ORS 701.153(2). 

There are two separate procedures for filing a complaint against a contractor's bond 

depending on the type of contractor endorsement. The general requirements for the CCB claim 

process are found in ORS 701.131 to 701.180 and OAR 812-004-0001 to 812-004-0600. 

2. Requirements for All CCB Complaints 

a) Privity and Subject Matter Requirements 

A complaint against a contractor must be based upon one of the bases provided for in 



2[111 Scott + Hookland LLP

ORS 701.140. A complainant must have a contractual relationship (i.e. "privity") with the 

respondent contractor. See OAR 812-004-0320(5) (7/1/10).2 

Owners and contractors may file a claim for negligent work, improper work, and breach 

of contract. ORS 701.140(1) & (3). With one exception, a contractor (or anyone required to be 

licensed as a contractor) must have been "properly licensed" during the bid, contracting and 

continuously through performance of the work. 

See OAR 812-004-320(4)(a)(B). The one 

exception is if the claim arises from "defects, deficiencies or inadequate performance of 

construction work.,,3 rd. "Properly licensed" for the purposes of a contractor asserting a 

complaint means a valid license with the proper endorsement for the work performed, proper 

designation of "exempt" or "non-exempt," and compliance with "any other requirements or 

restrictions" on the complainant's license. See rd. at (4)(b). 

Additionally, "residential" and "small commercial" project owners may file a claim to 

discharge or recoup funds expended in discharging a claim of construction lien, 4 but only if: The 

owner paid the contractor, the lien is filed against the property because the respondent failed to 

pay the person claiming the lien, and the subject property is a "residential" or "small 

commercial" structure as those terms are defined by ORS 701.005. See ORS 701.140(2). 

Employees, subcontractors, and material and equipment rental suppliers may assert 

,. , 

2 But see OAR 812-004-0320 regarding assigned claims resulting from a Bureau of Labor and Industries employee 

complaint. 

3 An example of a scenario presented by this exception: If a subcontractor performed defective work, a complaint 

asserted by the general contractor for the subcontractor to remedy the defective work for the benefit of the owner 

should not be barred due to a licensure concern. The owner is prevented from asserting the subcontractor claim due 

to the contract privity requirement. 


WASHlNGTON REGISTRATION BONDS 

~ 2011 Scott ~ Hookland LLP

claims for nonpayment. ORS--70-1. 140( 4-6}. Historically, the CCB has required material and 

equipment rental suppliers to provide addresses or legal descriptions for the location of each 

project supplied to confirm the structure was in fact constructed within the State of Oregon. See 

OAR 812-004-0320(6). 

b) Time Deadlines. 

ORS 701.143 sets forth the time limitations for CCB complaints, which is generaliy one 

(1) year from a particular event (with some exceptions): 

Complainant Subject of Complaint Deadline 

Owner New structures - contractor Earlier of 1 year from first 

substantially completed occupancy or 2 years after 

work 

substantial completion of 

structure * 

Existing structures - 1 year after substantial 

contractor substantially completion of structure 

completed work 

All structures - contractor 1 year after parties entered 

failed to begin work contract 

All structures - contractor 1 year after contractor 

failed to substantially ceased work 

complete work 

Licensed contractor New structure - claim Earlier of 14 months after 

against subcontractor date structure was first 

occupied or 2 years after 

substantial completion of 

structure* 

Existing structure - claim 14 months after substantial 

against subcontractor completion of work on 

structure 

Any structure - claim 14 months after 

against subcontractor who subcontractor ceased work 

failed to complete work on structure 

Licensed subcontractor, Any claim within CCB' s 1 year after contractor 

4 Note that DRS 87.058 provides a meiliod for abating a court action for ilie foreclosure ofa construction lien claim 

to permit the owner to pursue payment of the lien through an ORS 701.140(2) claim before w.ie CCB. 



~ 2011 Scott. Hookland LLP

material supplier, jurisdiction incurred th~~ indebtedness 

equipment supplier or 

licensed contractor 

employee 

*Note: A contractor's surety bond is only liable for fourteen (14) months from the earlier 

of the date of cancellation of the bond or expiration or cancellation of the contractor's 

license. ORS 701.150(3). 

c) Pre-Complaint Notices 

Parties who wish to file any complaint with the CCB must first send a notice to the 

contractor. ORS 701.133(1). The notice must be sent certified mail and must be sent at least 30 

days prior to filing the CCB complaint. If the time period for filing a CCB complaint is vvithin 

45 days of expiring, the complaint filing deadline is extended until 60 days after the notice is 

mailed. This requirement applies regardless of the type of structure. 

ORS 701.133(1) allows the CCB to waive the pre-complaint requirement if the contractor 

has actual knowledge of the dispute. By regulation, the CCB has provided certain limited 

circumstances in which it may waive the requirement. OAR 812-004-0340(9-10) (4/2811 0). 

Note that the pre-complaint notice process for filing a claim solely with the CCB does not 

include the "Notice of Defect" required by ORS 701.560 to 701.595 and 701.605 ("Notice of 

Defect Statutes").s 

See ORS 701.600(2)(excepting Notice of Defect requirement for claims 

filed with the CCB and Landscape Contractor's Board). 

d) Other Requirements and Limitations 

The CCB will only process complaints for indebtedness incurred while the respondent 

5 The Notice of Defect Statutes applies to a lawsuit or arbitration concerning a "residence" as defined by ORS 

701.560(5) (which is a broader definition than "residential structure" under ORS 701.005). Failure to comply with 

the requirements of the Notice of Defect Statutes may require dismissal ofthe lawsuit or arbitration. See ORS 


WASHlNGTON REGISTRATION BONDS 


contractor was licensed. OAR 812-004-320(3). The CCB requires all complaints to be made on 

its form specific to the type of claim asserted. OAR 812-004-340(1). 

3. CCB Complaint Process Depends On Residential or Commercial 

Classification of Both Structure and Contractor Endorsement 

Generally, there are two processes that a complaint against a contractor's CCB bond may 

follow that may be imprecisely described for the purpose of these materials as an "administrative 

process" or a 'judicial process." 

Under the "administrative process," the facts giving rise to tt~e complaint are determined 

administratively by or through the CCB. See generally ORS 701.145. An adjudicative hearing, 

with limited exceptions, is handled by the Office of Administrative Hearings as a contested case 

or if the parties agree, binding arbitration through the CCB. ld. Significantly, complainants - 

even corporate complainants - can represent themselves pro se, subject to the requirements of 

ORS 701.160. See also OAR 812-010-0180 (10/1/04) (regarding CCB arbitration). 

Under the ''judicial process," the facts giving rise to the claim are determined by a Court 

or arbitration in the form of the resulting judgment or award. The CCB's role is limited an 

administrative procedure to determine whether to issue a final order against the surety of the 

contractor's license bond based upon the judgment or award. See ORS 701.146. Strict 

requirements apply to provide both the CCB and the contractor's license bond surety notice of 

the action or arbitration and the judgment or award. 

Generally, complainants must be 

represented by legal counsel due to complexity and for corporate entities due to ORS 9.320. 

Which process applies depends on the contractor's endorsement and whether the 

701.595. 




structure is "residential," "small commercial," or "large commercial" as explained by the 

following table: 

Respondent's Type of Structure - See ORS Claim Process 

License 701.005 and Exhibit 1. (See ORS 701.139) 

Endorsement 

Residential "residential structure" Administrative process under ORS 701.145 

endorsement "small commercial structure" Administrative process under ORS 701.145 

only "large commercial" None - no CCB .iurisdiction.* 

Commercial "residential structure" None - no CCB jurisdiction. * 

endorsement "small commercial structure" Judicial process under ORS 701.146 

only "large commercial" Judicial process under ORS 701.146 

Dual "residential structure" Administrative process under ORS 701.145 

(meaning 

(against residential bond only) 

contractor "small commercial structure" Either the administrative or judicial process 

holds both 

at the complainant's election. 

Residential "iarge commercial" Judicial process under ORS 701.146 (against 

and 

commercial bond only) 

Commercial 

endorsements) 

* ORS 701.139 (2009), the statute that grants the CCB's authority over disputes and resolution 

processes, apparently fails to provide a claim against a single endorsement contractor (i.e. 

residential only or commercial only) who works outside the scope of that endorsement 

I 

Where a complainant has an option of which process to choose between the different 

types of processes, generally the "administrative" process is less expensive due to the ability to 

pursue claims pro se, but generally the "residential" bond is lower and may be subj ect to 

significant limitations for non-owner complainants. 

4. "Administrative Process" (for Residential or Small Commercial Projects by 

Residential Endorsement Contractors) 

Generally, the first step for initiating a bond complaint against a residential contractor 

involving the residential/small commercial process is to complete and fIle a complaint in the 



c 20n Scott. Hooldand LLP

form prepared by the CCB. Exhibit 2 is the complaint form to be used by owners and prime 

contractors (against subs), Exhibit 3 is the complaint form to be used by subcontractors (against 

contractors) and Exhibit 4 is the complaint form to be used by material/equipment suppliers 

(against contractors). 

a) Administrative Process if No Arbitration Clause and No 

Lawsuit Filed by Any Party 

Once a complaint is accepted, the CCB will notify the complainant to pay a filing fee. 

Once the fee is paid, an on-site inspection may be conducted by the CCB and, if it appears that 

the contract was breached or that work was done negligently or improperly, the CCB may 

recommend a resolution consistent with the terms of the contract, generally accepted building 

practices and industry standards. 

If the proposed resolution fails to resolve the complaint, then the CCB will generally 

refer the matter to an administrative hearing on the complaint in order to determine whether or 

not to award money damages against the contractor. Exhibit 5 is a CCB publication about the 

claims and dispute resolution process. 

When the CCB refers a matter for a hearing, it sends information about the 

AdmL.'1istrative Hearings process to the participants. At any administrative hearing on a bond 

complaint, a licensed contractor need not be represented by legal counsel. 

After a hearing is conducted, the hearings officer prepares findings of fact and 

conclusions and makes recommendations to the CCB for disposition of the complaint. The CCB 

will then issue a proposed order either dismissing the complaint or ordering the contractor to pay 

monetary da.11lages. 

A final order, which will have the effect of a formal judgment, will be 


WASIDNGTON REGISTRATION BONDS 

I!:> 2011 Scott. Hookland ILP

issued unless written exceptions to the proposed order are received by the CCB within 21 days 

after mailing of the proposed order. 

Any such exceptions are ruled on at a hearing by the CCB's Appeal Review Committee at 

their next regular meeting. The Review Committee will consider the evidence and arguments 

submitted at the original hearing but will not consider new or additional evidence. The Review 

Committee will either affirm the proposed order and finding of facts, modify either or both, or 

remand the complaint for a new hearing. Final orders of the CCB are appealable to the Court of 

Appeals. 

Many persons believe that the maximum recovery available through the CCB is the 

amount of the bond. That is not exactly correct. The CCB has the ability to award any amount 

against a licensed contractor and is not limited to awarding only the amount of the bond. While 

the complainant will not be able to recover more than the amount of the surety bond, this does 

not limit the amount that the CCB can award. 

b) Administrative Process If Arbitration Clause in Contract 

If the contract underlying the dispute contains an arbitration clause, then the CCB may 

require the parties to either waive the arbitration clause or comply with it. Failure to do either 

within 30 days of notification by the CCB results in closure of the claim. See OAR 812-004- 

0440. OAR Chapter 812, Division 010, governs arbitration within the CCB. 

c) Administrative Process May Be Suspended or Referred to Court 

or Arbitration 

In some instances, a claim against a residential contractor involving a residential structure 


WASIllNGTON REGISTRATION BONDS 

~ 2011 Scott. Hooldand LLP

may still wind up in court. 

For example, the CCB may determine that the "nature of the 

complexity" of the dispute is more appropriate for adjudication in court. ORS 701. 145(2)(b). 

Also, the CCB has the authority to require mediation and binding arbitration for residential and 

small commercial claims pursuant to ORS 701.148. 

The complainant may voluntarily file a lawsuit (for example, to include parties in 

addition to the respondent contractor). Likewise, the respondent may file its own lawsuit as a 

defensive tactic. When the CCB determines that "the same facts and issues involved in the 

[CCB] Complaint have been submitted to a court of competent jurisdiction," then the CCB may 

suspend processing of the complaint pending the outcome of the lawsuit. ORS 701.145(2); OAR 

812·004-0520 (7/1/08). 

d) Payment From Surety Bond. 

Upon issuance of a final order and forwarding of the order by the CCB to the surety, the 

surety is obligated to pay the sum awarded up to the amount of the bond or the statutory 

maximum, whichever is less. Final orders arising out of claims against contractors who have 

obtained a residential endorsement will remain limited to a maximum total of $3,000 for all nonowner 

complainants. See ORS 701.153(3). 

All complaints filed within a ninety (90) day period are to be satisfied as follows: 

II. CCB orders obtained by the owner of residential orsmal1 commercial structures have priority 

to the full extent of the bond over all other types of complainants; and 

III. If the complaints by the owners of residential or small commercial structures do not exhaust 

the bond, then the cumulative total paid to all other complainants (such as contractor and supplier 

complaints) is a maximum of$3,000. 

ORS 701.153(3). See Exhibit 6 for t.he bond requirements for various residential endorsements 



@ 2011 Scott. HO(Jkland LLP

(ranging between $10,000 and $20,000). If multiple complaints are filed within the same ninety 

(90) day period and exceed the sum of the bond, those final orders will be apportioned by the 

CCB according to the above priority ranking. ORS 701.153(4). 

e) Collection of Final Orders Beyond Surety Payment 

ORS 701.153(1-2) and ORS 205.125 to 205.126 set forth how to undertake post-final 

order collection activity on a CCB fmal order. 

ORS 701.153(1-2) expressly provides a method of filing t.~e 

CCB final order, with the 

recording officer of any county in Oregon, and then with the Circuit Court in the county of 

recording. Once the final order is recorded, it becomes a judgment lien against real property 

similar in effect as entry of a judgment. ORS 205.125(2). Upon recording the final order in the 

real property records, the complainant must make certain filings with the Circuit Court located in 

the county of recording to obtain a judgment to pennit collection through garnishment or 

execution. See ORS 205.126(1) generally. A final order can also be renewed "at any time 

within 10 years after" its recording. See ORS 205.126(2). 

5. "Judicial Process" (For Small or Large Commercial Projects By Commercial 

Endorsement Contractors) 

Generally, for a complaint arising out of construction of a small or large commercial 

structure by a commercially endorsed contractor, the complainant must first obtain a judgment in 

a court of competent jurisdiction before the CCB will issue an order that ultimately may bind the 

surety. 

The general procedure is found in ORS 701.146. Complainants are required to give 



@ 2011 Scott. Hookland LLP

notice and a copy of the complaint to the CCB and the surety, by certified mail, return receipt 

requested. The notice and complaint (including the case number) must be delivered to the CCB 

and surety the earlier of: 

Ninety (90) days after filing a lawsuit; 

Fourteen (14) days before a trial or arbitration begins; or 

Thirty (30) days before a judgment or award is "issued." 

ORS 701. 146(2)(a-c). While neither the CCB nor the surety is listed as a party to such a lawsuit, 

notice is necessary in order to give the surety the opportunity to intervene and defend. 

Within thirty (30) days after entry of a judgment, a certified copy of the judgment must 

be delivered to the CCB and the surety. 

TIP: Request two certified copies of the judgment and pay the fee at the time you submit 

your judgment. Follow up regularly to be sure the thirty (30) day period for submission 

does not expire while you wait for the Court staff. 

Thereafter, the CCB may issue a proposed order and, if not properly and validly objected to, a 

final order will be issued. Upon issuance of a final order and forwarding of the order by the 

CCB to the surety, the surety is obligated to pay the sum awarded up to the amount of the bond 

or the statutory maximum, whichever is less. 

For non~owner complainants, final orders arising out of claims against contractors who 

have obtained a commercial endorsement that were originally filed within a ninety (90) day 

period are satisfied as follows: 

a. CCB orders obtained by persons furnishing labor to a contractor or 

owed employee benefits by a contractor have priority to the full 

extent of the bond over all other types of complaints; 



~ 2011 Scott + Rockland LLP

. If the above~described complaints do not exhaust the bond, then all 

other complaints (such as commercial owner and supplier complaints) 

may be paid until the full extent of the bond is exhausted, except for 

costs, interest or attorney fees; and 

c. If complaints described in a or b above do not exhaust the bond, then 

complaints for costs, interest and attorney fees resulting from small 

commercial or large commercial structure complaints may be 

satisfied from the bond. 

ORS 701.157. See Exhibit 6 for the bond requirements for various commercial endorsements 

(ranging between $20,000 and $75,000). Note that prior to the enactment of certain legislation in 

2007, non-owner complainants were previously limited to a maximum recovery of $3,000. Now, 

a non-owner complainant who files against a commercial contractor's bond can conceivably 

obtain payment to the full extent of a commercial contractor's bond! 

Similar to residential 

bonds, if the total complaints filed in any ninety (90) day period exceed the sum of the bond, the 

CCB will apportion amounts to be paid by the surety to each complainant. ORS 701.157(2). 

6. General Complaint Issues - Update Addresses 

Contractors should make sure that their addresses on file with the CCB are correct. ORS 

701.117 provides that "Initial notice of a contested case or arbitration," like other communication 

from the CCB, shall be considered delivered when deposited in the United States Mail. This 

statute provides: 

701.117 Contractor to notify board of address change; effect of mail to last-known 

address. A contractor shall notify the Construction Contractors Board of any change of 

address while licensed and for one year following the date the contractor's license expires 

or otherwise becomes inactive. The contractor shall so notify the board within 10 days of 

the date upon which the change of address occurs. Initial notice of a contested case or 

arbitration directed by the board to the last-known address of record shall be considered 

delivered when deposited in the United States mail and sent registered or certified or post 

office receipt secured .. AJ1y other comnmnlcation directed by the board to the last-knovm 



address of record shall be considered delivered when deposited in the United States mail, 

regular mail. [Formerly 701.080] 

7. Suspending An Oregon Contractor's License 

The eeB may suspend a contractor's license if the contractor, or an owner, officer or 

responsible managing individual of the contractor, owes a "construction debt" or has had a 

"construction contractor license" revoked or suspended. The same is also true if an owner, 

officer or responsible managing individual of the contractor was an owner, officer or responsible 

managing individual of another contractor at the time the other contractor incurred a construction 

debt that is owing or at the time of an event that resulted in the revocation or suspension of the 

other contractor's license. See ORS 701.102(2)(aHc). 

ORS 701.1 02(1) defines "construction contractor license" as a license issued within the 

United States to engage in the business of construction contracting. Although a contractor's 

registration issued in Washington is not a license, it may meet the defmition. Therefore, if a 

contractor registered in Washington is also licensed as a contractor in Oregon and has its 

Washington contractor's registration suspended or revoked, the eeB may suspend the same 

contractor's eCB license. This can provide leverage to a creditor of such a contractor. 

Construction debt is defined in ORS 701.005(4) as follows: 

An amount owed under: (a) an order or arbitration award issued by the board that 

has become fmal by operation of law; 

(b) a judgment or civil penalty that has become final by operation of law arising 

from construction activities within the United States; or 

(c) a judgment or civil penalty that has become final by operation of law arising 

from or failure to comply with ORS 656.017. 

There is no statutory or administrative rule defining "construction activities". However, 



(!> 2011 Scott + Hool

the CCB's position on suspension is that if a claim could be made against the contractor's bond, 

the CCB will suspend based on a judgment based on a construction debt. Therefore, any of the 

claims that qualify as claims against a contractor's license bond should meet the definition of 

"construction activities", which in turn should meet the definition of "construction debt". 

Therefore, even if a claimant cannot make a valid claim against a contractor's license bond 

(perhaps because it is beyond the statute of limitations or because job site addresses or structure 

types are unknown), significant leverage can be brought against a contractor by the CCB 

suspending the contractor's license if the claimant can obtain ajudgment based on a construction 

debt. 



(l) 2011 Scott. Hookiand LLP



II. 

WASHINGTON REGISTRATION AND LICENSE BOND CLAIMS. 

As a preliminary matter, claims against Washington contractor bonds are divided into 

two categories. First, are claims against registration bonds issued to general contractors and 

specialty contractors regulated by Washington's Contractor's Registration Act. 

See Ch. 

18.27 RCW. Second, are claims against license bonds issued to electrical contractors and 

telecommunications contractors. See Ch. 19.28 RCW. 

WASHINGTON STATE CONTRACTORS REGISTRATION ACT 6 

A. Overview 

All contractors in the state of Washington are required to be registered through the 

Contractor's Section of the Department of Labor & Industries. This requirement is codified under 

the Washington State Contractor's Registration Act, Ch. 18.27 RCW. RCW 18.27.040(1); WAC 

296-200A-025. The following discussion is intended only as an overview of the statute within 

the context of filing claims against the statutory surety bond and is not an exhaustive review of 

the statute. 

B. Purpose 

The CRA is a comprehensive statute dealing with the registration of contractors and 

6 The authors are grateful to Seattle attorney JeffYusen ofYusen & Friedrich. The portion of 

these written materials addressing Washington registration bond claims, with certain 

amendments and additions, were created and authored by Mr. Yusen on March 6,2006 in a work 

entitled Suretyship & Liens in the Context of the Contractors Registration Act CReW 18.27) a...d 

the Construction Lien Act CRCW 60.04) for the Washington State Bar Association Young 

Lawyers Division. Mr. Yusen has graciously granted his permission to us to use his work in 

'tL1.ese materials. 

PAGE 16 ~ 



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protection of the public. The purpose of the statute is contained in RCW 18.27.140: 

It is the purpose of this chapter to afford protection to the public 

including all persons, firms, and corporations furnishing labor, 

materials, or equipment to a contractor from unreliable, fraudulent, 

financially irresponsible, or incompetent contractors. 

See also Murphv v. Campbell Illv. Co., 79 Wn.2d 417, 486 P.2d 1080 (1971); Bremmeyer v. 

Peter Kiewit Sons Co., 90 Wn.2d 787,585 P.2d 1174 (1978). 

The CR.i\ was enacted by the Washington Legislature in 1963 and originally consisted of 

eleven sections contained in Ch. 18.27 RCW. Since that time, the Legislature has revised the 

statute no less than twenty-four times adding or revising no fewer than 134 sections of the 

statute. In virtually every year since 1963, the Legislature has entertained, and often passed, 

additions or revisions to the statute. On nine occasions, the Legislature has issued substantial 

revisions, adding five or more sections. On five occasions, the Legislature has promulgated 

comprehensive revisions, adding or revising ten or more sections. The amount of attention paid 

by the Legislature to this statute is significant and reflects a strong public policy in this state in 

favor of protecting the public from contractors. Indeed, this is the central theme and purpose of 

the CRA and is repeatedly stated not only in the statute itself but in existing case law. The 

Legislature has dedicated much time and effort to this statute and to balancing the conflicting 

interests of the various industry players. A review of the statute as it exists today will show that 

the Legislature's focus is providing for the registration of contractors and protection of the 

public. In doing so, the Legislature focuses on the financial responsibility of the contractor 

through the bonding statute and the problem of umegistered contractors and how to encourage 



@ 2011 Scott. Hookland LLP

egistration rather than discourage it. See 1993 Wash. Laws, ch. 454, sec. 1. In effecting these 

strategies and purposes, the Legislature has carefully crafted a comprehensive statute that takes 

into consideration the conflicting wants and needs of many groups including, but not limited to 

residential homeowners, suppliers, subcontractors, laborers, taxing authorities, surety bond 

companies and the building industry. Further, the Legislature has mandated that the chapter will 

be strictly enforced and specifically indicates that the doctrine of substantial compliance shall not 

be used by the department in the application of the statute. RCW 18.27.005. 

The statutory scheme creates several protections for the public including (1) a contractor's 

registration requirement, RCW 18.27.020, .030, (2) a statutory bond or other financial security, 

RCW 18.27.040, and (3) required insurance or other fmancial security, RCW 18.27.050. 

C. Defmition of "Contractor" 

As envisioned by the Legislature to effect the statutory purpose, registration of all 

persons, firms or corporations that act as a contractor within the state of Washington is required. 

RCW 18.27.010, .020. The definitions section of the statute defines contractor as follows: 

(1) "Contractor" includes any person, firm, corporation, or other 

entity who or which, in the pursuit of an independent business 

undertakes to, or offers to undertake, or submits a bid to, construct, 

alter, repair, add to, subtract from, improve, develop, move, wreck, 

or demolish any building, highway, road, railroad, excavation or 

other structure, project, development, or improvement attached to 

real estate or to do any part thereof including the installation of 

carpeting or other floor covering, the erection of scaffolding or 

other structures or works in connection therewith, the installation 

or repair of roofing or siding, performing tree removal services, or 

cabinet or similar installation; or, who, to do similar work upon his 

or her own property, employs members or more than one trade 

upon a single job or project or under a single building permit 

except as otherwise provided in this chapter. "Contractor" also 

includes a consultant acting as a general contractor. "Contractor" 



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also includes any person, firm, corporation or other entity covered 

by this subsection, whether or not registered as required under this 

chapter or who are otherwise required to be registered or licensed 

by law, who offer to sell their property without occupying or using 

the structures, projects, developments, or improvements for more 

than one year from the date the structure, project, development or 

improvement was substantially completed or abandoned. 

While this definition is fairly broad and comprehensive, there are some exceptions to the 

definition of "contractor" that will not require registration by a party that otherwise falls under 

the definition of contractor. ReW 18.27.090 creates certain exemptions from registration which 

include any person contracting on property under the jurisdiction of the federal government 

(RCW 18.27.090 (7)), any person acting as a supplier (RCW 18.27.090 (8)) and any person 

working on his/her own property without the intention of selling the improved property (RCW 

18.27.090 (12)). 

"Contractor" as defined above, is further broken down by two additional definitions in 

RCW 18.27.010 as follows: 

(5) riGeneral contractor" means a contractor whose business 

operations require the use of more than one building trade or craft 

upon a single job or project or under a single building permit. A 

general contractor also includes one who superintends, or consults 

on, in whole or in part, work falling within the definition of 

contractor, 

(12) "Specialty contractor" means a contractor whose operations 

do not fall within the definition of "general contractor", A 

specialty contractor may only subcontract work that is incidental to 

the specialty contractor's work. 

D. Registration Required 

As indicated above, all contractors that fall within the definition of contractor under 



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RCW 18.27.010 (1) and otherwise are not exempted by RCW 18.27.090 are required to register 

with the Contractors Section of the Department of Labor & Industries in Olympia. See WAC 

296-200A-02S for specific requirements of registration, Washington is a "registration" state and 

not a "license" state. There are no testing or examination requirements as a prerequisite to 

registration as a contractor in Washington. It should be noted that this registration scheme differs 

from the licensing requirements to be an electrical contractor contained in Ch. 19.28 RCW. The 

main requirements for contractor's registration in Washington revolve around certain financial 

responsibility requirements through the required statutory surety bond (RCW 18.27.040) and 

insurance CRCW 18.27.050). 

E. Insurance or Financial Responsibility Requirement 

Presently, RCW 18.27.050 requires insurance or other financial responsibility in the form 

of an assigned account in the amount of $50,000.00 for property damage, $100,000.00 for injury 

or damage to a single person and $200,000.00 for injury or damage to more than one person. 

F. Bond or Financial Responsibility Requirement 

The statutory bond requirement for the eRA is found in RCW .18.27.040. The statute 

requires that a contractor registering as a general contractor maintain a bond in the amount of 

$12,000.00 and a contractor registering as a specialty contractor maintain a bond in the amount 

of $6,000.00. RCW 18.27.040 (I); WAC 296-200A-030, In the alternative, a registrant may file a 

deposit consisting of cash or other security acceptable to the department. RCW 18.27.040 (8), 

Typically, this deposit is a cash deposit in the form of an assigned bank account. The bond often 

is the sole source of funds to a claimant having a claim against a defaulting contractor. RCW 

18.27.040 defines t.~e coverage, conditions a..l1d l'Il110unt of the statutory bond and, generally, 



(Q 2011 Scott + Hookland LLP

indicates the manner and form for commencing and maintaining an action against the contractor 

registrant and the statutory bond. In 2001, the Legislature amended the statute by reserving a 

portion of each bond for residential homeowner claimants. RCW 18.27.040 (5). For a general 

contractor's bond in the penal sum of $12,000.00, a residential homeowner can reach the entire 

$12,000.00 while all other claimants (non-residential homeowner claimants) are limited to an 

aggregate of $6,000.00. On the specialty contractor's bond, a residential homeowner claimant can 

reach the entire $6,000.00 on the bond with non-residential homeowner claimants limited to an 

aggregate of $4,000.00. A copy ofRCW 18.27.040 is attached to these materials together with a 

copy of the statutory-bond. A more detailed discussion of the statutory bond follows. 

III. 

THE WASIDNGTON BOND CLAIM PROVISION OF THE CRA 

A. Bond Requirement 

RCW 18.27.040 (1) requires a contractor applicant registering as a general contractor to 

file a $12,000.00 bond. If the contractor applicant registers as a specialty contractor then a bond 

in the penal sum of $6,000.00 is required. There are certain additional requirements for bonding 

where a contractor has three (3) or more final judgments involving a residential single-family 

dwelling on two or more structures. See WAC 296-200A-030. The bond is a statutory bond 

employing a form developed by the Contractor's Section of the Department of Labor & 

Industries and names the state of Washington as obligee. RCW 18.27.040 (1). 

B. Bond Continuous Until Cancelled 

The statute specifically indicates that the bond is "continuous until cancelled" which 

means that the bond is a single surety contract for an indefinite term, i.e., until the bond is 

cancelled or exonerated and discharged by payment This language on one hand protects the 




surety from multiple bond losses and, at the same time, shifts the burden of insuring that the 

bond actually is cancelled, in the manner and form required by the statute, to the surety. It should 

be noted that these bonds can extend for years. The bonds are not actually "renewed" each year 

but are "continued" or "extended". The reason for this, of course, is that the surety never knows 

how long a contractor will continue to maintain its statutory bond so the surety will not know 

what fee to charge at the beginning of the undertaking. Thus, typically, the surety will ask for 

additional fee on an annual basis as a matter of convenience and, upon receipt, will continue or 

extend the bond. 

Another issue that comes up from time to time is the issue of changing the surety's name 

or bond number by rider. These riders are filed by the surety and normally will not affect its 

total, aggregate liability on a continuous bond. For example, where a bond is issued as 

continuous until cancelled by Bohd Company A and Bond Company A is purchased by Bond 

Company B at some point thereafter, it would not be unusual for Bond Company B to forward a 

surety name change or bond number change rider to the Contractor's Section. In doing so, the 

Contractor's Section will recognize that the same, continuous bond exists albeit under a different 

surety name or different bond number. In such a case, the same, continuous, bond continues to 

exist although the surety's name has been changed and the liability ofthe surety will be limited to 

the original, single, penal sum of the bond. 

C. Conditions on Bond 

The conditions of the bond are expressly set forth both in RCW 18.27.040 (1) and the 

statutory bond form itself. As a statutory bond, the bond form tracks the statutory language. 

Specifically, the bond is conditioned that the applicant/registrant will pay (1) all persons 




perfonning labor, including employee benefits, for the contractor, (2) all taxes and contributions 

due to the state of Washington, (3) all persons furnishing labor or material or renting or 

supplying equipment to the contractor and (4) all amounts that may be adjudged against the 

contractor by reason of breach of contract including negligent or improper work in the conduct 

of the contracting business. RCW 18.27.040 (1). As a matter of statutory interpretation, the 

conditions set forth in RCW 18.27.040 (1) need to be read in conjunction with the claims 

limitation language of RCW 18.27.030 (3) and the priorities language of RCW 18.27.040 (4). 

See Stewart Carpet Service. Inc. v. Contractors Bonding and Insurance Company, 105 Wn.2d 

353,715 P.2d 115 (1986). 

1. Labor Claims 

Labor claims can be broken down into two areas, actual claims by laborers and employee 

benefit claims. The Washington State Supreme Court has indicated that actual labor claims are 

narrow in scope and coverage, stating that the n .... ordinary and obvious meaning of this 

language, and of the section as a whole, is that the Legislature is focusing on wages and benefits 

contractors owe to individuallaborers ... n • Stewart Camet, 105 Wn.2d at 358. The Cou.rt also has 

indicated that laborers are the individuals who actually perform the work at the job site. See 

Better Financial Solutions, Inc. v. Transteel Elec., Inc., 112 Wash.App. 697, 51 P.3d 108 (2003). 

Under this definition, labor would not include office help or outside accountants or other outside 

professionals. This makes sense since the priority section of the statute, RCW 18.27.040 (4) 

refers to "employee labor!! or rtemployee benefits If • Labor also does not include a claim by a 

supplier of temporary labor. Better Financial Solutions, Inc. v. Caicos Corporation, 117 



Ill> 2011 Scott. Hooldand LLP

Wash.App. 899, 73 P .3d 424 (2003). In some instances, labor performed "off-site" will be 

covered under the bond. See Alaska Cascade v. Doors Northwest, 52 Wash.App. 588, 762P.2d 

362 (1988). 

The second area of potential coverage under the statute includes claims for "employee 

benefits". This language generally means employee fringe benefits or other benefits associated 

with a union and its collective bargaining agreement This area is very complex and a full 

discussion is beyond the scope of this paper but can briefly be summarized. Fringe benefit claims 

are subject to federal jurisdiction under the federal Employee Retirement Income Security Act of 

1974, ("ERISA"), 29 U.S.c. §1001-1461. Under ERISA, there is an extremely broad preemption 

provision that appears to have been narrowed by cases in recent years. Under earlier 

cases, courts recognized the breadth of the ERISA pre-emption provision and often barred claims 

by fringe benefit trusts against state public works bonds and retain age, state contractors 

license/registration bonds and actions filed under state statutes authorizing liens or other 

remedies. In Washington there are several cases that uphold a broad pre-emption of a state 

statutory bond remedy. See Puget Sound Elec. Workers Health & Welfare Trust Fund v. Merit 

Co., 123 Wn.2d 565, 870 P.2d 960 (1994); International Brotherhood of Electrical Workers 

Local Union No. 46 v. Trig Electrical Construction Co., 142 Wn.2d 431,13 P.3d 622 (2000). 

These cases remain somewhat troubling for purposes of application under the continuous 

contractor's registration act bond because their facts vary in that the bonded party was not the 

defaulting contractor and both cases were decided prior to the recent tide of cases nationwideboth 

state and federal-that are narrowing the breadth of the ERISA preemption provision as it 

applies to a statutory state contractor's bond. See Southern IBE\V -NECA Trust Func1s v. 



@ 2011 Scott + Hookland LLP

Standard Industrial Electric Co., 247 F.3d 920 (9th Cir. 2001). V&at is for certain, however, is 

the distinction between "employee wage deduction" claims by a fringe benefit trust or union and 

claims for "employer contributions". The former includes vacation fund payments and wage 

deductions for union dues, are not subject to ERISA pre-emption and the statutory bond will 

have liability. The latter are employer contributions required under the collective bargaining 

agreement, ~ governed by ERISA and will have to be analyzed in connection with the current 

state of the law as it regards the ERISA pre-emption provision and state bond remedies. 

Certainly, as of this writing, the situation remains somewhat muddled in Washington. 

2. Tax and Contribution Claims 

Claims for taxes and contributions are restricted to those due and owing the state of 

Washington and includes taxes and contributions due and owing to the Department of Revenue, 

Department of Labor & Industries and Department of Employment Security. Typically, the 

claims are submitted on an existing tax warrant and can be based either on actual filed and 

unpaid returns or estimates made by the taxing authority pursuant to statute and regulation. 

Taxes due to the federal government are not covered by the statutory bond. 

3. Claims by Persons Furnishing Labor or Materials or Renting or Supplying 

Equipment 

Claims by material suppliers, subcontractors and persons that rent, lease or supply 

equipment to the contractor generally will be covered under the bond and comprise the greatest 

percentage of claims that are filed against the bond. 



Iti 2011 Scott. Hookland LLP

a) Material Suppliers 

Claims by material suppliers clearly are authorized by the statute and make up the largest 

group of claims against the bond. Sureties generally will look at the defInitions of "materials" 

employed under the lien statute which will include articles that have been incorporated into or 

have become a part of a building or have been delivered to the site for incorporation into a 

fInished structure. See Portland Elec. & Plumbing Co " Inc. v. Dobler, 36 Wash.App. 114, 762 

P.2d 103 (1983); National Concrete Cutting, Inc. v. Northwest OM Contractors, Inc., 107 

Wash.App. 657, 27 P.3d 1239 (2003). Thus, a surety will deny a claim for a stereo system that is 

not fabricated into or becomes a permanent and fIxed part of a building or structure. 

b) Rental Equipment 

Charges for rental equipment are treated similar to claims by a material supplier. 

Particular attention is paid to the rental dates. A surety normally will deny claims for 

maintenance charges to rented equipment or for charges accruing from damages to the rented 

equipment. 

c) Equipment Claims 

Some years ago, equipment was added to the statute thereby creating coverage under the 

bond for equipment purchases. Sureties typically will cover an equipment purchase only to the 

extent that the equipment is a non-capital purchase. Thus, a surety will not normally consider 

paying off on a defaulted truck purchase. 

!II 

III 




d) Subcontractor Claims 

Prior to the recent amendment to the statute in 2001, a subcontractor claim had to be 

broken down into its labor and material components. This method of allocation was unwieldy 

and difficult to document especially when attempting to allocate overhead and profit components 

as well. After the amendment to the priorities section of the statute, RCW 18.27.040 (4)(c), 

registered subcontractors were authorized for coverage under the bond as a separate type of 

claim. Under the ruling of Stewart Carpet, supra, the Supreme Court held that an upper tier 

contractor may not recover from the bond of a lower tier subcontractor. Lower tier 

subcontractors, however, may recover from the bond of their upper tier contractor. Stewart 

~,supra; Allied American Painting Contractors v. Shore, 40 Wash. App. 783,700 P.2d 389 

(1985); International Commercial Collectors, Inc. v. Carver, 99 Wn.2d 302, 661 P.2d 976 

(1983). See also Farwest Steel Co. v. Mainline Metal Works, Inc., 48 Wash.App. 719,741 P.2d 

58, rev. den. 109 Wn.2d 1009 (1987); Better Financial Solutions, Inc. v. Caicos Corporation, 117 

Wash.App. 899,73 P.3d 424 (2003). 

4. Claims for Breach of Contract by a Party to the Construction Contract 

In analyzing these claims, courts generally will look not only to the conditions language 

ofRCW 18.27.040 (1) but the language of the entire provision as a whole. Stewart Carpet supra. 

In Stewart Carpet, the Supreme Court indicated that a claim for breach of contract by a party to 

the construction contract must mean that the Legislature was focusing "... on the contract between 

the consumer and upper-tier contractor ... ". 105 Wn.2d at 358. The Court further stated that "... the 

only provision in the priority section [RCW 18.27.040 (4)] which would apply to a consumer's 


WASmNGTON REGISTRATION BONDS 

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claim specifies claims for 'breach of contract by a party to the construction contract', which must 

mean the contract between the consumer and the contractor, since the consumer is not a party to 

any other construction contract. If the contractor does not perfonn pursuant to the terms of 'the 

contract', clearly the consumer has a right of action against the bond." 105 Wn.2d at 358-59. 

Under this analysis, then, it is generally accepted that privity of contract is required and that the 

only "contract" that can be covered under this provision is the contract between the consumer 

and the contractor. Stewart Carpet, supra; Warner v. Design and Build Homes, Inc., 128Wn. 

App. 34, 114 P.3d 664 (2005). 

Claims for breach of contract generally are broken down two types: non-residential or 

commercial and residential homeowner claims. The difference is important to note and fairly 

obvious. 

Commercial or non-residential breach claims do not occur that often. An example of this 

type of claim might be a claim for breach of contract in the construction of a commercial 

building or space or for a rental unit. As will be seen, the distinction is important for application 

of the claims limitation provision of RCW 18.27.040 (3) and for coverage amounts under the 

bond. 

By far and away the most typical breach claim is by a residential homeowner. 

"Residential homeowner" is defined under RCW 18.27.010 (10) as follows: 

(l0) "Residential homeowner" means an individual person or 

persons owning or leasing real property: 

(a) Upon which one single-family residence is to be built 

and in which the owner or lessee intends to reside upon completion 

of any construction; or 

(b) Upon which there is a single-family residence to which 

improvements are to be made and in which the owner or lessee 



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intends to reside upon completion of any construction. 

A claimant falling within this definition of residential homeowner will be covered under 

the bond for the full penal sum of the bond and, also, will be accorded the longer claims 

iimitation period of RCW 18.27.040 (3). A surety often will require that there actually be a 

breach of a "construction contractU in order to not challenge the claim for coverage under the 

statute. Thus, the sale of a completed home under a purchase and sale agreement may not be a 

"construction contract 1l as contemplated by the statute. Warranty or punchlist claims generally 

will relate back to the date of completion of the contract and only will be covered under the bond 

to the extent that the applicable claims limitation period has not run. 

D. Action Against the Contractor and Bond 

RCW 18.27.040 (3) authorizes any person, firm or corporation having a claim against the 

contractor that falls within t.h.e conditions of the bond to bring an action in the appropriate 

superior court. Additional specifics of how a suit is filed against a contractor and the bond is 

found in WAC 296-200A-080. Actions are authorized solely in superior court. The statute 

indicates the specific manner in which service of process for an action against the contractor and 

bond is made and requires that three copies of the summons and complaint and a required fee in 

t.he amount of $50.00 be forwarded to the Contractor's Section by certified mail or any other 

delivery service requiring notice of receipt at the time the action is commenced. RCW 18.27.040 

(3). This service is the exclusive method for effecting service on the registrant and the surety for 

suit on the bond. Upon receipt, the Contractor's Section will hold one copy for their file and 

forward a copy to both the registered contractor and the surety. 

The summons and complaint is served on the Department of Labor and Industries, which 

PAGE 29 • CLAIMS AGAINST OREGON LICENSE BONDS AND 


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effects service as to the surety and the contractor regarding the bond claim only. See RCW 

18.27.040(3). Your contractor customer should also be served with summons and complaint so 

that a claim against the contractor is initiated. See Subcontractors and Suppliers Collection 

Services v. McConnachie, 106 Wn. App. 738, 743, 24 P.3d 1112 (2001) ("Both the purpose of 

the statute and its language support the notion that service on the Department is for the limited 

purpose of realizing on a contractor's bond or deposit. 

Subcontractors' service of process 

through RCW 18.27.040(3), without more, did not confer personal jurisdiction over [the 

contractor],,); see also Ahten v. Barnes, 158 Wn. App. 343, 242 P.3d 35 (2010) ("Review of 

chapter 18.27 RCW, and in particular RCW 18.27.040 in its entirety, evidences the legislature's 

intent that actions 'filed under this chapter' refer only to actions for recovery against the 

contractor's bond .... We conclude that nothing in chapter 18.27 RCW, and section .040 

specifically, suggests that the legislature intended to address actions against contractors."). 

(1) Case Law 

Subcontractors and Suppliers Collection Services v. McConnachie, 106 Wn. App. 738, 

24 P.3d 1112 (2001). This case holds service of a summons and complaint on the Department of 

Labor and Industries, and not personally on the contractor, does not give personal jurisdiction 

over the contractor for claims not covered by the registration bond required by RCW 18.27. 

Ahten v. Barnes, 158 Wn. App. 343, 242 P.3d 35 (2010). 

In the Ahten case, the 

homeowner, Ahten, filed suit against her contractor, Barnes, for breach of contract. Ahten also 

asserted a contractors registration bond claim against Barnes and Barnes' surety. Ahten served 

the Department of Labor & Industries, but did not personally serve Barnes. Ahten obtained the 



IP 2011 Scott. Hookland ~p

entry of a default judgment against Barnes. Barnes learned of the judgment and successfully had 

the judgment set aside for improper service and lack of personal jurisdiction. Ahten appealed, 

arguing that she had served Barnes through substituted service under RCW 18.27.040(3), which 

states that service on L&I "shall constitute service and confer personal jurisdiction on the 

contractor and the surety for suit on claimant's claim against the contractor and the bond or 

deposit". The court disagreed with Ahten and affirmed the trial court's order setting aside the 

judgment. The court reviewed RCW 18.27.040 and concluded that the statute applied only to an 

action filed against the contractor AND the contractor'S bond or deposit, that the statute is limited 

to actions filed "under this chapter" and does not address direct actions against contractors. 

E. Claims Limitation Provision of the CRA 

RCW 18.27.040 (3) contains a claims limitation provision that will bar claims against the 

statutory bond. In 2001 the Legislature simplified the claims limitation bar by making it a flat 

two year claims limitation period for breach of contract claims brought by a residential 

homeowner and a one year period for actions commenced by all other authorized parties. 

As is critical with any claims limitation analysis, the key question is accrual or the date 

when the claims limitation period commences to run. The good news is that the statute itself 

defmes when accrual occms. For breach of contract claims, accrual occurs when the contract is 

substantially completed or abandoned. For all other claims, accrual occurs from the date the 

claimed labor was performed, benefits accrued, taxes and contributions became due or materials 

and equipment furnished. Since the statute itself defines accrual, the legal fiction of defIDing 

accrual through the "discovery rule" should not apply. See discussion in Architechtonics 

Construction Management. Inc. v. YJ1orram, 111 Wash. App. 725, 45 P.3d 1142 (2002). Further, 



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the running of the claims limitation period will not be tolled, absent fraud, by a contractor's 

efforts to correct or repair defects in performance. See E.L. Farmer Construction v. Hartford 

Accident & Indemnity Co., 114 Ariz 210,560 P.2d 65 (1976). 

F. Bond Liability Limited to Penal Sum of Bond 

RCW 18.27.040 (4) limits a surety's liability to the aggregate penal sum of the bond. The 

surety's liability does not "stack" since the bond is not tied to a registration period but, rather, is a 

single surety contract for an indefinite term. It should be noted that the bond limit applies to a 

claimants' claim for attorney's fees and costs as well. RCW 18.27.040 (4) (e), (5) and (6). 

G. Priorities Under the Bond 

RCW 18.27.040 (4) established a priority scheme as to entitlement to bond proceeds once 

payment occurs and the bond is exonerated. The claiming parties need to assess the outstanding 

claims commenced and pending at the time of exoneration of the bond and prioritize the claims 

in the order set forth in the statute: (1) employee labor and claims of laborers, including 

employee benefits, (2) claims for breach of contract by a party to the construction contract, (3) 

claims by registered or licensed subcontractors an claims for material and equipment, (4) claims 

for taxes and contributions and (5) claims for court costs, interest and attorneys' fees. The 

priorities will be established at the time of exoneration of the bond. The priority of payment 

under the bond is not a race priority in the sense of the first party to file an action or even obtain 

a judgment having the highest priority. Rather, the priority under the bond is based upon the 

priorities as set forth in RCW 18.27.040. Cook v. National Indemnity Co., 47 Wash.App. 110, 

733 P.2d 1002 (1987). It is clear, however, that it is a race statute in the event there is only a 

single outstanding claim against t.lJ.e bond and payment is made on the bond. Department of 



s 2011 Scott + Hookland LLP

Revenue v. National Indemnity Co., 45 Wash. App. 59, 723 P.2d 1187 (1986). The priorities 

provision comes into play only where there are multiple, outstanding claims against the bond. In 

such a case it will not matter which claimant filed first or even which claimant obtained the first 

judgment against the registered contractor. 

H. Attorney's Fees Provision 

In 2001 the Legislature added a provision to the CRA that authorizes an award of 

reasonable attorneys' fees and costs to a prevailing party making a claim for breach of contract 

by a party to a construction contract. RCW 18.27.040 (6). The attorneys' fees and costs may be 

assessed against the surety only, although the surety's aggregate liability continues to be limited 

to the penal sum of the bond or the maximum amount allowed for a particular claimant. RCW 

18.27.040 (6); RCW 18.27.040 (4)(e); See also Cosmopolitan Eng'g Group Inc. v. Ondeo 

Degremont, Inc., 159 Wn.2d 292, 149 P.3d 666 (2006). 

I. Alternative Security 

In lieu of a statutory bond, the contractor may file with the Contractor's Section a cash 

deposit or other acceptable security. RCW 18.27.040 (8); Lewis Plumbing & Heating, Inc. v. 

Agua Drilling, 26 Wash.App. 789, 634 P.2d 237 (1980). Generally, the method of reaching the 

cash deposit is similar to a proceeding against the bond except that the bank or other entity 

providing the security is not named as a party in the action. See WAC 296-200A-080. Upon 

obtaining a final judgment against the contractor, the claimant should forward a certified copy of 

the unsatisfied judgment to the Contractor's Section within one year of the date the judgment is 

entered. Upon receipt, the Contractor's Section either win payor direct payment of the unsatisfied 

final jud,:slUent from the security. RCW 18.27.040 (9), It is critical to note that the priority of 


WASIflNGTON REGISTRATION BONDS 

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payment on the security differs from that of payment on the bond in that it is a true race to 

judgment for payment on the security. Thus, the fIrst claimant to take a fInal judgment and 

forward the required copy to the Contractor's Section will receive the cash deposit regardless of 

time offiling or priority. 

SPECIAL CLAIMS ISSUES 

A. Surety Only Liable if Principal is Liable 

It is a standard defense to the surety that the surety is not liable unless its principal is 

liable. Tucker v. Brown, 20 Wn.2d 740, 150 P.2d 604 (1944); Turner v. Wexler, 14 Wash.App. 

143,538 P.2d 877 (1975). A judgment entered against the registered contractor generally will be 

accepted as establishing liability on the bond subject to independent defenses available to the 

surety. Ward v. LaMonica, 47 Wash.App. 373, 735 P.2d 92 (1987). Further, absent fraud, a 

surety's liability will be limited to the amount of its undertaking. Puget Sound Bank v. St. Paul 

Fire Insurance, 32 Wash.App. 32, 645 P.2d 1122 (1982). 

B. Negligence Claims 

There often is confusion as to the liability of the surety for "negligence" claims. This 

confusion comes from the unfortunate use of the language "negligent or improper work" as 

further defIning a breach of contract claim. It is critical to note that there is no cause of action for 

a tort of negligent construction in Washington solely for damage to property. Stuart v. Coldwell 

Banker Commercial Group. Inc., 109 Wn.2d 406, 745 P.2d 1284 (1987). In addition, the 

Legislature clearly has limited the scope of coverage under a statutory bond and, by statute, 

excludes tort claims from coverage under the statutory bond. See RCW 19.72.107. Thus, in the 

context of the eRA, "negligent or improper work" generally is accepted as a further explanation 

PAGE 34 - CLAIMS AGAJNST OREGON LICENSE BONDS AND 


of the definition of a breach of contract claim and will not establish an independent right to 

claims for a tort. 

C. Inspection Claii,!!§ 

A surety will deny a claim illlder its statutory bond where its principal has not acted as a 

contractor, but, rather, has performed inspection services. Although there is no specific case on 

point, courts have denied a claimant the protection of the bond on the basis that "inspections" do 

not fall within the definition of "contractor" under RCW 18.27.040 (1). The work of a contractor 

s inspector does not require registration and, accordingly, will be found to not be covered under 

the bond. 

D. Claims Incurred Outside of the State 

Sureties generally will closely review claims filed in areas bordering other states. A 

typical situation might involve materials purchased in Washington for specific use on an Oregon 

project Where it can be shown that the material supplier was aware that the materials were 

destined for a project outside of the state of Washington then there ,¥ill be no protection under 

the bond since the surety's principal was not acting as a Washington contractor. 

E. Federal Proiects 

Work performed by the surety's principal on federal projects such as a military 

installation will not be protected by the statutory bond since the surety's principal is not required 

to register in order to work on a federal project. See RCW 18.27.090 (7). 

F. Privity of Contract Required in a Breach of Contract Case 

In Stewart Carpet Services. Inc. v. Contractors Bonding and Insurance Company, 105 

Wn.2d 353, 715 P.2d 115 (1986), The 'Washington Supreme Court defined "breach of contract" 



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claims to involve only those that are parties to the construction contract, that is, the consumer 

and the contractor. Stewart Carpet, 105 Wn.2d at 358-59. Thus, claims by a breach of contract 

claimant against the bond of a subcontractor with whom the breach claimant did not contract will 

be found to fail for want of privity of contract. Attempts to create privity by characterizing the 

breach claimant as a third party beneficiary to the contract between the general contractor and 

the subcontractor also will fail on the basis that there is no intent to create such an obligation. 

See Warner v. Design and Build Homes. Inc., 128 Wn. App. 34, 114 P.3d 664 (2005). 

G. Warranty Claims 

Generally, claims for warranty will not be covered under the bond except to the extent 

that the claim is brought within the claims limitation period relating to the underlying contract 

claim. Claims for breach of a warranty contract will not be covered since the conditions of the 

bond only include claims for breach of a "construction contract". 

H. Multiple Sureties 

From time to time more than one surety might have liability on the same claim. Under the 

law of suretyship, a determination must be made as to whether or not the surety is a "co-surety" 

or a "sub-surety". See Restatement of the Law of Suretyship and Guaranty, 3 rd (American Law 

Institute, 1995), §§ 55-61. See also Millers Mutual Fire In.surance Company of Texas v. Farmers 

Elevator Mutual Insurance Company, 408 F.2d 776 (5th Cir. 1969). A co-suretyship relationship 

will be seen where two separate sureties have an obligation for the same obligation. This is seen 

where two sureties have issued a statutory bond for the same period oftime causing co-extensive 

liability. In such a case, the obligations of the sureties will be pro-rated between them. The issue 

of sub-suretysJ:-J.p is different in that the liability of the two sureties is overlapping rather than co- 



extensive. A common example of sub-suretyship is where a contractor has both a public works 

bond for a pmlicular project and a contractor's registration act bond. In such a case, the court 

will look to see which surety has the specific or primary liability and which bond has the general 

or secondary liability. The fact that the obligations overlap should not affect the assignment of 

liability to the primary or specific surety. In the example given, as between the two sureties, the 

surety bonding the specific project will have primary liability while the statutory contractors 

registration act surety would have the secondary or general liability. 

PRACTICE TIPS 

A. CONFIRM THE CONTRACTOR'S REGISTRATION AND 

INFORMATION 

Contact the Contractor's Section to confirm the contractor's registration and other 

pertinent information such as the contractor's registration number and the surety, bond number 

and effective dates. Reviewing a particular contractor's registration on-line will confirm all of 

this information plus notice of outstanding claims. The Contractor's Section can be reached as 

follows: 

Mailing Address: 

Contractor's Section 

Department of Labor & Industries 

P.O. Box 44450 

Olympia, W A 98504-4450 

Telephone Number: 360-902-5226 

1-800-647-0982 

Web Address: 

hups:! Ifol'tress. wa. gov/lnj/bbipl 

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III 



C1:I 2011 Scott. Ho(}kiand LLP

B. NECESSARY CONTENTS OF COMPLAINT 

In drafting the complaint against the contractor and surety, it is important to include the 

following information somewhere in the body of the complaint: (a) the name of the contractor 

exactly as it appears in the contractor's registration file, (b) the contractor's business address, (c) 

the name of the owners, partners or officers of the contractor, if known, Cd) the contractor's 

registration number, (e) the name of the bonding company that issued the contractor's bond, (f) 

the bond number and (g) effective date of the bond. 

WAC 296-200A-080(3)(a)-(d) and (4)(a)- 

(c). If-the security in lieu of·the bond-is being pursued, the complaint should recite (a) the name 

of the institution where the assigned account is held, (b) the accoW1t number and ( c) the date the 

assigned account was opened. WAC 296-200A-080(5)(a)-(c). 

C. SERVICE THROUGH CONTRACTOR'S SECTION 

Service of process against the surety and the registrant for a claim on the bond is 

exclusive through the Contractor's Section of the Department of Labor & Industries. The action 

should be filed in superior court before serving the Contractor's Section in the manner and form 

required by statute and regulations. Service is effected by sending three copies of the summons 

and complaint by certified mail together with a check payable to the Contractor's Section in the 

amount of $50.00 as the required fee and mailed to the Contractor's Section's address set forth 

above. 

D. FORWARD COPY OF FINAL JUDGMENT TO CONTRACTOR'S 

SECTION 

When a final judgment is entered against the contractor a copy should be forwarded to 




the Contractor's Section for their records. Doing so will cause the Contractor's Section to deny 

renewal of registration or establishment of a new registration for the registrant until it can be 

confirmed that the fmal judgment has been satisfied. See RCW 18.27.010 (11) defining 

Itunsatisfied final judgment" and RCW 18.27.030. This provision adds a little pop to the final 

judgment entered against the contractor registrant and gives the registrant an additional reason to 

satisfy the judgment sooner rather than later. 

IV. 

CLAIMS AGAINST LICENSE BONDS OF ELECTRICAL CONTRACTORS AND 

TELECOMMUNICATION CONTRACTORS 

RCW Chapter 19.28 governs claims against electrical contractors and 

telecommunications contractors and their bonds or assigned savings accounts. The bond or 

assigned savings amount is always $4,000. RCW 19.28.041(3) and RCW 19.28.420(7). 

A. Asserting a Claim 

RCW 19.28.071 describes how to make a claim against an electrical contractor's bond or 

assigned savings account. RCW 19.28.420(7) describes how to make a claim against 

telecommunications contractor license bond. Both types of claims must be brought in a lawsuit 

in the Superior Court of any county in which the contractor resides or transacts business, or in 

the county in which you provided labor, materials,and/or rental equipment. The contractor and 

the surety providing the license bond are joined as defendants. The claim against the bond is 

effected by serving a domestic surety (from Washington) by way of personally serving an 

insurance agent of the surety, and for a foreign surety (from a state other than Washington) by 

serving the Washington State Insurance Commissioner. The contractor should also be personally 

served to effect the claim against the contractor. Any lawsuit must be brought within one year 



© 2011 Scott. Hookland LLF

from the completion of the work in the perfonnance of which the breach is alleged to have 

occurred. RCW 19.28.071 and RCW 19.28.071(8). 

B. Priority of Claims 

The order of priority for claimants pursuant to RCW 19.28.071 and RCW 19.28.420(8) is as 

follows: 

(a) 

(b) 

(c) 

(d) 

Labor, including employee benefits; 

Materials and equipment used upon such work; 

Taxes and contributions due to the State; 

Da.111ages sustained by the claimant due to the contractor's failure to make and 

install in accordance with the provisions of Chapter 19.28 RCW, or any other 

applicable regulation or code. 

The bond will not be subject to claims for damaged equipment or similar consequential 

damages ~ only for failure to pay for labor, materials, and equipment furnished to the contractor. 

Recent Washington Appellate Court decisions have made it unclear whether union trust 

funds are preempted by ERlSA from asserting claims against contractor registration/license 

bonds. However, there is language in these opinions suggesting a "first party claim" by a union 

trust fund is not preempted. A "first party claim" is a claim by the union trust fund against the 

contractor or subcontractor employing the laborers for whom the union trust fund is seeking 

benefits be paid. It appears that, under the recent cases of Merit and IBEW v. Trig Electric, 

"third party claims" are preempted by ERISA. A "third party claim" is a claim by the union trust 

fund against the bond of a contractor or subcontractor who did not employ the employees whose 

trust fund benefits have not been paid. Under Merit and IBEW v. Trig Electric, it appears third 

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party bond claims are preempted by ERISA. Given it is unclear whether first party claims are 

preempted, union trust funds may be willing to split proceeds of a bond with a lower priority 

claimant such as a subcontractor, material supplier, or rental equipment supplier. 

C. Rank of Claims 

In the event a cash deposit or assigned savings account has been made in lieu of a surety 

bond, you should obtain a jUdgment against the contractor and the deposit, and then provide a 

certified copy of the judgment to the Director of the Department of Labor and Industries. Upon 

receipt of the certified copy of the judgment, the Director will have the judgment paid from the 

deposit, not to exceed $4,000. RCW 19.28.071 and RCW 19.28.420(8). Banks holding the 

deposit will likely tender the proceeds to the court, and you will have to obtain a court order 

directing the court clerk to disburse the proceeds to you. 

If a surety bond is in place rather than a cash deposit or assigned savings account, and if 

you obtain a judgment against the contractor and provide a copy of it to the surety, the surety 

will tender the bond proceeds into court. Thereafter, the court clerk will disburse the bond 

proceeds to you upon entry of an order directing disbursement of bond proceeds. 

As with the RCW 18.27 bonds, it is a "race" to the bond proceeds. You face sharing the 

bond proceeds with other same-ranking claimants, or being superseded by a higher priority 

claimant, unless and until the bond proceeds are actually disbursed to you pursuant to an order 

directing disbursement of bond proceeds. 

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V. ADDITIONAL ASPECTS OF WASHINGTON REGISTRATION AND LICENSE 

BOND CLAIMS 

A. No Job Site Address is Necessary 

Unlike Oregon, there is no need to obtain job site addresses in order to have valid claims 

against any contractor's registration or license bond or assigned savings account. Furthennore, 

you have a claim against these bonds whether the project is a state (but not federal) public works 

project, a commercial private project, or a residential private project. 

B. A Claim Against the Bond is a Good Negotiating Tool 

Contractors must have in place at all times a contractor's registration bond or assigned . 

savings account. If they do not, they cannot operate as contractors in the State of Washington. As 

such, a valid and aggressive claim against a contractor's bond or assigned savings account may 

get a quick resolution of the debt obligation because the contractor cannot risk being, in effect, 

put out of business. You should include in any demand letter for 

payment a statement that if 

payment is not timely made, an immediate claim will be made against the contractor's 

registration bond or assigned savings account. 

C. Attorney Fees 

Generally speaking, attorney fees are not recoverable in Washington unless authorized by 

statute or written agreement. Cosmopolitan Eng' g Group, Inc. v. Ondeo Degremont, Inc., 159 

Wn.2d 292, 149 P.3d 666 (2006) ("The general rule in Washington, commonly referred to as the 

'American Rule,' is that each party in a civil action wiil pay its own attorney fees and costs. 

This general rule can be modified by contract, statute, or a recognized ground in equity.") 



III 20U Scott. HooIdand LLP

(internal citations omitted). 

If you have a right to recover reasonable attorney fees, a contractor's registration bond or 

assigned savings account can be reached to pay those fees, if you are the prevailing party. In 

Cosmopolitan Engineering Group, Inc. v. Ondeo Degremont, Inc., 159 Wn.2d 292, 149 P.3d 666 

;- 

(2006), the court confIrmed that under RCW 18.28.040, the statute giving rise to contractor 

registration bond claims, a prevailing contractor registration bond claimant may recover attorney 

fees on its claim for the bond proceeds. In Nichols v. Day, 2010 Wash. App. LEXIS 863 (April 

26,2010) (Div. 1) (Unpublished Opinion), a homeowner sued a contractor and his bond, alleging 

breach of contract, defective construction work, breach of lease and violations of the Consumer 

Protection Act. 

After failing to respond to defendants' discovery requests, the homeowner 

voluntarily dismissed the action. The trial court then awarded the defendants fees and costs 

against the homeowner. The homeowner appealed the award. On appeal, the court upheld the 

award as to the surety, reversed the award (if any) to the contractor, and concluded that a 

"prevailing party" under RCW 18.27.040(6) includes a defendant who prevails through 

voluntary dismissal. 

A "prevailing party" under RCW 18.27.040 "is entiiled to costs, interest, and reasonable 

attorneys' fees" provided that those fees are incurred in an action against both the contractor and 

the contractor's bond or deposit. 

This is because it is always necessary to establish the 

contractor's breach of contract in order to recover from the bond. Cosmopolitan, 159 Wn.2d at 

300-01. The statute does not provide a mechanism for claimant to recover attorney fees in an 

action against the contractor alone. Cosmopolitan, 159 Wn.2d at 294. 

In any legal action for damages where the amount pleaded is $10,000 or less, the 



CI' 2011 Scott" Rookland LLP

prevailing party is entitled to recover its reasonable attorney fees. See RCW 4.84.250. There are 

two down sides to this statute. First, the claimant must serve an offer of settlement on the adverse 

party under which it agrees to accept the principal amount of its claim, excluding its attorney 

fees. If this offer is not accepted, then the claimant recovers its attorney fees if it is awarded an 

amount equal to or exceeding the amount set out in its offer of settlement. 

The defendant can serve an offer of settlement any time up to ten days before trial or a 

dispositive motion. If this offer is in the amount of the principal claim plus accrued interest, then 

the claimant must accept it and forego recovery of its attorney fees. Because the defendant has 

up until 10 days before trial or a dispositive motion to serve its offer of settlement, the claimant 

may spend substantial sums in attorney fees to posture the case for trial or resolution by way of a 

disposition motion, only to give up its right to recover those attorney fees ten days before trial or 

the dispositive motion. The second problem is that it is unclear whether this statute (RCW 

4.84.250) applies to situations in which you have a written agreement that includes an attorney 

fee provision. If it does, then the attorney fee provision may be mooted by RCW 4.84.250. 

NEW CASE: McGuire v. Bates, 169 Wn.2d 185, 189-91, 234 P.3d 205 (2010). 

In 

McGuire, plaintiff filed a lawsuit seeking recovery of the costs of her repairs and attorney fees 

pursuant to RCW 18.27.040(6) (the contractor's registration bond claim statute). 

Plaintiff 

subsequently offered to settle "all claims" for $2,180 "[p]ursuant to RCW 4.84.250-[.]280" and 

defendant accepted this offer. Plaintiff then submitted a request to the arbitrator for attorney fees 

pursuant to RCW 18.27.040(6). The arbitrator denied plaintiffs request, fmding that plaintiff 

had settled "all claims" including her attorney fees. Plaintiff submitted a request to the Whatcom 

COlli1ty Superior Calli"i far a trial de novo and a motion for e.ntry of judgment and ward of 


WASHIN"GTON REGISTRATION BONDS 

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attorney fees and costs. The superior court awarded attorney fees and costs to plaintiff as the 

prevailing party. Defendant appealed, and the Court of Appeals determined that plaintiff's offer 

to settle "all claims" referred only to the plaintiff's claim for damages and that plaintiff was not 

barred from seeking an award of attorney fees in addition to the amount of the offer. 

The 

Washington Supreme Court reversed, holding that an offer to settle "all claims", where one of 

the claims was for attorney fees, encompasses all claims, including claims for attorney fees. 

The statutes for license bonds claims against electrical contractors and 

telecommunication contractors do not expressly provide for attorney fees and costs as an element 

or type of recoverable damages. However, if there is a contract right to attorney fees and costs, 

sureties usually pay them (up to $4,000 penal sum of the bond). 

You can also argue attorney 

fees and costs are part of the damages sustained by the claimant, which is last priority of claim 

types. See RCW 19.28.071 and RCW 19.28.420(8). 

D. Bankruptcy 

All is not lost if your contractor customer files for bankruptcy before or during your 

pursuit of he and his bond. A contractor's registration bond is not considered part of the ba..'1krupt 

debtor's estate, and even though you may be required to stop pursuing the contractor, you may 

continue (or start) pursuing his contractor's registration bond without obtaining from the 

bankruptcy court relief from the automatic stay. In Ie Lockard, 884 F .2d 1171 (9 th Cir., 1989). 

You may attempt to stipulate to such relief, but it is not required. 

If your customer does not have a contractor's registration bond, but instead has an 

assigned savings account, then you still may be able to claim against that account. Although the 



ill 2011 Scott. Hookiand LLP .

account is considered part of the bankrupt debtor's estate, there is some case law authority 

indicating that you may seek relief from the automatic stay to pursue the assigned savings 

account at least as part of a class of claimants. Although filing a motion for relief from the 

automatic stay may add some legal expense, if successful, you should be able to claim against 

the account. 

E. You Can Only Claim "Upstream" 

You may seek recovery against a contractor's bond only if he contracted with you and is 

"upstream" from you in the contracting chain. For example, if you are a first tier subcontractor, 

and have not been paid by the prime contractor, you may pursue the prime contractor's 

contractor's registration bond. Conversely, if you are a prime contractor, and your first tier 

subcontractor has breached his agreement with you, you may not pursue your first tier 

subcontractor's contractor's registration bond. The only possible exception is if you are somehow 

able to take an assignment of claims by someone contracting downstream from the first tier 

subcontractor (for example, a supplier). Another exception to the "Upstream" rule is that an 

owner may claim downstream against the prime contractor's bond. 

F. Things to Remember for Open Account Claims 

(1) To avoid the one year statute oflimitations, do not wait more than six (6) months 

from when the contractor is in default to bring an action. 

(2) Include in all demand letters a reference to the specified surety or assigned 

savings account of contractor, and that a claim against that surei)' or account will be made if 

payment is not timely made. 



ll:> 2011 Scott. Hookland LLP

(3) Obtain a signed contract, 'with personal guarantees if possible, both having 

attorney fee provisions and an increased interest rate on past due obligations. 

(4) There is no need for job site addresses. 

(5) Generally, you can only sue a contractor that is "upstream" from you and not one 

that is "downstream." 

(6) You can pursue the contractor's registration bond of a bankrupt contractor, and 

probably also his assigned savings account. 

G. Claims When Your Customer is Unregistered 

If your customer is a contractor, but unregistered, then there will be no contractors 

registration bond or assigned savings account to claim against. As such, there will not be a 

separate pool offunds from which to seek recovery. Although not a separate fund, you may have 

claims against the unregistered contractor for violations of the Washington Consumer Protection 

Act (Rew 19.86). The damages recoverable under this claim include actual damages sustained 

(the charges for your materials, equipment or work), plus your reasonable attorney fees, and in 

the court's discretion an award of statutory damages in the amount of three times the actual 

damages, but not more than $10,000 (for causes of action that accrue before July 26, 2009) or 

$25,000 (for all causes of action that accrue on or after July 26,2009). RCW 19.86.090. Again, 

although there is no separate pool of funds to go after, you at least may have the right to seek a 

judgment for the amount owed you, plus your reasonable attorney fees, and possibly substantial 

additional statutory damages. 

Recent Legislative Changes - 2009 Wash. Laws Ch. 371. 2009 Washington Laws 

PAGE 47 ~ CLAIMS AGAINST OREGON LICENSE BONDS AND 



Chapter 371 amends RCW 19.86.090 such that the maximum amount of treble damages allowed 

for a CPA claim that accrues on or after July 26, 2009 is now $25,000. This law also adds a new 

section, since codified as RCW 19.86.093, whi-;;h outlines the manner in which a claimant can 

establish a CPA violation in a private cause of action in which an ''unfair'' or "deceptive act or 

practice" is alleged under RCW 19.86.020. Now, a claimant may establish that the act or 

practice is injurious to the public interest because it: (1) violates a statute that incorporates this 

chapter; (2) violates a statute that contains a legislative declaration of public interest impact; or 

(3)(a) injured other persons; (b) had the capacity to injure other persons; or (c) has the capacity 

to injure other persons. Note that RCW 18.27.350 already provides that a misdemeanor or 

infraction ofRCW 18.27 constitutes a violation of the CPA. 

H. Suspending A Contractor's Registration. 

A contractor's registration can be suspended in certain situations when an unsatisfied 

fmal judgment has been entered. 

RCW 18.27 .030(3)(b) provides, in pertinent part, as follows: 

The department shall suspend an active registration if (i) the department has 

determined that the registrant has an unsatisfied final judgment against it for work 

within the scope of this chapter; (ii) the department has detennined that the 

regisirani is a sole proprietor or an owner, principal, or officer of a registered 

contractor that has an unsatisfied final judgment against it for work within the 

scope of this chapter; ... 

Labor and Industries takes the position that the above statutory language "for work within 

the scope of this chapter" means construction work within the State of Washington for which a 

claim against the registration bond could be made. The bond claim does not have to be made, 

such as when the claD.l1fuit shllply fails to make the ciai.T. or it is outside the applicable statute of 



It> 2011 Scott. Hooidand LLP

limitations. The work cannot be performed outside the state and the work cannot be the subject 

of any exemption under RCW 18.27.090. It is clear Labor and Industries must suspend the 

registration of a contractor that has an unsatisfied final judgment against it for which a claim 

against the contractor's bond could have been made. Labor and Industries must aiso suspend a 

contractor's registration if the contractor is a sole proprietor or an owner, principal, or officer of 

a registered contractor that has an unsatisfied final judgment against it for work within the scope 

ofRCW 18.27. 

RCW 18.27.030(3)(c) provides as follows: 

The department may suspend an active registration if the department has 

determined that an owner, principal, partner, or officer of the registrant was an 

owner, principal or officer of a previous partnership, corporation, or other entity 

that has an unsatisfied final judgment against it. 

Therefore,. Labor and Industries may, but it not required to, suspend a contractor's 

registration where an owner, principal, partner or officer of the contractor was an owner, 

principal, or officer of a previous contractor having an unsatisfied final judgment against it. 

This ability to suspend a related contractor's registration can provide leverage to get a 

claim paid. 

Chapter 19.28 RCW, governing electrical contractors and telecommunications 

contractors, does not have provisions requiring or permitting suspension of a contractor's license 

based on a judgment against a related contractor. 



@ 2011 Scott + Hookland LLP

LICENSE ENDORSEMENTS ~ Use this box to fill out Part 

Selecting an endorsement is related to the type of structure that an applicant intends to construct 

(or develop for construction). 

The law defines three types of structures: 

TYPE OF STRUCTURE 

Residential 

Structure 

Small 

Commercial 

Structure 

• A site-built home 

DESCRIPTIONS 

• A structure that contains one or more dwelling units and is four stories 

or less above grade 

• A condominium, rental residential unit or other residential dwelling unit 

that is part of a larger structure, ifthe property interest in the unit is 

separate from the property interest in the larger structure 

· 

A modular home constructed off-site 

• A manufactured dwelling 

• A floating home 

A nonresidential: 

• Structure of 10,000 square feet or less and not more than 20 feet 

high 

• Leasehold, rental unit or other unit that is part of a larger structure, 

if the unit has 12,000 square feet or less and not more than 20 feet 

• Structure of any size for which the entire contract price of all 

construction work to be performed on the structure does not total 

more than $250,000 

EXAMPLES 

• Single-family residence 

• Apartment Complex or 

Condos 4 stories or 

less 

• Individual Units in a 

high rise building 

Does not mean: 

• MotelslHotels 

• Dormitories 

·• Prisons/Jails 

Summer camps 

• Row houses 

• 7-11 stores 

• Gas stations 

• Fast food restaurants 

• Tenant space in malls 

• Under $250,000 

construction projects 

Large 

Commercial 

Structure 

Any structure that is not a residential structure or small commercial 

structure 

• Apartment Complex or 

Condos more than 4 

stories 

• Hospitals 

• Parking Garages 

• Shopping Malls 

• Manufacturing Facilities 

instructions page 10 

Oregon Exhibit 1 

Page 1 of 1

CONSTRUCTION CONTRACTORS BOARD 

BREACH OF CONTRACT COMPLAINT FORM FOR 

OWNERS AND PRIME CONTRACTORS 

INSTRUCTIONS TO COMPLETE THE FORM 

1. Read the "Resolving Disputes with Your Contractor" brochure before you fIll out the complaint 

form. There are limits on the time in which you must file a complaint. There are also other limits that 

you should know about. The brochure explains how the Construction Contractors Board (CCB) 

complaint process works. It is available on our website. 

2. Do Not Use E-Mail to Communicate with the CCB. E-mail is not a reliable method to send 

information to the CCB. The state e-mail filters may delete your e-mail before we receive it or we may 

delete the e-mail thinking it is spam. Therefore, do not use e-mail to communicate with us. 

3. At least 30 calendar days before you fIle the complaint you must give the contractor notice that you 

plan to me a complaint with the CCB. This notice must be in writing and must say that you plan to file 

a complaint with the CCB. You must mail the notice by certified mail to the contractor's address of 

record shown in CCB licensing records. You can get this address by logging onto our website and 

looking up the contractor's license number under the Licensing inquiry or by calling the CCB at 503- 

378-4621. See page 4 of these instructions for more details about this notice. When you send your 

complaint form. you must send a copy of your notice letter and a copy of your receipt from the post 

office showing that you mailed the notice by certified mail, the date you mailed the notice, and the 

address you mailed the notice to. If you do not send this proof with your complaint form or if we receive 

your complaint fonn less than 30 calendar days after you mailed this notice, we will not be able to 

process your complaint and it will be returned to you. We cannot accept your complaint until at least 30 

calendar days after you mail this notice, even if it is returned to you by the post office because it could 

not be delivered. Even if you are almost out of time to file your complaint, send your notice now and file 

your complaint 30 calendar days later. 

4. Complete all applicable boxes on the complaint form and date and sign the form at the bottom. If 

you do not give all required information or do not sign the form, we will return the form for you to 

complete. This will delay processing of your complaint. However, if you do not have the contractor's 

CCB number, you can leave that space blank and we will search our records for the number. 

OW Complaint 10120108 Instructions Page I of 4 


Page 1 of7

5. Box 5 of the complaint form is for information about your contract with the contractor. You must fill in 

this area. Be sure to fill in an dates and include the month, date, and year. We cannot use documents you 

send us to fill in the form for you or assume what information should be on the form. 

6. Proof of Contract: 

• If you had an oral contract for the work, you must send documents to prove you had a contract. Those 

docwnents could be invoices, billings, both sides of canceled checks, written statements, etc. Make 

sure your copies are clear and legible. 

• If you had a written contract for the work, you must send a copy of every page of that contract. The 

contract must be signed by both you and the contractor. If your contract was for the purchase of a 

new home, the contract might be named something like sales agreement/receipt for earnest money. 

Deeds, escrow statements, or closing statements are not contracts for construction or purchase. 

If you do not send a complete copy of your written contract or other contract documents, it will 

delay processing of your complaint. 

6. On page 2 of the complaint form be sure to give a brief, numbered list of exactly what work items you 

believe the contractor did wrong, did not finish, or did not start. If the complaint is not for bad work, 

clearly state what the contractor did that breached your contract and what you want us to help you 

resolve. If you do not send this information, it will delay processing of your complaint. 

7. Be sure to fill in both parts of Page 3 of the complaint fmTIl.In the top portion check the box for the type 

of structure that is at the job site where the work was performed. In the bottom portion give clear 

directions (or a map) to the job site, beginning with an exit from a major highway. If you do not send 

this information, it will delay processing of your complaint. 

8. LIEN COMPLAINTS: If your complaint has to do with a construction lien, you must send the contract 

as discussed above AND you must also send a copy of the lien documents. This includes a "Notice of 

Right to a Llen" that the lienor gave you, a copy of the recorded lien showing the county recorder's 

information, a copy of each invoice that is the basis for the lien (you can get these from the lienor), and 

proof that you paid the contractor. If the lienor filed a court action about the lien (usually called a suit to 

foreclose the lien), also send a copy of it. If you do not send this information, it wili delay processing 

of your complaint. 

9. PRIME CONTRACTOR COMPLAINTS: Be sure that you fill in your CCB license number in the 

space on the complaint form just below your telephone number. 

10. Be sure to date and sign the complaint form. If you do not sign the form, it will delay processing of 

your complaint. 

11. COMPLAINTS INVOLVING WORK ON LARGE COMMERCIAL STRUCTURES: 

a. If you hired the contractor before July 1, 2008, or before your contractor renews its license with a 

commercial or residential endorsement, you might have to file in court or begin arbitration. If you are 

filing an owner complaint and your contract is for $25,000 or more or if you are filing a primary 

contractor complaint and it involves work on a large commercial structure, you must file in court or 

begin arbitration if you want access to the contractor's bond. You must deliver a copy of the court 

complaint or documents showing that you began arbitration to the CCB and to the contractor's 

bonding company. You must deliver these copies by certified mail, return receipt requested. The 

OW Complaint 10/20/08 Instructions Page 2 of 4 


Page 2 of7

CCB and the contractor's bonding company must receive the copy before a judgment or arbitration 

award is issued and no later than the earlier of: 

• 90 calendar days after you file the court complaint or begin arbitration 

• 14 calendar days before the first day aftrial or arbitration 

• 30 calendar days before a judgment or arbitration award is issued. 

b. If your complaint is against a contractor endorsed as a commercial contractor, you must file in court 

or begin arbitration if you want access to the contractor's bond. You must deliver a copy of the court 






• 14 calendar days before the first day of trial or arbitration 

• 30 c!,)-lendar days before a judgment or arbitratjon award is issued. 

GUIDELINES FOR INFORMATION 

1. Use only 81'2" by 11" (normal letter size) paper. If you have items smaller than 8W' by 11", please tape 

them to 81'2" by 11" paper. For two-sided items such as checks, photocopy each side. Send legible 

copies, not originals. 

2. Do not send photos, videotapes, or audiotapes. Keep this information for your records. You should 

state in your complaint that you have this infonnation available and give a brief description of it. We 

might ask you to send us the infonnation later or you might need it for evidence if your complaint needs 

a hearing. 

3. Either type in black ink or hand write using a black ink pen. Do not use pencil because it does not copy 

well. 

4. Do not put documents in notebooks or binders. These do not fit in our files. Please do not attach post-it 

notes or business cards to any documents or information. 

S. Allow at least a W' margin on all sides of each page, and do not write on both sides of the paper. 

6. Use white or very light colored paper. Other colors of paper do not copy wen. 

7. Do not highlight portions of documents. When photocopied, highlighted areas come out black. 

OW Complaint 10/20/08 Instructions Page 3 of 4 


Page 3 of

PRE-COMPLAINT NOTICE REQUIREMENTS 

The pre-complaint notice letter you send to the contractor must have all of the following information 

in it. 

1. Date 

2. Contractor's Name 

3. Contractor's Address - This must be the address shown in the CCB licensing record. You can get this 

from our website at www.oregon.gov/CCB or by calling us at 503-378-4621. 

4. Your letter must state that you intend or plan to file a complaint with the CCB. 

5. Your name must be on the letter. 

With your complaint form you must send a copy of the letter and a copy of the post office receipt showing 

that you sent the letter by certified mail, the date you sent the letter, and the address you sent it to. The 

receipt must have the postmark stamp it. 

SAMPLES 

This is a sample of a properly completed post 

office receipt with the postmark stamped on it. 

This is a sample of what your letter must say: 

U.s. Postal Service,., : . ~ 

CERTIFIED MAILm RECEIPT . 

(Domestic Mall Only; flo fnliClrem;e coverage PT(lIllderJ) 

Date (1) 

Contractor's Name (2) 

Contractor's address (3) 

Dear Sir: 

iT1 

, .0 .s-nr Q 

Cl 

r- 

Be sure the 

respondent's name 

and address show 

here. 

Be sure the post 

office date-stamp 

is here and you 

can read the date. 

I intend to file a complaint with the 

Construction Contractors Board thirty days after 

I mail this letter. (4) 

our Name (5) 

OW Complaint 10120/08 

Instructions Page 4 of 4 


Page 4 of7

Construction Contractors Board OFFICE DATE STAMP THIS SECTION FOR OFFICE USE ONLY 

PO Box 14140 

Salem OR 97309·5052 

File Number 

License Dates 

BREACH OF CONTRACT 

COMPLAINT 90-day Period License Type 

OWNER or PRIME CONTRACTOR 

Complaint Type 

1. Person Making Complaint 2. Complaint Against 

Name 

Name 

Business Name (If Applicable) Company CCB# 

Mailing Address 


City State Zip Code City State Zip Code 

Home Phone Work Phone Phone Number(s) with area codes 

( ) ( ) 

0 Are you a licensed contractor CCB # 4. Nature of Complaint 

0 Complaint by Owner 

3. Job Site Address 0 Complaint by Owner - Construction Lien Filed 

Street 

0 Complaint by Prime Contractor against Subcontractor 

Note: DO NOT USE THIS FORM if you are a material/equipment 

Supplier, a subcontractor, or an employee. 

City State Zip Code 6. Other Filings 

5. Contract 0 Check this box if other eCB complaint(s) have been filed 

Oral (Submit checks & invoices to verify contractual relationship) affecting this property. (CCB File No.(s) ) 

o Written (Complete copy of contract must be attached) 0 CheCk this box if this issue has been submitted to a court or 

Contract Date Total Contract Amount Total Paid to Date arbitration for determination or resolution, and attach details. 

$ $ 7. Information Notice DYes ONo DUnkooWD 

If you are an owner, did your contractor give you an 

Date Work Started Date Work Ceased Information Notice to Owner About Construction Liens 

What was to be done on the contract (for example, build house, install a 

8. Consumer Notifieation DYes ONo DUnknown 

If you are an owner, did your contractor give you the 

Consumer Protection Notice foml 

roof): 9. Notice of Procednre DYes DNo DUnknown 

If you are an owner, did your contractor give you the 

For New Home Construction Only 

Notice of Procedure fonn 

Date structure was completed Date of Actual Occupancy 10. Pre-Complaint Notice Date sent 

Complaint Items: List your breach of contract complaint items on the second page of this form.. 

You must include copy of the notice and proof of certified mailing, 

1 certify that this complaint form with all attachments are true, complete, and correct 10 the best of my knowledge and 

Date: ______________ ,Signature __________________ ---' 

OW Complaint 10120/08 

RETURN ALL PAGES TO CONSTRUCTION CONTRACfORS BOARD 

Do Not Send Processing Fee with this Form 


Page 5 of 

Form Page 1 of3

BREACH OF CONTRACT COMPLAINT 

OWNER or PRIME CONTRACTOR 

Page 2 

FOR OFFICE USE ONLY 

File Number 

9. Complaint Items: 

No. Briefly list by number items of improper or ner:!li2ent work or breaches of contract (see #6 of instructions) 

I I 

OW Complaint 1 0/20/08 

RETURN ALL PAGES TO CONSTRUCTION CONTRACTORS BOARD 



Page 6 of7 

Fonn Page 2 of3


OWNER OR PRIME CONTRACTOR 

Page 3 

A. Certification of Structure Type and Size 


File Number 

Indicate the type of structure that is located at the job site where the work that is the subject of this complaint was perfonned. 

Check only one box below: 

0 1. Residential structure means a residence that is a site-built home; a structure that contains one or more dwelling units and is four 

I stories or less; a condominium, rental residential unit or other residential dwelling unit that is part of a larger structure (ifthe 

property interest in the unit is separate from the property interest in the larger structure); a modular home constructed off-site; a 

manufactured dwelling; or a floating home. An appurtenance (such as a sidewalk, driveway, deck, fence, garage, or shop buiiding) 

to one of these structures is also considered part of a residential structure. 

D 2. Small commercial structure means: (1) A structure that is not a residence with a ground area of 10,000 square feet or less and a 

height from the top surface of the lowest flooring to the highest interior overhead finish of the building of 20 feet or less; (2) an 

appurtenance (such as a sidewalk, driveway, deck, or fence) to one of these structures; (3) a structure that is not a residence that is a 

leasehold, rental. or other unit and that is part of a larger structure, if the unit has a ground area of 12,000 square feet or less and a 

height from the top surface of the lowest flooring to the highest interior overhead finish of the unit of 20 feet or less; or (4) A 

structure of any size that is not a residence for which the contract price of all construction to be performed on the structure does not 

total more than $250,000. 

0 3. Large commercial structure means any structure not fitting the above definitions. This includes work on a street, a public 

works project, an apartment or condominium building more than four stories high, a structure not used as a residence that is more 

than 10,000 square feet in ground area or more than 20 feet high, or a leasehold or rental unit in a larger structure not used as a 

residence that is more than 12,000 square feet in ground are or more than 20 feet high. 

B. Directions To The Job Site 

Provide written directions or draw a simple site location map below and return this form to the Construction Contractors Board with your 

complaint. Your directions or lTIap should begin with an exit fTom a major highway. Yau may attach additional sheets if needed. 

NOTE: Failure to prQvideclear directions may result in a delay in processing of your complaint. 

OW Complaint 10/20/08 

RETURN ALL PAGES TO CONSTRUCTION CONTRACTORS BOARD 



Page of 

Form Page 3 of3


BREACH OF CONTRACT COMPLAINT FORM: 

FOR SUBCONTRACTORS 

INSTRUCTIONS TO COMPLETE THE COMPLAiNT FORM 

1. Read the "Resolving Disputes with Your Contractor" brochure before you fill out the complaint 

form. There are limits on the time in which you must file a complaint. There are also other limits that 

you should know about. The brochure explains how the Construction Contractors Board (CCB) 

complaint process works. It is available on our website. 


information to the CCB. The state e-mail filters may delete your e-mail before we receive it or we may 


3. At least 30 calendar days before you file the complaint you must give the contractor notice that you 

plan to file a complaint with the CCB. This notice must be in writing and must say that you plan to file 



looking up the contractor's license number under the Licensing inquiry or by calling the CCB at 

503-378-4621. See page 4 of these instructions for more details about this notice. When you send your 

complaint form, you must send a copy of your notice letter and a copy of your receipt from the post 


address you mailed the notice to. If you do not send this proof with your complaint form or if we receive 

your complaint form less than 30 calendar days after you mailed this notice, we will not be able to 



not be delivered. Even if you are almost out oftime to file your complaint, send your notice now and file 


4. Complete all applicable boxes on the complaint form and date and sign the form at the bottom. If 




SUB Complaint 10/20/0S Instructions Page 1 of 4 


Page 1 of7

5. Proof of Contract (Box 4 of complaint form): 

• If you had an oral contract for the work, you must send documents to prove you had a contract. Those 

documents could be invoices. billings, etc. Make sure your copies are clear and legible. 

• If you had a written contract for the work, you must send a copy of every page of that contract. The 

contract must be signed by both you and the contractor. 

If yon have a written contract and you do not send a complete copy, it will delay processing of your 

complaint. 

6. In Box 6, Details, you must list each invoice you allege the respondent has not paid. You can include 

unpaid invoices from different job sites on the same form. Put each invoice on a separate line and 

complete all infonnation on the line for each h"lvoice (see number 7, belm~I). The invoice amount that you 

place on the form should be the actual invoice amount. Do not deduct any amounts from that total. You 

can continue this list at the bottom of page 2 and on page 3 if necessary. 

7. In Box 6 you must also enter the complete job site address (including the street number, street name, city, 

and state) where you performed the work. If you cannot supply this information, we cannot process your 

complaint. You must also check the appropriate box for the type of structure located at that job site 

address. Use the following defipitions to decide the structure type: 

a. Residential structure means a residence that is a site-built home; a structure that contains one or 

more dwelling units and is four stories or less; a condominium, rental residential unit or other 

residential dwelling unit that is part of a larger structure (if the property interest in the unit is separate 

from the property interest in the larger structure); a modular home constructed off-site; a 

manufactured dwelling; or a floating home. An appurtenance (such as a sidewalk, driveway, deck, 

fence, garage, or shop building) to one of these structures is also considered part of a residential 

structure. 

b. Small commercial structure means: (1) A structure that is not a residence with a ground area of 

10,000 square feet or less and a height from the top surface of the lowest flooring to the highest 

interior overhead finish of the building of 20 feet or less; (2) an appurtenance (such as a sidewalk, 

driveway, deck, or fence) to one of these structures; (3) a structure that is not a residence that is a 

leasehold, rental. or other unit and that is part of a larger structure, if the unit has a ground area of 


interior overhead fmish of the unit of 20 feet or less; or (4) A structure of any size that is not a 

residence for which the contract price of all construction to be perfonned on the structure does not 


c. Large commercial structure means any structure not fitting the above definitions. This includes 

work on a street, a public works project, an apartment or condominium building more than four 

stories high, a structure not used as a residence that is more than 10,000 square feet in ground area or 

more than 20 feet high, or a leasehold or rental unit in a larger structure not used as a residence that is 

more than 12,000 square feet in ground are or more than 20 feet high. 

7. On Line A at the bottom of the form, enter the total amount of all the invoices. On Line B, enter a1l 

payments you received or credits you applied to any of the invoices listed on the fonn. 

8. Along with the completed complaint form also send a legible copy of each invoice that you list on the 

form. If you do not send copies of the invoices, it will delay processing of your complaint. 

SUB Complaint 10120/08 Instructions Page 2 of 4 


Page 2 of


a. If you perfonned the work before July 1, 2008, or before your contractor renews its license with a 

commercial or residential endorsement, you must file in court or begin arbitration if you want access 

to the contractor's bond. You must deliver a copy of the court complaint or documents showing that 

you began arbitration to the CCB and to the contractor's bonding company. You must deliver these 

copies by certified mail, return receipt requested. The CCB and the contractor's bonding company 

must receive the copy before a judgment or arbitration award is issued and no later than the earlier of: 




b. If your complaint is against a contractor endorsed as a commercial contractor, you must file in court 




CCB and the contractor's bonding company mustreceive the copy before a judgment or arbitration 






1. Use only 8W' by 11" (normal letter size) paper. If you have items smaller than 8W' by 11", please tape 

them to 8W' by 11" paper. For two-sided items such as checks, photocopy each side. Send legible 

copies, not originals. 

2. Do not send photos, videotapes, or aUdiotapes. Keep this infonnation for your records. You should 

state in your complaint that you have this information available and give a brief description of it. We 


a hearing. 


well. 


notes or business cards to any documents or infonnation. 

5. Allow at least a W' margin on all sides of each page, and do not write on both sides of the paper. 

6. Use white or very light colored paper. Other colors of paper do not copy well. 


SUB Complaint 10120/08 Instructions Page 3 of 4 


Page 30f7

PRE-COMPLAINT NOTICE REQUIRE:MENTS 

The pre-complaint notice letter you send to the contractor must have all of the following information 

in it. 

1. Date 

2, Contractor's Name 

3, Contractor's Address: This must be the address shown in the CCB licensing record. You can get this 


4. Your letter must state that you intend or plan to file a complaint with the CCB. 

S, Your name must be on the letter, 

With your complaint form you must send a copy of notice letter and a copy of the post office receipt showing 

that you sent the letter by certified mail, the date you sent the letter, and the address you sent it to, The 

receipt must have the postmark stamp it. 

SAMPLES 


office receipt with the postmark stamped on it. 

rr 

CJ 

.:r- 

U.S. Postal Servicen,' : ' -:, 

CERTIFIED MAIL .. RECEIPT " 

(Domestic MIlN Ollly; NQ In:;;uram:/i> COllCY;'1ge Preilllded) 

m ~1;mlmiiWtlDl~~~~~ 

r-'I 

.0 

m ~--~~~~~~~~~~~~~~ 

rI"\ 

8 CertJbclFea 

g Rewm RticIopl F •• 1-='--'="':::""--1 

(~I RoIjuIrod) ~;....:.-.:.....::.::.........-it 

Cl R .. llW:led DeI""IY Foe 

..0 (En ,;pc.de 

Be sure the 








Date (1) 

Contractor's Name (2) 


Dear Sir: 



I mail this letter, (4) 

Your Name (5) 

SUB Complaint 10120/08 

Form Page 4 of 4 


Page 4 of


PO Box 14140 

Salem OR 97309·5052 

OFFICE DATE STAMP 


COMPLAINT 

SUBCONTRACTOR 

File Number 

License Dates 

90-day Period 

THIS SECTION FOR OFFICE USE ONLY 

License Type 


1. Person Making Complaint 

Name 

2. Complaint Against 

Name 

Business Name (If Applicable) 

Business Name (If Applicable) 

CCB# 


MaiJing Address 

City State Zip 

I (hon) 

o Are you a licensed contractor CCB# 

3. Pre-complaint notice Date sent 

4. Contract 

Oral (Submit checks & invoices to verify contractual relationship) 

o Written (Complete copy of contract must be attached) 

5. Other Filings 

City State Zip Phone 

( ) 

Please include copy of notice and proof of certified mailing. 

Contract Date Total Contract Amount Total Paid to Date 

$ $ 

o Check this box if other CCB complaint(s) have been filed affecting o Check this box if this issue has been submitted to court or 

this IJIUI1'" t~· (Complaint No.(s) ) arbitration for determination or resolution, and attach details 

6. Details 

Please complete the following recapitulation. Invoices must be listed in chronological order (oldest first, most recent last). The total amount 

claimed must reconcile with the invoices listed. Attach a cOJlY of each invoice listed. Be sure your c~es are clear and legible. 

Date Started Date Stopped Invoice # Invoice Amount Complete Job Site Address Structure Type 

(Contmue uus bst on pages 2 and 3 of thIS form If necessary) 

Residential 

o Small Commercial 

lJ Large Commercial 

D Residential 

Small Commercial 

LarJ~e Commercial 

Residential 


o Large Commercial 

o Residential 

D Small Commercial 

o Laree Commercial 

A. Total amount ofInvoices (including those listed on pages 2 and 3, if any) ................................................................... $ ______ _ 

B. Total amount received to date ...................................................................................................................................... $ ______ _ 

I certify that all in/onnation on this complaint fonn and attachments is true, complete, and correct to the best of my knowledge and 

Date: ___________ _ 

Signature ______________ ---' 

SUB Complaint 10/20/0& 


Form Page 1 of3 


Page 50f7


SUBCONTRACTOR 

(page 2) 


File Number 

Structure Types 

For each invoice listed under item 6 of this form, you must check the appropriate box for the type of structure located at the job site where 

the work covered by that invoice was perfonned. The following are the structtne type definitions: 

Residential structure means a residence that is a site-built home; a structure that contains one or more dwelling units and is four stories 

or less; a condominium, rental residential unit or other residential dwelling unit that is part of a larger structure (if the property interest in 

the unit is separate from the property interest in the larger stmcture); a modular horne constructed off-site; a manufactured dwelling; or a 

floating horne. An appurtenance (such as a sidewalk, driveway, deck, fence, garage, or shop building) to one of these structures is also 

considered part of a residential structure. 

I 

Small commercial structure means: (1) A structure that is not a residence with a ground area of 10,000 square feet or less and a height 

from the top surface ofthe lowest flooring to the highest interior overhead finish of the building of20 feet or less; (2) an appurtenance 

(such as a sidewalk, driveway, deck, or fence) to one of these structures; (3) a structure that is not a residence that is a leasehold, rental. or 

other unit and that is part of a larger structure. if the unit ha.c; a ground area of 12,000 square feet or less and a height from the top surface 

of the lowest flooring to the highest interior overhead finish of the unit of20 feet or less; or (4) A structure of any size that is not a 

residence for which the contract price of all construction to be performed on the structure does not total more than $250,000. 

Large commercial structure means any structure not fitting the above definitions. This includes work on a street, a public works project, 

an apartment or condominium building more than four stories high, a structure not used as a residence that is more than 10,000 square feet 

in ground area or more than 20 feet high, or a leasehold or rental unit in a.larger structure not used as a residence that is more than 12,000 

square feet in ground are or more than 20 feet high. 

6. Details (continued) 

Date Started Date Stopped 

Invoice # Invoice Amount Complete Job Site Address Structure Type 

D Residential 


. Ei Large Commercial 

D Residential 


Larfe Commercial 

Residential 


Ei Lar£e Commercial 

D Residential 

D SmaU Commercial 


o Residential 


Ei Large Commercial 

Residential 



D Residential 


1] Large Commercial 

Residential 


D Large Commercial 

SUB Complaint 10/20108 




Page 6 of 7


SUBCONTRACTOR 

(page 3) 


File Number 

Date Started Date Stop~ed Invoiee# Invoice Amount Complete Job Site Address Structure Ty~e 

Residential 


Large Commercial 

Residential 


Lar2e Commercial 

Residential 

Small Commerciai 


Residential 



Residential 



Residential 

SmaU Commercial 


Residential 



Residential 


DLarge Commercial 

Residential 



Residential 



Residential 


_ 0 LaNe Commercial 

Residential 



Residential 


I 


Residential 



Residential 



Residential 

Small Commercia! 


SUB Complaint 10/20/08 




Page 7 of7


BREACHOFCONTRACTCOMPLMNTFORM 

FOR MA TERIALfEQUIPMENT 

INSTRUCTIONS TO COMPLETE THE FORM 

1. Read the "Resolving Disputes with Your Contractor" brochure before you fIll out the form. There 

are linllts on the time in which you must file a complaint. There are also other limits that you should 

know about. The brochure explains how the Construction Contractors Board (CCB) complaint process 

workS. It is available on our website. 


infonnation to the CCB. The state e-mail filters may delete your e-mail before we receive it or we may 


3. At least 30 calendar days before you file the complaint you must give the contractor notice that you 

plan to fIle a complaint with the CCB. This notice must be in writing and must say that you plan to file 



looking up the contractor's license number under the Licensing inquiry or by calling the CCB at 503- 

378-4621. See page 4 of these instructions for more details about this notice. When you send your 

complaint form, you must send a copy of your notice letter and a copy of your receipt from the post 


address you mailed the notice to. If you do not send this proof with your complaint fonn or if we receive 

your complaint form less than 30 calendar days after you mailed this notice, we will not be able to 



not be delivered. Even if you are almost out oftime to file your complaint, send your notice now and file 


4. You will need to show that you had an agreement to furnish material or rent equipment to the contractor 

for construction work at specific job sites in Oregon. 

5, Complete all applicable boxes on the complaint form and date and sign the form at the bottom. If 


MS Complaint 10/20/08 Instructions Page 1 of 4 


Page 1 of 7



6. In Box 5, Details, you must list each invoice you allege the respondent has not paid. Put each invoice on 

a separate line and complete all information on the line for each invoice, (see number 6, below). The 

invoice amount that you place on the form should be the actual invoice amount. Do not deduct any 

amounts from that total. You can continue this list at the bottom of page 2 and on page 3 if necessary. 

7. In Box 5 you must also enter the complete job site address (including the street number, street name, city, 

and state) where the materials or equipment listed in each invoice were used and installed. If you cannot 

supply this information, we cannot process your complaint. You must also check the appropriate box for 

the type of structure located at that job site address. Use the following definitions to decide the structure 

type: 

a. Residential structure means a residence that is a site-built home; a structure that contains one or 

more dwelling units and is four stories or less; a condominium, rental residential unit or other 

residential dwelling unit that is part of a larger structure (ifthe property interest in the unit is separate 

from the property interest in the larger structure); a modular home constructed off-site; a 

manufactured dwelling; or a floating home. An appurtenance (such as a sidewalk, driveway, deck., 

fence, garage, or shop building) to one of these structures is also considered part of a residential 

structure. 

b. Small commercial structure means: (1) A structure that is not a residence with a ground area of 


interior overhead finish of the building of 20 feet or less; (2) an appurtenance (such as a sidewalk, 

driveway, deck, or fence) to one of these structures; (3) a structure that is not a residence that is a 

leasehold, rental. or other unit and that is part of a larger structure, if the unit has a ground area of 


interior overhead finish of the unit of 20 feet or less; or (4) A structure of any size that is not a 

residence for which the contract price of all construction to be performed on the structure does not 


c. Large commercial structure means any structure not fitting the above definitions. This includes 

work on a street, a public works project, an apartment or condominium building more than four 

stories high, a structure not used as a residence that is more than 10,000 square feet in ground area or 

more than 20 feet high, or a leasehold or rental unit in a larger structure not used as a residence that is 

more than 12,000 square feet in ground are or more than 20 feet high. 

8. On Line A at the bottom of the form., write the total of the invoices listed on your complaint form. On 

Line B list amounts that are included in Line A for tools, interest, service charges, etc. Do not put 

amounts on Line B that are additions to the invoice amounts listed on the complaint form. On Line C 

enter all payments you received or credits you applied to any of the invoices listed on the form. 

9. Be sure to date and sign the form. If you do not sign the complaint form, it will delay processing of 


10. Along with the completed complaint form also send a legible copy of each invoice that you list on the 

form. If you do not send copies of the invoices, it will delay processing of your complaint. 


a. If you performed the work before July 1, 2008, or before your contractor renews its license with a 

commercial or residential endorsement, you must file in court or begin arbitration if you want access 

to the contractor's bond. You must deliver a copy of the court complaint or documents showing that 

you began arbitration to the CCB and to the contractor's bonding company. You must deliver these 

MS Complaint 10/20/08 Instructions Page 2 of 4 


Page 2of7

copies by certified mail, return receipt requested. The CCB and the contractor's bonding company 

must receive the copy before a judgment or arbitration award is issued and no later than the earlier of: 


• 14 calendar days before the flrst day of trial or arbitration 


b. If your complaint is against a contractor endorsed as a commercial contractor, you must me in court 










1. Use only 8)-2" by 11" (normal letter size) paper. If you have items smaller than 8W' by 11", please tape 

them to 8W' by 11" paper. For two-sided items such as checks, photocopy each side. Send legible 

copies, not originais. 

2. Do not send photos, videotapes, or aUdiotapes. Keep this information for your records. You should 

state in your complaint that you have this information available and give a brief description of it. We 


a hearing. 


well. 


notes or business cards to any documents or information. 

5. Allow at least a 'lS." margin on all sides of each page, and do not write on both sides of the paper. 

6. Use white or very light colored paper. Other colors of paper do not copy well. 


MS Complaint 10120/08 Instructions Page 3 of 4 


Page 3 of

PRE-COMPLAINT NOTICE REQUIREMENTS 

The pre-complaint notice letter you send to the contractor must have all of the foUowing information 

in it. 

1. Date 

2. Contractor's Name 

3. Contractor's Address: This must be the address shown in the CCB licensing record. You can get this 


4. Your letter must state that you intend or plan to me a complaint with the CCB. 

5 . Your name must be on the letter. 

With your complaint form you must send a copy of the notice letter and a copy of the post office receipt 

showing that you sent the letter by certified mail, the date you sent the letter, and the address you sent it to. 

The receipt must have the postmark stamp it 

SAMPLES 


office receipt with the postmark stamped on it 


tr' 

C 

~ 

rn 

U.S. Postal Service", . ' '. 

CERTIFIED MAIL .. RECEIPT ' 

(OamestJc Moll Only; No Insurance Cc"crage Provided) 

Date (1) 

~ 

JO 

rn ~--=-~~~~~~~--~-=----~ 

rn 

Contractor'S Name (2) 


Be sure the 



here. 





Dear Sir: 



I mail this letter. (4) 

our Name (5) 

MS Complaint 10/20/08 

Instructions Page 4 of 4 


Page4of7


PO Box 14140 

Salem OR 97309-5052 

OFFICE DATE STAMP 


COMPLAINT 

MA TERlALlEQllPMENT 

File Number: 

License Dates 

9CH1ay Period 

THIS SECTION FOR OFFICE USE ONLY 

License Type 


1. Person or Company Making Complaint 

Company 

Name 

Name of Representative 

PositionITitle 

2. Complaint Against 

Name 

Company 



( ) 


I CCB# 


( ) 

3. Pre-complaint notice Date sent 

Please include copy of notice and proof of certified mailing. 

4. Other Filings 

o Check this box if other CCB complaint(s) have been filed affecting o Check this box if this issue has been submitted to a court or 

this property (CCB File No.(s) 

)' arbitration for determination or resolution, and attach details 

5. Details 

Please complete the following recapitulation. Invoices must be listed in chronological order (oldest first, most recent last). The total amount 

claimed must reconcile with the invoices listed. Attached a copy of each invoice listed. Be sure your copies are clear and legIble. 

Date of Invoice Invoice # Invoice Amount Complete Job Site Address Structure Type 

D Residential 



o Residential 

(Contmue thIS hst on pages 2 and 3 of this form If necessary) 



o Residential 



o Residential 

B Small Commercial 

Lafl!e Commercial 

o Residential 



Residential 



o Residential 



A. Total of invoices listed above (including those listed on pages 2 & 3, if any) ............................................. $ ______ _ 

B. Enter total amount of tools, interest, and service charges included in above invoices ................................... $ ______ _ 

C. Enter total payments received or other credits to apply against above invoices ........................................... $ ______ _ 

I certify that all information on this complaint form and attachments is true, complete, and correct to the best of my 

Date: ______________ _ 

Signature _________________ -' 

MS Complaint 10120/08 


Oregon E:.dHBR J41ge 1 of3 

Page 50f7


MA TERIALIEQUIPMENT 

Page 2 

Structure Types 


File Number 

For each invoice listed under item 6 of this foml, you must check the appropriate box for the type of structure located at the job site where 

the work covered by that invoice was performed. The following are the stnlCture type definitions: 

Residential structure means a residence that is a site-built home; a structure that contains one or more dwelling units and is four stories or 

less; a condominium, rental residential unit or other residential dwelling unit that is part of a larger structure (if the property interest in the 

unit is separate from the property interest in the larger structure); a modular home constructed off-site; a manufactured dwelling; or a 

floating home. An appurtenance (such as a sidewalk, driveway, deck, fence, garage, or shop building) to one of these structures is also 

considered part of a residential structure. 

Smaii commerciai structure means: (1) A structure that is not a residence with a ground arCl! of 10,000 square feet or less and a height 

from the top surface of the lowest flooring to the highest interior overhead finish of the building of 20 feet or less; (2) an appurtenance 

(such as a sidewalk, driveway, deck, or fence) to one of these structures; (3) a structure that is not a residence that is a leasehold, rental. or 

other unit and that is part of a larger strLlcture, if the unit has a ground area of J 2,000 square feet or less and a height from the top surface of 

the lowest flooring to the highest interior overhead finish of the unit of20 feet or less; or (4) A strllcture of any size that is not a residence 

for which the contract price of all construction to be perfonned on the structure does not total more than $250,000. 

Large commercial structure means any strucfure not fitting the above definitions. This includes work on a street, a public works project, 

an apartment or condominium building more than four stories high, a structure not used as a residence that is more than 10,000 square feet 

in ground area or more than 20 feet high, or a leasehold or rental unit in a larger structure not used as a residence tbat is more than 12,000 

square feet in ground are or more than 20 feet high. 

, 

..>. "" Ii --.tv 1.1 .. 

Date of Invoice Invoice # Invoice Amount Complete Job Site Address 

Structure Type 

Residential 


Lar~e Commercial 

Residential 


LaI"f!e Commercial 

Residential 



Residential 


o Lar~ Commercial 

g Residential 



Residential 


Ei LaT!~e Commercial 

Residential 



Residential 


Lal1!:e Commercial 

Residential 

Small Commercia! 


MS Complaint 10120/08 


Oregon ExlffiHlt ~ge 2 of 3 

Page 6 of7


MA TERIALJEQIDPMENT 

Page 3 

Date of Invoice Invoice # 1 nvoice Amount Complete Job Site Address 


File Number 

Structure Type 

Residential 


La~e Commercial 

Residential 



Residential 


n T .3r1!e Commercial 

Residential 



g Residential 



Residential 



Residential 



Residentiai 


Larl\"e Commercial 

Residential 


Larj~e Commercial 

Residential 



Residential 


Lar!~e Commercial 

Residential 



Residential 



Residential 



Residential 


Lar-ge Commercial 

Residential 



Residential 



MS Complaint 10/20/08 


Oregon EJflfffi ~ge 3 00 

Page 7 of7

RESOLVING DISPUTES WITH 

YOUR CONTRACTOR 

Information for Complainants 

July 1,2008 

Oregon Construction Contractors Board 

700 Summer St NE, Suite 300 

PO Box 14140 

Salem OR 97309-5052 

Phone: 503-378-4621 

Fax: 503-373-2007 

www.oregon.gov/CCB 


Page 1 of 31

This booklet is not meant to be a complete analysis of the Construction Contractors Board's laws and 

rules. This information is general in nature and is not legal advioe. If you have questions about how the 

law applies to your particular situation, you should talk to an attorney. 

You can find the Construction Contractors Board's laws in DRS Chapter 701 and the Construction 

Contractors Board's rules in OAR Chapter 812. You can get copies of these laws and rules at 

www.oregon.govICCB or by calling 503-378-4621. 


Page 2 of 31

Table of Contents 

GENERAL INFORMATION 

1~!tC»!)IJC:1rIc)JI m~m.~~c======e~n~mm ••••••••••••• w •••••••••••••••••••••••••••••••••••••••••••••• 1 

DEFINITIONS ................................................................................................................................................ 2 

WORDS OF CAUTION .................................................................................................................................... 2 

BEFORE "LING A COMPLAINT ........................................................... 4 

RESOLVING THE PROBLEM INFORMALLY ...................................................................................................... 4 

REQUIRED PRE-COMPLAINT NOTiCE ............................................................................................................. 4 

REQUIREMENTS FOR FILING A COMPLAINT ............................... n ........ 5 

THE RESPONDENT MUST BE LICENSED ......................................................................................................... 5 

'TYPES OF COMPLAINTS THE CCB CAN ACCEPT .............................................................................................. 5 

HOW TO RLE A COMPLAINT .......................................................................................................................... 6 

TIME LIMITS FOR RUNG COMPLAINTS ......................................................................................................... 9 

CERTAIN CONTRACTUAL RELATIONSHIPS ARE REQUIRED ........................................................................... 10 

WHATTO DO IFYOU HAVE A COMPLAINTTHAT DOES NOT FALL WiTHIN THESE REQUIREMENTS .................... 10 

RESIDENTIAL COMPLAINT PROCEDURE ...... u .................................... 11 

COMPLAINTS RlED IN COURT OR ARBITRATED OUTSIDETHE CCB .............................................................. 11 

COMPLAINTS NOT FILED IN COURT ............................................................................................................. 11 

COMMERCIlU. COMPLAINT PROCEDURE •••• u .................................... 12 

PROCESSING FEE •••••••••••••••,............................................................. 12 

1I~ILItIIfCJS ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 12 

AGENCY ORDERS1i~;;;=1iilS;!;II=C!=I!I!=~==II!I'I!f •••• 1I!-......................................................... 13 

PAYMENT FROM THE RESPONDENT'S BOND ...................................... 13 

HOW LONG ALL THIS MIGHT TAKE ....... u .......................................... 15 

OWNER COMPLAINTS .................................. ~ .......................................... 16 

CONSTRUCTION LIEN COMPLIlINTS ................................................. 18 

PRIMARY CONTP~CTOP.. COMPLAINTS n~~~~"""~u .................................. 21 

SUBCONTRACTOR COMPLAINTS ....................................................... 23 

~1WI~~"1r~~ c:()rv.I .. I.IlI!l~!i ••••••••••••••••••••••••••••••••••••••••••• _•••••••••••••••••••• 2S 

1WI1l~~IlIIl~c:C)~ .. ~IlIJl1r!i ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 26 

Resolving Disputes with your Contractor 

Table of Contents 


Page 3 of 31

NOTES 


Page 4 of 31

GENERAL INFORMATION 

INTRODUCTION 

If you are a customer of a contractor or if you are a material supplier, prime contractor, 

subcontractor, or contractor's employee and you are involved in a dispute about a construction 

project, the Construction Contractors Board (CCB) may be able to help you resolve the dispute. 

These instructions will explain: 

• Steps you may take before you file a CCB breach of contract complaint. 

• How to file a breach of contract complaint. 

• What to do after the complaint is filed. 

• What the CCB can do if the parties do not want to enter into the complaint process 

(sometimes referred to as the dispute resolution process) or a complaint can't be filed. 

lfyou file a complaint, we will try to help both parties settle the dispute. If the dispute cannot be 

settled, we may investigate it. If we find that the complaint is valid, we may issue an order that 

the contractor pay you money. If we order a contractor to pay and the contractor does not pay, 

we may ask the contractor's bonding company to pay. The only way to get access to the 

contractor's bond is through the CCB complaint process. 

You should be aware that: 

• Under the U.S. and Oregon constitutions and Oregon statutes, we must protect due 

process rights of each party. We cannot take sides in the dispute. 

• We must apply the same law that a court applies to a breach of contract or negligence 

claim. In other words, the legal standards that detennine if a contractor breached a 

contract or did negligent work are the same as those that apply in cooo. This includes the 

need for you to supply evidence that proves the complaint. 

• Some cases involve difficult legal issues. You may need legal advice from an attorney. 

At times the process might become frustrating because of the time it takes to process the 

complaint and the effort needed for you to prove your complaint. The CCB tries to make the 

complaint process as easy as possible considering the demands of due process requirements and 

Oregon laws. Usually our process is easier and less expensive than a court action, but it is more 

comp licated than making an insurance claim. 

We have a website that gives more infonnation about complaints. If you have access to a 

computer, we suggest you look at that website. It is located on the internet at 

www.oregon.gov/CCB. Our laws and rules are posted on this website. If you do not have a 

computer, you can get a copy of our laws and rules by calling 503-378-4621. 

Sometimes these instructions refer to Frequently Asked Questions (F AQ) on our website. These 

provide answers to questions about our dispute resolution program. If you do not have a 

Resolving Disputes with Your Contractor Page 1 


Page 5 of 31

computer, you can get a printed copy of the FAQ by calling 503-378-4621 and asking for a copy 

of the Dispute Resolution Services FAQ. 

DEFINITIONS 

A "complainant" is an owner, primary contractor, material supplier, subcontractor, or employee 

who files a breach of contract complaint. 

A "respondent" is the contractor that the complaint is filed against. 

"Day" means a calendar day. 

"Party" means a complainant or a respondent. 

WOBDS OF CAUTION 

Time Limits for Filing Complaints 

There are strict time limits for filing complaints. If your complaint is for any of the following, 

you may need to file it immediately: 

• Remodeling work that was done almost a year ago. 

e A new structure that was occupied ahnost a year ago. 

• A new structure that was built almost two years ago. 

• An unpaid fee for work that was done almost a year ago. 

• Materials that were delivered almost a year ago. 

For information about specific time limits for filing your type of complaint, see the section at the 

end of this booklet for your particular type of complaint. See page 5 to determine the type of 

complaint you should file. 

Mail 

If you change your address or hire an attorney after you file the complaint, you must notify the 

CCB in writing. Sometimes during the complaint process we may send a notice, a request for 

information, or a request for you to respond. Most of these notices or requests will have a 

deadline for your response. We will send most of them by regular mail, but we will send some of 

the most important notices by certified mail. 

If you are away from your address for more than a week or do not pick up your mail, you may 

miss a notice or request. This could result in your complaint being closed or your missing a 

chance to request a hearing. If we close your complaint, we cannot help you resolve the dispute 

and you will lose possible access to the contractor's bond. For these reasons you should ask 

someone you trust to pick up your mail and notify you of mail from the CCB. Be sure to 

promptly pick up and review all mail from the CCB, including certified mail. 

Resolving Disputes with Y aUf Contractor Page 2 


Page 6 of 31

Original Documents 

Do not send original documents unless we ask you for them. You should send us legible copies 

of documents that support your side of the dispute. We cannot make clear copies of photographs 

or documents that are larger than a legal size sheet of paper (such as house plans). If you send 

any photographs or large documents, you must send us four copies so we can send one to the 

other party and hold the rest in case of hearing. Be sure to keep a copy of any letters or 

documents you send to us. 

Everything We Receive Must be in Writing 

All decisions that the CCB makes must be based on a written record. We cannot make a decision 

that is not supported by a written record. Therefore, you must put all information about your 

complaint in writing. 

Do Not Use E-Mail to Communicate with the CCB 

E-mail is not a reliable method to send information to the CCB. The state e-mail filters may 

delete your e-mail before we receive it or we may delete the e-mail thinking it is spam. We 

recommend that you not use e-mail to communicate with us. 

Copies of Everything We Receive are Sent to the Other Party 

The CCB must send all information received from one party to the other party to the complaint. 

This guarantees that each party sees aU the information that we use to make our decision. This 

also allows each party a chance to respond to infonnation we receive from the other party. 

Seeking Advice from an Attorney 

Many people can settle their dispute with a contractor without the help of an attorney. However, 

it might be a good idea for you to talk to an attorney. Even a short discussion with an attorney 

may be enough to inform you of your rights, the position you should take in settlement 

negotiations, or the best way to present your case. If your complaint is complicated, you should 

get legal advice. 

We Cannot Give Legal Advice 

CCB staff cannot take your side in the dispute. We also cannot give legal advice. Only an 

attorney you hire can give you legal advice. We can explain how the complaint process works, 

how we interpret the laws relating to the complaint process, and requirements for filing the 

complaint or continuing its processing. However, we cannot answer questions of a legal nature, 

including what other legal actions you may be able to or should take, how to present your 

evidence at hearing, etc. 



Page 7 of 31

BEFORE FILING A COMPLAINT 

RESOLVING THE PROBLEM INFORMA.LLY 

You should try to resolve the problem with your contractor before you file the complaint. Some 

contractors are willing to resolve the problem before a complaint is filed but become defensive 

or aggressive after a complaint is filed. First, make sure you let your contractor know about your 

complaint Talk to the contractor about the problem and try to reach an agreement to correct the 

problem. If this doesn't help, write a list of your complaints and deliver that list to your 

contractor. Suggest that the contractor respond to you about those complaints within a reasonable 

time. However, be aware of the time limits for filing a complaint discussed below. 

REQUI.RED PRE·(;OMPLAINT NOTI(;E 

Before you file a complaint you must send a written notice to the contractor that the complaint 

wil1 be filed against. This notice must: 

• Include your name. 

• State that you intend to file a CCB complaint against the contractor. 

• Be sent by certified mail. You must keep the certified mail receipt the post office gives 

you showing the date you mailed the notice and the address it was mailed to. You will 

need this when you file your complaint. 

• Be sent to the address the contractor listed in CCB records on the date you mail the 

notice. To get this address, go to the "Find a Licensee" link at www.ccb.state.or.us or call 

503-378-4621. Be very careful to correctly identify the contractor so that you send the 

notice to the right address. You must send the notice by certified mail to the address 

listed in the CCB records even if you know this address is not correct. You may also send 

a copy of the notice to any other address you have for the contractor if you wish. 

• Be mailed 30 or more calendar days before you file your CCB complaint. 

If you have access to the internet, you can create a pre-complaint notice letter using our website 

at wW¥l.oregon.gov/CCB. 

When you file the complaint, you must send copies of the notice and the certified mail receipt 

with your complaint information. 

There are time limits for filing a complaint. These are described below. If you mail the precomplaint 

notice less than 45 calendar days before the end of the time limit for filing the 

complaint, that time limit is extended to 60 calendar days after you mail the notice. The time 

limit is not extended if you mail your notice more than 45 calendar days before the end of the 

time limit. You should avoid filing your complaL."1t or sending the pre-complaint notice too close 

to the end of the time limit. If you mail the pre-complaint notice after the end of the time limit 

for filing your complaint, the CCB must dismiss your complaint. 



Page 8 of 31

REQUIREMENTS FOR FILING A COMPLAINT 

The dispute resolution (complaint) system is backed up by a bond that each contractor must 

purchase. Therefore, there are limits on complaints that are stricter than limits on filing a lawsuit. 

THE RESPONDENT MUST BE LICENSED 

The respondent must have been licensed with the CCB during at least a portion of the work 

period involved in the complaint or at the time the respondent incurred the debt in a 

subcontractor, material supplier, or employee complaint. If the respondent was not licensed at the 

time, the CCB cannot process the complaint. The work period began on the date the respondent 

offered a written proposal, entered into a contract, accepted a payment, or began construction 

(whichever comes first) and ended when the respondent substantially completed the work If the 

respondent did not substantially complete the work, the work period ended on the date the 

respondent last worked on the structure involved in the complaint. 

TYPES OF c;OMPLAINTS THE CCB CAN ACCEPT 

Oregon law limits the CCB to processing only the following types of complaints: 

Owner Complaints 

This is a complaint by the owner of the structure or property where the respondent performed the 

work. The owner must allege that the respondent perfonned negligent or improper construction 

work or breached the terms of the construction contract. For specific infonnation, see page 16. 

Construction Lien Complaint 

This is also a complaint by the owner ofthe structure or property where the respondent 

performed the work. The owner must allege that the respondent was paid in full for the 

construction work; however, the respondent did not pay a subcontractor, material supplier, or 

employee and that subcontractor, material supplier, or employee filed a lien. For specific 

information, see page 18. 

Primary Contractor Complaint 

This is a complaint by a licensed contractor against a respondent subcontractor alleging negligent 

or improper construction work or breach of a construction contract by the respondent. For 

specific information, see page 21. 

Subcontractor Complaint 

This is a complaint by a subcontractor alleging that the subcontractor perfonned construction 

work for the respondent but the respondent did not pay for all of the work For specific 




Page 90f31

Employee Complaint 

This is a complaint by a person who performed construction work for the respondent as an 

employee and alleges that the respondent did not pay for all of the work. For specific 


Material Supplier Complaint 

This is a complaint by a material supplier or equipment rental company that sold materials to the 

respondent to be used and installed in a structure or who rented equipment to the respondent to 

be used on a structure. The complainant must allege that the respondent did not pay for all of the 

materials or equipment. For specific information, see page 26. 

BOW TO FILE A ~OMPLAINT 

A. Type of structure. First, identifY the structure involved in the dispute. The following are 

the three structure types: 

• Residential structure: A residence that is a site~built home; a structure that contains 

one or more dwelling units and is four stories or less; a condominium, rental residential 

unit or other residential dwelling unit that is part of a larger structure (if the property 

interest in the unit is separate from the property interest in the larger structure); a modular 

home constructed off~site; a manufactured dwelling; or a floating home. An appurtenance 

(such as a sidewalk, driveway, deck, fence, garage, or shop building) to one of these 

structures is also considered part of a residential structure. 

• Small commercial structure means: (1) A structure that is not a residence with a 

ground area of 10,000 square feet or less and a height from the top surface of the lowest 

flooring to the highest interior overhead finish of the building of20 feet or less; (2) an 

appurtenance (such asa sidewalk, driveway, deck, or fence) to one of these structures; (3) 

a structure that is not a residence that is a leasehold, rental. or other unit and that is part of 

a larger structure, if the unit has a ground area of 12,000 square feet or less and a height 

from the top surface of the lowest flooring to the highest interior overhead finish of the 

unit of 20 feet or less; or (4) A structure of any size that is not a residence for which the 

contract price of all construction to be performed on the structure does not total more 

than $250,000. 

• Large commercial structure: Any structure not fitting the above definitions. This 

includes work on a street, a public works project, an apartment or condominium building 

more than four stories high, a structure not used as a residence that is more than 10,000 

square feet in ground area or more than 20 feet high, or a leasehold or rental unit in a 

larger structure not used as a residence that is more than 12,000 square feet in ground are 

or more than 20 feet high. 

8. Contractors License. The CCB will determine how to process your complaint depending 

on (1) when you first hired your contractor and (2) the license held by your contractor. The 

following tables are for your infonnation only. If you provide the CCB with the date on which 



Page 10 of 31

you first hired your contractor, the CCB will search its records and determine the license 

category or endorsement of your contractor. 

(1) lfyou frrst hired your contractor before July 1,2008, your contractor is licensed in one 

of the following categories.lfyou first hired your contractor on or after July 1,2008, and 

your contractor has not yet renewed its license since July 1, 2008, your contractor is licensed 

in one of the following categories. 

General Contractor - All Structures 

General Contractor - Residential Only 

Specialty Contractor - All Structures 

Specialty Contractor - Residential Only 

Inspector 

Limited Contractor 

Licensed Developer 

(2j If you frrst hired your contractor on or after July 1,2008 and your contractor was first 

licensed on or after July 1, 2008, your contractor is licensed in one of the following 

endorsements. If you first hired your contractor on or after July 1,2008 and your contractor 

renewed its license before you hired your contractor, your contractor is licensed in one of the 

following endorsements. 

(a) A residential contractor is endorsed as one of the following: 

Residential General Contractor 

Residential Specialty Contractor 

Residential Limited Contractor 

Residential Developer 

(b) A commercial contractor is endorsed as one of the following: 

Commercial Genera I Contractor - Level 1 

Commercial General Contractor - Level 2 

Commercial Specialty Contractor - Level 1 

Commercial Specialty Contractor - Level 2 

Licensed Developer 

(c) A contractor can be endorsed as both a residential contractor (subsection (a), above) 

and a commercial contractor (subsection (b), above) 

If you want to learn the status of your contractor's license, you can get that information on the 

CCB website at www.oregon.gov/ccb or you can contact the CCB at 503-378-4621. 



Page 11 of 31

C. Contractor Licensed in a Category listed in Section (8)(1). If you file a complaint 

against a contractor based on work perfonned before July 1, 2008, or against a contractor 

licensed before July 1,2008, who had not yet renewed in an endorsement, the CCB will process 

the complaint based_ on the structure type. 

• Residential Structure: If the dispute involves a residential structure, you must use the 

residential complaint procedure. See further instructions on page 8. 

• Small Commercial Structure: If the dispute involves a small commercial structure, 

you may use either the residential complaint procedure or the commercial complaint 

procedure. It is your choice which procedure you want to use. See further instructions on 

page 8. 

• Large Commercial Structure: If the dispute involves a large commercial structure, 

you must use the commercial complaint procedure. 

D. Contractor Endorsed as a Residential Contractor listed in Section (8)(2)(a). If 

you file a complaint against a contractor endorsed as a residential contractor at the time you hired 

the contractor, you must use the residential complaint procedure. See further instructions on 

page 8. 

E. Contractor Endorsed as a Commercial Contractor listed in Section (B)(2)(b). If 

you file a complaint against a contractor endorsed as a commercial contractor at the time you 

hired the contractor, you must use the commercial complaint procedure. See further instructions 

on page 9. 

F. Contractor Endorsed as both a Residential Contractor and a Commercial 

Contractor described in Section (B)(2)(c). If you file a complaint against a contractor 

endorsed as both a residential contractor and a commercial contractor at the time you hired the 

contractor, you must file your complaint based on the structure type. 

• Residential Structure: If the dispute involves a residential structure, you must use the 

residential complaint procedure. See further instructions on page 8. 

• Small Commercial Structure: If the dispute involves a small commercial structure, 

you may use either the residential complaint procedure or the commercial complaint 

procedure. It is your choice which procedure you want to use. See further instructions on 

page 8. 

• Large Commercial Structure: lfthe dispute involves a large commercial structure, 

you must use the commercial complaint procedure. 

Filing Under the Residential CODlplaint Procedure 

To file a complaint under the residential complaint procedure, complete a Breach of Contract 

Complaint fann and send it to the CCB. Instructions for the fonn are attached to it. Please follow 



Page 12 of 31

these instructions carefully. Be sure to attach a copy of your contract, a copy of your precomplaint 

notice, and a copy of the certified mail receipt from the post office. The date the CCB 

receives your substantially completed complaint form is the date of filing. It is the date we must 

use to detennine if the complaint is filed within the required time. 

Filing Under the Com.m.ercial Com.plail1t Procedure 

To me a complaint under the commercial complaint procedure, you must file a complaint in 

court or start arbitration. As soon as you file in court or start arbitration, you must complete a 

Breach of Contract Complaint form and send it along with a copy of the court complaint or 

arbitration documents (such as the arbitration demand or application) to the CCB and to the 

respondent's bonding company by certified mail, retumreceipt requested. Be sure to attach a 

copy of your contract, a copy of your pre-complaint notice, and a copy of the certified mail 

receipt from the post office for the pre-complaint notice. The date the CCB receives both the 

substantially completed complaint form and copy of the court complaint or arbitration documents 

is the date of filing. It is the date we must use to detennine if the complaint is filed within the 

required time. 

The CCB and the bonding company must receive the copy of the court complaint or arbitration 

documents no later than the earlier of: 

• 90 calendar days after you file your court complaint or arbitration or 

• 14 calendar days before the first day of trial or hearing or 

• 30 calendar days before the court issues a judgment or the arbitrator issues an award. 

You should also send: 

• A cover letter stating that the complaint is filed under the commercial complaint 

procedure and 

• Pre-complaint notice documents. For specific information, see page 4. 

If you do not provide a Breach of Contract Complaint fonn with the copy of the court complaint 

or arbitration documents, we will return your documents to you. We cannot accept or process 

complaint under the commercial complaint procedure unless we received both the completed 

complaint form and a copy of the court complaint or arbitration documents. 

TIME LIMITS FOR FILING (;OMPLAINTS 

The laws giving the CCB jurisdiction to process complaints also limit the time to file a 

complaint. Unfortunately, the law does not allow the CCB to process any complaint that is not 

timely. There are no exceptions to this law. This applies even if you notified the contractor of the 

problem within the required time or you were not aware of the problem. If we do not receive 

your complaint in our office within the required time, we cannot process it or help you resolve 

the problem. 

For specific information about the time limit for filing each type of complaint, see the section 

about your particular type of complaint at the end of this booklet. Time requirements for owner 



Page 13 of 31

complaints begin on page 16, construction lien complaints on page 18, primary contractor 

complaints on page 21, subcontractor complaints on page 23, employee complaints on page 25, 

and material complaints on page 26. 

CERTAIN CONTRACTUAL BELATIONSHIPS ABE REQUIBED 

The iaws governing our complaint process require specific relationships between the 

complainant and the respondent. We cannot process the complaint unless you have one of the 

following relationships with the respondent. 

• A direct contractual relationship. This means that you entered into a contract (either 

oral or written) with the respondent. 

• If you hired a primary contractor or general contractor who then hired a subcontractor 

and that subcontractor did not properly perform the work, we cannot accept a 

complaint from you against that subcontractor. This is because your direct contractual 

relationship Was with the primary contractor or general contractor, not with the 

subcontractor. In this case you need to file your complaint against the general 

contractor or primary contractor. The general contractor or primary contractor can 

then file a complaint against the subcontractor. 

+ If you are a subcontractor or a material supplier making a complaint for non-payment, 

you must have been hired by the respondent or you must have sold materials directly 

to the respondent. 

• A real estate purchase conditioned upon an inspection report or repairs 

made by the respondent. This means that you can file a complaint if: 

• You purchased a structure and one of the terms of your purchase contract is that the 

seller would make repairs. If this is the case you can file a complaint against the 

contractor that the seller hired to perform those repairs. 

• You purchased a structure based on the respondent's inspection report. If this is the 

case you can file a complaint against the inspector if you allege that the inspector 

performed an improper inspection. 

• An employment relationship. This means that the respondent hired you as an 

employee to perform construction work. 

If you do not have one of these contractual relationships with the respondent, we cannot process 


WHAT TO DO IF YOU HAVE A COMPLAINT THAT DOES NOT 

FALL WITHIN THESE HEQUmEMENTS 

Tfyou are not sure that we can process your complaint because it may not meet the above 

requirements, consider filing it anyway. We will review your information to determine whether 

we can process it. We will also review your information for possible violations ofCCB laws. 



Page 14 of 31

Always file a complaint if you believe that the contractor violated the law so the CeB can review 

the alleged violation for possible enforcement action. 

If we cannot process your complaint, that does not mean you cannot take action against the 

contractor. We are an alternative to the court system; we do not replace it. In many cases you can 

still file the complaint in court. Talk to an attorney for advice about other legal options you may 

have. 

The CCB may arbitrate construction disputes even if we cannot process a complaint for possible 

access to the bond. We may do this only ifboth you and the respondent agree to binding 

arbitration by the eCB and we consent to act as arbitrator. Arbitration may be a better choice 

than filing in court. If you are interested in this, ca11503-378-4621 and ask for an arbitration 

packet. 

RESIDENTIAL COMPLAINT PROCEDURE 

When the eCB receives a complaint under the residential complaint procedure, we assign it to a 

dispute analyst. The analyst reviews the complaint, determines if it is in our jurisdiction, and 

decides how the complaint should be processed. The analyst will notify you in writing describing 

the next step or steps in the process. 

(;OMPLAINTS FILED IN (;OURT 011 ARBITRATED OUTSIDE 

THE(;(;B 

If you file a complaint that has also been filed in court or is being arbitrated, you should submit a 

copy of one of the fonowing documents with the complaint fonn: 

• The court complaint or 

• The documents (such as letters or application forms) related to starting arbitration. 

If the subject of the court action or arbitration is in our jurisdiction, we will open a complaint 

file. If the court action or arbitration is still pending, we will suspend action on the complaint 

until the court case or arbitration is finished. We will give you instructions on what you must do 

to keep the complaint open until the court or arbitrator makes a decision. Once the court or 

arbitration decision is made, we will base continued processing of the complaint on the court 

judgment or arbitration award. Normally the dispute analyst will review the judgment or award, 

decide what part of the award is within the eCB's jurisdiction, and issue an order based on that 

decision. Ifa party to the complaint disagrees with that order, that party may request a hearing. 

Any hearing held in these circumstances will only address whether the eCB has jurisdiction over 

the complaint and will not decide issues that were already decided by the court or arbitrator. See 

page 12 for a description of hearings. 

~OlUPLAINTS NOT FILED IN COURT 

If there is no pending court action or arbitration related to the complaint, the eeB will 

investigate the allegations in your complaint. That investigation might include an on-site meeting 

ResolvingDisputes with Your Contractor Page 11 


Page 15 of 31

with the parties and one of our investigators. See pages 16 and 21 for more infonnation on 

on-site meetings. 

If we do not bold an on-site meeting, our investigation will consist of collecting and reviewing 

documents from each party. 

If the dispute is not resolved during the investigation, the dispute analyst will make one of two 

decisions based on the evidence in the file: 

• There is enough written evidence in the file to support a proposed order. A proposed 

order may order the respondent to pay damages to you or it may dismiss the complaint. If 

neither party requests a hearing on the order, it will automatically become final. 

• There is not enough evidence in the file to support a proposed order. In this case the 

dispute analyst will refer the complaint to the Office of Administrative Hearings because 

a hearing will be needed before any decision can be made on the complaint. 

COMMERCIAL COMPLAINT PROCEDURE 

As noted above, certain complaints involving commercial structures must be filed in court or 

must be arbitrated. When the CCB receives a complaint under the commercial complaint 

procedure, a dispute analyst reviews the complaint. If the complaint appears to be within our 

jurisdiction, the analyst suspends processing the complaint until the court action or arbitration is 

finished. From this point on, processing continues the same as processing of a complaint filed in 

court under the residential complaint procedure. 

PROCESSING FEE 

Depending on the type of complaint you file and whether we have jurisdiction over the 

complaint, you may need to pay a processing fee of$50. A dispute analyst will review your 

complaint. If you are required to pay a processing fee, the analyst will request it from you. DO 

NOT PAY ANY FEE TO THE CCB UNTIL WE REQUEST THAT YOU PAY IT. Ifthe 

complaint is not in our jurisdiction or if you file the complaint using the commercial complaint 

procedure, you do not usually need to pay any fee. 

HEARINGS 

The CCB's decisions are issued as orders. CCB orders include a description of what you must do 

if you disagree with the order. If the dispute analyst issues a proposed order, either party may 

request a hearing within 21 calendar rl~ys from the order date. Hearings are also necessary if the 

dispute analyst cannot issue an order. If a hearing is necessary, we will send you information 

about the hearing process. 



Page 16 of 31

Hearings are held before an Administrative Law Judge (AU) from the Office of Administrative 

Hearings. The Office of Administrative Hearings is independent from the CCB. Most hearings 

are held in Salem. Testimony is taken under oath and is subject to cross-examination. ALJs make 

decisions based on all of the evidence presented at the hearing. A hearing is similar to a trial 

before a court, but it is a bit less formal. 

AGENCY ORDERS 

The dispute analyst or ALJ may issue one of two types of orders: 

• Dismissal. lfthe order is for dismissal, the complaint is dismissed and closed effective 

on the date the order becomes final. 

• Payment. If the respondent is ordered to pay you, the respondent has 30 calendar days 

from the date the order becomes final to make that payment. 

PAYMENT FROM THE RESPONDENT'S BOND 

If the respondent does not pay you as ordered, 30 calendar days after the order becomes final we 

will determine if we can send the complaint to the respondent's bonding company. We williet 

you mow if we can submit it to the bonding company immediately or if we must wait until 

processing of other complaints is complete. 

The date we receive the first complaint against a contractor begins a 90-day period. We cannot 

tell a bonding company to pay a complaint if there are any other complaints filed in the same 90- 

day period that are not ready for bond payment. Sometimes this causes delays in submitting 

complaints for payment. 

Contractor Licensed in a Category. If you file a complaint against a contractor based on 

work performed before July 1, 2008, or a contractor licensed before July 1, 2008 who had not yet 

renewed in an endorsement. The law states that complaints filed during that 90-day period have 

equal access to the respondent's bond, within certain limits based on the type of each complaint. 

Owner complaints for work involving residential or small commercial structures get paid from 

the bond first. lfmoney remains in the bond after those complaints are paid, non-owner 

complaints (employee, primary contractor, subcontractor, and material complaints) for work on 

residential and small commercial structures get paid (up to a maximum total of $3,000 from the 

bond). If there is still money in the bond after those payments are made, complaints involving 

large commercial structures may be paid from the bond. 

Contractor Endorsed as a Residential Contractor. If you file a complaint against a 

contractor endorsed as a residential contractor when you hired it to perform the work. The iaw 

states that complaints filed during that 90-day period have equal access to the respondent's bond, 

within certain limits based on the type of each complaint. Owner complaints for work involving 



Page 17 of 31

esidential or small commercial structures get paid from the bond fIrst. If money remains in the 

bond after those complaints are paid, non-owner complaints (employee, primary contractor, 

subcontractor, and material complaints) for work on residential and snl.'lll commercial structures 

get paid (up to a maximum total of$3,000 from the bond). 

Contractor Endorsed as a Commercial Contractor. If you me a complaint against a 

contractor endorsed as a commercial contractor when you hired it to perform the work. The law 

states that complaints filed during that 90-day period have equal access to the respondent's bond, 

within certain limits based on the type of each complaint. Persons furnishing labor to a contractor 

or who are owed employee benefits by a contractor get paid from the bond first. If money 

remains in the bond after the employee complaints are paid, owner complaints for work 

involving small commercial or large commercial structures get paid. 

Contractor Endorsed as Both a Residential Contractor and a Commercial 

Contractor. If you file a complaint against a contractor endorsed as both a residential 

contractor and a commercial contractor when you hired it to perform the work. If the work at 

issue involved a residential structure or a small commercial structure and the complaint was filed 

and processed under the residential complaint procedure, the payment from the bond will be 

made as described in "Contractor Endorsed as a Residential Contractor", above. If the work at 

issue involved a small commercial structure or a large commercial structure and the complaint 

was filed and processed under the commercial complaint procedure, the payment from the bond 

will be made as described in Contractor Endorsed as a Commercial Contractor, above. 

Contractor Working without Proper Endorsement. You may file a complaint with the 

CCB against a residential contractor involving the construction of a large commercial structure. 

Although the CCB may help resolve the dispute, the CCB will not be able to order the bonding 

company to make payment from the residential bond. Similarly, you may file a lawsuit against a 

commercial contractor involving the construction of a residential structure. If you prevail in court 

and get a judgment in your favor, you should notify the CCB so that we may suspend the 

contractor's license if the contractor does not pay the judgment. However, the CCB will not be 

able to order the bonding company to make payment from the commercial bond. 

The law states that complaints filed during that 90-day period have equal access to the 

respondent's bond, within certain limits based on the type of each complaint. Owner complaints 

for work involving residential or small commercial structures get paid from the bond fIrst. 1£ 

money remains in the bond after those complaints are paid, non-owner complaints (employee, 

primary contractor, subcontractor, and material complaints) for work on residential and small 

commercial structures get paid (up to a maximum total of$3,000 from the bond). If there is still 

money in the bond after those payments are made, complaints involving large commercial 

structures may be paid from the bond. 



Page 18 of 31

HOW LONG ALL THIS MIGHT TillIE 

If an On-Site Meeting is Needed (most Owner and Primary Contractor complaints) 

Most owner and primary contractor complaints require on-site meetings. The time for scheduling 

this meeting is usually a month or more. If the dispute is not resolved at that meeting and the 

respondent does not repair the work, two more months may go by before you can get bids far the 

repair work. The dispute analyst may take one to two weeks to study the bids and issue a 

proposed order. Ifwe issue a proposed order, each side has 21 calendar days to request a hearing 

before the order becomes final. If an order to pay damages becomes fmal without a hearing, the 

respondent has 30 calendar days to pay it. If the respondent does not pay it and all other 

complaints in your 90-day period are ready for bond payment, we can send it to the bonding 

company for payment. The bonding company may take up to a month to pay. Adding up these 

time periods, we can say that a complaint may normally take at least six months before a bonding 

company pays it. 

If you delay in providing information to the dispute analyst, that will delay final action on the 

complaint. If a hearing is needed, final action on the complaint will be delayed by at least six 

months. Occasionally, because of hearings, appeals, and other delays, a complaint may take 

several years to resolve. 

If No On-Site Meeting is Needed (most Construction Lien, Subcontractor, 

Employee, and Material complaints) 

A dispute analyst will review all information you provide. If all information is complete, the 

analyst will send a copy of the complaint to the respondent and give the respondent an 

opportunity to respond. If you delay in providing information to the dispute analyst, that will 

delay final action on the complaint. 

If we issue a proposed order, each side has 21 calendar days to request a hearing before the order 

becomes final. If an order ta pay damages becomes fmal without a hearing, the respondent has 

30 calendar days ta pay it. If the respondent does not pay it and all other complaints in your 90- 

day period are ready for bond payment, we can send it to the bonding company for payment. The 

bonding company may take up to a month to pay. Adding up these time periods, we can say that 

a complaint may nonnally take at least five months before a bonding company pays it. 

If a hearing is needed, final action on the complaint will be delayed by at least six months. 

Occasionally, because of hearings, appeals, and other delays, a complaint may take several years 

to resolve. 



Page 19 of 31

INFORMATION ON SPECIFIC 

COMPLAINT TYPES 

OOlUPLAINT FORM 

OWNER COMPLAINTS 

"Breach of Contract Complaint Fonn for Owners and Prime Contractors", OW Complaint 

7/1/08. 

WHO (;AN FILE AN OWNED COMPLAINT 

An owner is a person who does not need a CCB license and: 

• Has a structure built by a contractor or 

• Purchases or enters into an agreement to purchase a structure from a contractor or 

developer or 

• Owns, leases, or rents a structure on which construction work is being or has been 

performed. 

Property managers may be considered owners if they are licensed under ORS chapter 696. A 

person acting for an incapacitated person based on a formal guardianship, power of attorney, or 

other legal document may also be considered an owner. 

You may authorize someone (such as a son or daughter) to act as your agent. That person may 

act for you regarding most actions on the complaint. However, an agent cannot appear for you at 

a hearing, except in certain l.imited cases. If a hearing is held on the complaint, you will receive 

instructions on who may appear on your behalf. 

If you are required to have a CCB license for the work, you must file a primary contractor 

complaint, not an owner complaint unless the property involved in the complaint is your 

personal property and you do not intend to sell it when work is completed. 

TIME LIMITS FOR FILING AN OWNER (;OMPLAINT 

lithe complaint involves a new structure, we must receive it within one year from the date 

you or your tenant first moved into the structure or two years from the date the structure was 

completed and ready for occupancy, whichever comes flrst. 

If the complaint involves work on an existing structure and the respondent substantially 

completed the job, we must receive the complaint within one year from the date the respondent 

substantially completed the work. This is the date the respondent finished the job, not including 

returns for repair work or warranty work. 



Page 20 of 31

Regardless of whether the complaint involves a new or existing structure: 

• If the respondent abandoned the job and did not substantially complete it, we must 

receive the complaint within one year from the date the respondent last performed work 

on the job. 

• If you entered into a contract with the respondent but the respondent did not perform any 

work under that contract, we must receive the complaint within one year from the date 

you entered into the contract. 

WHAT YOU NEED TO SEND WITH THE COMPLAINT FORM 

Be sure to complete all areas of the complaint form. All ofthe information requested on that 

form is necessary for quick review and action on the complaint. In addition to the complaint 

form, you must send evidence to show that you had a contract for construction with the 

respondent. If you do not complete the complaint form or provide necessary information, it will 


Pre-Complaint Notice 

You must send a copy of your pre-complaint notice letter and the celtified mail receipt. (See 

page 4 for details on pre-complaint notice requirements.) 

Written Contract 

If the contract was in writing, you must send a copy of the entire contract, including any change 

orders. If there are terms listed on the back of the contract document, you must also send a copy 

of the back side of that contract. If you purchased a home from the respondent, the purchase 

contract might be narned something like Sales Agreement/Receipt for Earnest Money. Those 

contracts usually have many pages. You must send a copy of every page included in your 

contract. 

Oral Contract 

If you did not have a written contract, you must send other documents to show that you had a 

contractual relationship with the respondent, such as copies of work orders, invoices, both sides 

of cancelled checks, billings, proposals, etc. 

EltlEBGENCY SITUATIONS AND MITIGATION OF DAMAGES 

There are situations where the respondent's work must be repaired immediately. Examples 

include a leaking roof or structural work that is in danger of collapsing. In these cases you may 

need to hire a contractor to make necessary repairs before we complete our process. We are not 

permitted under the law to shortcut the administrative process for resolving complaints. 

Normally our investigators are fully booked, so we cannot schedule emergency on-site meetings 

because that would require canceling another complainant's meeting. 

You have the burden of proving the complaint. Therefore, if you must repair the work before we 

can hold an on-site meeting, you will need proofthat the repairs were needed and that the 

respondent should be responsible for your repair costs. This can be done through photos, samples 



Page 21 of 31

of the work., written reports from the contractors who repair the work, a home inspector's report, 

etc. Note that video may not be the best evidence because it is difficult and time consuming to 

review. 

ON·SITE MEETINGS 

Once the CCB detennines it has jurisdiction over your complaint, in most cases we will hold an 

on-site meeting. The meeting will be held at the job site where the work was performed. If an 

on-site meeting is scheduled, we will send instructions to you before the meeting. A CCB 

investigator will meet with the parties at the job site. At that meeting the investigator will try to 

help the parties settle the dispute. If the problem cannot be settled, the investigator will review 

the respondent's work on each complaint item. The investigator will detennine if the work does 

or does not need repair and will submit written recommendations that will be sent to the parties. 

If a party does not agree with the investigator's recommendations, that party may request a 

hearing. 

If the parties agree to a settlement at the on-site meeting, we will continue processing the 

complaint based on that settlement agreement. We will send you written instructions about the 

next step at that time. 

If the investigator recommends that the respondent make repairs to the work, you are required to 

give the respondent a chance to make those repairs unless the respondent is not licensed at the 

time of the on-site meeting or the investigator recommends that the respondent not be allowed to 

make repairs. If you do not allow the respondent to make recommended repairs, the complaint 

may be dismissed and closed. 

After the on-site meeting, if the respondent does not do the repair work, you may need to get 

estimates from other licensed contractors for the costs ofthose repairs. We will process the 

complaint for damages based on the investigator's recommendations or settlement agreement 

and any estimates you submit. If you need to get estimates, we will inform you in writing. 

CONSTRUCTION LIEN COMPLAINTS 

~OltIPLAlNT FORM 

«Breach of Contract Complaint Form for Owners and Prime Contractors", OW Complaint 

7/1/08. 

WHO CAN FILE A CONSTRUCTION LIEN ~OMPLAINT 

You may only file a construction lien complaint if you are an owner (see definiiion below) and: 

• You hired a licensed contractor to perform construction work and 

o Yau paid that contractor for the v/ork and 

• The contractor purchased materials on credit or hired a subcontractor or employee to 

perform part of the work and 



Page 22 of 31

• The contractor did not pay the material supplier, subcontractor, or employee for the work 

or materials and 

• The material supplier, subcontractor, or employee filed a lien against your property to try 

to get paid for the contractor's debt. 

The person or business filing the lien is called the "lienor". 

If a contractor files a lien against you because you did not pay that contractor for work, you may 

file an owner complaint. Do not file a construction lien complaint under this circumstance. 

(please note that these complaints use the same form.) If you are a primary contractor and you do 

not own the structure where the work was performed, you cannot file a construction lien 

complaint. 

An owner is a person who does not need a CCB license and: 

• Has a structure built by a contractor or 

• Purchases or enters into an agreement to purchase a structure from a contractor or 

developer or 

• Owns, leases, or rents a structure on which construction work is being or has been 

performed. 

Property managers may be considered owners if they are licensed under ORS chapter 696. A 

person acting for an incapacitated person based on a formai guardianship, power of attorney, or 

other legal document may also be considered an owner. 

You may authorize someone (such as a son or daughter) to act as your agent. That person may 

act for you regarding most actions on the complaint. However, an agent cannot appear for you at 

a hearing, except in certain limited cases. If a hearing is held on the complaint, you will receive 

instructions on who may appear on your behalf. 

NOTICE OF RIGHT TO A LIEN 

A material supplier, subcontractor, or an employee cannot file a valid lien against residential 

property unless they gave a Notice of Right to a Lien to the owner of the property shortly before 

or shortly after beginning to provide labor, materials, or services. A Notice of Right to a Lien is 

not a lien. It is just a notice to let the property owner know that the person giving the notice has 

begun to deliver materials or perform work on the job and has lien rights. You cannot file a 

construction lien complaint based only on a Notice of Right to a Lien. You must wait until a 

construction lien is actually recorded with the county before you can file a construction lien 

complaint. 

TIME LIMITS FOR FILING l\ (;ONSTRUCTION LIEN 

~OMPLAINT 

The time limits for filing a construction lien complaint are the same as those for filing a110Wl1ef 

complaint. See information about those time limits on page 16. 



Page 23 of31

W1IAT YOU NEED TO SEND WJl.TB THE COMPLAINT t'ORM 

Be sure to complete all areas of the complaint form. All of the information requested on that 

fonn is necessary for quick review and action on the complaint. In addition to the complaint 

fonn, you must send evidence to show that you had a contract for construction with the 

respondent. If you do not complete the complaint form or provide necessary information, it will 



You must send a copy of your pre-complaint notice letter and the certified mail receipt. (See 



Ifthe contract was in writing, you must send a copy of the entire contract, including change 

orders. Ifthere are terms listed on the back of the contract document, you must also send a copy 

of the back side of that contract. If you purchased a home from the respondent, the purchase 

contract might be narned something like Sales Agreement/Receipt for Earnest Money. Those 

contracts usually have many pages. You must send a copy of every page inciuded in your 

contract. 

Oral Contract 




Lien Documents 

You must also send all of the following: 

• A copy of the Notice of Right to a Lien that the lienor gave you when they either 

delivered materials or began their work. 

• A copy ofthe recorded construction lien showing the county recorder's stamp and date of 

filing information. 

• Proof that you paid your primary contractor for the work. 

Additional documents you might need to provide 

If you paid the lien to keep a foreclosure suit from being filed or for any other reason, you need 

to send documents to show that you paid to have the lien removed and the amount you paid. 

If the lienor filed a foreclosure suit to collect on the lien, you must also send a copy of t..lmt 

foreclosure suit. 



Page 24 of 31

PRIMARY CONTRACTOR COMPLAINTS 

COMPLAINT FOBM 

"Breach of Contract Complaint Form for Owners and Prime Contractors", OW Complaint 

7/1108. 

WHAT IS A PBIMARY CONTRACTOR COMPLAINT 

A primary contractor complaint is filed by a licensed primary contractor against a licensed 

subcontractor who the primary contractor hired to do construction work. 

A primary contractor is an individual or business that: 

• Has a contract with the owner of a structure to perform construction work or 

• Is building or remodeling a structure with the intent to sell it. 

A primary contractor may hire one or more subcontractors to perform all or part of the work. 

Primary contractor complaints may be filed for negligent construction work, improper 

construction work, or breach of a construction contract. 

TIME LIMITS FOB FILING A PRIMARY CONTRACTOR 

COMPLAINT 

If the complaint involves a new structure, we must receive it within 14 months fi·om the date 

someone first moved into the structure or two years from the date the structure was completed 

and ready for occupancy, whichever comes fIrst. 

If the complaint involves work on an existing structure and the respondent substantially 

completed the job, we must receive the complaint within 14 months from the date the respondent 

substantially completed the work. This is the date the respondent fInished the job, not including 

returns for repair work or warranty work. 

Regardless of whether the complaint involves a new or existing structure, if the respondent 

abandoned the job and did not substantially complete it, we must receive the complaint within 14 

months from the date the respondent last worked on the job. 

WHAT YOU NEED TO SEND WITH THE COMPlAINT FORM 

Be sure to complete all areas of the complaint form. AU oftne infonnation requested on that 

form is necessary for quick review and action on the complaint. In addition to the complaint 

form, you must send evidence to show that you had a contract for construction with the 

respondent. If you do 110t complete the complaint form or provide necessary information, it will 




Page 25 of 31


You must send a copy of your pre-complaint notice letter and the certified mail receipt. (See 



Ifthe contract was in writing, you must send a copy of the entire contract, including change 

orders. If there are terms listed on the back of the contract document, you must also send a copy 

of the back side of that contract. 

Oral Contract 




EMERGENCY SITUATIONS AND MITIGATION OF DAMAGES 

There are situations where the respondent's work must be repaired immediately. Examples 

include a leaking roof or structural work that is in danger of collapsing. In these cases you may 

need to hire a contractor to make necessary repairs before we complete our process. Weare not 

permitted under the law to shortcut the administrative process for resolving complaints. 

Normally our investigators are fully booked, so we cannot schedule emergency on-site meetings 

because that would require canceling another complainant's meeting. 

You have the burden of proving the complaint. Therefore, if you must repair the work before we 

can hold an on-site meeting, you will need proof that the repairs were needed and that the 

respondent should be responsible for your repair costs. This can be done through photos, samples 

of the work, written reports from the contractors who repair the work, a home inspector's report, 

etc. Note that video may not be the best evidence because it is difficult and time consuming to 

review. 

ON-SITE MEETINGS 

Once the CCB detennines it has jurisdiction over your complaint, in most cases we will hold an 

on-site meeting. The meeting will be held at the job site where the work was performed. If an onsite 

meeting is scheduled, we will send instructions to you before the meeting. A CCB 

investigator will meet with the parties at the job site. At that meeting the investigator will try to 

help the parties settle the dispute. If the problem cannot be settled, the investigator will review 

the respondent's work on each complaint item. The investigator will determine if the work does 

or does not need repair and will submit written recommendations that will be sent to the parties. 

If a party does not agree with the investigator's recommendations, that party may request a 

hearing. 

If the parties agree to a settlement at the on-site meeting, we will continue processing the 

complaint based on that settlement agleement. 'vVe will send you vvritten instru.ctions about the 

next step at that time. 



Page 26 of31

If the investigator recommends that the respondent make repairs to the work, you are required to 

give the respondent a chance to make those repairs unless the respondent is not licensed at the 

time of the on-site meeting or the invf)stigator recommends that the respondent not be allowed to 

make repairs. If you do not allow the respondent to make recommended repairs, the complaint 

may be dismissed and closed. 

After the on-site meeting, if the respondent does not do the repair work, you may need to get 

estimates from other licensed contractors for the costs of those repairs. We will process the 

complaint for damages based on the investigator's recommendations or settlement agreement 

and any estimates you submit. If you need to get estimates, we will inform you in writing. 

SUBCONTRACTOR COMPLAINTS 

COMPLAINT FORM 

"Breach of Contract Complaint Form for Subcontractors", SUB Complaint 7/1/08. 

WHAT IS A SUBCONTRAcrOR COMPLAINT 

A subcontractor complaint is a complaint filed by a subcontractor against a licensed primary 

contractor for unpaid labor or materials furnished under a construction contract between the 

subcontractor and the primary contractor. 

If you sold materials to the primary contractor and your contract did not include performance of 

any construction work, you must file a material complaint For more specific infonnation about 

material complaints, see page 26. If you sold materials to the primary contractor and installed 

any of those materials or performed any construction work under the contract, you must file a 

subcontractor complaint. 

You must use the agency's subcontractor complaint form. You must provide specific job site 

addresses (including street, city, and state) for each job site where you performed work at issue 

in the complaint. Do not file your complaint on the general complaint fonn for owners and prime 

contractors or on the specific complaint fonn for material or employee complaints. 

If the work you performed requires a CCB license, we may only process the complaint if you 

were properly licensed with this agency: 

1. Atthe time the bid was made or the contract was entered into and 

2. Continuously throughout the work period involved in the complaint. 

TIME LIMITS FOR FILING A SIJII(;ONTBACTOR COMPLAINT 

You must file your complaint within one year from the date the debt was incurred. This is 

normally the last day you \vorked on the job. 



Page 27 of 31

WHAT YOlJ NEED TO SEND WITH THE COMPLAINT .~ORItI 

Be sure to complete all areas of the complaint fonn. All of the infonnation requested on that 

form is necessary for quick review and action on the complaint. If you do not complete the fonn 

or provide necessary infonnation, it will delay processing of your complaint. 

In addition to the completed complaint fonn, you must also send: 

• A copy of your pre-complaint notice letter and certified mail receipt. (See page 4 for 

details on pre-complaint notice requirements.) 

• A copy of each invoice billing the primary contractor for your work. 

• lfthe contract was in writing, you must send a copy of the entire contract. If there are 

terms listed on the back of the contract document, you must also send a copy of the back 

side of that contract. 

USUALLY THERE IS NO ON·SITE MEETING 

Normally the only issue in subcontractor complaints is whether the subcontractor was paid. In 

most cases no on-site meeting is held. However, if the primary contractor alleges you were not 

paid because you did not properly perform the work or if it appears a settlement meeting might 

settle the issues in the complaint, the agency may hold an on-site meeting so our investigator can 

review the issues and help the parties settte the matter without a hearing. 



Page 28 of 31

COMPLAINT FOltH 

EMPLOYEE COMPLAINTS 

"Breach of Contract Complaint Form for Employees", EM Complaint 7/1108. 

WHAT IS AN EMPLOYEE «;OMPLAINT 

An employee complaint is filed by an employee of a licensed contractor for unpaid wages or 

benefits. 

TIME LIMITS FOR FILING AN EMPLOYEE COMPLAINT 

You must file your complaint within one year from the date you performed the work. 


You must use the employee complaint form. Be sure to complete all areas of the form and the 

calendar. All of the information requested on that fonn is necessary for quick review and action 

on the complaint. If you do not complete the form or provide necessary infonnation, it will delay 

processing of your complaint. 

You must list on the complaint fonn the specific job site addresses (including street, city, and 

state) for each job site where you performed the work. Also check the box for the type of 

structure located at each of those job sites. See the instructions attached to the complaint form for 

more information. 

In addition to the completed complaint form, you must also send: 

• A copy of your pre-complaint notice letter and mail receipt. (See page 4 for details on 

pre-complaint notice requirements.) 

• Evidence to prove that you worked as an employee of the contractor. That evidence 

might be copies of time cards, copies of previous paycheck stubs, a copy of your W-4 

form, or a notarized written statement from a person not related to you stating facts 

indicating that you worked for the contractor. 



Page 29 of31

COMPLAINT FORM 

MATERIAL COMPLAINTS 

"Breach of Contract Complaint Form for Owners and Prime Contractors", Complaint 7/1108. 

WHAT IS A MATERIAL COMPLAINT 

A material complaint is filed by a supplier who has not been paid for materials sold to or 

equipment rented to a licensed contractor. 

TIME LIMITS FOR FILING A MATERIAL rnMPLAINT 

You must file your complaint within one year from the date the materials were delivered or the 

date the purchaser took possession of the materials. If you do not know the delivery date, the 

date of the invoice applies except in the case of special or custom ordered materials. In that case 

you must file the complaint within one year from the date the materials were ordered. 


You must use the material/equipment complaint form. Be sure to complete all areas of the fonn. 

All of the information requested on that form is necessary for quick review and action on the 

complaint. If you do not complete the complaint form or provide necessary information, it will 


You must list each invoice on the complaint fonn. For each invoice you must state the complete 

job site addresses (including street, city, and state) where the materials listed in that invoice were 

used and installed. You must also check the box for the type of structure located at each job site. 

See the instructions attached to the complaint form for more information. 

In addition to the completed complaint form" you must also send: 

• A copy of your pre-complaint notice letter and certified mailing receipt. (See page 4 for 

details on pre-complaint notice requirements.) 

• A copy of each invoice you list on the complaint form. 



Page 30 of 31


Page 31 of 31 

;."

LICENSE ENDORSEMENTS· Use this box to fill out partl 4 I (continued) 

An applicant must select one of the following: 

• Residential endorsement only (see Residential Contractors chart below) 

• Commercial endorsement only (see Commercial Contractors chart on page 12); or 

• Both residential and commercial endorsements 

Once you've selected a residential, commercial or both endorsements, you will need to select a classification. See charts on pages 

11 and 12. 

RESIDENTIAL CONTRACTORS 

Endorsement 

Scope of Work 

Limitations 

Bond and 

Classifications 

Insurance 

Residential These contractors may supervise, arrange for, or perform Residential general contractors may $20,000 

General Residential bond 

(partly or completely) an unlimited number of unrelated build- perform the same work as residen- 

Contractor ing trades involving any residential or small commercial struc- tial speCialty contractors. $500,000 

(RGC) 

ture or project. 


insurance 

Residential These contractors perform work involving one or two unrelated The building trades may change $15,000 

Specialty building trades for residential or small commercial projects. from job to job. (Example: a residen- Residential 

Contractor Alternatively, these residential contractors may perform work tial specialty contractor may perform bond 

(RSC) 

on a single property involving three or more unrelated building 

masonry and roofing work on one $300,000 

project and concrete work on antrades 

if the contract for labor and materials is $2,500, or less. 


other.) 

insurance 

Residential 

Limited 

Contractor 

(RLC) 

These contractors may supervise, arrange, and/or perform This is for part-time contractors who $10,000 

(partly or completely) an unlimited number of unrelated building build as a hobby, for retirees, and for Residential bond 

trades involving any residential or small commercial structure handyman services. 

$100,000 

or project if they certify that they meet all ofthe following: 


1. The applicant expects gross sales of less than $40,000 from There is no limit to the number of 

insurance 

the construction business in the next year. 

building trades that can be 

2. The applicant does not contract to perform any work that supervised, arranged or performed. 

exceeds $5,000. 

3. The value of any work performed does not exceed $5,000 "Gross" means total sales, in other 

per job site per year. 

words, the total amount paid for labor 

4. The CCB may inspect the applicant's Oregon Department and supplies before expenses and 

of Revenue tax records to verify any of the above. 

taxes are deducted. 

5. The applicant agrees that if gross construction business 

volume exceeds $40,000 during the year, it will immediately 

notify the CCB, change its endorsement and increase its 

bond and insurance coverage, if required. 

Residential These contractors meet all ofthe following: This claSSification is for residential $20,000 

Developer 1. The applicant owns the properties, or an interest in the developers who arrange for the Residential bond 

(RD) properties, on which it arranges for construction work; construction of structures, or 

$500,000 

2. The applicant arranges for construction work or improvement development of property, that they 


of residential or small commercial real property, with the intent intend to sell. 

insurance 

to sell the property; 

3. The applicant acts in association with one or more licensed 

general contractors who have sole responsibility for 

overseeing all phases of construction activity on the property; 

and 

4. The applicant does not perform any construction work on 

the property. 

COMMERCIAL CONTRA CTOR Endorsement and Classifications on next page ... 

Instructions page 11 Oregon Exhibit 6 

Page 1 of2

- 

I LICENSE ENDORSEMENTS - Use this box to fill out Part 4 (continued) 

COMMERCIAL CONTRACTORS 

I 

Endorsement 

Classifications 

Scope of Work 

Limitations 

Bond and Insurance 

Commercial General 

Contractor 

Level1(CGC1) 

Commercial General 

Contractor 

Level 2 (CGC 2) 

These contractors may supervise, 

arrange for, or perform (partly or 

completely) an unlimited number of 

unrelated building trades involving 

any small or large commercial 

structure or project. 

Level 1 and 2 contractors can 

perform the same work. 

Commercial general contractors $75,000 Commercial bond 

may perform the same work as 

commercial specialty contractors. $2 million aggregate insurance 

A Level 1 contractor must have 8 $20,000 Commercial bond 

years of construction experience 

A Level 2 contractor must have 4 

years of construction experience. 

$1 miilion aggregate insurance 

Commercial Specialty 

Contractor 

Level 1 (eSC 1) 

These contractors perform work 

involving one or two unrelated 

The building trades may change 

from job to job. (For example, a $50,000 Commercial bond 

commercial specialty contractor 

building trades for small or large may perform masonry and rOOfing $1 million aggregate insurance 

I---------~ commercial projects. 

work on one project and concrete 

Commercial Specialty 

work on another.) 

$20,000 Commercial bond 

Contractor 

Level 1 and 2 contractors can 

Level 2 (CSC 

perform the same work. 

2) 

Commercial Developer 

(CD) 

These contractors meet all of the 

following: 

1. The licensee owns the properties, 

or an interest in the properties, on 

which it arranges for construction 

work; 

2. The licensee arranges for 

construction work or improvement 

of small or large commercial real 

property, with the intent to sell the 

property; 

3. The licensee acts in association 

with one or more licensed general 

contractors who have sole 

responsibility for overseeing all 

phases of construction activity on 

the property; and 

4.The licensee does not perform 

any construction work on the 

property. 


years of construction experience. $500,000 

per occurrence Insurance 


years of construction experience. 

This classification is for commercial 

developers who arrange for 

the construction of structures, or 

the development of property, that 

they intend to sell. 

$20,000 Commercial bond 

$500,000 

per occurrence insurance 

.. 

Workers Comp~nsation for ExemptCommercial Contractors- Use this box to fill out Part 5 

If you chose a commercial endorsement (part 4) and have an exempt independent contractor license status (part 3) you are 

required to carry workers' compensation insurance that includes "personal election" coverage to cover owners ofthe business. 

The law does not apply to non-exempt commercial contractors since those contractors already are required to carry workers' 

compensation for their workers. You can find additional information about this law by visiting www,oregon.govlCCB . 

- 

Please certify that you carry the appropriate workers compensation insurance by marking the box in part 5. 

Instructions page 12 Oregon Exhibit 6 

Page 2 of2

2011 OREGON AND WASHINGTON 

CONSTRUCTION LAW: COMPARISON AND CONTRAST 

CONSTRUCTION CONTRACT ISSUES: 

WASHINGTON AND OREGON 

Presented by 

Gary Christensen, Miller Nash LLP 

Lisa Lui, Miller Nash LLPI 

Gary Christensen, Miller Nash LLP 

D. Gary Christensen, a partner, has practiced law since 1988, when he joined Miller 

Nash. His practice focuses on design and construction law and commercial litigation, and he is 

chair of the firm's construction law team. Gary regularly negotiates design, construction, and 

construction management contracts, in addition to handling major construction-defect, payment, 

and delay disputes. He has also handled significant public contract and bidding disputes, 

embezzlement claims, international sales disputes, condemnations, and insurance fraud claims. 

Most of his career has been focused on construction of schools, medical facilities, affordable 

housing projects and renovations, distribution centers, resorts, and large commercial facilities, 

with respect to both up-front negotiation of contracts and claim management-and litigation, 

when required-during and after construction. Gary has been selected for inclusion in Law & 

Politics magazine as an "Oregon Super Lawyer" every year since 2007. Gary is AV®-rated by 

Martindale-Hubbell. 

Gary received his B.A. in international relations, cum laude with university honors from 

Brigham Young University, and his J.D. from the J Rueben Clark Law School, Brigham Young 

University. 

Lisa Lui, Miller Nash LLP 

Lisa C. Lui, a partner, focuses on real estate and construction law. She counsels clients 

in a wide range of real estate matters, including acquisitions and sales, development, financing, 

and loan workouts of commercial and residential real estate. Lisa also advises clients in 

complex construction and design contractingfor projects of all sizes, and in all areas of 

commercial leasing including ground and space leases, subleases, sale/leaseback, and medical 

office leasing. Lisa's transactional practice includes representing clients from a wide range of 

industries and businesses, including healthcare, higher education, real estate development, 

nonprofit entities, and tribes. Her practice additionally includes representing creditors in 

insolvency matters. 

Lisa received her B.A. in legal studies/rom the University of California, Berkeley. She 

received her MA. in public administrationfrom the University o/Washington and her 1.D.from 

the University of Washington School of Lmt'. 

I Disclaimer: These materials are not provided for the purpose of providing legal advice, and any questions 

.' 

should 

be directed to legal counsel. 

MILLER NASH

CONSTRUCTION CONTRACT ISSUES: 

WASHINGTON AND OREGON 

Construction contracts have evolved into fairly standardized creatures, thanks in part to 

the form contracts of groups such as the American Institute of Architects and the Associated 

General Contactors. But practitioners in Washington and Oregon with "cross-border" practices 

are well aware that despite the very standard nature of construction contracting a number of 

significant differences in the laws of each state must be addressed in a contract to ensure its 

effectiveness and enforceability. This article will compare those areas of Washington and 

Oregon law that most commonly appear in construction contracts in both jurisdictions. 

I. Statutes of Limitations and Renose 

Oregon 

For actions based in contract (written and oral), including breach of contract, and 

enforcement of indemnification or warranty, the applicable limitations period is six years. 

ORS 12.080(1). Thisperiod is usually applied to tort claims as well. But see Abraham v. T 

Henry Construction, Inc., _ Or. _, n.3 (March 10,2011) (actions for injury must be brought 

within two years). ORS 12.110(1). 

The applicable statute of repose for construction of real property improvements is ten 

years from the date of substantial completion for a condo, residential, or small commercial 

project, or six years from substantial completion for a large commercial project. ORS 12.135(1). 

Washington 

The applicable limitations period for claims based on a written contract is six years. 

RCW 4.16.040. The six year period begins to run at either substantial completion of the work, or 

the date when services were terminated, whichever is later. RCW 4.16.310. For oral contracts, 

the limitations period is three years. RCW 4.16.040, .080(3). A three-year limitation period also 

applies to actions for injury. RCW 4.16.080(2). 

In Washington, the issue of the statute of repose and the discovery rule in the contract 

context have been the source of much debate in the last 10 years. While the general rule is that a 

cause of action for breach of a construction contract accrues on the date of breach rather than the 

date of discovery, the outside date for filing such a claim coincides with the statute of repose, 

even in the case of a latent construction defect. See 1000 Virginia, Ltd. Partnership v. Vertecs 

Corp., 153 Wn.2d 566, 146 P.3d 423 (2006); RCW 4.24.326(g). A contract claim must therefore 

be brought within the six year period following substantial completion or termination of services. 

2. Indemnification 

The laws in both Washington and Oregon prohibit contract clauses that purport to require 

one party to indemnify another for the negligence of the indemnitee. 

2

Oregon 

ORS 30.140 prohibits enforcement of a contract in which an "innocent" party must 

indemnify another for that party's own negligence, and states in relevant part: 

Certain indemnification provisions in construction agreement void. 

(1) Except to the extent provided under subsection (2) of this section, any 

provision in a construction agreement that requires a person or that person's 

surety or insurer to indemnify another against liability for damage arising out of 

death or bodily injury to persons or damage to property caused in whole or in part 

by the negligence of the indemnitee is void. 

(2) This section does not affect any provision in a construction agreement 

that requires a person or that person's surety or insurer to indemnify another 

against liability for damage arising out of death or bodily injury to persons or 

damage to property to the extent that the death or bodily injury to persons or 

damage to property arises out of the fault of the indemnitor, or the fault ofthe 

indemnitor's agents, representatives or subcontractors. 

Oregon's anti-indemnification statute has been interpreted to also prohibit a contract term 

requiring an indemnitor to purchase insurance that would provide coverage for claims resulting 

from the indemnitee's own negligence. See Walsh Const. Co. v. Mutual afEnumclaw, 338 Or. 1, 

104 P .3d 1146 (2005) (limiting the use of additional insured endorsements to pay for liability of 

an additionally insured party that failed to allege fault on the part of the insured party). 

Washington 

Much like the Oregon law, RCW 4.24.115 prohibits enforcement of a contractual term 

that requires a party not at fault to indemnify for the injury as a result ofthe sole negligence of 

the party being indemnified. This prohibition should be distinguished from a contract term 

whereby the contractor or subcontractor gives a warranty and indemnity for claims related to 

defects in workmanship or materials. Such a provision is enforceable. See National Bank of 

Wash. v. Equity Investors, 81 Wn.2d 886, 506 P.2d 20 (1973). 

RCW 4.24.115 states in relevant part: 

Validity of agreement to indemnify against liability for negligence relative to 

construction, alteration, improvement, etc., of structure or improvement attached 

to real estate or relative to a motor carrier transportation contract. 

(1) A covenant, promise, agreement or understanding in, or in connection 

with or collateral to, a contract or agreement relative to the construction, 

alteration, repair, addition to, subtraction from, improvement to, or maintenance 

of, any building, highway, road, railroad, excavation, or other structure, project, 

development, or improvement attached to real estate, including moving and 

demolition in connection therewith, or a motor carrier transportation coritract, 

3 

MILLER NASH

purporting to indemnify against liability for damages arising out of bodily injury 

to persons or damage to property: 

(a) Caused by or resulting from the sole negligence of the indemnitee, his 

agents or employees is against public policy and is void and unenforceable; 

(b) Caused by or resulting from the concurrent negligence of (i) the 

indemnitee or the indemnitee's agents or employees, and (ii) the indemnitor or the 

indemnitor's agents or employees, is valid and enforceable only to the extent of 

the indemnitor's negligence and only if the agreement specifically and expressly 

provides therefor, and may waive the indemnitor's immunity under industrial 

insurance, Title 51 RCW, only if the agreement specifically and expressly 

provides therefor and the waiver was mutually negotiated by the parties. This 

subsection applies to agreements entered into after June 11, 1986. 

3. Waivers of Employer Immunity 

Under most state industrial insurance schemes, an employer has complete immunity from 

direct claims brought by its employees for death or injury. In the construction contracting 

context, the risk is that a worker who is not the employee of the general contractor or the owner 

will seek damages for injuries incurred at the worksite. Both the general contractor and the 

owner will seek to contractually shift the exposure for that worker's injury to the actual 

employ~r. 

Oregon 

Oregon courts have decided that the Oregon workers' compensation law contains an 

absolute prohibition against waiver of statutory immunity by an employer, even in the face of 

constitutional freedom of contract challenges. See Roberts v. Gray's Crane & Rigging, Inc., 

73 Or. App. 29, 697 P .2d 985 (1985). ORS 656.018 states in relevant part: 

(1)(a) The liability of every employer who satisfies the duty required by 

ORS 656.017 [employer required to pay compensation and perform other duties] 

(1) is exclusive and in place of all other liability arising out of injuries, diseases, 

symptom complexes or similar conditions arising out of and in the course of 

employment that are sustained by subject workers, the workers' beneficiaries and 

anyone otherwise entitled to recover damages from the employer on account of 

such conditions or claims resulting therefrom, specifically including claims for 

contribution or indemnity asserted by third persons from whom damages are 

sought on account of such conditions, except as specifically provided otherwise in 

this chapter. 

(c) Except as provided in paragraph (b) of this subsection [excluding claims 

asserted by a railroad or other certain entities], all agreements or warranties 

contrary to the provisions of paragraph (a) of this subsection entered into after 

July 19, 1977, are void. 

• 

4 

MILLER NASH

Washington 

Unlike in Oregon, Washington employers may waive their statutory immunity under 

Title 51 RCW if the agreement specifically and expressly provides for such a waiver and states 

that the waiver was separately negotiated. RCW 4.24.115; Brown v. Prime Constr. Co., 102 

Wn.2d 235, 684 P .2d 73 (1984). A typical contract provision related to the waiver of employer 

immunity may be: 

For the sole purpose ofthe giving effect to the indemnification provision 

contained in this Agreement, and only to the extent of claims against Indemnitor 

by Indemnitee under the indemnification provision, Indemnitor specifically 

waives any immunity it may be granted under the Washington State Industrial 

Insurance Act, Title 51 RCW. The indemnification obligation under this 

Agreement is not limited in any way by any limitation on the amount or type of 

damages, compensation, or benefits payable to or for any third party under 

workers' compensation acts, disabilities benefit acts, or other employee benefit 

acts. 

By initialing below the Owner and Contractor certify that the waiver of immunity 

specified by this provision was mutually negotiated. 

o Owner's Initial 

o Contractor's Initial 

5 

MILLER NASH

4. Construction Lien Procedures 

The differences in lien law between Oregon and Washington and the implications for 

contracting are notable to the extent that the timing and requirements of notices may affect 

preparation and negotiation of contracts and, thus, are included here. 

Washington 

Pre-Claim Notice · Notice and disclosure · 

Oregon 

Notice by general contractor 

statement by general 

to residential owner at time of 

contractor to: (a) residential contract (not applicable for 

owners for four or fewer units commercial owner) (ORS 

or contract value of $1 ,000 or 87.093) 

greater; and (b) commercial • Notice of right to claim a lien 

contracts between $1,000 and by supplier of materials or 

$60,000 (RCW 18.27.114) equipment on commercial 

· Notice by sub-subcontractors work, and by all 

or material and equipment subcontractors to residential 

suppliers unless contract is owner (ORS 87.021) 

directly with owner; notice • Notice to lender also 

required of subcontractors for required, and to ensure 

single-family residential! 

priority for materials provider 

garage only (RCW 60.04.031) (ORS 87.025) 

• Relates back for equipment, 

materials, labor, or services 

provided eight businesses 

days prior to notice service 

Within 90 days after last date 

Claim · 

• Within 75 days after the 

on which labor performed, or earlier of (a) substantial 

Must be recorded in county 

material or equipment 

completion; or (b) last date 

where project is located provided (ReW 60.04.091) on which work was 

performed (ORS 87.035) 

Post-Claim Notices • Within 14 days of recording 

· 

oflien (to owner only) 

(ReW 60.04.091) 

Within 20 days of lien filing 

and not later than 10 days 

before filing complaint to 

foreclose (to owner and 

lender) (ORS 87.039, 87.057) 

Foreclosure of Lien • Not later than 8 months after • Not later than 120 days after 

recording claim of lien 

recording claim of lien 

(ReW 60.04.141) (ORS 87.055) 

5. Notice of Claims 

If a contract specifies a period during which notice of a claim must be given, and a 

procedure for the making of notice, Washington courts have strictly construed such a contract 

provision and contractors who faii to comply with contract provisions for notice and supporting 

documentation of claims may forfeit their claims; actual notice is not sufficient. See Mike M 

Johnson v. Spokane County, 112 Wn. App. 462, 78 P.3d 161 (2003). 

6 II 

MILLER NASH

6. Insurance 

By and large, the insurance requirements are fairly standardized and will not vary 

between Oregon and Washington. But the unique aspects ofthe anti-indemnity laws in each 

state implicate two exceptions to this general rule. 

Oregon 

As a result of the Walsh case, which limited use of additional insured endorsements, an 

Oregon construction contract provision requiring one party to name the other party as an 

additional insured under the first party's insurance policy should contain language consistent 

with the ruling in MW Builders, Inc. v. Safeco Ins. Co. of America stating that the purpose of the 

additional insured coverage is to cover losses or claims except to the extent that the losses and 

claims are caused by the negligence of the additionally insured party. 1004 WL 2058390, D.Or., 

September 14,2004 (NO. CIY. 02-1 578-AS). 

Washington 

Washington employers that waive their statutory immunity under the Washington 

Industrial Insurance Act, Title 51 RCW, and undertake to indemnify for claims brought by their 

workers will likely face an insurance coverage gap because employers do not ordinarily obtain 

private insurance to cover claims for employee injury or death. The insurance industry has 

developed the aptly named "Stop Gap" employer liability coverage to ostensibly protect the 

employers for claims brought by employees who would have otherwise been covered by 

Title 51. Stop Gap coverage is therefore advisable in both the prime contract and subcontracts. 

7. Venue/Choice of Law 

Oregon 

In Oregon, a contract may not provide that the contract is subject to the laws of another 

state or that any litigation or dispute resolution proceeding be conducted in another state. 

ORS 701.640 states in relevant part: 

Prohibition against contrary provisions, covenants or clauses 

(1) A construction contract may not include any provision, covenant or 

clause that: 

(a) Makes the contract subject to the laws of another state or that requires 

any litigation, arbitration or other dispute resolution proceeding arising from the 

contract to be conducted in another state[.] 

(2) Any provision, covenant or clause described in subsection (1) of this 

section is void and unenforceable. 

7 

MILLER NASH

See also ORS 81.105 (applies to a contract for construction work performed primarily in 

Oregon). 

Washington 

By contrast, parties to a contract in Washington may agree to have their disputes brought 

in any otherwise proper county or venue. See Keystone Masonry, Inc. v. Garco Constr., Inc., 

135 Wn. App. 927, 147 P.3d 610 (2006) (public policy favors enforcement of forum-selection 

clauses in contracts). 

8. Delay Damages 

Oregon 

Historically, Oregon law prohibited delay damages in all construction contracts. 

Oregon's legislature recently passed a law against delay damages, ORS 279C.315, applicable 

only to public works projects. Generally, terms waiving or releasing delay damages are 

enforceable in private contracts. 

Washington 

Washington's delay damages law, RCW 4.24.360, applies to all construction contracts 

(public or private) and prohibits contractual waivers of delay damages. RCW 4.24.360 states: 

Construction contract provision waiving, releasing, etc., rights of contractor, 

etc., to damages or adjustment for nnreasonable delay caused by contractee, 

etc. - Declared void and unenforceable - Exceptions. 

Any clause in a construction contract, as defined in RCW 4.24.370, which 

purports to waive, release, or extinguish the rights of a contractor, subcontractor, 

or supplier to damages or an equitable adjustment arising out of unreasonable 

delay in performance which delay is caused by the acts or omissions of the 

contractee or persons acting for the contractee is against public policy and is void 

and unenforceable. 

This section shall not be construed to void any provision in a construction 

contract, as defined in RCW 4.24.370, which (1) requires notice of delays, 

(2) provides for arbitration or other procedure for settlement, or (3) provides for 

reasonable liquidated damages. 

Note that contractors and subcontractors must follow strict notice and dispute-resolution 

procedures in order to claim delay damages. Even a contract containing intricate disputeresolution 

procedures to obtain delay damages does not violate the "no damage for delay" 

provisions ofRCW 4.24.360. See Absher Constr. Co. v. Kent Sch. Dist. No. 415,77 Wn. App. 

137,890 P.2d 1071 (1995). 

8 

'. 

MILLER NASH

9. Sales Tax Issues 

While sales tax is not an issue in Oregon, the Washington Department of Revenue (the 

"DOR") has strict rules with respect to its interpretation of sales tax provisions in construction 

contracts. Retail sales tax is collected from businesses selling goods at retail or performing retail 

services (such as custom prime construction). Such businesses must collect and remit sales tax 

on their total charges (unless a specific exemption applies), including charges for permits and 

other fees, labor, profit, materials, and charges for subcontractors. The general rule is that sale 

tax is applied to the gross contract price (no deduction of costs incurred) and that all billing 

invoices must separately state the sales tax. If the contract includes a retainage provision, sales 

tax must be computed before deducting retainage amounts. 

The DOR will presume that a quoted contract price does not include sales tax unless the 

tax is separately stated and itemized. RCW 82.08.050. This is true even if the parties know and 

agree that a quoted contract price includes sales tax; if the tax is not separately stated, the DOR 

will collect the amount of tax owed on the gross contract price. 

A simplistic example of contract language that would be construed as separately stating 

the amount of sales tax as follows: "The contract price is $100,000 plus $5,000 sales tax." Even 

if applications for progress payments do not separately state the sales tax, the DOR will construe 

such a contract as having separately stated the tax. Alternatively, if the contract states a total 

price "tax included" but the applications for payment separately state the amount of sales tax, the 

DOR will construe the contract as having separately stated the tax. But if a contract states, "The 

contract price is $105,000, tax included" without further supporting documentation, the DOR 

will collect sales tax based on a gross contract price of $1 05,000. 

The following is an example of contract language addressing the treatment of sales tax: 

The Owner shall pay to the Contractor separately with each progress payment and 

with the final payment all Washington State sales tax ("WSST") due on those 

payments. The Contractor shall (a) identify the amount ofWSST as a separate 

line item on its Applications for Payment and (b) remit to the Washington State 

Department of Revenue the amount received from the Owner for payment of 

WSST. Although not included as part of the Guaranteed Maximum Price, the 

Contractor shall show WSST on the Schedule of Values as a separate line item. 

To the maximum extent possible, the Contractor shall avoid paying WSST and 

shall obtain a reseller permit from the Washington Department of Revenue. 

Notwithstanding the foregoing, the Contractor shall be responsible for paying 

WSST due on equipment and tools purchased by the Contractor and not 

incorporated into the Project, and such amounts may be included in the Cost of 

the Work. 

10. Prompt-Pay Requirements 

No specific statute in Washington applies to private contract payment provisions or 

prescribes the frequency of payments. On private contracts in Oregon, ORS 701.625 requires 

9 

MILLER NASH

payments on a construction contract to be made on a 30-day cycle except after very specific 

notice provisions are followed allowing the parties to contract for any alternative payment cycle. 

ORS 701.625 provides in relevant part: 

Progress payments 

(1) By mutual agreement with an original contractor, an owner may make 

progress payments to the original contractor on a construction contract that is 

anticipated to last less than 60 days. An owner shall make progress payments to 

the original contractor on all other construction contracts. Progress payments 

shall be made on the basis of a certified billing or estimate for the work performed 

and the materials or products supplied during the preceding 30-day billing cycle, 

or an alternate billing cycle as stated in the construction contract. Ifbillings or 

estimates are to be submitted in alternate, rather than 30-day billing cycles, the 

construction contract shall specify the alternate billing cycles in a clear and 

conspicuous manner as prescribed in subsection (2) of this section. Except as 

provided in subsection (3) of this section, the owner shaH make progress 

payments to the original contractor within 14 days after the date the billing is 

submitted pursuant to subsection (4) of this section. 

(2) A construction contract may provide for an alternate billing cycle if the plans 

and specifications specifically set forth that there is an alternate billing cycle and 

the owner provides for each page of plans and specifications a statement 

substantially similar to the following statement: 

Notice of Alternate Billing Cycle 

The contract will allow the owner to require the submission of billings or 

estimates in billing cycles other than 30-day cycles. Billings or estimates 

for the contract shall be submitted as follows: 

(3) An owner may make progress payments later than 14 days after the date the 

billing or estimate is submitted if: 

(a) The owner is responsible for providing plans and specifications that expressly 

allow in a clear and conspicuous manner an extended payment, defined by a 

specified number of days after the billing or estimate is submitted; and 

(b) The owner provides for each page of plans and specifications a statement 

substantially similar to the following statement: 

Notice of Extended Payment Provision 

The contract will allow the owner to make payment within __ days 

after the date a biliing or estimate is submitted. 

10 

., 

MILLER NASH

Note that both states have prompt pay laws applicable to public contracts. 

11. Conclusion 

Attention to and familiarity with the unique laws applicable to Washington or Oregon 

projects should help a practitioner avoid creating unnecessary risk for clients and ensure 

enforceability of construction contract documents if disputes arise. 

Presented by: 

Gary Christensen 

Miller Nash LLP 

3400 U.S. Bancorp Tower 

Portland, OR 97204-3699 

(503) 205-2435 

Lisa Lui 

Miller Nash LLP 

4400 Two Union Square 

601 Union Street 

Seattle, Washington 98101-2352 

(206) 622-8484 

11 

" 

MILLER NASH

TARAM. MELLOM is an associate attorney with the law finn of Scott • 

Hookland LLP. She practices in the areas of construction law, creditor's rights, and 

general litigation where she represents owners, prime contractors, subcontractors and 

material and equipment suppliers, with an emphasis on public contract disputes. She is 

admitted to practice law in the following jurisdictions: Oregon State Courts (since 2006), 

Federal District Court of Oregon (since 2008), Washington State Courts and the Federal 

District Courts in Washington (since 2010), and Idaho State Courts and the Federal 

District Court of Idaho (since 2010). She is an Executive Committee member of the 

Construction Law Section and a member of the Debtor/Creditor Section of the Oregon 

State Bar. She received a Bachelor of Arts Degree in Finance with honors in 2003 from 

Western Washington University and in 2006 received her law degree with honors from 

the Willamette University - College of Law.

Jeremy T. Vermilyea has nearly 15 years of experience representing general contractors, 

specialty contractors, developers, design professionals and other members of the construction 

industry. He has litigated complex matters in the state and federal courts in Oregon, Alaska, 

Washington, Idaho and California, including public works payment claims, ERISA claims, 

construction delay claims, construction defect claims, and lien and bond claims. He has also 

litigated a variety of other disputes including real property disputes, intellectual property 

disputes, products liability disputes and employment, wage & hour and labor claims. 

Jeremy's experience extends to advising clients on matters of corporate formation, mergers and 

acquisitions, commercial leasing and property acquisition, succession planning, and corporate 

dissolution. This type of work, often provided when clients lack inside counsel, supports the full 

cycle of legal issues that businesses face. 

Jeremy currently serves on the Board of Directors of the Oregon-Columbia Chapter of the 

Associated General Contractors. He recently completed a two-year appointment as the Chapter's 

Counsel to the Board. He has drafted or helped to draft numerous pieces of legislation affecting 

Oregon's construction industry, including Oregon public works statutes, contractor licensing 

statutes, and lien statutes. 

13290467.1

TABLE OF CONTENTS 

EXHIBIT LISTS ........................................................................................................................................................ II 

LEGAL CAUTION .................................................................................................................................................. IV 

I. 

OVERVIEW OF CONSTRUCTION LIEN /PUBLIC IMPROVEMENT BOND RIGHTS ................. 1 

II. 

III. 

OREGON ....................................................................................................................................................... 2 

A. CONSTRUCTION LIEN CLAIMS (PRIVATE PROJECTS) ........................................................................................ 2 

1. Overview .................................................................................................................................................... 2 

2. Checklists ................................................................................................................................................... 2 

3. Entitlement to Construction Lien Rights .................................................................................................... 2 

4. Pre-Claim Notice Requirements ................................................................................................................. 4 

5. Claim Requirements ................................................................................................................................... 9 

6. Post-Claim Requirements ......................................................................................................................... 13 

7. Foreclosure of Lien Claim ....................................................................................................................... 15 

B. OREOON LITTLE MILLER ACT CLAIM (STATE AND LOCAL PUBLIC PROJECTS) .............................................. 16 

1. Checklists ................................................................................................................................................. 16 

2. Entitlement to Bond Claim ....................................................................................................................... 16 

3. Pre-Claim Requirements .......................................................................................................................... 17 

4. Notice Requirements ................................................................................................................................ 17 

5. Post-Claim Notice Requirements ............................................................................................................. 19 

6 Foreclosure a/Bond Claim ...................................................................................................................... 19 

WASHINGTON .......................................................................................................................................... 20 

A. CONSTRUCTION LIEN CLAIMS (PRIVATE PROJECTS) ...................................................................................... 20 

1. Overview .................................................................................................................................................. 20 

2. Checklists ................................................................................................................................................. 20 

3. Entitlement to Construction Lien Rights ................................................................................... ............... 20 

4. Pre-Claim Notice Requirements ............................................................................................................... 22 

5. Claim Requirements ................................................................................................................................. 25 


7. Foreclosure of Lien Claim ....................................................................................................................... 35 

B. WASHINGTON LITTLE MILLER ACT CLAIM (STATE AND LOCAL PUBLIC PROJECTS) ..................................... 37 

1. Overview .................................................................................................................................................. 37 

2. Checklists ................................................................................................................................................. 37 

3. Entitlement to Bond Claim ....................................................................................................................... 37 

4. Pre-Claim Notice Requirements ............................................................................................................... 38 

5. Notice Requirements ................................................................................................................................ 39 


7. Foreclosure of Bond Claim ...................................................................................................................... 41 

PAGE i-OREGON & WASHINGTON CONSTRUCTION LIEN AND BOND LAW 

© 2011 Scott. Hookland LLP

OREGON EXHIBITS 

1. Oregon Construction Lien Checklist 

2. Summary of Steps Necessary to Perfect a Construction Lien in Oregon 

3. Sample Notice of Right to a Lien 

4. Chart regarding "When to Send a Notice of Right to a Lien" 

5. Oregon Public Works Checklist 

6. Summary of Steps Necessary to Perfect an Oregon Public Works Claim 

PAGE ii - OREGON & WASHINGTON CONSTRUCTION LIEN AND BOND LAW 

© 201IScott + Hookland LLP

WASHINGTON EXHIBITS 

A. Construction Lien Checklist 

B. Construction Lien Summary of Steps 

C. Notice to Customer and Department of Labor and Industries Notice 

- "Facts About Construction Liens" 

D. Prime Contractor Posting Requirement 

E. Prec1aim Notice to Owner 

F. Chart Explaining - When to Send Preclaim Notice to Owner 

G. Notice of Furnishing Professional Services 

H. Claim of Lien 

1. Claim of Lien Cover Sheet 

J. Public Works Claims Checklist 

K. Summary of Steps to Perfect Payment Bond Claim 

1. Preclaim Notice of Claim on Payment Bond 

M. Notice of Claim on Payment Bond 

PAGE iii - OREGON & WASHINGTON CONSTRUCTION LIEN AND BOND LAW 

© 2011 Scott + Hookland LLP

Oregon & Washington Construction Lien and Bond Law 

April 22, 2011 

Jeremy T. Vermilyea & Tara M. Mellom 

• USE THIS INFORMATION WITH CAUTION. 

These materials contain general information only, and must not be construed as legal 

advice, or take the place of competent legal counsel. Their purpose is to provide general -- not 

specific -- information on SOME -- but not all -- of the steps and precautions that must be 

considered so that your Oregon and Washington lien or bond claim(s) may be valid and enforced 

if necessary. The Oregon and Washington laws in this area are complicated and your procedures 

and follow-tI-ilough on the preparation of any bid, contract, lien claim or bond claim should be 

checked by your attorney! Also, the history of the construction lien and bond statutes suggests 

that they have been amended on a regular basis by the respective legislature and subject to 

constant interpretation by the courts. As such, the general information contained in these 

materials may be dated. Again, you should seek the advice of competent legal counsel for 

specific situations and advice as to the "then existing" status of the law . 

• Administrative Rules Change Often. 

Unlike the Oregon Revised Statutes ("ORS"), which can be modified by the Oregon 

Legislature when it meets every year, the Oregon Administrative Rules ("OARs") promulgated 

by the Oregon Construction Contractors Board ("CCB") and by other Oregon administrative 

agencies change more frequently. The OARs that are included here are those which the 

applicable agency made available at the time of publication. Changes may well have occurred 

since that time. Contact the relevant agency to obtain the most current OARs. Similarly, the 

relevant Washington administrative rules ("WAC") may also be changed on a regular basis. 

Before you undertake any efforts, you should consult competent legal counsel to 

determine the current state of the law and to receive advice specific to your situation. 

PAGE iv - OREGON & WASHINGTON CONSTRUCTION LIEN AND BOND LAW 


I. OVERVIEW OF CONSTRUCTION LIEN /PUBLIC 

IMPROVEMENT BOND RIGHTS 

Among the first questions to ask about any construction project is: "Is this a public or 

private project" 

The answer to this question will govern not only your bidding and contract requirements 

but whether you have any construction lien or public improvement bond rights. 

In general terms, construction liens are only created and may only be perfected against 

private construction projects. 

If you furnish materials or labor to be used or consumed in the construction of a publiclyowned 

improvement in Oregon or Washington, you do not have a right to lien the government's 

interest in the improvement. See Bank of Idaho v. Malheur Co., 30 Or 420, 423 (1896). The 

definition of "government" interests protected from construction lien claims in Oregon and 

Washington is broad and includes -- but is not limited to -- the federal government, the state, 

state agencies, municipalities, school districts and counties. 

You may, however, be able to perfect a construction lien claim against a private party's 

interest in the government's property -- such as the holders of private leaseholds or easements. 

(Often these private interests exist at airports such as PDX). 

Because of the prohibition on construction liens on public projects, Oregon and 

Washington statutes generally provide that the prime contractor must furnish a payment bond in 

order to secure payments due to suppliers and subcontractors. 

PAGE 1 - OREGON & WASHINGTON CONSTRUCTION LIEN AND BOND LAW 


II. OREGON 

A. CONSTRUCTION LIEN CLAIMS (PRIVATE PROJECTS) 

1. Overview 

In general tenns, a construction lien is nothing more than a security interest in real 

property owned by a private party. A construction lien secures payment of a debt due to a person 

who provided labor, services, materials or equipment that were used or consumed in the 

construction of the improvement located on the real property against which the lien is claimed. 

Real property for purposes of construction liens includes both the land and the associated 

improvements. 

2. Checklists 

Exhibit 1 and Exhibit 2 to these materials are checklists which are intended to be used as 

general guides to assist you in maintaining, perfecting and foreclosing your lien rights in Oregon. 

However, please use these checklists with caution, as they do not address every potential factual 

scenario regarding potential lien rights. 

3. Entitlement to Construction Lien Rights 

a) Type of Project 

As discussed above, you are only entitled to assert construction lien rights against 

property owned by a private party. Ifthe property is wholly owned by a governmental entity you 

may not assert a construction lien, instead refer to the materials on Oregon Little Miller Act 

claims. You may, however, be able to perfect a construction lien claim against a private party's 

interest in government's property -- such as the holders of private leaseholds or easements. 

(Often these private interests exist at airports like PDX). If you are unsure as to the ownership of 



a particular project, either consult legal counselor a title company for assistance. 

b) Who is Your Customer 

There is no limit on the tier of subcontractor you must be to assert a consITUction lien 

claim on a private project, provided that you do so at the request of the property owner or agent 

or construction agent of the owner. "Construction agent" is defined as a contractor, architect, 

builder or other person having charge of construction or preparation. ORS 87.005(3). 

c) Are You Registered as a Contractor 

If you are acting as a contractor, as defined by ORS Chapter 701, without being properly 

licensed with the Oregon Construction Contractors Board ("CCB"), you will in most cases be 

denied all construction lien rights. ORS 701.131. Therefore, it is imperative that prior to 

contracting for any work requiring licensure as a contractor, you become licensed with the CCB 

and timely renew your registration prior to any lapse thereof. 

d) Is Your Customer Registered as a Contractor 

Effective January 1, 2011, a new provision was ,added to the Construction Lien Law 

(ORS Ch. 87.001- to 87.060 and 87.075 to 87.093). 

The new provision requires sub-tier 

contractors and suppliers to confinn, on projects involving existing owner-occupied residences, 

that their customers are properly licensed in order to maintain lien rights. House Bill 3689 (now 

known as Chapter 77, Oregon Laws 2010) reads in pertinent part; 

SECTION 3. (1) A subcontractor or a person that provides labor, materials or equipment for a project to 

renovate, remodel, repair or otherwise alter an existing owner-occupied residence may not perfect a claim 

oflien against the owner's property under ORS 87.035 ifthe subcontractor or the person provided or 

contracted to provide services, labor, materials or equipment to a contractor that was unlicensed at the 

earlier of the following times: 

(a) The time the subcontractor or the person first contracted with the contractor for the project; or 

(b) The time the person first delivered labor, materials or equipment to the project site. 

(2) Subsection (1) ofthis section does not apply if the services, labor, materials or equipment is purchased 

with cash or consumer credit. 

(3) The Construction Contractors Board may notifY a person at the person's request ofthe status of a 

contractor's license using any means the board uses to notifY a contractor of the contractor's license status. 

The board may charge the person a fee in an amount the board specifies by rule for the cost of providing 


© 2011 Scott. HookIand LLP

the notice to the person. 

(Emphasis added). 

Similar to Washington, if you are contracting with either a contractor or subcontractor, 

who must be properly licensed as a contractor (ORS 701.021), then your lien rights now depend 

on whether your customer was properly licensed as a contractor at the earliest of: (1) the time 

you first contracted for the project, or (2) the first delivery of labor, materials, or equipment to 

the project. NOTE: It is insufficient to have reviewed the status of a contractor's license upon 

the opening of a general credit account. Rather, the licensure review must occur either at: (1) the 

time of contracting for the project, or (2) upon the first delivery to the project, whichever is 

earHer. 

However, this new licensure provision only applies to the provision of labor, materials or 

equipment for a project to renovate, remodel, repair or otherwise alter an existing owneroccupied 

residence. 

To permit compliance with the mandatory licensure review, the legislature provided that 

the CCB may notify a person, at that person's request, of the status of a contractor's license. In 

providing this service, the CCB may charge a fee for the cost of providing the notice. Currently, 

one can review a contractor's license free of charge at the following web address: 

https://ccbed.ccb.state.or.us/ccb frames/consumer info/ccb index.htm. 

4. Pre-Claim Notice Requirements 

In Oregon, there are two basic forms of pre-claim notices that may be required in order to 

preserve a person's ability to record a valid construction lien: a "Notice of Right to a Lien" and 

an "Information Notice To Owner." Failure to give these notices at the appropriate time to the 

appropriate persons may seriously impact or defeat a person's lien rights. 

The following 

discussion examines these pre-daim issues. 



a) Notice of Right to a Lien 

A Notice of Right to a Lien does not guarantee payment. A Notice of Right to a Lien 

puts the owner(s) and/or mortgagee(s) (lender) of the property on notice that you are providing 

labor, material or equipment to the property and may perfect a claim of lien if your bill is not 

paid. Among the important functions that a Notice of Right to a Lien serves for the potential lien 

claimant are: 

If required under the circumstances by Oregon law, the notice preserves a person's 

ability to recover a valid lien that may otherwise be lost (ORS 87.021(3)); 

If the person supplies materials, it preserves certain "priority" rights the person may 

have against any mortgagees who have an interest in the property (ORS 87.025(3)); 

and 

The notice may assist in establishing the right to a lien against absentee owners, such 

as landlords or contract vendors, who must have knowledge of the improvement 

(ORS 87.030). 

Yet delivery of a Notice of Right to a Lien also gives rise to certain important rights of 

the owner or mortgagee that require the potential lien claimant's attention. Those rights include: 

The right of the owner to request certain information that if not provided within the 

required time period, may result in the loss of the ability to recover attorney fees if an 

action to enforce the lien is necessary (ORS 87.027); and 

The right of the mortgagee to request certain information that if not provided within 

the required time period, may result in the loss of priority over the mortgagee if an 

action to enforce the lien is necessary (ORS 87.025(4)). 

The Notice of Right to a Lien is the appropriate pre-claim notice when the contractor 

providing the notice has not contracted (is not in privity) with, the owner of the subject real 

property and improvement(s). The Notice of Right to a Lien is a statutory form found at ORS 

87.023. A sample Notice of Right to a Lien is attached as Exhibit 3. 

All Notices of Right to a Lien must be in writing, delivered in person or delivered by 

registered or celiified mail to the owner(s) and mortgagee(s). ORS 87.018. However, upon 



compliance with the delivery requirements, an owner or mortgagee may not defeat a person's 

lien rights simply by claiming ignorance. Morse Bros., Inc. v. Kemp Construction, 147 Or App 

217 (1997). 

The Notice of Right to a Lien in the form set forth by ORS 87.023 may be given at any 

time during the progress of the improvement, but the person's right to perfect a claim of lien is 

restricted to materials, equipment, services and labor provided after a date which is eight (8) 

days, not including Saturdays, Sundays and other holidays as defined in ORS 187.010, before 

such notice is delivered or mailed. 

To further assist in determining whether or not a Notice of Right to Lien is required see 

the chart attached as Exhibit 4 (entitled "When to Send a Notice of Right to a Lien"). 

and Notice of Procedure 

A contractor who contracts for work with the owner of a "residential structure" or the 

unit owner of a "zero':'lot-line dwelling" is required to provide an Information Notice To Owner, 

Consumer Protection Notice, and Notice of Procedure in the forms adopted by the Oregon CCB 

at the required time. See ORS 87.093 and ORS 701.330. Additionally, the contractor must also 

have a written contract. See ORS 87.037. Failure to provide the Information Notice to Owner or 

maintain a written contract under such circumstances will result in the loss of the contractor's 

lien rights. 

The Information Notice to Owner, Consumer Protection Notice, and Notice of 

Procedure forms are required to be given by contractors who contract with owners for residential 

construction or improvements when such contract is in excess of $2,000 and must be given in the 

forms adopted by the CCB. ORS 87.093 and ORS 701.330. The applicable statutory definitions 

of residential construction or improvements are: 



(a) "Residential construction or improvement" means the original construction of residential property and 

the repair, replacement, remodeling, alteration or improvement of residential property. 

(b) "Residential construction or improvement contract" means a written agreement between an original 

contractor and an owner for the performance of a residential construction or improvement and all labor, 

services and materials furnished and performed under the agreement. 

ORS 87.093(8). 

The Information Notice to Owner must be delivered to the property owner personally, by 

registered or certified mail, or by first class mail with a certificate of mailing. ORS 87.093(3). 

The other two notices are only required to be delivered to the property owner and there is no 

required means of delivery, except that proof of delivery must be obtained. Once delivered, the 

contractor must maintain proof of delivery of all three notices, for a period of two (2) years after 

the contract was entered into. Proof of delivery ofthe notices shall include, but not be limited to: 

(a) A signed copy of the notices; 

(b) An unambiguous phrase in the written contract that acknowledges receipt of 

the notices and that is initialed by the owner; or 

(c) Copies of the written contract, if the notices are fully contained in the written 

contract. 

When the contract is initially in excess of $2,000 and in writing, the notices must be 

given at the time the contract is signed by the owner or owner's agent. If the original contractor's 

agreement is oral or initially under $2,000, the notices are required to be mailed - or otherwise 

delivered - within five (5) days after the contract is made or five (5) days after the original 

contractor knows or reasonably knows the contract price will exceed $2,000, respectively. In 

addition, the notices must be provided to the "first purchaser of residential property constructed 

by the contractor and sold within the 7S-day period immediately following the completion of 

construction. " 

The failure to provide a required Information Notice to Owner will prevent the original 


© 201 I Scott. Hookland LLP

contractor from recording a valid lien. In addition. an original contractor who fails to provide the 

required notices may be suspended or fined by the CCB. 

Thus, a prudent contractor will be certain to keep records proving he provided the 

Information Notice to Owner, Consumer Protection Notice, and Notice of Procedure. One way 

to do this is to keep copies of the notices that were signed and dated by the homeowners. Absent 

action such as this, the contractor may face a "he said/she said" dispute with the homeowner 

about whether the notices were timely and properly provided. 

c) Failure to Have Written Contract Results In No Lien 

Rights on Residential Structure or Zero Lot Line Dwelling 

Projects 

Oregon law requires any contract with the property owner or first purchaser of a 

residential structure or unit owner or first purchaser of a zero-lot-line dwelling that has an 

aggregate price of more than $2,000 to be in writing. These terms are defined in ORS 701.005 

as follows: 

"Residential structure" (a) Means: 

(A) A residence that is a site-built home; 

(B) A structure that contains one or more dwelling units and is four 

stories or less above grade; 

(C) A condominium, rental residential unit or other residential 

dwelling unit that is part of a larger structure, if the property interest in the 

unit is separate from the property interest in the larger structure; 

(D) A modular home constructed off-site: 

(E) A manufactured dwelling; or 

(F) A floating home as defined in ORS 830.700. 

"Zero-lot-line dwelling" means a single-family dwelling unit constructed 

in a group of attached units in which: 

(a) Each attached unit extends from foundation to roof with open space on 

two sides; and 

(b) Each dwelling unit is separated by a property line. 

The applicable statute provides: 



701.305 Requirement for written contract with residential property owner; ***. (1) A contractor may 

not perform work to construct, improve or repair a residential structure or zero-lot-line dwelling for a 

property owner without a written contract if the aggregate contract price exceeds $2,000. If the price of a 

contract was initially less than $2,000, but during the course of performance the contract exceeds that 

amount, the contractor shall mail or otherwise deliver a written contract to the property owner not later than 

five days after the contractor knows or should reasonably know that the contract price will exceed $2,000. 

Failure to have a written contract will not void the contract. 

Failure to obtain a written contract means the contractor may not record a valid lien! The 

applicable lien statute provides: 

ORS 87.037 Prohibition against claim of lien. An original contractor may not claim a lien arising 

from the improvement of real property if a written contract for the work is required by ORS 701.305 and 

the contractor does not have a written contract. 

Many questions remain unanswered. For example, what if the owner refuses to sign the written 

agreement. Does an unsigned agreement satisfy ORS 87.037 What if the owner claims he 

never saw the written agreement Further, does a contractor have to comply with the specific 

requirements of ORS 701.305(2) that contain a number of required terms or does "any" writing 

satisfy the pre-lien requirement ORS 87.037 seems likely to cause uncertainty for the near 

future. 

5. Claim Requirements 

a) Time Period to File a Claim of Lien: 75 Calendar Days 

In Oregon, a person claiming a construction lien for providing labor, renting equipment 

or furnishing materials, must file his/her lien within 75 days after he has ceased to provide labor, 

equipment or materials or 75 days after completion of construction, whichever is earlier! 

To count the 75 days, count by calendar days - weekends and holidays count towards 

the 75 day deadline! 

In other words, unless any other time period in construction lien law 

expressly excludes Saturdays, Sundays and other legal holidays (as with the Notice of Right to a 

Lien procedure under ORS 87.021(1», you must include every day when you are counting the 

number of days. If the deadline falls on a Saturday, Sunday or another legal holiday on which 



the recording office is closed, your lien rights are not extended - you must record your lien 

earlier! This time period -- like other time periods in the construction lien law -- cannot be 

extended simply because the owner says it is "okay" to file a lien after the 75 day period. 

To determine what day you ceased to provide labor, equipment or materials, do not 

rely upon small amounts or repairs. A person cannot postpone hislher statutory deadline for 

filing a lien claim by the performance of "trifling matters" or by repairing his own substandard 

work. See Fox & Co. v. Roman Catholic Bishop, 107 Or 557 (1923). In other words, use a day 

where a "substantial" amount of labor, materials or equipment was supplied or delivered to the 

project site. 

To determine whether completion of construction has occurred or not, look for a 

number of events. The completion of construction occurs when: 

(1) the improvement is substantially completed; or 

(2) a valid completion notice is posted; or 

(3) the improvement is abandoned. ORS 87.045(1). 

The method of detem1ining when construction is substantially completed is similar to that used 

to determine whether a contract has been substantially completed. The substantial completion of 

construction implies the substantial completion of all contracts. 

A factor indicating when a contract is substa.'1tially completed is the date an oV.'ller pays 

a contractor in reliance on the contractor's work being completed. See Schade v. Alton, 61 Or 

187, 189 (1912). Also, deteTI11ining whether a supplier has removed his tools from the 

construction site is a relevant inquiry, Dallas Lumber & Supply Co. v. Phillips, 249 Or 58 

(1968), while assessing whether the supplier's efforts have been approved by a govemmental 

inspector may not be. See Coffey v. Smith, 52 Or 538,542 (1908). 



) Contents of Lien Claim (Five Elements) DRS 87.035. 

Oregon construction liens must be recorded by the recording officer of the county in 

which the project or some portion thereof is located. ORS 87.035(2). The county office is 

generally called the "recorders office" or "office of deeds and records." 

Generally, all Oregon construction liens must contain five elements: 

(a). A true statement of demand, 

(b). the name of the owners of the realty and improvements, 

(c). the name of the person who hired the claimant, 

(d). a description ofthe property, and 

. (e). proper verification under oath (generally before a notary public). 

ORS 87.035(3-4). 

Each requirement is discussed below. 

(1) A True Statement of Demand, After Deducting Credits and Offsets 

Essentially this element is a question of "how much is owed". If true, a notation which 

sets forth only the balance claimed as due by the person is adequate as a statement of demand. 

See, ~ McCormack v. Bertschinger, 115 Or 250 (1925). 

Yet this simple requirement can 

involve many potential issues. The following describes some of the potential issues and pitfalls. 

Non-lienable items and potential failure o(lien. 

If a claim of lien contains both lienable and non-lienable items which are solely noted in 

a lump sum balance that cannot be segregated without the aid of extrinsic evidence, such a lien 

may be fully unenforceable. 

An example of non-lienable charges may include, for example, 

charges already paid or charges for labor or materials not incorporated into the project (i.e. 

materials never provided, or items not fully consumed in construction such as equipment). 

Actual incorporation of materials. 

Another issue is the requirement that the materials actually be incorporated into an 

"improvement" before the charges for those materials become "lienable." Generally, proof of 

PAGE 11- OREGON & WASHINGTON CONSTRUCTION LIEN AND BOND LAW 


delivery to the project site creates the rebuttable presumption that the materials were actually 

incorporated into an improvement on the project. Watkins v. St. Charles Mem. Hospital, 279 Or 

327,331 (1977). 

Subcontractors 

A lien claimant is not required to deduct from his lien claim the amount he owes to 

subcontractors who are entitled to file additional liens on their own behalf. Jersey & Son v. 

Bailey Construction Co. 262 Or 491, 494 (1972). 

Of course, however, payments to 

subcontractors must be credited off the balance of the lien. 

Practice TiD: In preparing the claim of lien, attach an exhibit that segregates out 

the sums owed to the greatest degree possible to permit line item deletion of 

possible non-lienable items in the lien. This can often be done by attaching an 

exhibit reciting (for example) invoice numbers and charges or delivery receipts 

associated with the various charges. 

(2) Name of Owner(!,) 

The lien claim need only contain the name(s) of the owner(s) at the time of the lien is 

filed. See ~ Paget v. Peters, 133 Or 608, 611-12 (1930). A misnomer of an owner's name - 

such as incorrectly stating that it is an assumed business name, see McGregor Co. v. Heritage, 

291 Or 420,424-25 (1981) (agricultural services lien) -should not invalidate the lien if the owner 

or third person is not prejudiced thereby. 

(3) Name of Your Customer 

The lien must include the name of the person by whom the claimant was employed, to 

whom slhe furnished the materials or rented the equipment, or by whom contributions are owed. 

The failure to correctly state the name of a claimant's employer may invalidate the lien only if 

adverse parties are misled by the mistake. See James A. C. Tait & Co. v. Stryker, 117 Or 338 

(1926). 



(4) Property Description 

A lien claim is also required to state "(a) description of the property to be charged which 

is sufficient for identification, including the street address if known." Although stating the legal 

description of the property satisfies the requirements of the construction lien law, no requirement 

dictates that the property's legal description be stated. C-3 Builders, Inc. v. Krueger, 56 Or App. 

502, 505-06 (1982). Rather, if the lien claim describes the improvement and land in a manner 

that enables persons ffulliliar with the area to identify them with reasonable certainty, the lien's 

description meets statutory muster. See e.g. Kollock & Co. v. Levde 77 Or 569,575 (1915). 

(5) Verification 

A lien claim must show that it was verified under oath by "the person filing or of some other 

person having knowledge of the facts." Verification of a construction lien is achieved when a 

notary public signs and seals a statement that the person filing the lien has personally appeared 

before him and under oath and stated that he has knowledge of the facts relative to the lien claim 

and that all statements in the claim are true as he verily believes. A lien claim which is not 

verified is invalid. Knowingly swearing a false lien subjects a person to criminal penalties under 

ORS 162.075. ORS 87.035(4). 

6. Post-Claim Requirements 

Once the construction lien is recorded, a lien claimant must prompt provide certain postclaim 

notices and be aware that an action to foreclose the lien must be commenced within 120 

calendar days after the date the lien was recorded or the lien expires and is invalid. 

a) Post-Claim Notices 

Under Oregon lien law, striCt compliance with post-claim notice requirements 1S 

exceedingly important to maintain a lien claimant's ability to recover attorney fees III a 



foreclosure lawsuit. There are two post-claim notices: 

(1) Notice of Filing Lien Claim (Mail Within 20 Days of Recording 

Lien) 

In general terms, after a person files a lien, slhe must hand deliver or mail, within twenty 

calendar days after the lien is filed, a written notice with a copy of the lien to all the owners and 

mortgagees that a lien claim has been filed. ORS 87.039. If mailed, the written notice must be 

mailed by certified or registered mail. 

(2) Notice of Intent to Foreclose (Deliver More Than 10 Days Before 

Commencing Action To Foreclose Lien) 

At least ten (10) days prior to filing the foreclosure action, the claimant must deliver a 

notice to all owners and mortgagees of the claimant's intent to foreclose the construction lien. 

ORS 87.057. 

Notice of a lien claimant's intent to foreclose must be given to every mor1gagee 

regardless of whether such mortgagee is a necessary party to the foreclosure. Molalla Pump v. 

Chaney 42 Or App 789, 792 (1979). 

Practice Tip: Many practitioners combine the notice of filing the lien claim and 

the notice of intent to foreclose. Some sample language acceptable for use in 

non-FDCPA situations is: 

You are hel"eby notified that on [date], [claimant} recorded 

a Claim of Construction Lien in the amount of [$--1, for labor, 

materials, equipment and/or services used in the construction of 

the improvement commonly known as [project name/address). A 

true and correct copy of the Claim of Lien is attached to this 

notice. 

You are hereby further notified pursuant to DRS 87. 057 

that, unless payment in full is made within ten (10) days after the 

date of delivery of this notice, [claimant] intends to commence suit 

to foreclose the enclosed lien. 

Payment in the form of a cashier's check, cash or certified check 

should be made payable to [claimant] and delivered to the 

undersigned at the address shown above. 



Take care, however, once the notice of intent to foreclose has been provided, to respond to any 

owner requests for information discussed as follows. 

(3) Pitfall: Owner Requests for Information. 

If a notice of intent to foreclose has been provided and an owner makes a request for 

information, the lien claimant must respond to that request within five calendar days. ORS 

87.057. Generally the written request will seek a "statement of contractual basis" or "a list of 

materials and supplies and the charges therefore." Failure to provide this information within the 

five calendar day period may result in the loss of the lien claimant's ability to recover attorney 

fees pursuant with ORS 87.060(5) in an action to foreclose the lien. 

"'7 

I. Foreclosure of Lien Claim 

A lien foreclosure action must be filed in the circuit court in which the lien was recorded 

no later than 120 days after recording of the claim of lien - otherwise the lien expires and is of 

no further effect. ORS 87.055. 

If a lien claimant pleads and proves compliance with Oregon lien law's post-claim notice 

requirements, the lien claimant can seek recovery of its attorney fees independent of the lien 

claimant's right (or lack thereof) to recover under its contract. ORS 87.060(5). 


© 20]] Scott. Hookland LLP

B. OREGON LITTLE MILLER ACT CLAIM (STATE AND LOCAL 

PUBLIC PROJECTS) 

1. Checklists 

Exhibit 5 and Exhibit 6 to these materials are checklists which are intended to be used as 

general guides to assist you in maintaining and foreclosing your bond claim rights on Oregon 

state and local public projects. However, please use these checklists with caution, as they do not 

address every potential factual scenario regarding potential bond claims rights. 

2. Entitlement to Bond Claim 

In general terms, Little Miller Act statutes were adopted for public work projects in lieu 

of a supplier's construction lien rights on private projects. See ~, Multnomah Co. v. United 

States Fidelity & Guaranty Co., 87 Or 198, 203 (1918). A person claiming to have supplied 

labor, materials or equipment pursuant to an Oregon public works contract (including state, 

county, municipal, etc.) and claiming an entitlement to payment under the bond, has a right of 

action on the contractor's bond, cashier's check or certified check only if: 

(1) You have not been paid in full; and 

(2) You must give written notice of the claim to the contractor who furnished the 

bond or check and also the public body or state agency that let the contract; and 

(3) The notice of claim shall be sent by registered or certified mail or hand delivered 

no later than 180 days after the day you last provided labor or furnished materials. The 

notice may be sent or delivered to the contractor at any place the contractor maintains an 

office to conduct business or at the residence of the contractor. 

Information concerning the existence of the bond, the name of the bonding company and 

sureties can generally be obtained from the clerk or contracting officer of the public body that let 

the contract. 

The contractor who has placed an order should also be able to furnish this 

information (although often they are not willing to provide this infoffilation as they would only 



e helping you make a claim against their bond). 

bond. 

3. Pre-Claim Requirements 

There are no pre-claim requirements for making a claim on an Oregon Little Miller Act 

4. Notice Requirements 

In Oregon, to perfect a Little Miller Act claim, notice must be given by all protected 

parties, except claims for contributions to an employee benefit plan, within the following 

deadlines: 

120 days after their last substantial day on project if the public contract was first 

advertised or, if not advertised, entered into BEFORE May 26, 2009 or 

180 days after their last substantial day on project if the public contract was t1rst 

advertised or, if not advertised, entered into ON OR AFTER May 26, 2009. 

See ORS 279C.605. 

For selecting the day from which the deadline is counted, in City of The Dalles v. 

D'Electric Co., Inc., 105 Or App 46 (1990), the Oregon Court of Appeals held that replacement 

or corrective materials can be used to calculate the notice timing requirements under the Little 

Miller Act. This is different than under Oregon's construction lien statutes which generally do 

not permit "repair" work to qualify as the valid last day. Under Oregon's Little Miller Act, 

notice of a claim must be given by all claimants, no matter what tier. 

a) Claim Form 

A general form of notice is provided in ORS 279C.605(3): 

To (here insert the name of the contractor or subcontractor and the name of the public 

body): 


© 201 I Scott. Hookland LLP

Notice hereby is given that the undersigned (here insert the name of the claimant) has a 

claim for (here insert a brief description of the labor or materials performed or furnished 

and the person by whom performed or furnished; if the claim is for other than labor or 

materials, insert a brief description of the claim) in the sum of (here insert the amount) 

dollars against the (here insert public works bond or payment bond, as applicable) taken 

from (here insert the name of the principal and, if known, the surety or sureties upon the 

public works bond or payment bond) for the work of (here insert a brief description of the 

work concerning which the public works bond or payment bond was taken). Such 

material or labor was supplied to (here insert the name of the contractor or 

subcontractor). 

(here to be signed) 

It is recommended that claimants include as much information as they have about the project. 

This information can include the following: (1) address of the claimant, (2) title of project and 

contract date, and (3) name of the bonding company. 

b) Service 

ORS 279C.600(1) governs who must receive an Oregon Little Miller Act Claim: 

First, the contractor who acquired the bond must always receive the notice. The 

statutory form appears to give the option of sending the notice to "the contractor or 

subcontractor" - again, the contractor who provided the bond is who needs to receive the notice. 

Second, the public body must also receive notice. If the public works contract is with a 

state agency, notice must also be given to the state agency. The statute does not specify "who" at 

the state agency is supposed to receive the notice. The legislative history of the bill suggests that 

it is incumbent upon the state agency to route the notice to the appropriate person after it is 

received. Previously, notices sent to public bodies other than a state agency had to be addressed 

to the "clerk or auditor." This requirement has been stricken from the statute. 

Notice to the surety is not mandated in order to perfect a claim, but providing the notice 

may commence the six month time period for the recovery of attorney fees against the surety. 

ORS 742.061. 

See Dockins v. State Farm Ins. Co., 329 Or 20 (1999) (providing a broad 



interpretation of what is a "proof of loss" on a claim that triggers the six -month period). 

The Oregon Supreme Court has noted, School Dist. No.1 v. Rushlight & Co., 232 Or 

341,351-53 (1962), that actual notice ofa claim may be sufficient to perfect a Little Miller Act 

claim if written notice reaches the appropriate governmental official even though the claimant 

did not present or filed it with that person. Rushlight predates the applicable amendments to 

ORS Chapter 279C that now mandate written notice to the contractor and the contracting agency. 

Thus, for Rushlight to apply now, both the contractor and the appropriate governmental official 

will have to have eventually received the notice. 

5. Post-Claim Notice Requirements 

There is no post-claim notice requirements for either state or local public works claims. 

6. Foreciosure oi Bond Ciaim 

An action on the Oregon Little Miller Act bond must be instituted no later than two (2) 

years after the person last provided labor or materials -- not two years from when the notice was 

given! 



III. 

WASHINGTON 

A. CONSTRUCTION LIEN CLAIMS (PRIVATE PROJECTS) 

1. Overview 

In general terms, a construction lien is nothing more than a security interest in real 

property owned by a private party. A construction lien secures payment of a debt due to a person 

who provided labor, services, materials or equipment that were used or consumed in the 

construction of the improvement located on the real property against which the lien is claimed. 

Real property for purposes of construction liens includes both the land and the associated 

improvements. 

2. Checklists 

Exhibit A and Exhibit B to these materials are checklists w:bich are intended to be used 

as general guides to assist you in maintaining, perfecting and foreclosing your lien rights in 

Washington. However, please use these checklists with caution, as they do not address every 

potential factual scenario regarding potential lien rights. 

3. Entitlement to Construction Lien Rights 

a) Type of Project 

As discussed above, you are only entitled to assert construction lien rights against 

property owned by a private party. Ifthe property is wholly owned by a governmental entity you 

may not assert a construction lien, instead refer to the materials on Washington Little Miller Act 

claims. You may, however, be able to perfect a construction lien claim against a private party's 

interest in government's property -- such as the holders of private leaseholds or easements. 

(Often these private interests exist at airports like SEATAC). 

If you are unsure as to the 

ownership of a particular project, either consult legal counselor a title company for assistance. 



) Who is Your Customer 

There is no limit on the tier of subcontractor you must be to assert a construction lien 

claim on a private project, provided that you do so at the request of the property owner or agent 

or construction agent of the owner. "Construction agent" is defined as any registered or licensed 

contractor, registered or licensed subcontractor, architect, engineer, or other person having 

charge of any improvement to real property. RCW 60.04.011(1). 

c) Are You Registered as a Contractor 

If you are acting as a contractor, as defined by RCW Chapter 18.27, without being 

properly registered with the Washington Department of Labor and Industries ("Department"), 

you will in most cases be denied all construction lien rights. RCW 18.27.080. Therefore, it is 

imperative that prior to contracting for any work requiring registration as a contractor, you 

become registered with the Department and timely renew your registration prior to any lapse 

thereof. 

d) Is Your Customer Registered as a Contractor 

If you are a subcontractor on a private project, your construction lien rights depend on 

whether your customer is registered during the time period you began providing work. RCW 

60.04.041. To maintain your construction lien rights, you must be able to prove that before you 

contracted with your customer, you customer was duly and properly registered for the entire 

period when the labor, professional services, material, or equipment was to be furnished. Your 

safest manner of proceeding as a subcontractor on any private project is therefore to check your 

customer's registration, by obtaining a copy of its certificate of registration showing it is 

currently registered prior to beginning work and keep evidence of this reference check in your 

files. 




a) For Prime Contractors 

(1) Notice to Customer 

A prime contractor contracting directly with the owner or the owner's agent must provide 

a "Notice to Customer" when working on the following projects: 

1) The repair, alteration, or construction of four (4) or fewer residential units or 

accessory structures on residential property when the bid or contract price totals 

$1,000 or more; or 

2) The repair, alteration, or construction of a commercial building when the bid or 

contract price totals between $1,000 and less than $60,000. 

RCW 18.27.114. 

The Notice to Customer must be provided to the owner before starting construction. The 

Notice to Customer is not statutorily required to be served in any particular fashion, however, the 

prime contractor is required to retain a signed copy ofthe Notice to Customer for a minimum of 

three (3) years. The failure to provide and maintain an acknowledged Notice to Customer 

will result in loss of lien rights! Therefore, it is recommend that you provide the Notice to 

Customer to the owner at the time of contracting, retain a signed copy of the Notice to Customer 

in your job file, and include a provision in the body of the contract whereby the owner 

acknowledges receipt thereof in advance of starting construction. This method of service will 

help ensure that you maintain your lien rights. 

RCW 60.04.255 also requires prime contractors to provide an informational notice about 

construction lien laws and available safeguards therefrom, issued by the State Attorney General's 

office and the Department. This notice is to be provided simultaneously with the Notice to 

Customer. It is recommended that you simply combine the two notices into one larger notice 

and serve both notices as discussed above. 



Attached hereto as Exhibit C is a sample combined Notice to Customer and Department 

informational notice. It is recommended that you check the Department's website regularly for 

changes to both required notices. 

(2) Posting Requirement 

On any construction project costing more than $5,000, the prime contractor is required to 

post a notice on the project site for the duration ofthe project. The notice must be legible, posted 

in plain view on the construction project, and contain the following information: 

(a) The legal description or the tax parcel number, the street address (if available), and 

any other means of identification of the construction site; 

(b) The property owner's name, address, and telephone number; 

(c) The prime contractor's business name, address, telephone number, current state 

contractor registration number and identification; and 

(d) Either: 

(i) The name,· address, and telephone number of the office of the lender 

administering the interim construction financing, if any; or 

(ii) The name and address of the firm that has issued a payment bond, if any, on 

behalf of the prime contractor for the protection of the owner if the bond is for an amount 

not less than fifty percent of the total amount of the construction project. 

Failure to comply with the posting requirement will subject the prime contractor to potential civil 

penalties. 

The benefit of complying with the posting requirement is that the prime contractor will 

not be obligated to indemnify the owner for damages caused by construction liens as he usually 

would be. If this notice is posted, the prime contractor must receive all pre-claim notices for the 

project. Upon receipt of any pre-claim notice, the prime contractor may take the necessary steps 

to make sure that the providers of the notices are paid. This will avoid construction liens later 

being recorded against the property. 



Additionally, ifthe prime contractor posts the required notice, and the potential lien 

claimant does not provide the prime contractor with the required pre-claim notice, then the 

potential lien claimant does not have lien rights. For more discussion on this issue, see the preclaim 

notice requirements for subcontractors immediately below. 

Attached hereto as Exhibit D is a sample Project Notice to be posted at the beginning of 

each applicable project. 

b) For Subcontractors 

(1) First-Tier Subcontractors 

If you are a subcontractor who contracts directly with the prime contractor, t.~ere 

are no 

pre-claim notice requirements, unless the project is a remodel, repair or alteration of an existing 

owner-occupied single family residence or appurtenant garage. In other words, you do not have 

to provide any information or notice to the property owner to have construction lien rights on 

commercial projects. 

(2) Second-Tier and Lower Subcontractors 

A subcontractor who does NOT contract directly with the prime contractor must provide 

a "Notice to Owner". RCW 60.04.031. 

The Notice to Owner, in the form set forth by RCW 60.04.031(4), may be given at any 

time during the progress of the improvement, but the person's right to perfect a claim of lien is 

restricted to the materials, equipment, and services! provided during the sixty (60) calendar 

days2 preceding the giving of such notice as well as all subsequent materials, equipment, or 

1 A potential lien claimant that provides professional services where no improvement has been commenced must 

provide a notice distinct from the Notice to Owner called the "Notice of Fumishing Professional Services." This 

notice is found in RCW 60.04.031 (5). See also Exhibit G to these materials. 

2 In the case of new construction of a single family residence, the person's right to perfect a claim of lien is restricted 

to materials, equipment, and services provided after a date which is ten (l0) days, before such notice is delivered or 

mailed. 



services furnished. 

Therefore, if you fail to send the notice in the first sixty (60) days, you can still protect 

your lien rights for future materials, equipment and services to upon proper service of the notice. 

Additionally, a potential lien claimant's labor charges are protected without delivery of such 

notice. 

The Notice to Owner must be provided to the owner by either: (1) certified or registered 

mail; or (2) hand delivery, with a signed acknowledgement receipt by the owner or affidavit of 

service. The Notice to Owner must also be provided to the prime contractor, in similar fashion, 

if it has complied with the posting requirements (discussed above). 

The failure to timely provide the Notice to Owner will result in partial or full loss of 

lien rights! Therefore, it is recommended that you mail the Notice to Owner to the owner and 

prime contractor immediately upon your commencing construction of the improvement, and that 

you retain the signed return receipts acknowledging delivery of the notices in your job file. 

Attached hereto as Exhibit E is a sample Notice to Owner. Also attached hereto as 

Exhibit F is a summary of When to Send a Notice to Owner. 

5. Claim Requirements 

a) Time Period to File a Claim of Lien: 90 Calendar Days 

Prime contractors and subcontractors must record a construction lien no later than 

ninety (90) calendar days after last furnishing labor, professional services, materials or 

equipment. RCW 60.04.091. Although it is not a good practice to rely upon a last day that 

involved the furnishing of a small amount of labor, materials, services, or equipment (also 

known as trifling), such "trifling" amounts may count as the last day of work. In other words, if 

you believe you completed your work on July 1, but on August 1 you go back out to complete 



that work, your 90 day period likely begins to run from August 1. This is true even if the work 

done on August 1 is a trifling amount. 

Nevertheless, you should not as a practical matter use remedial or punchlist work to start 

the 90 day period running. A judge may determine that the trifling amount of work does not 

count, and you may in turn lose your lien rights if you relied on that work to meet your 90 day 

deadline. 

To be safe, you should always start counting the 90 day period from your last 

substantial, original work on the project, and you should not rely upon any trifling, remedial, 

punchlist, repair or warranty work for purposes of your 90 day deadline. 

Repair work (work to fix your original work) may count toward your 90 day deadline in 

certain situations. However, warranty work does not count towards your deadline. The 

difference between repair work and warranty work can be very unclear. As such, it is not a good 

practice to rely on repair work, given that it may later be construed by a court to be warranty 

work. 

The deadline to record is computed in consecutive calendar days. As such, it includes 

weekends and holidays. Furthermore, should the 90 day deadline fall on a Saturday, Sunday, or 

legal holiday, the lien should be recorded no later than the most immediate previous business 

day. For example, if the deadline falls on Monday, July 4 th , the lien should be recorded no later 

than Friday, July 1 st . 

Waiting until the next business day after the weekend or holiday is 

arguably too late. 

b) Contents of Lien Claim (Six Elements) RCW 60.04.091 

The required contents of a claim of lien are set forth in RCW 60.04.091. The claim of 

lien must contain the following: 

(a) The name, phone number, and address of the claimant; 



(b) The first and last date on which the labor, professional services, materials, or 

equipment was furnished or employee benefit contributions were due; 

(c) The name of the person indebted to the claimant; 

(d) The street address, legal description, or other description reasonably calculated to 

identify, for a person familiar with the area, the location of the real property to be charged 

with the lien; 

(e) The name of the owner or reputed owner of the property, ifknown, and, if not known, 

that fact shall be stated; and 

(f) The principal amount for which the lien is claimed. 

A sample Claim of Lien is attached as Exhibit H and Exhibit I. 

(1) Claimant Information 

In addition to the name, telephone number and address of the lien claimant, if the lien 

claimant is a registered contractor, the lien claimant must also include the claimant's contractor's 

registration number. 

(2) First and Last Date of Work 

Your records should indicate the first and last dates on which you provided work. Please 

remember, that it is not the date of your invoice that controls, but rather the actual first day of 

furnishing labor, materials, services and/or equipment, and the last day of so providing. Often 

times your invoices will be dated later then when the actual work reflected in them was done. 

DO NOT fall into the trap of using your invoice dates! 

(3) Name of Your Customer 

RCW 60.04.091(1)(c) requires that the claim oflien include the name and address of the 

person indebted to the lien claimant. You generally know who asked you to provide work, so it 

should not be difficult to include the full and proper legal name of your customer. To confIrm 

this information, you can research a business entity name by completing a business license 



search with the Washington Secretary of State, Corporations Division at 

http://,,,;,,,;'w.sos.wa.gov/corps/search.aspx or if they are a registered contractor with the 

Department at https://fortress.wa.gov/lni/bbip/. 

It is recommended that you then compare this information with what has been provided 

to you by your customer on his credit application, if any. For example, Smith Construction may 

be an assumed business name registered to John J. Smith. In that instance, your construction lien 

should state the name of your customer as follows: "John J. Smith, doing business as Smith 

Construction. " 

(4) Description of the Property 

RCW 60.04.091(1)(d) does not specifically require a legal description to be a valid lien 

claim. A sufficient description of the property may be a street address or other description 

reasonably calculated to identify, for a person familiar with the area, the location of the real 

property to be charged with the lien. Fircrest Supply, Inc. v. Plummer, 30 Wn. App. 384, 634 

P.2d 891 (1981). Nevertheless, for a true and complete description, you should attach to, or 

include in, the lien a legal description of the property to be liened. 

You can obtain this 

information by requesting a "trio" (a copy of the last deed, tax map, and property summary) from 

your local title company. 

(5) Name of Owner or Reputed Owner 

There are several types of property owners potentially subject to a claim of lien. These 

include, but are not limited to: Full/fee title owners and tenants/lessees. It is important to focus 

on who requested the construction work when determining the ownership interest subject to the 

lien. 

In the case of a lease ownership, the terms of the lease determine whether a tenant is an 



agent for the landlord/property owner such that a construction lien can reach the property 

owner's interest in the property. If the lease requires the tenant to make improvements to the 

propeliy, the tenant is considered the agent of the property owner and a construction lien can 

reach the interest of the property owner. The interest of the property owner cannot be reached if 

the lease merely permits or allows the tenant to make the improvements. 

Seattle Lighting 

Fixture Co., Inc. v. Broadway Central Market, Inc., 156 Wash. 189 (1930). 

RCW 60.04.091(1)(e) requires the property owner, or reputed owner, be named in the claim of 

lien. It is recommended that you attempt to include the full and proper legal name of the owner 

or owners in the lien. If the owner is not an individual, then you should determine what type of 

entity the owner is (i.e. corporation, partnership, limited liability company, etc.) and verify the 

owner's full and correct name. 

A lien claim is not defective if it names the owner or reputed owner, but also includes 

additional names of persons having no interest in the property. Furthermore, a lien claim may 

still be valid even if the lien claimant is mistaken as to the actual owner. A lien claim is not 

defective even if it fails to include a spouse as a reputed owner if the lien claim shows that the 

lien claimant did not have knowledge of the spouse's interest. 

Nevertheless, significant effort should be made to identify in the lien all property owners, 

even if only to maintain a lien against all ownership interests. The lien claimant should request a 

trio on the property, or obtain a title report on the property, to assist in determining current 

ownership. 

(6) The Principal Claim 

Generally, a iien claim win not be held invalid if it claims an amount due which exceeds 

the amount the court ultimately finds owed. Similarly, a lien will not likely be found invalid if 



the lien claim states a different amount than the amount alleged due and owing in the foreclosure 

complaint. Nevertheless, if a lien claim amount is frivolous and made without reasonable care or 

is clearly excessive, the owner, prime contractor, subcontractor, or other lien claimant may seek 

an order from the court commanding you to appear and show cause why the lien should not be 

declared void. RCW 60.04.081. 

Then if the court finds determines that your lien claim is 

frivolous and made without reasonable care or clearly excessive, the court will issue an order 

either (1) releasing the lien if it is frivolous and made without reasonable care or (2) reducing the 

lien if clearly excessive, and in either case will award costs and reasonable attorney fees to the 

applicant. 

You should take care to calculate the principal amount of your claim correctly, and apply 

all credits, offsets and payments that are appropriate. It is also a good idea to include as an 

exhibit to the lien a detailed description of all labor, materials, services and rental equipment and 

the dates when these were provided. Such an exhibit should assist in opposing any claim that the 

lien is overstated or does not include a proper demand after deducting all just credits and offsets. 

Additionally, if you have contracted directly with the property owner, you will need to 

charge and collect the applicable Washington State sales tax. If, at the time you record a lien, 

you have not been paid the sales tax, you will need to include the sales tax as part of your lien 

claim. If you have not contracted directly with the property owner, you will still need to charge 

and collect the sales tax unless you have a proper reseller permit (formerly known as a "resale 

certificate") or another exemption applies. 

You are entitled to interest on your lien claim. If a written agreement between you a..'1d 

your customer entitles you to interest at a specific rate, your lien claim should include interest on 

the principal amount at that rate from the date the amount becomes past due and owing under the 



tenns of the agreement. Even if your contract does not allow higher interest, you should state in 

your lien that interest accrues at the legal rate (12%) from the date it becomes past due and 

owing. If you do not state in your lien that you are entitled to interest (at any rate), you will be 

entitled to interest at the legal rate (12% per annum) from the date oflien recording, until paid. 

Non-lienable items and potential failure of lien. 

A lien claim will be held invalid when a large, undetenninable portion of the principal 

claim is for charges that are non-lienable. Willfully claiming non-lienable charges will defeat a 

lien claim. Nevertheless, a non-lienable item, included in a lien claim by mistake, may be 

deducted from the lien claim if there is sufficient segregation in the lien to separate the lienable 

items from the non-lienable items (i.e. a breakdown exhibit). In such case, the lien will be held 

valid to the extent of the remaining lienable charges. 

Where non-lienable and lienable items have been included in a lien claim, good faith is 

the test as to whether the entire lien will be defeated. A lien claim claiming non-lienable charges 

may be valid where there is no showing of bad faith or that the amount was willfully claimed. 

As such, if there is any evidence that you intentionally included non-lienable charges in 

your lien, your entire lien claim will likely be found defective. You should avoid the issue by 

carefully including in your lien claim only lienable items, and the accurate amount due and 

owing for those items. 

Segregation of sums due among improvements. 

Where there is more than one building or improvement built, the lien claimant should 

attempt to designate the amount due on each building or improvement to avoid any concern 

regarding the validity of its lien claim. However, if you have failed to specifically do so, contact 

legal counsel, as the courts may still find the lien claim valid due to substantial compliance. 

PAGE 31- OREGON & WASHINGTON CONSTRUCTION LIEN AND BOND LAW 


c) Verification and Acknowledgment Requirements 

The lien claim must be verified and acknowledged. However, the statute creates 

confusion as to what constitutes a properly verified and acknowledged claim of lien. RCW 

60.04.091(2) provides as follows: 

Shall be signed by the claimant or some person authorized to act 

on his or her behalf who shall affirmatively state that they have 

read the notice of claim of lien and believe the notice of claim of 

lien to be true and correct under penalty of perjury, and shall be 

acknowledged pursuant to chapter 64.08 RCW. 

Meanwhile, the statutory form of claim of lien provides as follows: 

STATE OF WASHINGTON, COUNTY OF ____ ~) ss. 

_________ , being sworn, says: I am the claimant (or 

attorney of the claimant, or administrator, representative, or agent 

of the trustees of an employee benefit plan) above named; I have 

read or heard the foregoing claim, read and know the contents 

thereof, and believe the same to be true and correct and that claim 

of lien is not frivolous and is made with reasonable cause, and is 

not clearly excessive under penalty of perjury. 

Subscribed and sworn before me this ___ day of ____ _ 

The verification set forth in the statutory form of claim of lien should be enforced because it is 

the later enactment. As such, the more stringent verification immediately set forth above should 

be used. 

The claim of lien must be properly acknowledged, meaning acknowledged pursuant to 

the requirements of Chapter 64.08 RCW, to be valid. RCW 60.04.091; Williams v. Athletic 

Field, Inc., 155 Wn. App. 434, 228 P.3d 1297 (2010). 

There are several forms of proper 

acknowledgment. Some examples are provided below for your reference: 



Certificate of Acknowledgment (or an Individual: 

On this day personally appeared before me (name of 

person) to me known to be the individual, or individuals described 

in and who executed the within and foregoing instrument, and 

acknowledged that he (she or they) signed the same as his (her or 

their) free and voluntary act and deed, for the uses and purposes 

therein mentioned. SUBSCRIBED and SWORN to or affirmed before 

me this day of , 20_ 

Notary Public in a..l1d for Wasp.ington 

My appointment expires: ___ _ 

Notarial Certificate {or an Acknowledgment in an Individual Capacity: 

I certify that I know or have satisfactory evidence that 

(name of person) is the person who appeared before me, and said 

person acknowledged that (he/she) signed this instrument and 

acknowledged it to be (his/her) free and voluntary act for the uses 

and purposes mentioned in the instrument. SUBSCRIBED and 

SWORN' to or affirmed before me frIis day of ________ 

20 

Certificate of Acknowledgment for a Corporation: 

Notary Public in and for Washington 


On this __ day of 

, 20_, before me 

personally appeared __, to me known to be the (president, vice 

president, secretary, treasurer, or other authorized officer or 

agent, as the case may be) of the corporation that executed the 

within and foregoing instrument, and acknowledged said 

instrument to be the free and voluntary act and deed of said 

corporation, for the uses and purposes therein mentioned, and on 

oath stated that he was authorized to execute said instrument and 

that the seal affixed is the corporate seal of said corporation. 

In Witness \\lhereof I have hereunto set my hand and 

affixed my official seal the day and year first above written. 

(Signature and title of officer with place of residence of notary 

public.) 

For an Acknowledgment in a Representative Capacity: 



I certify that I know or have satisfactory evidence that 

(name of person) is the person who appeared before me, and said 

person acknowledged that (he/she) signed this instrument, on oath 

stated that (he/she) was authorized to execute the instrument and 

acknowledged it as the (type of authority, e.g., officer, trustee, 

etc.) of (name of party on behalf of whom instrument was 

executetl) to be the free and voluntary act of such party for the uses 

and purposes mentioned in the instrument. SUBSCRIBED and 

SWORN to or affirmed before me this day of _______ 

20 

Notary Public in and for Washington 


See RCW 64.08.010 et seq.; RCW 42.44.100. Also see the sample Claim of Lien that is Exhibit 

H to these materials. 

Compare the forms of proper acknowledgment to the acknowledgment in the statutory 

form of claim of lien, which states: "Subscribed and svvom to before me this .... day of .... " 

followed by a signature line. RCW 60.04.091. Note that this does not comply with Chapter 

64.08 RCW and therefore may not be a proper acknowledgment. It is recommended that 

claimants use the form of acknowledgements found in RCW 64.08.010 et seq. to avoid issue. 

d) Recording Requirements. 

The claim of lien must be recorded in the office of the county auditor located in 

the county in which the project is located. A construction lien is recorded in the same manner as 

deeds and other instruments of title, i.e. mortgages, trust deeds, etc. RCW Chapter 65.04 sets 

forth standard requirements for all instruments presented to a county auditor or recording officer 

for recording. 

As stated previously, contractors must record their lien no later than 90 calendar days 

after last furnishing a substantial amount of labor, materials, services and/or rental equipment. 

You should not count your 90 day deadline from a small or trifling amount of work, or from any 



epair or warranty work you perform. 


In Washington, the lien claimant must give a copy of the construction lien to the owner or 

reputed owner, by mailing it by certified or registered mail or by personal service, within 

fourteen (14) calendar days of the date the construction lien is recorded. RCW 60.04.091(2). 

If this is :not done, the lien claimant forfeits any right to recover reasonable attorney fees 

and costs against the owner in a lien foreclosure action. RCW 60.04.091(2). 

This notice should be served immediately after the lien is recorded, because if the owner 

is located in another state and you serve the lien claimant by certified or registered mail, it may 

take at least a few days to reach the owner, and a few more days for you to receive the green card 

indicating receipt. The fourteen (14) day period can rapidly run in this situation. Despite the 

apparent requirement that the lien copy only be mailed within the fourteen (14) day period, it is 

advantageous to have a green card receipt back before this period runs showing the lien copy was 

received. In this event, compliance cannot be questioned. 

To assist with early service, it is recommended that after the construction lien is fully 

executed, but before it is recorded, several copies of the fully executed lien claim be made and 

retained. The original lien claim can then be recorded, and the copies of the lien can be served 

on the property owner(s) in a timely fashion. 

A mortgagee or lender need not receive a copy of the lien, but it is recommended to also 

send them a copy to encourage early payment of the claim. 

7. Foreciosure of Lien Ciaim 

A construction lien is valid for a period of eight (8) calendar months from the date it is 



ecorded. 

Therefore, the construction lien must either be paid or a lawsuit commenced to 

foreclose it within this eight (8) month period; otherwise, the lien claim becomes void and 

unenforceable. 

RCW 60.04.181 provides for a discretionary award of reasonable attorneys' fees in an 

action to foreclose a lien claim, where the amount in controversy is more than $10,000. 


© 201 1 Scott. Hookland LLP

B. WASHINGTON LITTLE MILLER ACT CLAIM (STATE 

AND LOCAL PUBLIC PROJECTS) 

1. Overview 

In general terms, Little Miller Act statutes were adopted for public work proj ects in lieu 

of contractor's construction lien rights. A person claiming to have supplied labor, materials, 

services or equipment pursuant to an Washington public works contract (including state, county, 

municipal, etc.) and claiming entitlement to payment under the bond, has a right of action on the 

contractor's bond, cashier's check or certified check only if: 

(I ) You have not been paid in full; and 

(2) If a second-tier or lower subcontractor, you must give pre-claim notice of the 

claim on payment bond to the prime contractor who furnished the bond; and 

(3) You must give written notice of the claim to the prime contractor who furnished 

the bond; and 

(3) If required, the notice of bond claim is sent no later than 30 calendar days after 

acceptance of the work by the public body. The notice must be sent to the board, council, 

commission, trustees, officer, or body acting for the public body that let the contract. 

2. Checklists 

Exhibit J and Exhibit K to these materials are checklists which are intended to be used 

as general guides to assist you in maintaining and foreclosing your bond claim rights on 

Washington state and local public projects. However, please use these checklists with caution, 

as they do not address every potential factual scenario regarding potential bond claims rights. 

3. Entitlement to Bond Claim 

For bond claim rights on state and local public works projects, you must simply be a 

subcontractor or supplier. 


© 2011 Scott. HookJand LLP


a) First-Tier Subcontractors 

There is no pre-claim notices requirement for subcontractors who contract directly vvith 

the prime contractor on state and local public works project. 

b) Second-Tier or Lower Subcontractors 

Those who furnish materials or equipment 3 to one other than the prime contractor must 

serve the prime contractor with written notice that he is furnishing such materials or equipment 

to the project and that the prime contractor's bond will be held liable for non-payment. This preclaim 

notice must be served no later than ten (10) calendar days after the date the potential 

claimant first delivers materials or equipment to any subcontractor. RCW 39.08.065. 

The pre-claim notice must contain the following information: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

A statement that you have commenced to deliver materials and/or equipment at 

the request of your customer. 

The name of your customer; 

The name ofthe project; 

The address or other description of the project; 

A statement that the prime contractor and its payment bond will be held for 

payment for the materials and/or equipment furnished by you; and 

It must be dated and signed by you, showing your title, your address and 

contractors registration number, if you are registered as a contractor. 

The pre-claim notice is statutorily required to be served by either hand delivery or mail. 

If required, it is recommended that you send the pre-claim notice by certified mail, return receipt 

requested to the prime contractor, or by hand delivery with a signed acknowledgment by the 

prime contractor that he received the notice. 

PAGE 38 - OREGON & WASHINGTON CONSTRUCTlON LIEN AND BOND LAW 


If a pre-claim notice is necessary and is not properly and timely served, it will result in a 

complete loss of payment bond claim rights. There is no relation back akin to construction 

lien Notices to Owner. You cannot provide the notice after the ten (10) day period, and assert 

that the pre-claim notice relates back ten (10) days to cover materials or equipment delivered 

during that time or future deliveries. 

A sample Pre-Claim Notice of Claim on Payment Bond is included in these materials as 

Exhibit L. 

5. Notice Requirements 

On state and local public works projects, subcontractors must serve a bond claim within 

thirty (30) calendar days "from and after the completion of the contract with an acceptance of 

the work by the affirmative action of the board, council, commission, trustees, officer, or body 

acting for the" public body. 

a) Acceptance 

Acceptance is a formal act by the public body (e.g. city council's formal adoption of the 

project as complete). Nevertheless, an architect's final certificate is enough to start the thirty (30) 

day period. McGowan Bros. Hdw. Co. v. Fidelity & Dep. Co., 84 Wash. 470 (1915). 

Be careful of "early acceptance" of a portion of the project. If the portion of the project 

on which you provided work is accepted prior to the remaining portions of the contract being 

completed, your thirty (30) day period to file a claim against the payment bond begins to run 

from the date your portion of the project was accepted. As such, consider serving a payment 

bond claim immediately after completing your work, so as to avoid unknown and early 

acceptance. 

3 A pre-claim notice is not required to be furnished if the subcontractor provides solely labor to the project. 



) Service 

Although no particular form of service is statutorily required, you should serve the claim 

on the public body by either (1) registered or certified mail, return receipt requested, or (2) 

personal service with a signed acknowledgment of receipt or an affidavit of service. Both of 

these manners of service will later provide adequate proof that the claim was in fact timely 

served. 

The claim must be directed to the particular public body involved. More specifically, it 

must be presented to and filed "with such board, council, commission, trustees or body acting for 

the state, county or municipality, or other public body, city, town or district." For example, if a 

school district is the public body, the Notice of Claim on Payment Bond should be to the 

particular school district, but it should be served on that school district's school board because 

the board is the "body acting fer the districC' 

If you file your notice of claim after you complete your portion of the work, but before 

the entire work of improvement is accepted by the public body, you have provided timely and 

sufficient notice. Filing a notice of claim after the prime contractor has ceased its work, but 

before completion by a subsequent prime contractor and acceptance by the public body, is also 

sufficient notice. 

You should also attach an exhibit to the claim, which breaks your claim into labor, 

materials and rental equipment. This will provide proper segregation in the event you are a 

second or lower tier subcontractor who has failed to provide a pre-claim notice. In such event, at 

least the labor portion of your claim will be protected. 

A sample Notice of Claim on Payment Bond is attached as Exhibit M to these materials. 


There is no post-claim notice requirement for either state or local public works claims. 



7. Foreclosure of Bond Claim 

On Washington state and local public works projects, there is no statute prescribing the 

duration of a bond claim. As such, the regular statute of limitations for written contracts will 

control, which is either four years (for contracts involving goods) or six years (for contracts 

involving services). Nevertheless, if the payment bond contains its own statute of limitations 

period, that specific period controls. 

Commencing a foreclosure suit on a payment bond claim is done by filing the complaint 

and then serving the summons and complaint upon one necessa.ry party within 90 days of 

complaint filing. 

RCW 39.08.030 provides that a claimant may recover attorney fees in an action on a 

Washington public works bond. 



OREGON CONSTRUCTION LIEN CHECKLIST 

75th Day: ___ , 20_ (#18) 120th Day: ___ , 20_ (#26) 

1. Client's name: 

2. Name of person/entity 

who/which employed client: 

Check the Secretary of State website: 

www.sos.state.or.us and the Construction Contractors 

Board (CCB) website: www.ccb.state.or.us. Also call 

Secretary of State ((503) 986-2200) and Construction 

Contractors Board (CCB) ((503) 378-4621, ext 4900). 

Review ORS 60.094 (corporate name), 648.007 

(assumed business names), 671.575 (prohibits 

unlicensed landscaping business filing lien), and 

701.131 (prohibits unlicensed contractor from 

perfecting claim of lien or commencing claim). Is 

client required to be licensed as a plumber or 

electrician 

See 1 above. Also review contracts, invoices, credit 

applications, and payments. Review ORS 

87.035(3)(c). 

3. If client provided work 

to a contractor for a project to 

"renovate, remodel, repair or 

otherwise alter an existing 

owner-occupied residence ", is 

that contractor CCB licensed 

DYes D No 

Date client checked CCB 

license status: 

Is this date the date that client: 

D First contracted for project 

D First delivered to the project 

site 

Check contractor's license status on the Construction 

Contractors Board (CCB) website: 

www.ccb.state.or.us.print out the page showing the 

contractor's license status and keep a copy in your job 

file. 

No lien rights if work is provided for a project to 

"renovate, remodel, repair or otherwise alter an 

existing owner-occupied residence" to a contractor 

that is unlicensed either at the time that client first 

contracted for the project or that client first delivered 

work to the project site, whichever is earlier. Review 

HB 3689 (effective 111111). NOTE: It will not be 

sufficient to have reviewed the status of a contractor's 

license upon the opening of a general credit account. 

Page 1 - OREGON CONSTRUCTION LIEN CHECKLIST 

© 2011 Scott. Hookland LLP 


Page 1 of 7

4. Name of owner(s): See 1 above. Also review lien notices and title 

information. Reviev.l ORS 87.035(3)(b). See Miller v. 

Ogden, 134 Or App 589,896 P2d 596 (1995), aff'd, 

325 Or 248 (1997). 

5. Name ofmortgagee(s): See 1 above. 

6. All names confirmed Is the information the same Are there any licensing 

with: 

issues 

Secretary of State 

CCB 

D 

D 

7. 

Type of construction: 

Residential D 

Commercial D 

8. Client provided: 

Labor 

Equipment 

Materials 

Services 

D 

D 

D 

9. Date of client's 

bid/ contract: 

Date client started working: 

D 

Review ORS 87.021(3) (definitions) and 87.093. 

Review Calapooia Pole Structures, Inc. v. Moulder, 

128 Or App 190, 875 P2d 495 (1994) (look to nature 

of contract not simply location of structure). 

Review ORS 87.021 and 87.025(3) (materials). 

Review Teeny v. Haertl Constructors, Inc., 314 Or 

688, 842 P2d 788 (1992) (labor exception is 

subcontractor oriented). 

See 1 above for licensing issues. Review ORS 87.021, 

87.093, and 701.330 for notice issues. Review ORS 

671.625 and 701.305 (written contract requirements). 

10. Information Notice to 

Owner required: 

Review ORS 87.093. See 2, 4, and 7 above. 

DYes D No 

11. If 10 is yes, date of See 9 above. Review ORS 87.093(2)-(3). Review 

delivery ofInformation Notice ORS 87.030 (notice ofnonresponsibility). 

to Owner: 




Page 2 of7

12. If client is prime 

contractor on "residential 

structure" or "zero-lot-line 

dwelling," is there a written 

contract 

DYes 0 No 

13. Notice of Right to a 

Lien Required: 

No 0 

Owner(s) 0 

Mortgagee( s ) 0 

14. Date of mailing Notice 

of Right to a Lien: 

Receipts: 

No lien rights without written contract. Review ORS 

87.037, 701.305 (written contract requirement and 

standard contractual terms), 701.005 (defmition of 

"residential structure" or "zero-lot-line dwelling"), 

and OAR 812-012-0110 (terms of written contract) 

(effective 4/28/1 0). 

Review ORS 87.021, 87.023 and 87.025(3). See 2,4, 

7, and 8 above. 

See 9 above. Review ORS 87.021 and 87.025(3). 

Review Morse Bros., Inc. v. Kemp Construction, Inc., 

147 Or App 217,935 P2d 464 (1997). 

15. Has client received any Review ORS 87.025(4) and 87.027 (requests for 

requests under ORS 87.025 or information). 

87.027: 

DYes 0 No 

If yes, when: 

Has client responded: 

oYesoNo 

When is response due: 

To whom: 

16. Date project completed: Review ORS 87.045 and Dallas Lbr. & Supply v. 

Phillips, 249 Or 58,436 P2d 729 (1968) (completion 

notices not conclusive test). 

17. Client's last day of 

work on the project: 

Not repair, Fox & Co. v. Roman Catholic Bishop, 107 

Or 557,215 P 178 (1923), or trifling, Cons. Elec. v. 

Jepson Elec., 272 Or 384,537 P2d 83 (1975). 




Page 3 of 7

18. 75 days* from project's 

completion: 

75 days* from client's last 

day: 

Review ORS 87.035. Do not extend by agreement. 

Review ORS 87.010. Review Tyree v. Tyree, 116 Or 

App 317, 840 P2d 1378 (1992) (do not use ORCP 10 

to extend deadline) 

*If labor, materials, or 

equipment, use earlier of 

above dates as the last day to 

record lien. 

19. Original Contract 

Amount: 

$.....,.--- 

Minus payments of: 

Review dates, amounts, and applications of payments. 

Review ORS 87.035(3)(a). 

Change order( s): 

Backcharges: 

Extra Work Order: 

20. Total remaining owing: 

$ ____ including: 

$ for labor 

$ for materials 

$ for equipment 

$ for services 

21. Client is entitled to 

interest of_% per annum 

beginning: 

22. Property address: 

Review ORS 87.035(3)(a). Avoid nonsegregated liens, 

Anderson v. Chambliss, 199 Or 400,262 P2d 298 

(1953), and do not overstate, J. W Copeland Yards v. 

Phillips, 275 Or 193, 550 P2d 438 (1976). Review 

ORS 87.010. Review any lien waivers and releases. 

Review P&C Construction Co. v. America,n 

Diversified, 101 Or App 51,789 P2d 688 (1990), and 

ORS 701.420-701.430 and 82.010 (statutory interest). 

Review contract. 

Review ORS 87.035(3)(d) and notices, title 

information, and building permits. 




Page 4 of7

23. Property description: 

County: 

24. Who will sign lien: 

Title: 

25. Date lien recorded: 

Document No.: 

26. 120 days from 

recording date is: 

Review ORS 87.035(3)(d) and notices, title 

information, and building permits. Review Tigard 

Sand & Gravel Co. v. LBH Construction, 149 Or App 

131,941 P2d 1075 (1997). ORS 93.600 does not 

apply. Bell Hardware v. Ed Szoyka Woodworking Co., 

123 Or App 332, 879 P2d 208 (1994). 

Review ORS 87.035(4). Not a lawyer. Necessary 

witness! But see Teeny v. Haertl Constructors, Inc., 

111 Or App 543, 548-549, 826 P2d 1029, rev'd in 

part, 314 Or 688 (1992) (lawyer's verification 

discussed). 

See 18 above. Review ORS 87.035. Make a copy 

before lien is recorded to include with notice of filing. 

Review ORS 87.055. Last day to file foreclosure 

action. Do not extend by agreement. 

27. 20 days from recording Review ORS 87.039. See 4 and 5 above. 

date is: 

28. Date Notice of Filing I 

Foreclosure sent: 

Receipts: 

See 27 above. Review ORS 87.057. 

Note all mortgagees must receive notice. Molalla 

Pump v. Chaney, 42 Or App 789, 601 P2d 874 (1979). 

Was Notice of Intent to 

Foreclose included 

DYes 0 No 

If no, date Notice ofIntent to 

Foreclose delivered: 

Receipts: 




Page 5 of

29. Has client received any Review ORS 87.057. 

requests under ORS 87.057 

DYes 0 No 

If yes, when: 

Has client responded 

DYes 0 No 

Response is due: 

30. Date Foreclosure See 26 above. 

Report ordered: 

From: 

Order No.: 

31. Additional notices Review ORS 87.057. See 28 above. 

required: 

DYes 0 No 

Date sent: 

32. Release Demand Review ORS 87.076(4). 

received: 

DYes 0 No 

If yes, date received: 

Date response due: 

33. Cash deposit or bond Review ORS 87.076-87.088. 

made: 

DYes DNa 

If yes, was affidavit filed: 

DYes 0 No 

If yes, was notice received: 

I 

DYes 0 No 




Page 6 of

34. Date notice of cash 

deposit or bond received: 

Date petition to determine 

adequacy due: 

35. Date complaint filed: 

Case No.: 

Review ORS 87.078(2) and 87.086. 

Review ORS 87.055. See 26 above. Complaint also 

refers to cross-claim, counterclaim, 1.e., any claim 

foreclosing the lien. 

Filed in 

Oregon 

---- 

County, 

36. Date Pendency of an 

Action Notice recorded: 

Document No.: 

37. 60 days from filing date Review ORS 87.055 and 12.020. See 35 above. 

of complaint is: 

38. Date all service See 37 above. 

completed: 

39. Date Lien Satisfaction! 

Release recorded: 

Document No.: 

40. Date judgment was 

Signed: 

Filed: 

Entered: 

41. Date Pendency of an 

Action Notice Released: 




Page 7 of 7

SUMMARY OF STEPS NECESSARY TO PERFECT A 

CONSTRUCTION LIEN IN OREGON 

USE THIS INFORMATION WITH CAUTION 

This summary contains general information only, and must not be construed as legal advice, or take the 

place of competent legal counsel. Its purpose is to provide general - not specific - information on SOME - but 

not all - of the steps and precautions that must be taken, so that your claim of lien may be valid and may be 

enforced, if necessary. The Oregon Construction Lien Law is complicated, and your procedures and follow-through 

on the preparation of any lien should be checked by an attorney. Also, the history of the construction lien statutes 

suggests that they are amended on a regular basis by the Oregon Legislature and, as such, the general information 

contained in this summary may be dated. Again, you should seek the advice of legal counsel for speCific situations 

and advice as to the ''then existing" status of the law. This does not address liens for design professionals. In 

addition, all contractors should make sure that they are licensed with Oregon Construction Contractors 

Board. 

1. Pre-claim Issues 

When 

Before performing work 

Either at the time of contracting 

for the project or at the time of 

first delivery of labor, materials or 

equipment to the project site, 

whichever is earlier 

On date Contract is Signed 

(or within 5 days of exceeding 

contract threshold price) 

Within 8 business days of first 

delivery of material or 

performance of labor 

Who 

All original contractors who 

perform work for the owner of a 

"residential structure" or "zero-Iotline 

dwelling" if the aggregate 

contract price exceeds $2,000 (If 

original contract does not exceed 

$2,000 but subsequent 

negotiations result in contract 

being amended to exceed 

$2,000, original contractor must 

then deliver written contract) 

All subcontractors or persons 

that provide labor, materials or 

equipment to a contractor for a 

project to "renovate, remodel, 

repair or otherwise alter an 

existing owner-occupied 

residence" 

All original contractors engaged 

in residential construction where 

the aggregate contract price 

exceeds $2,000. (If original 

contract price does not exceed 

$2,000, but subsequent 

negotiations result in contract 

being amended to exceed 

$2,000, original contractor must 

then send notice within 5 days) 

All original contractors, 

subcontractors, and suppliers 

who are required to give this 

notice 

Action Required 

Have a written contract required 

by ORS 87.037 (2007) (effective 

1/1/08). See also ORS 701.305 

(written contract requirement and 

standard contractual terms); 

ORS 701.005 (definition of 

"residential structure" or "zerolot-line 

dwelling"); OAR 812-012- 

0110 (terms of written contract) 

(effective 4/28/10). 

Check CCB license status of the 

contractor the work is provided to 

on the Construction Contractors 

Board (CCB) website: 

www.ccb.state.or.us, print out 

the page showing the 

contractor's license status and 

keep a copy in your job file 

(effective 1/1/11). See HB 3689. 

Provide Information Notice to 

Owner to all owners (ORS 

87.093) 

Provide Notice of Right to a Lien 

to all owners and mortgagees 

(ORS 87.021 and 87.025) 

Oregon Construction Lien Summary 



Page 1 of2

Within 15 business days after 

receipt of written demand from 

owner or mortgagee (for 

demands received before Claim 

of Lien is recorded) 


subcontmctors, and suppliers 

Send to owner or mortgagee a 

list of materials or labor, etc. with 

statement of charges and unpaid 

balance (ORS 87.025 and 

87.027) 

When 

Within 75 calendar days after last 

substantial performance of labor, 

delivery of materials, or rental of 

equipment or 75 days after 

completion of construction 

whichever is earlier 

When 

Within 20 calendar days after the 

lien is recorded 

Within 5 calendar days after 

receipt of written demand from 

owner (for demands received 

after Claim of Lien is recorded) 

Not less than 10 calendar days 

before filing suit to foreclose 

Claim of Lien 

When 

Within 120 calendar days after 

Claim of Lien is recorded 

2. The Claim 

Who 

All original contractors 


3. Post-claim Notice 

Who 



who have recorded a Claim of 

Lien 



who have recorded Claim of Lien 




4. The Action 

Who 





Record Claim of Lien in the 

county where the real property/ 

improvement is located (ORS 

87.035) 


Provide a Notice of Filing Claim 

of Lien to all owners and 

mortgagees with a copy of 

recorded Claim of Lien attached 

(ORS 87.039) 

Provide to owner a list of 

materials, labor, and/or rental 

equipment with statement of 

charges and unpaid balance 

(ORS 87.057) 

Provide Notice of Intent to 

Foreclose Claim of Lien to all 

owners & mortgagees 

(ORS 87.057) 


File suit to foreclose lien 

(ORS 87.055) 

Oregon Construction Lien Summary 



Page 2 of 2

NOTICE OF RIGHT TO A LIEN 

(ORS 87.021) 

Warning: Read this notice. 

Protect yourself from paying any contractor or supplier 

twice for the same service. 

To: 

(Owner) 

Date of mailing: 

(registered or certified mail) 

(Owner's address) 

This is to inform you that ______________________ (name of contractor) has begun to 

provide ________________________________________ 

_______________________________________ Cdescription of 

materials, equipment, labor or services) ordered by ____________________ for 

improvements to property you own. The property is located at ____________________ 

A lien may be claimed for all materials, equipment, labor and services furnished after a date that is eight days, not 

including Saturdays, Sundays, and holidays, as defined in ORS 187.010, before this notice was mailed to you. Even if you 

or your mortgage lender has made full payment to the contractor who ordered these materials or services, your property 

may still be subject to a licn unless the supplier providing this notice is paid. 

THIS IS NOT A LIEN. It is a notice sent to you for your protection in compliance with the construction lien laws of the 

State of Oregon. 

This notice has been sent to you by: 

Name: 

Address: 

Phone: 

If you have questions about this notice, feel free to call us. 

See reverse side for more important information. 


Page 1 of 2

Under Oregon's laws, those who work on your property or provide labor., equipment, services or materials and are not 

paid have a right to enforce their claim for payment against your property. This claim is known as a construction lien. 

If your contractor fails to pay subcontractors, materials suppliers, rental equipment suppliers, service providers or 

laborers, or neglects to make other legally required payments, the people who are owed money can look to your property 

for payment, even tfyou have paid your contractor in full. 

The law states that all people hired by a contractor to provide you with materials, equipment, labor or services must give 

you a Notice of Right to a Lien to let you know what they have provided. 

WAYS TO PROTECT YOURSELF ARE: 

• RECOGNIZE that this Notice of Right to a Lien may result in a lien against your property unless all those supplying a 

Notice afRight to a Lien have been paid. 

• LEARN more about the lien laws and the meaning of this notice by contacting the Construction Contractors Board, an 

attorney or the firm sending this notice. 

• ASK for a statement of the labor, equipment, services or materials provided to your property from each party that 

sends you a notice of right to a lien. 

• WHEN PAYING your contractor for materials, equipment, labor or services, you may make checks payable jointly to 

the contractor and the firnl furnishing materials, equipment, labor or services for which you have received a notice of 

right to a lien. 

• OR use one of the methods suggested by the "Information Notice to Owners." If you have 110t received such a notice, 

contact the Construction Contractors Board. 

• GET EVIDENCE that all firms from whom you have received a notice of right to a lien have been paid or have 

waived the right toclaim a lien against your property. 

• CONSULT an attorney, a professional escrow company or your mortgage lender. 

Learn more about the lien law by requesting a booklet from the Construction Contractors Board called Construction Liens 

(503-378-4621 or www.oregon.goy/CCB). It contains an explanation of construction liens, how consumers can protect 

themselves and contractor responsibilities. 

f!ntcrtlienll 0-08 


Page 2 of2

WHEN TO SEND A NOTICE OF RIGHT TO A LIEN TO 

OWNER(S) AND MORTGAGEE(S)/LENDER(S) 

IIf you provide: 

lAnd your 

contract is with 

all owner(s) 

And you do not 

have a contract 

with all owner(s) 0 

I I Send to Send to Send to Send to 

I 

lowner(s) 

EJEJEJEJ 

lender(s) owner(s) lender(s) 

MATERIAL ONLY 

To a Residential Improvement t 

To a Commercial Improvement NO YES YES YES 

ON SITE LABOR AND MATERIAL 


EJ~EJ~ 

To a Commercial Improvement NO YES* NO YES* 

ON SITE LABOR ONLY 


ITo a Commercial Improvement 

I~~~~ 

IINO IINO IINO IINO I 

EJEJEJEJ 

RENTAL EOUIPMENT 


To a Commercial Improvement NO NO NO NO 

# Information Notice to Owners may be required. 

* Notice is given to protect material portion of claim. See ORS 87.025. 

o Consider sending Notice to require Owner to post a Notice of Non-Responsibility, even if not 

required by ORS 87.021. 

t If you are a subcontractor or person that provides labor, materials or equipment to a contractor 

for a project to "renovate, remodel, repair or otherwise alter an existing owner-occupied 

residence", check CCB license status of the contractor either at the time of contracting for the 

project or at the time of first delivery oflabor, materials or equipment to the project site 

(whichever is earlier). See HB 3689 (effective 1/1111). 

When to Send a Notice of Right to a Lien to Owner(s) and Mortgagee(s)/Lender(s) 



Page 1 of 1

OREGON PUBLIC WORKS CHECKLIST 

1. Claimant's name: 

2. Name ofpersonlentity 

who/which employed client: 

Call Secretary of State «503) 986-2200; 

www.sos.state.or.us) and Construction 

Contractors Board (CCB) «503) 378- 

4621, ext 4900; www.ccb.state.or.us). 

Review ORS 60.094 (corporate name), 

648.007 (assumed business names), 

671.575 (prohibition on unlicensed 

landscaping business filing lien), and 

701.131 (prohibits unlicensed contractor 

filing claims). 

See 1 above. Also review contracts, 

invoices, credit applications, and 

payments. 

3. Name of contractor who Not all public works contracts require a 

acquired the bond (i.e. bond. Confirm one exists and is correct. 

prime/general contractor): Use Oregon Public Records Request to 

obtain. 

4. Name of public body 

which let the contract (State 

agency, county, city, etc.): 

5. All names confirmed 

with: 

If state agency, do not simply insert 

location of proj ect. 

Is the information the same Are there any 

licensing issues 

Secretary of State 0 

CCB 0 

6. Type of construction: 

See 3 above. 

7. Claimant provided: 

Labor 0 

Equipment 0 

Materials 0 

Services 0 

Review Multnomah Co. v. United States, 

87 Or. 198 (1918). Equipment is included 

in definition of "Labor or Materials." 

Page 1 - OREGON PUBLIC WORKS CHECKLIST 



Page 1 of 5

'. ',". '.', .. :.,...,;,.... ;, ..... 

;,;is:''; . 

~'P8x"·.iL; .' .;, .•""'. 

I> .. ·':,ff)'>;": ..'. .:Cf)NSIpElf .. 

I>;: ,., •. 

8. Date of claimant's See 1 above for licensing issues. 

bid/contract: 

Date claimant started working: 

"'., 

9. Copy of bond obtained See 3 above. 

DYes 0 No 

10. Is bond correct Under ORS 279C.625, the public body 

DYes 0 No 

that let the contract and the officer(s) 

authorizing the contract are jointly and 

Ifno, concerns: 

severally liable to parties who should have 

been protected by the Little Miller Act 

bond if one was required and not 

provided. A tort claim notice under ORS 

30.260-30.300 may be provided by parties 

who should have been protected parties 

under the bond. 

11. Date project completed: 

12. Claimant's last day of Unlike lien statutes, corrective work may 

work on the project: count as a last day. See City of Dalles v. 

D'Electric Co., Inc., 105 Or.App. 46 

(1990). 

13. 180 days: Do not rely on ORCP 10 or ORS 174.120 

in counting days. The time period may 

from'Project's not be extended if the last day falls on a 

completion is: 

Saturday, Sunday, or other legal holiday. 

IS: 

from Client's last day 

*N ote that if the contract was first 

advertised or l 

if not advertised. entered into 

before May 26 l 2009 the old 120 day 

deadline applies. 




Page 2 of 5

I 

TO DO l·· 

~: 

::~ .;: ~ . 

,".: 

CONSIDER .• 

.. 

. ::'. 

t::t::

'ro~bo " 

... ~ .... 

19. Date claim received by 

contractor: -------- 

20. Date claim received by 

public body: ______ _ 

The notice must be sent by registered or 

certified mail or hand delivered by the 180 

day deadline (See 13 above). ORS 

279C.605(1). It is unclear whether the 

notice which is mailed but not physically 

received by the contractor and public body 

within the 180 day period would be 

timely. However, there are decisions 

under the comparable Miller Act which 

hold that the notice must be physically 

received within that period. Pepper Burns 

Insulation, Inc. v. Arico Corp., 970 F2d 

1340 (4th Cir. 1992). Thus, the claimant 

should make sure that the notice is 

physically received by the contractor and 

public body by the 180th day. 

The statute does not specify "who" at the 

contracting agency is supposed to receive 

the notice. By definition, the "contracting 

agency" includes, but is not limited to, the 

Director of the Oregon Department of 

Administrative Services and any person 

authorized by a contracting agency to 

conduct a procurement on the contracting 

agency's behalf." See ORS 

279A.OI0(1)(b). The legislative history of 

prior statutes suggests that it is incumbent 

upon the agency to route the notice to the 

appropriate person after it is received. 

Nonetheless, to avoid any question on this 

issue it is suggested that separate notices to 

the state agency be directed to: (1). The 

name of the agency which let the contract 

(CAUTION!! This might not be where the 

work is being done); (2). The state agency 

% the project manager; and (3). The state 

agency % the agency's clerk, auditor, 

director or manager. 




Page 4 of 5

I' 

. . ... 

• ;TO)DQ),"/ 

'

SUMMARY OF STEPS NECESSARY TO PERFECT AN OREGON 

PUBLIC WORKS CLAIM 

USE THIS INFORMATION WITH CAUTION 

This summary contains general information only, and must not be construed as legal advice, or take the 

place of competent legal counsel. Its purpose is to provide general -- not specific -- information on SOME - 

but not all -- of the steps and precautions that must be taken, so that your bond claim may be valid and may be 

enforced, if necessary. The bonding laws are complicated, and your procedures and follow-through on the 

preparation of any bond claim should be checked by an attorney. The general information contained in this 

summary may be dated. Again, you should seek the advice ofJegal counsel for specific situations and advice as to 

the "then existing" status of the law. In addition, all contractors should make sure that they are licensed with 

the Oregon Construction Contractors Board or determine whether an exemption may apply. 

1. Pre-claim Notice 

When 

Within 180 days after last 

substantial performance of 

labor, delivery of materials, 

or rental of equipment. 

Who 

2. The Claim 



on Oregon Public Works 

Projects 

3. Post-Claim Notice 


Notice of the Claim must 

have been received by both: 

(1) contractor which 

provided the bond and (2) 

the contracting agency. 

When 

No later than 2 years after 

last day on the project. Not 

based on the Claim's date. 

Who 

All Claimants. 

4. Action 


Commence Action. 

Oregon Public Works Claim Summary 

© 2011 Scott. Rookland LLP 


Page 1 of 2

Oregon Notes (see also Federal Notes): 

1. The Oregon Little Miller Act was modified by the 1993 Oregon Legislature. The 

legislature did not specify "who" at the state agency is supposed to receive the notice. 

While some state agencies may attempt to adopt specific administrative rules to specify 

exactly who the notice should be sent to, the legislative history of the bill suggests that it 

is incumbent upon the state agency to route the notice to the appropriate person after it is 

received. Nonetheless, to avoid any question on this issue it is suggested that separate 

notices to the state agency be directed to: (1) The name ofthe state agency which let 

the contract (CAUTION!! This might not be where the work is being done); (2) The 

state agency c/o the project manager; and (3) The state agency c/o the agency's clerk, 

auditor, director or manager. 

2. You should insure that notice is actually received before the time period expires. The 

time period may not be extended if the last day falls on a Saturday, Sunday or other legal 

holiday. 

3. You should also consider giving notice directly to the surety (the bonding company) as 

this may expedite payment and commence the six-month time period for the recovery of 

attorney fees against the surety under ORS 742.061. 

4. At least two notices are required: 

a. One to the state agency that let the contract or the clerk or auditor of the public 

body if the public body is other than a state agency that let the contract; and 

b. One to the contractor who furnished the bond. 

5. You should make sure that the public body did not except the project from the 

requirements for a bond and make sure that if a bond was required it was the "right" 

bond. (For example, the public body for some reason may have required a bond form 

similar to the federal requirements which differ than the state requirements). 

6. You should consider complying with any applicable Oregon Administrative Rules 

adopted by state agencies related to the notices. 

Oregon Public Works Claim Summary 



Page 2 of2

W ASIDNGTON CONSTRUCTION LIEN CHECKLIST 

90 th Day ____,' 200_ (#19) 8 th Calendar Month ____, 200_ (#27) 

- 

I 

~ 

IConsider 

-.--;--------.-.-.-....-......---..-.-.-..--.------~---~ 

1. Lien Claimant's Name: 

ICaH Secretary of State (360) 753-7115; Department I 

0fLabor and Industries (360) 902-5226 (for other I 

1than electrical contractors) or (360) 902-5269 (for I 

lelectrical contractors). RCW 18.27.080; 60.04.041 

I(Prohibition on unregistered contractors filing liens). 

i 

12. Lien Claimant registered as contractor----rSee 1 above. RCW 18.27 or 19.28 (for electrical 

I Yes No Icontractors - Department of Labor and Industries: 

IIfYes, registration #: 

j3. Name of person/entity that employed Lien 

IClaimant: 

14. Contractor's Registration number of person/entity 

lemploying Lien Claimant: 

, I 

!5. Name ofOwner(s) of property subject to lien: 

1(360) 902-5226 (for other than electrical contractors) I 

lor (360) 902-5269 (for electrical contractors_) ___ l 

1 above. Also review contracts, invoices, credit 

lications and payments. 

lSe~RCW 60.04.041. Call Dep~ent of Labor and 

IIndustries: (360) 902-5226 (for other than electrical 

lcontractors) or (360) 902-5269 (for electrical 

icontractors). No lien rights unless person/entity 

lemploying lien claimant is registered. 

iSee 1 above. Also review lien notices and title 

iinformation . 

! . ~---.-----r------~~--------~--------- 

16. Name ofmortgagee(s) of property subject to lien: See 1 above. 

names confirmed with Secretary of State and 

In.'n",rfTnpnt of Labor and Industries Yes 

the information the same Are there any 

or non-registration issues 

Claimant provided: 

Labor 

Materials 

Rental Equipment __ 

Professional Services 

(Engineer or Architect) 

Commercial 

O. Date of Claimant's bid/contract: 

Claimant started working: 

RCW 60.04.031 and 60.04.011. 

I above for registration issues. Review RCW 

18.27. 

iII. Notice to Customer required 

RCW 18.27.114. 

! No Yes 

~~~-----.-~-----------~,~~--~" -~~~~~-~r---·----·-----"'·--------·----·--·--"'--------·,----I 

112. If 11 is yes, give date of delivery of Notice to 

ICustomer and attach a copy. 

Preclaim Notice of Right to Claim a Lien 

No Owners 

Date of mailing or service precJaim Notice of 

to Claim a Lien: 

RCW 60.04.031. 

60.04.031. 

© 2011 Scott - Hookland LLP Washington Exhibit A 

Page 1 of 3

-----·--------·--------------------~~~r----~--~--~--- 

15. Has Claimant served a Stop Notice iReview RCW 60.04.221. 

_No _Yes; if yes, when 

Has Lender paid any subsequent draw requests 

No Yes 

--------~-~--~--~r_~--~~----~-~----~--~--- 

116. Date project completed: I 

~-. ------ 

117. Claimant's last day of work on the project: 

i 

IEven re~air, ~uchlist or trifling work: not just 

isubstantJaI ongmal work. Do not consIder warranty 

i work . 

..-I 

I 

Illwarranty, punchlist or trifling work. 

I 

18. Claimant's last day of substantial original work IOnly substantial original work; not any repair, 

n the project (different than date in question 17 

!above). , 

---------------------------,----' 

119.90 days from Claimant's last day is: IReview RC\V 60.04.091(2). Do not extend by 

I lagreement. " ' 

;20. Origina~ontr~ amount: $---------' IRevie~;~unts-and·~cati~ns forpay;~t.·1 

Less payments of $ I' I 

I Change orders: +/- $ _____ 

!, Extra work orders: $ ,i '" ,: 

121. Total remaining owing~$-·---'~·-·---·iReview RCW60.04.091. Avoid n-;.,-;;--segreg~ted---·I 

I $ for labor iitems, and do not overstate. Review RCW 60.04.081. I 

I $ for materials I . 

$ for rental equipment ! 

$ for services (ArchlEng'r) I 

I Backcharges: +/- $ I i 

r- $. _ fors~le~_L __________ · ___ 1 

122. Claimant is entitled to __% interest per IReview contract. Pacific Erectors v. Gall Landau I 

:annum beginning: 

!Young, 62 Wn App 158 (1991) (for contract rate). 

IReview RCW 19.52.010 (statutory interest) 

r-----------------------------·- 

Address of property subject to lien: 

24. Legal or other description of property subject to 

lien (include county): 

will sign the lien 

recorded: 

8 calendar months from recording date is: 

14 days from recording is: 

Date Notice oflien recording sent: 

Receipts: 

CW 60.04.091(2). Attorneys should not sign liens; 

ersonal knowledge/verification issue and witness 

Revivew RCW 60.04.091(2). Make a 

of lien before recording. 

RCW 60.04.141. Last day to file foreclosure 

Do not extend by agreement. 

60.04.191(2). Notice oflien recording and 

of lien must be served on all owners by 

service, certified mail, or registered mail 

14 days oflien recording in order to preserve 

to attorney fee recovery in any foreclosure suit. 

Order 6 calendar months after lien 

to ensure enough time to file foreclosure 

timely. 


Page 2 of 3

· Lien release bond recorded RCW 60.04.l61 

No Yes 

County, Washington 

Date lis pendens notice recorded: 

No.: 

60.04.141 

-.. ~,.-, ...'-..........-....--.--,..... ~ ..--...-..-.-.................-.-........-,...-....................... ~, .............:.............--....... T ....·...·..·,··............·_·..··.._..··...._......·....··..····_··..·..···...................:......--..............-..,.. ~ ..................- ..................""..... .. 

138. Date lis pendens notice release recorded: I 

IAuditor'slRecorder's No.: 

i 

----..----.-..-.-------.-~----~-----.---...-..----..! 


Page 3 of 3

1. Pre-Claim Notices 

SUMMARY OF STEPS TO PERFECT A LIEN IN WASHINGTON 

" 

When 

Who 

Action Reguired 

i Before commencing 

construction. 

--,-' , '--'-'-'-'----_. 

New construction of 

single family residence: 

within 10 days 

(including weekend and 

holidays) offirst 

supplying services, 

materials or equipment. 

Commercial Qrojects 

and Remodels or repairs 

of existing owneroccuJ2ied 

single familx 

residences: within 60 

days of first supplying 

professional services, 

I materials or equipment. 

I Between 6 and 35 days 

after payment is due the 

claimant under the 

claimant's contract or 

invoice. 

, 

I 

All original contractors required Provide Notice to Customer; no special 

to be registered under RCW delivery method is required, so delivery can 

18.27 working directly for be by regular mail or delivery. However, 

owners on: 

because lien rights depend on proof that the 

(a) the repair, alteration or owner received the notice before work 

construction of four or fewer started, we recommend obtaining the 

residential units or accessory owner's signature acknowledging receipt of 

structures on residential 

the notice. 

property when the bid or 

contract price totals $1,000 or 

more, or 

(b) the repair, alteration or 

construction of a commercial 

building when the bid or 

contract price totals $1,000 or 

more, but less than $60,000. 

All material and equipment 

suppliers vvho do not contract 

directly with the owner. (There 

are exceptions, but for the 

purposes of material and/or 

equipment suppliers, they 

should always provide the 

precIaim notice unless they are 

contracting directly with the 

owner). 

All providers of professional 

services, original contractors, 

subcontractors, and suppliers. 

On all projects not having a 

payment bond of at least 50% of 

the amount of construction 

financing. 

i Provide preclaim notice to all owners and 

the prime contractor. Lenders do not have 

to receive this precIaim notice. PrecIaim 

notice must be provided by certified or 

registered mail, or by serving the notice 

personally and obtaining evidence of 

service in the form of a receipt of other 

acknowledgment. 

Provide a notice to real property lender 

("stop notice") to the interim or 

construction financing lender at its office 

that administers the interim or construction 

financing. The notice must also be provided 

to the owner and appropriate prime 

contractor. The notice must be given by 

certified or registered mail to the lender, 

owner and appropriate prime contractor, or 

delivering or serving the notice personally 

and obtaining evidence of delivery in the 

form of a receipt or acknowledgment signed 

I by the lender, owner and appropriate 

contractor. 

© 2011 Scott - Hookland LLP Washington Exhibit 8 

Page 1 of2

2. The Claim 

Within 90 days oflast substantial 

I original performance of labor, 

I delivery or materials, or rental of 

I equipment. 

I All providers of professional 

I services, original contractors, 

I subcontractors, and suppliers. 


Record claim of lien in county 

auditor or recorder's office 

where the subject property is 

located. 

... 

3. Post-Claim Notices 

I When 

Within 14 days 

after lien 

recording. 

Who 

All providers of professional services, original 

contractors, subcontractors, and suppliers who 

have recorded a claim of lien. 


Provide a copy of the claim of lien to 

all owners by certified mail, 

registered mail or by personal 

service. 

4. The Action 

Who 


Within 8 months after All providers or professional services, original File suit to 

recording of the claim of contractors, subcontractors and suppliers who have foreclose claim of 

lien. filed a claim of lien. lien. 

CONDOMINIUMS: 

If labor, material, equipment or professional services are provided prior to the declaration of condominium 

being recorded, then the above rules are the same as if the project was not a condominium. 

If, however, the services are provided after the condominium declaration is recorded, then a lien may be 

created only against individual units, and only after the owners of the individual units or their agents or 

construction agents request that the services be performed. In these situations, the notice to customer and 

preclaim notices must be furnished to the owner(s) of each individual unit. The claim of lien must also 

identify the individual units and their owner(s). Furthermore, the notice that a lien claim has been recorded 

must be provided to the owner(s) of the individual units within 14 days of the recording date. 

© 2011 Scott - Hookland LLP Washington Exhibit B 

Page 2 of2

Department of Labor and hldustries 

Construction Compliance 

MODEL DISCLOSURE STATEMENT 

NOTICE TO CUSTOMER 

This contractor is registered with the state of Washington, registration no. 

, and 

has posted with the state a bond or deposit of 

for the purpose of satisfying 

claims against the contractor for breach of contract including negligent or improper work in the conduct 

of the contractor's business. The expiration date of this contractor's registration is 

THIS BOND OR DEPOSIT MIGHT NOT BE SUFFICIENT TO COVER A CLAIM THAT MIGHT 

ARISE FROM THE WORK DONE UNDER YOUR CONTRACT. 

This bond or deposit is not for your exclusive use because it covers all work performed by this contractor. 

The bond or deposit is intended to pay valid claims up to 

that you and 

other customers, suppliers, subcontractors, or taxing authorities may have. 

FOR GREATER PROTECTION YOU MAY 'VITHHOLD A PERCENTAGE OF YOUR 

CONTRACT. 

You may withhold a contractually defined percentage of your construction contract as retainage for a 

stated period of time to provide protection to you and help insure that your project will be completed as 

required by your contract. 

YOUR PROPERTY MAY BE LIENED. 

If a supplier of materials used in your construction project or an employee or subcontractor of your 

contractor or subcontractors is not paid, your property may be liened to force payment and you could pay 

twice for the same work. 

FOR ADDITIONAL PROTECTION YOU MAY REQUEST THE CONTRACTOR TO PROVIDE 

YOU WITH ORIGINAL "LIEN RELEASE" DOCUMENTS FROM EACH SUPPLIER OR 

SUBCONTRACTOR AT YOUR PROJECT. 

The contractor is required to provide you with further infomlation about lien release document if you 

request it. General infonnation is also available from the state Department of Labor and Industries. 

I have received a copy of this disclosure statement. 

Dated this ___ day of _______ of the year ___ _ 

Signature of Customer 

The contractor must retain a signed copy of the disclosure statement in his or her files for a minimum of 

tllree years, and produce a signed or electronic sign.ature copy of tIle disclosure statement to the 

department upon request. 

F625-030-000 model disclosure statement notice to customer 09-2007 

Washington Exhibit C 

Page 1 of 3

O 

Washington 

State Department of 

Labor & Industries 

Contractor Registration 

Facts About Construction Liens 

What you should know about contracts 

If your contractor fails to pay subcontractors, 

suppliers or laborers or neglects to make other 

legally required payments, those who are owed 

money can look to your property for payment, 

even if you have paid your contractor in full. 

This is true if you have hired a contractor to build a 

new home or are buying a newly built home. 

It is also true when you remodel or improve your 

property, although the amount of your liability 

may be limited to the amount you owe the prime 

contractor at the time a lien is filed. 

Under Washington laws, those who work on your 

property or provide materials and 

are not paid have a right to enforce 

their claim for payment against 

your property. This claim is 

known as a 

construction 

lien. 

People who supply materials or labor ordered by 

your contractor are permitted by law to file a lien 

only if they do so within 90 days of cessation of 

performance or delivery of materials. The time 

frame is spelled out in RCW 60.04.091. 

If you enter into a contract to buy a newly built 

home, you may not receive a notice of a lien based 

on a claim by a contractor or material handler. Be 

aware that a lien may be claimed even though you 

have not received a notice. 

Before making fina] payment on the project, request 

a completed lien release form from each contractor 

ru"'1d material supplier. A sample of LlUs release of 

lien form is available from the Department of Labor 

& Industries, Contractor Registration Section. 

You have final responsibility for seeing that all bills 

are paid even if you have paid your contractor in 

full. 

If you receive a notice to enforce a lien, take the 

notice seriously. Let your contractor know you have 

received the notice. Find out what arrangements 

are being made to pay the sender of the notice. 

When in doubt, or if you need more details, 

consult your attorney. When and how to pay 

your contractor is a decision that requires serious 

consideration. 

···Hertiirider:'iJlJ9ShJngttm:I~WSIeqUirecontra~to;s;bgiVe 

·y:ou;ajlJscl.os~fe;~tirteml3ntif.yo.ur cpntf.8ct exceeds;· 

. $l,()oolR CW1~:21.rT4(AI ortS:)].'.· . . . 

. . : :. ~. ... .: ,. .. ";'-"":. . . .... - . . .. ; : .. :. . ...... . 

Page 2 of 3

How to protect your investment 

If you are dealing with a lending institution, ask 

your loan officer what precautions the lending 

institution takes to verify that subcontractors and 

material suppliers are being paid when mortgage 

money is paid to your contractor. 

J[j On the Web: Find more information 

about hiring a contractor at: 

www.Lni.wa.gov/TradesLicensing/Contractors/HireCon 

Request lender supervision when dealing with 

a lending institution that provides interim or 

construction financing. 

Ask the prime contractor to disclose all potential 

lien claimants as a condition of payment. A lien 

claimant must mail (by certified or registered mail 

or by personal service) a copy of the claim of lien 

to the owner within 14 days of the time the lien is 

recorded [RCW 60.04.091(2)]. While an action is 

ongoing, an owner may withhold from this prime 

contractor the amount of money for which a claim 

is recorded by a subcontractor, supplier or laborer 

[RCW 60.04.151]. 

Other formats for persons with disabilities are available 

on request Call 1-800-647-0982. TOO users, call 

360-902-5797. L&I is an equal opportunity employer. 

It is recommended that your check be made 

payable jointly, naming the contractor and the 

subcontractor or supplier as payees. 

Upon payment and acceptance of the amount due, 

the owner has the right to an executed release of all 

lien rights by lien claimants [RCW 60.04.071]. 

Consider using an escrow agent to protect your 

interests. Find out whether your escrow agent 

will protect you against liens when disbursing 

payments. If you are interested in this alternative, 

consult your attorney. 

Request that your contractor post a performance 

bond in the amount of the project cost. That will 

give you recourse in the event the contractor fails to 

complete the building agreement. 

""i::La;~sor :'&:Jdd&:t~:~;'~~~~~a~~t~'g~;#aa~1W~~~t~;~s:, ,', 

" 'n,:Jorrl.prpductiQh"'~Y'lefldi.n~jl1stitutio[lsaflP 

actors·fordlstrihuti'OQ,totheirclients;;:ltexplains 

'{jnstrHC1:icmlien',Jawtonelp you 

his:iil" 'ion :is':inotareffe-ctioh 

"Hated Ourcollfractor;' 

,

THE CONSTRUCTION SITE POSTING REQUIREMENT 

Washington State Construction Liens 

Property Owner: ___________________________ _ 

Address: -------------------------------- 

Telephone: _____________________________ _ 

Job Site Address: ----------------------------- 

Legal Description or Tax Parcel #: _____________________ _ 

Contractor: ------------------------------ 

Address: --------------------------------- 

Telephone: ________________________________ _ 

Registration No.: __________________________________ __ 

Lender and/or Bonding Company: __________________________ _ 

Address: ------------------------------------- 

Telephone: ____________________________________ _ 

© 2011 Scott - Hookland LLP Washington Exhibit D 

Page 1 of 1

NOTICE TO OWNER 

IMPORTANT: READ BOTH SIDES OF THIS NOTICE CAREFULLY 

PROTECT YOURSELF FROM PAYING TWICE 

To: 

Date: 

Re: 

From: 

(description of property: street address or general location) 

AT THE REQUEST OF: 

(name of person ordering the professional services, materials, or 

equipment) 

THIS IS NOT ALIEN: This notice is sent to you to tell you who is providing professional services, materials, 

or equipment for the improvement of your property and to advise you of the rights ofthese persons and your 

responsibilities. Also take note that laborers on your project may claim a lien without sending you a notice. 

OWNER/OCCUPIER OF EXISTING RESIDENTIAL PROPERTY 

Under Washington law, those who furnish labor, professional services, materials, or equipment for the repair, 

remodel, or alteration of your owner-occupied principal residence and who are not paid, have a right to 

enforce their claim for payment against your property. This claim is known as a construction lien. 

The law limits the amount that a lien claimant can claim against your property for professional services, 

materials or equipment. Claims for professional services, materials or equipment may only be made against 

that portion of the contract price you have not yet paid to your prime contractor as of the time this notice was 

given to you or three days after this notice was mailed to you. Review the back of this notice for more 

information and ways to avoid lien claims. 

COMMERCIAL AND/OR NEW RESIDENTIAL PROPERTY 

You have or will be providing professional services, materials, or equipment for the improvement of your 

commercial or new residential project. In the event you or your contractor fail to pay us, we may file a lien 

against your property. A lien may be claimed for all professional services, materials, or equipment furnished 

after a date that is sixty days before this notice was given to you or mailed to you, unless the improvement 

to your property is the construction of a new single-family residence, then ten days before this notice was 

given to you or mailed to you. 

Sender: 

Address: 

Telephone: 

Brief description of professional services, materials, or equipment provided or to be provided: 

IMPORTANT INFORMATION ON REVERSE SIDE 

© 2011 Scott - Hookland LLP Washington Exhibit E 

Page 1 of 2

IMPORTANT INFORMATION FOR YOUR PROTECTION 

This notice is sent to inform you that we have or will provide professional services, materials, or equipment 

for the improvement of your property. We expect to be paid by the person who ordered our services, but if 

we are not paid, we have the right to enforce our claim by filing a construction lien against your property. 

LEARN more about the lien laws and the meaning of this notice by discussing them with your contractor, 

suppliers, Department of Labor and Industries, the finn sending you this notice, your lender, or your attorney. 

COMMON METHODS TO A VOID CONSTRUCTION LIENS: There are several methods available to 

protect your property from construction liens. The following are two of the more commonly used methods. 

DUAL PAYCHECKS (Joint Checks): When paying your contractor for services or materials, you 

may make checks payable jointly to the contractor and the finns furnishing you this notice. 

LIEN RELEASES: You may require your contractor to provide lien releases signed by all the 

suppliers and subcontractors from whom you have received this notice. If they cannot obtain lien releases 

because you have not paid them, you may use the dual payee check method to protect yourself. 

YOU SHOULD TAKE APPROPRIATE STEPS TO PROTECT YOUR PROPERTY FROM LIENS. 

YOUR PRIME CONTRACTOR AND YOUR CONSTRUCTION LENDER ARE REQUIRED BY LAW 

TO GIVE YOU WRITTEN INFORMATION ABOUT LIEN CLAIMS. IF YOU HAVE NOT RECEIVED 

IT, ASK THEM FOR IT. 

© 2011 Scott - Hookland LLP Washington Exhibit E 

Page 2 of 2

WHEN TO SEND NOTICE TO OWNER 

(Preclaim Notice of Right to a Lien) 

(Washington) 

:AND 

AND 

:Your contract is with a Your contract is with a 

lprime first tier contractor. first or lower tier 

IMATERIAL ONLY 

iResidential Improvement 

ICommerciallmprovement 

:No 

iNo 

[Yes 

iYes 

! 

IoN-SITE LABOR AND--- 

IMA TERIALS 

1 

i I 

I 

'Residential Improvement INa 

Commercial Improvement 

I 

iNo 

ION-SITE LABOR ONLY 

jResidentiallmprovement iNo 

jCommerciallmprovement iNo 

I ! 

'IR-E-N-T-A-L-E-O-U-I--P-M-E-N-T-O-N-L-Y-'"I 

ResidentiallmProvement 

Commercial Improvement 

I 

NOTES: 

f 

INo 

iNa 

iNa 

No 

I 

iNo 

iNo 

--, 

IYes 

iYes 

I 

IYes* 

IYes* 

INo 

iNa 

I 

I 

IYes 

iYes 

iYes 

!Yes 

----------------~-- 

1) For repair. alteration or remodel of owner-occupied single family residences or appurtenant garages: Providers 

of professional services, materials or rental equipment to one other than the owner-occupier or his common law 

agent must provide the preclaim notice to owner to have lien rights. Such provider's lien claim may be satisfied 

only from the amount not yet paid the prime contractor by the owner-occupier at the time preclaim notice is 

received by the owner-occupier. The preclaim notice relates back 60 days from the date sent to protect 

professional services, materials, and rental equipment furnished during the 60 day period. The labor portion of 

any claim does not require a preclaim notice and is not limited to the amount not yet paid the prime contractor by 

the owner-occupier at time preclaim notice is received by the owner-occupier. 

2) There can be more than one owner on any given property. You may have a contact with one owner and not 

another, so you may have to look at the above chart two or three times, depending on the number of owners. 

3) If you contract with all of the owner(s), you may not have to provide the preclaim notice to owners, but may 

be required to provide the "Notice to Customer." 

4) Even though Mortgagees do not receive the notice to owner, if a mortgagee's trust deed of mortgage was 

recorded before the lien claimant began providing professional services, on site labor, materials or rental 

equipment, the mortgagee must receive the Notice to Real Property Lender ("Stop Notice") in order for the lien 

claimant to possibly have priority over the mortgagee. 

*The notice to owner should be sent to at least protect the material portion (and any rental equipment) of 

the claim. 

I 

© 2011 Scott - Hookland LLP Washington Exhibit F 

Page 1 of 1

NOTICE OF FURNISIDNG 

PROFESSIONAL SERVICES 

That on the __ day of 

, 20_, [name of provider 1 began providing 

professional services upon or for the improvement ofreal property legally described as follows: 

[legal description is mandatory] 

The general nature ofthe professional services provided is [describe the services generally]. 

The owner or reputed owner of the real property is [owner's name 1 . 

[Provider's Name] 

By: ____________ _ 

Title: ------------------------- 

[Name of Claimant] 

[Street Address] 

[City, State, Zip Code] 

STATE OF ______ _ ) 

) ss. 

County of ________________ _ ) 

[Phone Number] 

I certify that I know or have satisfactory evidence that (name of person) is the person who 

appeared before me, and said person acknowledged that (he/she) signed this instrument, on oath 

stated that (he/she) was authorized to execute the instrument and acknowledged it as the (type of 

authority, e.g., officer, trustee, etc.) of (name of party on behalf of whom instrument was 

executed) to be the free and voluntary act of such party for the uses and purposes mentioned in the 

instrument. Subscribed and sworn to before me on the date set forth below. 

DATED: __________ _ 

NotrryPublicFor __________________ _ 

My Commission Expires:, _____________ _ 

© 2011 Scott - Hookland LLP Washington Exhibit G 

Page 1 of 1

After recording return to: 

Scott. Hookland LLP 

PO Box 23414 

Tigard, OR 97281 

Our File: 

CLAIM OF LIEN 

(name of claimant) , 

vs. 

Claimant, 

CLAIM OF LIEN 

{name of claimant's contracting party) , 

Lien Debtor. 

Notice is herehv Q"jven that the nerson named below claims a lien nursuant to 

- - -- - - -.,I 0 - J. L 

Chapter 60.04 RCW. In support of this lien the following information is submitted: 

1. NAME OF LIEN CLAIMANT: 

TELEPHONE NUMBER: 

ADDRESS: 

CONTRACTOR'S REGISTRATION NO.: 

(If required) 

2. DATE ON WHICH THE CLAIMANT BEGAN TO PERFORM LABOR, 

PROVIDED PROFESSIONAL SERVICES, SUPPLY MATERIAL OR 

EQUIPMENT OR THE DATE ON WHICH EMPLOYEE BENEFIT 

CONTRIBUTIONS BECAME DUE: 

(Date) 

3. NAME OF PERSON INDEBTED TO THE CLAIMANT: 

(Legal, proper name of claimant's contracting party) 

4. DESCRIPTION OF THE PROPERTY AGAINST WHICH A LIEN IS 

CLAIMED: 

1 - CLAIM OF LIEN 

© 2011 Scott - Hookland LLP Washington Exhibit H 

Page 1 of 5

(Abbreviated legal description and APN) 

The address of s2.id land is --------------------- 

____ County, 

Washington. The land is more particularly described as: 

(lfthefulilegal description is lengthy, consider referring here to it as Exhibit "A", 

and attaching it as that exhibit) 

5. NAMES OF THE OWNERS OR REPUTED OWNERS: 

The names of the owners or reputed owners of said land are --------------- 

who at all times herein mentioned had knowledge of the construction of said 

improvement. All other owners or reputed owners are otherwise unknown. (List 

all owners, including any lessees or land sale contract vendors and vendees). 

6. THE LAST DATE ON WHICH LABOR WAS PERFORMED, PROFESSIONAL 

SERVICES WERE FURNISHED; CONTRIBUTIONS TO AN EMPLOYEE 

BENEFIT PLAN WERE DUE; OR MATERIAL, OR EQUIPMENT WAS 

FURNISHED: 

(Date) 

7. PRINCIPAL AMOUNT FOR WHICH LIEN IS CLAIMED: 

As set forth on Exhibit" A" (or "B" if a legal description is attached as Exhibit 

"A") attached hereto and incorporated herein, the following is a true statement of 

claimant's demand after deducting all just credits and offsets, to-wit: 

The reasonable value and contract amount of claimant's labor, services, materials 

and equipment is: 

Labor ...................................... $0.00 

Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 

Equipment ................................... $0.00 

Services .................................... $0.00 

Recording fees ................................ $ 

Total ...................................... $ 

Less all just credits and offsets ...................... $ < 0.00 > 

Balance due claimant ............................ $* 



Page 2 of 5

*Together with Washington State Sales Tax in the amount of $ 

, together 

with _% interest per annum (contract or legal rate) on the principal balance of 

$ from ,20_ until paid. (lfthere is no Washington 

State Sales Tax, then delete the first phrase and start after the asterisk with the claim for 

interest) 

(The Exhibit referred to at the beginning of this paragraph seven (7) should 

breakdown the claim into professional services, labor, materials, and equipment, and when 

each item within each category is provided. This segregation will help prevent a lien from 

being found totally void for the reason of commingling lienable and non-lienable items). 

8. IF THE CLAIMANT IS THE ASSIGNEE OF THIS CLAIM SO STATE HERE: 

(State whether claimant is or is not an assignee of the lien claim) 



Page 3 of 5

9. MISCELLANEOUS 

a) In construing this instrument, the masculine pronoun means and includes 

the feminine and the neuter and the singular includes the plural, as the 

circumstances may require. 

b) The paragraph captions are of convenience only and shall not be deemed to 

limit the terms or provisions of this claim of lien. 

DATED this __ day ___________ , 20_ 

(Name of claimant) 

By: ____________ 

(Name typed out) 

Its (Title of signatory) 

Telephone number: 

Address: 

STATEOF _____ _ 

County of _______ _ 

) 

) 

) 

ss. 

(Name of signatory), says as follows: I am the (Title) for claimant above named; 

I have read or heard the foregoing claim, read and know the contents thereof, and believe 

the same to be true and correct and that the claim of lien is not frivolous and is made with 

reasonable cause, and is not clearly excessive under penalty of perjury. 

(Name typed out) 



Page 4 of 5

(individual capacity) 



) 

) ss. 

) 

I certify that I know or have satisfactory evidence that (name of person) is the 

person who appeared before me, and said person acknowledged that (he/she) signed this 

instrument and acknowledged it to be (his/her) free and voluntary act for the uses and 

purposes mentioned in the instrument. Subscribed and sworn to before me on the date set 

forth below. 

DATED: _____ _ 

OR 

(representative capacity) 

(Signature) 

Title 

My appointment expires: _________ _ 



) 

) ss. 

) 

I certify that I know or have satisfactory evidence that (name of person) is the 

person who appeared before me, and said person acknowledged that (he/she) signed this 

instrument, on oath stated that (he/she) was authorized to execute the instrument and 

acknowledged it as the (type of authority, e.g., officer, trustee, etc.) of (name of party 

on behalf of whom instrument was executed) to be the free and voluntary act of such party 

for the uses and purposes mentioned in the instrument. Subscribed and sworn to before me 

on the date set forth below. 

DATED: __________ __ 

(Signature) 

Title 

My appointment expires: ________ _ 



Page 5 of 5

.RETURN ADDRESS 

Document Title(s) 

Reference Number(s) of Related Document(s) 

G ran to r( S) (Last, First and Middle Initial) 

Acidi.tiOlJaI Reference #'s on Page_ 

Gran tee( S) (Last, First and Middle Initial) 

Legal Description (abbreviated fonn, i.e, lot, block, plat or section, township, range, quarter/quarter) 

Additional legal is on page __ 

Assessor's Property Tax Parcel/Account Number 

Additional parcel #'s is on page __ 

TheAuditorlRecorder will rely on the information provided on this form. The staff will not read the 

document to verify the accuracy of completeness of the indexing information provided herein. 

I am requestiug au emergeucy nonstandard recording for an additional fee as provided iu 

RCW 36.18.010. I understand that the recording process may cover up or otherwise obscure 

some part ofthe text of the original document. 

Signature of Requesting Party 

© 2011 Scott - Hookland LLP Washington Exhibit I 

Page 1 of 1

WASHINGTON PUBLIC WORKS CLAIMS CHECKLIST 

1. Client's name: 

2. Name of person/entity that employed 

claimant: 

Call Secretary of State: (360) 753-7115; 

www.secstate.wa.gov/ 

Call Dept. of Labor & Industries: (360) 

902-5226 (for other than electrical 

contractors); (360) 902-5269 (for 

electrical contractors). 

Review RCW 18.27.080. 

www.lni.wa.gov/ 

See 1 above. A!so review contracts; 

purchase orders, invoices, credit 

applications, and payments. 

3. Name of public body which let contract: 

See 1 above. Also review payment bond 

and performance bond information. 

4. All names confirmed with: 

Is the information the same 

Secretary of State D 

Dept. of Labor & Industries D 

5. Client provided: Labor D 

Equipment D 

Materials D 

Professional Services D 

(Engineer/Architect) 

6. Breakdown of balance owed Claimant: 

$ __ ~ ___ for labor 

$ for materials 

$ for equipment 

$ for professional services 

$ for sales tax 

$ total * 

*Is Claimant entitled to interest higher than 

the legai rate of 12% No DYes D 

If Yes, what is the basis of higher interest 

rate Contract right ___ _ 

Other ---- 

If other, please explain: 

Page 1 - WASHINGTON PUBLIC WORKS CLAIMS CHECKLIST 

© 2011 Scott - Hookland LLP Washington Exhibit J 

Page 1 of 3

7. Date of Claimant's bid/contract: 

,CONSIDER.·.·"···· 

., 

, 

Date Claimant started work: 

8. Date Claimant ceased performing work 

(last day of substantial, original work): 

This information must be in each claim. 

8. Date Claimant ceased performing work 

(last day of substantial, original work): 

This information must be in each claim. 

9. Preclaim Notice of Retainage Lien Claim 

sent: No 0 Yes 0 

See 10 below. 

10. Date of mailing or serving preclaim 

Notice of Retainage Lien: 

11. Date of mailing or serving preclaim 

Notice of Right to Payment Bond 

Claim: 

Receipt: 

12. Date of project completion: 

13. Date project is accepted by the public 

body: 

Review RCW 60.28.015. This notice 

must be provided by material or rental 

equipment suppliers who furnish to one 

other than the prime contractor, and 

relates back 60 days from date sent. 

Must be sent by certified or registered 

mail or by personal service with written 

evidence of service. 

Review RCW 39.08.065. This notice 

must be provided by material and rental 

equipment suppliers furnishing to one 

other than the prime contractor and must 

be provided within 10 days after the first 

delivery of materials or rental equipment. 

Notice should be sent by certified or 

registered mail or by personal service with 

written evidence of service. 

Review RCW 60.28.011 (2). Completion 

of the project does not mean an 

acceptance of the prime contractor's 

work. Completion and acceptance can 

occur at different times. 

Review RCW 39.08.030. Watch out for 

early acceptance of the portion of the 

prime contractor's work that includes the 

claimant's work. 



Page 2 of 3

I 

"'".,,:.,:'\: " TO DO ',,:,;'" 

1,,«'· ,,:,:CONSI DER "':,/,;:>,i '," 

. 

1< 

.< 

"'" 

.. 

14. Date notice of retainage lien claim 

'. Must be served within 45 days after the 

served on public body: 

completion of the contract between the 

public body and the prime contractor. 

Service should be by certified or registered 

mail or by personal service with written 

evidence of service. 

15. Date notice of payment bond claim on Must be served within 30 days after 

public body: 

public body accepts the work of the 

improvement. Watch out for early 

acceptance of the portion of the prime 

contractor's work that includes the 

claimant's work. Service should be by 

certified or registered mail or by personal 

service with written evidence of service. 

16. 30 days after service of payment bond Right to attorney fees matures under RCW 

claim: 

39.08.030. Bring suit on payment bond 

claim and to foreclose retainage lien claim. 

17. Date that is 4 months after service of This is the last day to either foreclose the 

notice of retainage lien claim: 

retainage lien claim or re-serve it. Must 

file foreclosure action no later than 4 

months and 45 days after completion of 

the contract between the pubiic body and 

the prime contractor. (Cannot re-serve 

claim at this ~oint). In conjunction with 

foreclosing retainage lien claim, also bring 

suit on ~ayment bond claim even though 

statute of limitations on ~ayment bond 

claim may be three, four, or six years, or 

as set forth in payment bond. 



Page 3 of 3

1. Pre-claim Notice 

IWhen 

STATE PUBLIC WORKS BOND CLAIM 

WASHINGTON (LITTLE MILLER ACT) BOND CLAIM 

IAction Required 

/within 10 days of first supplying JAll subcontractors, and ,Provide preclaim 

Imaterials or equipment. There islsuppliers on Washington Public Inotice of payment 

Ino relation back. Possible Ilworks Projects and who are notlbond claim to the 

I~~~~~~~~~~~~l~~:~: :'~~fen ,;III~~:~:~~:!~~~~~~IY with the II-~_ ::~:_d_o_::~~tor.__ 

bY _~II 

10.\,.1\.1 Q..lJ. ....... J.lV\.. u..l.lU\"I.l .l.l.t1L"",,u . .1 . 

Iprice contract. 

2. The Claim 

I~ ~--lw~--------~-----IAction Required 

IWithin 30 d~ys after IAll subcontractors, and iN~tice of the Claim must be 

Ilacceptance* (nt completion)!supp!iers on Was~ington 

of the work of Improvement by !publIc Works ProJects. ** 

Ithe public body.! 

3. Post-Claim Notice 

NONE 

4. Action 

iserved via certified mail 

lupon the public body that 

Ilet the contract. 

,-.---------------------------------------:-------------,--------------1 

!When !Who iAction 

1- '-- , 

jRequired 

, IWithin four (4) months after serving the notice of payment !AII iFile suit to 

Ibond claim. The limitations period will either be set forth in iclaimants. lforeclose the 

Ithe bond or it will be three, four or six years after the notice 

Ipayment bond 

iofbond claim is served. In order to be consistent with the 

:claim. 

! 

* To avoid early acceptance by the public body of a portion of the overall work, serve the 

notice of payment bond claim within thirty (30) days after the delivery of materials or 

equipment is complete. 

** A material or equipment supplier will not be able to claim against the \Vashington 

public works bond unless it supplies to a "subcontractor." There is a two-part test to 

define who is a "subcontractor." These tests are found in Farwest Steel Corp. v. Mainline 

Metal Works, Inc., 48 Wn. App. 719 (1987). 

© 2011 Scott - Hookland LLP Washington Exhibit K 

Page 1 of 4

First test: Did the "subcontractor" perform work on the project site If so, then it should 

be a "subcontractor." 

Second test: Does the "subc~ntractor's" subcontract with the prime contractor account for 

at least ten percent (10%) of the owner/prime contractor contract If so, then the 

"subcontractor" status may be established. 

It may be unclear whether the first or second test will be applied in a given situation. If 

only the second test is used, then many suppliers supplying to "subcontractors" may not 

be able to claim against the Washington public works bond. The bottom line is that each 

case will tum on its own facts. 

Since Farwest Steel, three cases have consistently held that a supplier to a fabricator 

providing little or no on-site work has standing to assert a bond claim on a federal 

project. See U.S. ex reI. Conveyor Rental & Sales Co. v. Aetna Casualty & Surety Co., 

78] F.2d 488 (9th Cir. 1992); U.S. ex reI. Tacoma Steel Supply, Inc. v. M. A. Mortenson 

Co. and Federal Insurance Co., U.S. District Court, Western District of Washington at 

Tacoma, Case No. C96-5833PDB (April, 1997); and U.S. ex reI. ISSC Inc., dba Seaport 

Steel v. Cree Construction Co., Inc., U.S. District Court, Western District of Washington 

at Seattle, Case No. C94-836C. 

Given that the Farwest Steel court relied heavily on then existing federal authority, and 

the fact that subsequent federal authority is inconsistent with Farwest Steel, it may be that 

a Washington appellate court would now find that a supplier furnishing to a fabricator or 

contractor having a small portion of the overall work has standing to make payment bond 

and retain age liens claims on Washington state public works projects. Nevertheless, at 

this point, it is unclear whether such standing exists. 

The key is detelmining whether the fabricator has a subcontractor relationship or supplier 

relationship with the prime contractor. If it is a subcontractor relationship, the supplier to 

the fabricator may have bond rights. If it is a supplier relationship, the supplier to the 

fabricator probably does not have bond rights. The Conveyor Rental court listed these 

thirteen (13) factors weighing in favor of a subcontractor relationship: 

(1) The product supplied is customer fabricated; 

(2) The product supplied is a complex integrated system; 

(3) A close financial interrelationship exists between the companies: 

(4) A continuing relationship exists with the prime contractor as evidenced by either the 

requirement of shop drawing approval by the prime contractor or the requirement that the 

supplier's representative be on the job site; 

(5) The supplier is required to perform on site; 


Page 2 of 4

(6) There is a contract for labor in addition to materials; 

(7) The term "subcontractor" is used in the agreement; 

(8) The material supplied did not come from existing inventory; 

(9) The supplier's contract constitutes a substantial portion of the prime contract; 

(10) The supplier is required to furnish all the material of a particular type; 

(11) The supplier is required to post a performance bond; 

(12) There is a backcharge for the cost of correcting the supplier's mistakes; and 

(13) There is a system of progressive or proportionate fee payment. 

The Conveyor Rental court listed the following five (5) factors when weighing in favor of 

a supplier relationship: 

(1) A purchase order form is used by the parties; 

(2) The materials come from pre-existing inventory; 

(3) The items supplied are relatively simple in nature; 

(4) The contract is a small percentage of the total construction costs; and 

(5) Sales tax is included in the contract price. 

In reaching its determination, the court will likely apply a balancing test weighing factors 

that tend to favor a subcontractor relationship against factors that tend to favor a supplier 

relationship. Not all thirteen (13) factors in favor of a subcontractor relationship must 

exist. Likewise, not all five (5) factors indicating a supplier relationship must exist. 

Significantly, the contract between the prime contractor and fabricator need not call for 

on site performance by the fabricator to find a subcontractor relationship. In addition, the 

use of the term "subcontractor" in the agreement is not necessary to find a subcontractor 

relationship. 

Practical Tip: In determining whether to provide materials or rental equipment to a 

fabricator or subcontractor having a small portion of the overall work, evaluate and 

determine the existence of the above thirteen (13) subcontractor relationship factors and 

five (5) supplier relationship factors. The more subcontractor relationship factors and the 

less supplier relationship factors that exist, the more likely you will have bond rights on 

federal and possibly even state public works projects. 


Page 3 of 4

To help avoid this unclear issue, consider requiring your customer to post a payment 

bond for you to claim against. In addition, consider requiring your customer and the 

prime contractor to sign a joint check agreement with you under which all parties agree 

that for purposes of public works claims, you are providing materials at the direct request 

of the prime contractor and that the prime contractor and your customer have a 

subcontractor relationship and not a supplier relationship. 


Page 4 of 4

PRECLAIM NOTICE OF CLAIM ON PAYMENT BOND 

SENT CERTIFIED MAIL NO. 

RETURN RECEIPT REQUESTED 

To: Prime Contractor 

RE: 

Preclaim Notice of Claim on Payment Bond 

YOU ARE HEREBY NOTIFIED that the undersigned has, at the request of 

_______ ,.--____ , commenced to deliver or furnish materials, supplies, 

(name of contracting party) 

andlor equipment on ____ ..,,----,,--___ for use in the construction, alteration, 

(date of first delivery) 

and/or repair of that certain building or structure known as ____________ 

which is located upon the property described as ____-----,--,---__...,..-,-_____ 

(address or description) 

You are further notified that you and your bond will be held for payment for such 

materials, supplies, or equipment so furnished. 

DATED this ___ day of ________ , 20_ 

Claimant's Name 

Address 

City, Sate, Zip 

Contractor's Registration No.: 

(if applicable) 

cc: _____________ _ 

(Name) 

Credit Manager 

© 2011 Scott - Hookland LLP Washington Exhibit L 

Page 1 of 1

NOTICE OF CLAIM ON PAYMENT BOND 

SENT CERTIFIED MAIL NO. 

RETURN RECEIPT REQUESTED 

To: (Name of state, county, or municipality or other public body city, town, or district) 

RE: 

Notice of Claim on Payment Bond 

NOTICE IS HEREBY GIVEN that the undersigned 

__----;-;-:-_-,--_----;_____' dba _________ has a claim in the sum of 

(claimant's name) 

________________ Dollars ($__________) against the 

bond taken from __-:---_-::--:___-:-___, as principal and prime contractor, and 

(name of prime contractor) 

___-:--_--:::---:-:-__---:___' as surety, for the work of __________ 

(name ofbondingcompary) 

(brief description of the \A/ork concerning \vhich said bond was taken) 

DATED this ___ day of ________ , 20 

Claimant's Name 

Address 

City, Sate, Zip 

Contractor's Registration No.: 

(if applicable) 

cc: ____________ ___ 

(Name) 

Credit Manager 

© 2011 Scott - Hookland LLP Washington Exhibit M 

Page 1 of 1

Curtis A. Welch, Esq. 

Curtis A. Welch is a member of the law firm of Duggan, Schlotfeldt & Welch PLLC. 

From 1990 to the present, he has represented owners, developers, contractors, 

subcontractors and suppliers in matters involving construction law, civil litigation and 

creditor's rights. His practice since 1999 has also included insurance law and insurance 

defense. He is admitted to practice law in both Oregon and Washington. 

Mr. Welch received his Bachelor of Science degree in Economics from the University of 

Oregon, and his Law Degree from the University of Oregon School of Law, where he 

was an Editor of the Law Review. 

He has served as President of the Southwest Washington Contractor's Association, on the 

board of directors of that Association, and on many association committees from 1999 to 

the present. He has served on the Multnomah County Bar Professionalism Committee. 

He is a member of the Oregon Remodelers Association and the Building Industry 

Association of Southwest Washington. His community service has also included service 

as a youth sports coach from 1993 through 2010.

Notice to Lender to Withhold Funds ("Stop Notice")-The Washington Lien 

Claimant's Method for Asserting a Claim against Construction Loan Funds 

1. Notice to Lenderffime Limits 

In Washington, a person who has valid lien rights under the construction lien 

statutes (hereinafter "potential lien claimant") may assert a claim against funds loaned for 

the construction by serving upon the construction lender a notice of an unpaid bill due to 

the potential lien claimant. RCW 60.04.221. The term "potential lien claimant" is 

defmed under RCW 60.04.011 (11) as any person or entity entitled to assert construction 

lien rights and who is licensed or registered if required to be licensed or registered by the 

state. 

Under RCW 60.04.221 (1), a potential lien claimant who has not received a 

payment within five (5) calendar days after the date required by their contract, invoice, 

employee benefit plan agreement, or purchase order, may provide a notice to any 

construction lender that sums are due or to become due the potential lien claimant. 

The sum stated in the Notice to Lender (hereinafter "Notice") must be for labor, 

materials, equipment or professional services for which the potential lien claimant may 

, claim a lien. RCW 60.04.221 (1). Further, in order to be effective, the Notice must be 

served on the lender not later than thirty-five (35) calendar days after the sum fIrst 

became due. RCW60.04.221 (1). 

2. Lender's Duties 

Upon receipt of the Notice, the lender is required to withhold from the next 

construction-financing draw and from any subsequent draw the amount claimed to be due

as stated in the Notice. RCW 60.04.221 (5). In lieu of withholding from the construction 

loan draws, the lender may obtain from the prime contractor a payment bond for the 

benefit of the potential lien claiInant in an amount sufficient to cover the fullOUi1t stated in 

the potential lien claimant's Notice. !d. 

Once the lender has withheld the sum stated in the Notice, the lender is prohibited 

from disbursing any of the withheld sum, except by written agreement of the potential 

lien claimant, owner and prime contractor, or by order of a court with jurisdiction over 

the matter. RCW 60.04.221 (6). 

If the lender fails to withhold the sum stated in the Notice, or obtain the payment 

bond, the lender's trust deed or mortgage is subordinated to the lien of the potential lien 

claimant in an amount equal to the sum wrongfully disbursed to others, but not more than 

the sum stated in the Notice, plus costs and attorney fees. RCW 60.04.221 (7). 

The clear advantage to a potential lien claimant of utilizing the Notice to Lender 

procedure is that a fund or security is created for the protection of the potential lien 

claimant providing the Notice. In some situations, absent such a Notice, all constructionfinancing 

funds are disbursed to the exclusion of potential lien claimants, and the 

potential lien claimant's recourse is a lien against the real property and improvement of 

the subject project. 

However, if the potential lien claimant's lien is subordinate in 

priority to the construction trust deed or mortgage, the lien claimant's likelihood of 

recovering the full sum due is diminished. By utilizing the Notice to Lender procedure, 

the potential lien claimant may gain priority over the construction trust deed or mortgage 

to the extent of the sum stated in the Notice if the lender fails to withhold that sum from 

draws. Further, once the lender withholds the sum stated in the Notice, the potential lien

claimant may receive payment before other potential lien claimants, by either entering 

into a written agreement with the owner and prime contractor regarding release of the 

monies held by the lender, or by order of a court. 

3. Service of Notice 

The Notice must be in writing and mailed by certified or registered mail to, or 

personally served upon, the lender, owner, and appropriate prime contractor. 

RCW 

60.04.221 (3). The form of Notice is set forth under RCW 60.04.221 (4) (d). Generally, 

the Notice must contain the names and addresses of the owner(s), prime contractor, 

lender(s), and potential lien claimant; the location of the subject property; a description of 

the labor, equipment, services or materials provided; the sum claimed due and the date it 

became due; a demand to the lender to withhold the claimed sum from construction 

financing draws, and a warning to the lender that failure to comply with the notice may 

subject the lender to a whole or partial compromise of any priority lien interest. RCW 

60.04.221 (4). 

4. Multiple Notices/Challenges to Notices 

A potential lien claimant may serve more than one Notice to Lender in relation to 

a project, provided that each Notice is served more than five (5) calendar days after the 

payment became due, and not more than thirty-five (35) days after the payment first 

became due. Multiple notices are advisable if the potential lien claimant continues to 

work on the project. 

However, the potential lien claimant should proceed with caution before sending a 

Notice to ensure that the Notice does not overstate the amount owing and that it is not 

premature. A potential lien claimant is liable for any loss, cost or expense, including

attorney fees, to a party injured arising out of any unjust, excessive or premature Notice. 

RCW 60.04.221 (8). 

Under ReW 60.04.221 (9), an owner of real property subject to such a Notice, or 

a contractor, subcontractor or lender, who believes the Notice to be frivolous and without 

reasonable cause, or is clearly excessive, is entitled to apply to the court for an order 

declaring the Notice to be void. However, in the same proceeding, the court may enter an 

order finding that the Notice was made with reasonable cause and was not clearly 

excessive, may declare the Notice valid, and award costs and reasonable attorney fees to 

the potential lien claimant. RCW 60.04.221 (9)(d). 

5. Maintaining Construction Lien Rights 

The Notice to Lender procedure is not a substitute for filing a construction lien. 

Rather, in order to utilize the Notice to Lender procedure, the potential lien claimant must 

have valid lien rights at the time he or she serves the Notice. This requires the potential 

lien claimant to file their construction lien timely, and to ensure that they serve all prelien 

notices required of them to be served, such as the Notice of Right to Claim a Lien 

and the Notice to Owner, if required under the circumstances applicable to the potential 

lien claimant.

Retainage Liens on Public Improvement Projects in Washington 

1. The Retained Fund on Public Improvement Projects 

On state and local public improvement projects in Washington, a public body is 

required to reserve, as a trust fund, a retainage sum not to exceed five percent of the 

monies earned by the general contractor on the project. RCW 60)8.011 (1). This trust 

fund, commonly referred to as the "retained fund", is for the protection of laborers, 

subcontractors, material suppliers and equipment suppliers, as well as for the protection 

of state and local government with respect to taxes which may be due from the general 

contractor in relation to the project. RCW 60.28.011 (2). 

Alternatively, the general contractor may post a bond for all or any portion of the 

required retainage fund. RCW 60.28. OIl (6). The bond must be in a form acceptable to 

the public body and be issued by a bonding company that meets the standards established 

by the public body. /d. The bond is subject to all claims and liens and in the same 

manner and priority as provided for in relation to the retained fund. [d. 

Under Substitute House Bill 1384, which has passed by unanimous vote in both 

the Senate and House of the 2011 Washington legislature, RCW 60.28.011 has been 

amended to provide that the statutory retainage fund will not be required on public 

improvement contracts involving the construction, alteration, repair or improvement of 

any highway, road, or street funded in whole or part by federal transportation funds. 

Rather, under the bill, such public improvement contracts involving federal transportation 

funds must rely on the payment bond required under RCW 39.08 for the protection and 

payment of claims of persons arising under the public construction contract.

As of the date of the writing of this article, Substitute House Bill 1384 has not 

been signed by the Governor, but it is expected that it will be signed into law. 

Regardless, the amendment affects only a segment of the public contracting work in the 

state of Washington. 

2. Persons Entitled to Maintain Liens against the Retained Fund 

The defmition of those persons entitled to protection under the retainage fund 

statute is broad. Under RCW 60.28.011 (12) (b), a "person" entitled to file a lien against 

the retained fund is defined as "a person or persons, mechanic, subcontractor, or 

materialperson who provides labor or provides material for a public improvement 

contract, and any other person who supplies the person with provisions or supplies for the 

carrying on of a public improvement contract." 

In order to be protected under the retainage fund statute, it is not necessary that a 

materialperson or laborer furnish material or labor directly to the contractor. Rather, the 

protection also extends to a person who furnishes material or labor to a subcontractor. 

The scope of the persons protected under the retainage fund statute is not without 

limits however. In Better Financial Solutions, Inc. v. Caicos Corporation, 117 Wash. 

App.899, 905-07, 73 P.3d 424 (2003), the court held that a company which provided 

temporary labor to a subcontractor on a public improvement project was not a laborer 

entitled to protection under the retainage fund statute, because that company, Better 

Financial Solutions or "BFS", did not perform labor on the project site. The court drew a 

distinction between providing laborers and actually performing labor, and held that the 

retainage fund statute "contemplates persons who do actual work on the project rather 

than persons who provide laborers to perform the actual work." ld. at 907.

The court also held that BFS was not a subcontractor for purposes of the retainage 

fund statute because the function of BFS did not bear the required "nexus with project's 

physical construction." ld. at 907-12. 

If a claimant is within the protected class of persons under the retainage fund 

statute, the claimant has a lien on the retained fund, or on the bond posted in lieu of the 

retained fund. RCW 60.28.011 (2). In order to enforce the lien, the claimant must follow 

the procedures discussed below. 

3. Pre-Lien Notice 

First, the claimant must deliver a pre-lien notice to the general contractor. RCW 

60.28.015. This pre-lien notice covers only those materials, supplies and equipment 

furnished or leased during the sixty (60) days preceding the giving of the notice, as well 

as all subsequent materials, supplies or equipment that the claimant furnishes. ld. Those 

persons who provide solely labor need not provide a pre-lien notice. 

Under RCW 

60.28.015, the pre-lien notice must state in substance and effect as follows: 

a. That the claimant is and/or has furnished materials, supplies or 

equipment for the project; 

b. The name of the subcontractor ordering the materials, supplies or 

equipment from the claimant; and 

c. That a lien may be claimed against the retained fund for all 

materials, supplies and equipment provided by the claimant. 

The notice must be given either by: (1) mailing it by registered or certified mail in 

an envelope addressed to the general contractor; or (2) personal service on the general 

contractor or the general contractor's representative and obtaining evidence of such

service III the fonn of a receipt or other acknowledgement signed by the general 

contractor or its representative. RCW 60.28.015. 

Determining whether a person has supplied solely labor can be difficult, as 

demonstrated by a recent Washington Court of Appeals opinion, Campbell Crane & 

Rigging Services, Inc. v. Dynamic Intern. AK, Inc., 145 Wash. App. 718, 186 P.3d 1193 

(2008). In Campbell Crane, the general contractor, Berschauer Phillips, subcontracted 

with Dynamic International to furnish labor and materials to a project for the City of 

Vancouver. Dynamic subcontracted with Campbell Crane to supply and operate cranes 

for constructing the project. 

Campbell Crane invoiced Dynamic for crane operation, which invoice did not 

differentiate between equipment rental and crane operation. 

Dynamic did not pay 

Campbell Crane, and consequently Campbell Crane filed a notice of claim of lien against 

the retainage fund, as well as against Berschauer Phillip's payment bond. Campbell 

Crane then filed suit. 

Campbell Crane did not provide a pre-lien notice to Berschauer under either the 

retainage fund statute or the payment bond statute, and Berschauer argued that Campbell 

Crane's retainage lien and payment bond claim were both invalid for failure to provide a 

pre-lien notice. The Court of Appeals held that Campbell Crane was not required to give 

the pre-lien notice under either the retainage fund statute or the payment bond statute 

because it used cranes as tools incidental to the crane lifting services, and therefore 

Campbell Crane's only role was that oflaborer. [d. at 725-26. 

Despite the result of the Campbell Crane case, it is prudent to always provide the 

pre-lien notice, even if only iabor is provided, because of the risk of losing the right to

foreclose a lien against the retainage fund. The process for providing a pre-lien notice is 

not costly or time-consuming. 

4. The Retainage Lien Claim 

The second step in the retainage lien process is the requirement that the claimant 

give notice of its lien against the retained fund, or against the bond in lieu of the fund, to 

the board, counsel, commission or other body acting for the state, county or municipality, 

within forty-five days of completion of the contract work. RCW 60.28.011 (2). 

Washington case law does not define the term "completion of the contract work" 

referenced in RCW 60.28.011 (2). 

Thus it is unsettled whether "completion of the 

contract work" refers to the overall work on the project, or the claimant's own work. 

Accordingly, the most conservative approach is that claimant use the completion of the 

claimant's own contract work to calculate the deadline for giving the notice of lien. 

The form of notice of retainage lien claim is very straightforward. The form is the 

same form as the statutory form for a bond claim set forth in RCW 39.08.030, modifying 

it to state that the claimant has a claim against the retainage fund under RCW 60.28.011. 

It is common practice to give the notice of retainage lien claim in the same document as 

the bond claim and thus both types of claims and the enabling statutes are commonly 

referenced in the document that follows the form set forth in RCW 39.08.030. The notice 

of retainage lien should contain the claimant's name, amount of the claim, name of the 

contractor or subcontractor to whom the claimant supplied the labor, materials or 

equipment, a brief description of the labor, materials or equipment provided, a 

description of the project including the contract number for the prime contractor contract 

with the public entity, and it must be signed by the claimant.

The notice of retainage lien claim must be delivered by certified mail or by 

personal service on the public body and on the general contractor. See RCW 60.28.011 

(2) (requiring that the notice shall be given in the "manner provided in RCW 39.08.030.") 

5. Foreclosure of the Retainage Lien Claim 

Finally, in order to maintain its lien claim, the claimant must file suit to foreclose 

its lien within four months after filing the lien claim against the retained fund or the bond 

in lieu of the fund. RCW 60.28.030. 

Although the retainage fund statute does not expressly provide, Washington's 

case law contemplates that a person may also keep the person's retainage lien valid by refiling 

it every four months, before expiration of the four-month limitation period on an 

existing retainage lien. Shope Enterprises, Inc. v. Kent School Dist., 41 Wash. App. 128, 

132, 702 P.2d 499 (1985), However, refilling more than four months after initially filing 

a retainage lien claim will not revive the retainage lien. Airefco, Inc. v. Yelm Community 

Schools No.2, 52 Wash. App. 230, 234, 758 P.2d 996 (1988). 

If claimant prevails in an action to foreclose its lien against the retained fund, or 

bond in lieu of the fund, they are entitled to recover their reasonable attorney fees and 

costs. RCW 60.28.030. The award of attorney fees under RCW 60.29.030 is mandatory. 

Diamaco, Inc. v. Mettler, 135 Wash. App. 572, 574, 145 P.3d 399 (2006) rev. den. 161 

Wash. 2d. 1019, 171 P.3d 1056. 

Washington Courts have interpreted RCW 60.28.030 to provide for an award of 

attorney fees only to a claimant and not to a contractor successfully defending a retainage 

fund claim. Better Financial Solutions, Inc. v. Caicos Corporation, 117 Wash. App. at 

913.

In relation to venue, RCW 60.28.030 provides that the retainage lien "shall be 

enforced by action in the superior court of the county where filed." However, a forum 

selection clause in the construction contract executed by the claimant can override this 

venue requirement. Keystone Masonry, Inc. v. Garco Construction, Inc. 135 Wash. App. 

927,936, 147 P.3d 610 (2006). In Keystone Masonry, the Court of Appeals held that a 

forum selection clause in the parties' contract overrode the venue requirement under 

RCW 60.28.030, and ruled that the action should be transferred from Pierce County 

where the retainage lien was filed, to Spokane County, the county specified in the parties' 

contract as the venue for actions. 

In regard to priority of retainage liens, RCW 60.28.040 provides that the top 

priority is for the lien of employees who have not been paid prevailing wages. Taxes due 

to the state and iocai government are the next priority, followed by other retainage lien 

claims.

E .

Portland Lawyers Construction Thomas Ped Page 1 of 1 

WILLIAMS 

KASTNER~M 

111e: 

HOME 

ABOUT US 

OUR WORK 

ATIORNEYS 

Beijing 

Hong Kong 

Portland 

Seattle 

Shanghai 

Tacoma 

International 

RESULTS 

PED, THOMAS A. 

Practice Areas: 

Construction 

lJtttlatlon General 

Product I.I

Construction Defects 

5 STEPS FOR A HEALTHY DEFENSE 

Thomas A. Ped 

WILLIAMS KASTNER & GIBBS, PLLC 

888 SW Fifth Avenue, Suite 600 

Portland, Oregon 97204 

(503)228-7967 

tped(a)williamskastner .com 

STEP #1: 

RESPOND TO ORS 701 NOTICE OF DEFECT LETTER (*FOR 

RESIDENTIAL STRUCTURES) 

The bulk of construction defect claims involve single family residences, condominium projects, 

and townhomes. Such legal claims are initiated by a notice of defect letter sent pursuant to the 

statutory scheme set forth in ORS 701.560 to ORS 701.600. An owner of a residential structure 

may not compel arbitration or commence a court action against a contractor, subcontractor or 

supplier to assert a claim arising out of or related to any defect in the construction, alteration or 

repair of a residence or in any system, component or material incorporated into a residence 

unless the owner has sent that contractor, subcontractor or supplier a "notice of defect." ORS 

701.565(1). The steps required of a contractor following receipt of a notice of defect can be 

broken down as follows: 

a. Request a "visual examination" 

A contractor, subcontractor or supplier that receives a notice of defect may, within 14 days, send 

the owner a written request to conduct a visual examination of the residence. ORS 701.570(2). 

An owner must make the residence available for visual inspection within 20 days of receipt of 

the request. ORS 701.575(1). In practice, a visual inspection merely consists of a "look at the 

structure," as opposed to a more in-depth inspection that may involve destructive testing, which 

typically entails removal of portions of the exterior (or interior, as the case may be) to examine 

aspects of the construction that are not readily apparent to the naked eye. A contractor that 

wishes to conduct testing beyond the visual inspection may only do so under the statute by 

written request to the owner within 14 days of the visual inspection. ORS 701.570(3). 

b. Send a "secondary notice of defect" 

If a contractor knows of another contractor, subcontractor or supplier that may be responsible for 

some or all of the defects, the contractor must send a "secondary notice of defect" by registered 

mail, return receipt requested, to the intended recipient's last known address as shown in the 

records of the Construction Contractors Board ("CCB"). ORS 701.570(1). The CCB's website 

can be found at www.ccb.state.or.us. Sending a secondary notice is standard operating 

2518294.1

procedure for a general contractor, in order to bring the potentially responsible subcontractors 

and suppliers to the table. The secondary notice must be accompanied by a statement describing 

the basis for contending that the other contractor, subcontractor or supplier may be responsible 

for some or all of the defects. Id. 

Practice Tip: It is always a good idea to copy the subcontractor or supplier's 

insurance company on the secondary notice. The CCB maintains matrices of all 

contractor's liability insurers going back approximately ten years. Having a 

savvy paralegal who is familiar with the CCB website is very helpful to conduct 

this research and prepare the letters. An insurer may be more likely to respond to 

the notice by hiring an expert and retaining counsel at the outset. It is not unheard 

of for a subcontractor to file away a secondary notice without responding, in the 

hopes that the whole thing will go away. Copying the insurer some times helps 

speed the process toward resolution - although not always. 

Question: What happens if a general contractor fails to send a secondary notice 

of defect to a subcontractor Answer: Nothing. Although an owner is barred 

from bringing suit without first complying with ORS 701.560 et seq, there is no 

such bar to a general contractor from later bringing suit against its subcontractors 

and suppliers, notwithstanding the notice of defect statutes. 

c. Provide a written response to owner 

Not later than 90 days after receiving a notice of defect, a contractor must send a written 

response to the owner, which must include either an acknowledgement of the existence of any of 

the defect(s); or, a statement describing the existence of a defect different in nature or extent 

from the defect described in the notice of defect; or, a denial of the existence of the defect(s). 

The response must also include an offer to perform some or all of the requested remediation, an 

offer to pay a stated amount to the owner for the defects and incidental damage, or (again) a 

denial of responsibility for some or all of the acknowledged defects or incidental damage. ORS 

701.570(5). 

Question: Must an owner accept a contractor's offer to perform repairs 

Answer: No. Even if an offer is made, the owner may simply reject it and then 

commence an arbitration or file a lawsuit. ORS 701.580(4). 

**** 

STEP #2: 

ASK (AND HIRE) AN EXPERT 

Construction defect cases are very expert driven, and you cannot leave home or the office 

without one. Construction experts are essential to addressing the specialized and technical issues 

that arise in construction matters. I usually try to contact an expert on the day an assignment for 

the defense of the case is made. The good ones typically are retained quickly. There are several 

reputable expert construction firms in Oregon and Washington to choose from. 

2518294. I

An expert can some times help provide a more objective assessment of the alleged defects than 

perhaps one that can be provided by your client. Oftentimes, contractors, rightly or wrongly, 

believe they did nothing wrong. Hearing the analysis from a qualified expert can help ease the 

client toward a settlement, as appropriate. 

Experts can also help with the jargon involved in construction cases. It seems that every 

component of a building has at least two or more names. "Building paper," for example (which 

is installed over the sheathing and underneath the siding) may be referred to as "felt paper," 

"building wrap," and "weather-resistive barrier" (aka "WRB"). Construction terms can be 

bewildering to the uninitiated, but an expert can make short work of it. 

Practice Tip: Never forget the power of "Go ogle" and similar internet search 

engines. If a lawyer is hesitant to appear ignorant in front of the client or even the 

expert, online research of construction terms can at least get you into th~ ballpark 

for discussion. 

**** 

STEP #3: 

WALK THE SITE YOURSELF 

Every building site is different, and a thorough knowledge ofthe its dimensions and unique 

characteristics is essential to defending the case. Reviewing expert reports and photographs can 

only help so much. Having your client point things out can enable a better understanding of the 

issues and the potential trouble spots. Whether the inspection is conducted as part of the 

response to the notice of defect, or later, you have to get out there. 

**** 

STEP #4: 

CONSIDER THE LEGAL ISSUES 

Defense of a construction defect suit involves a host of legal issues. The types of legal claims 

that can be asserted by an owner depend in part upon whether the contractor built the subject 

building for the owner under a construction contract, whether the residence was sold to the 

owner on a "spec" basis, or whether the defendant was a subcontractor on the job. The differing 

kinds of claims are briefly addressed below. 

a. Claims against a contractor on a construction contract - Breach of Contract 

Where an owner brings suit against the builder with whom it contracted, a claim for construction 

defect typically is for breach of contract only. Most construction contracts include an obligation 

perform construction work in a "workmanlike manner." In Jones v. Emerald Pacific Homes, 

Inc., 188 Or App 471, 71 P3d 574, rev den 336 Or 125, 79 P3d 882 (2003), which involved just 

such a contract, the trial court dismissed the owners' negligence claim on that ground that it was 

predicated on the breach ofthe same duty that formed the basis for the owners' contract claim. 

The trial court was affirmed on appeal, in which the Court of Appeals noted that while it is 

possible that a breach of contract claim can give rise to tort liability, that possibility exists only 

2518294.1

when tort liability is predicated on the breach of a duty independent of the duty that forms the 

basis for the contract claim. 

Practice tip: It is not unusual for owners to include negligence claims in their 

complaint, in which it is alleged that the builder had a duty independent of the 

obligations of the contract by virtue that the builder exercised independent 

judgment on the owners' behalf in constructing the home. Such claims may be 

subject to dismissal on a motion for summary judgment. However, this may 

create a dilemma for the defense: Ifthe negligence claim is dismissed, the basis 

for insurance coverage may be eliminated. It is therefore advisable to seek to the 

insurer's agreement that coverage will remain in place in the event the negligence 

claims are dismissed. 

b. Claims against a "spec" builder - Implied Warranty 

Where an owner has purchased a home from a "spec" builder (i.e., the house was built for sale to 

the general public), the owner's claim for construction defects is in implied warranty. In Yepsen 

v. Burgess, 269 Or 635,641,525 P2d 1019 (1974), the cou.rt held that the sale ofa new house by 

the builder-seller carries with it an implied warranty that "the house is constructed in a 

reasonably workmanlike manner and is fit for habitation." 

c. Claims by owners who did not contract with the builder or subcontractor - 

Negligence 

In Harris v. Suniga, 209 Or App 410, 149 P3d 224 (2006), the Oregon Court of Appeals clarified 

that an owner that had purchased an apartment building from the original owner for whom the 

apartments had been built could assert a claim for defects against the builder in negligence, since 

there was no contractual relationship to otherwise define the builder's duties. Owners' attorneys 

have now begun to rely upon Harris to justify suing a builder's subcontractors in negligence, 

too, as opposed to suing the builder and waiting for it to make third party claims against its 

subcontractors and suppliers. 

d. Statute of limitations 

The statute of limitations is where things can get interesting. The statute of limitations for 

contract claims is six years. ORS 12.010. Recently, in Waxman v. Waxman & Associates, Inc., 

224 Or App 499, 198 P3d 445 (2008), the Court of Appeals held that the time for suit on contract 

claims for defective construction begins at the time of breach and that there is no discovery rule. 

In Waxman, since the plaintiffs had brought suit more than six years after the completion of 

construction, the claims were barred. This was so even though the plaintiffs had purchased their 

townhomes approximately five years after construction and did not discover the alleged defects 

until a few years later. 

Practice tip: Where an owner who contracted with the builder for the 

construction has brought claims in negligence and breach of contract more than 

2518294.1

six years after completion, a suit may be subject to dismissal altogether, based on 

Jones and Waxman. 

e. Other defenses 

Where the contractor built according to the plans and specifications provided by the owner, a 

complete defense may exist based on the Spearin doctrine, which is based on United States v. 

Spearin, 248 US 132,39 Set 59,63 LEd 166 (1918) (owne'r that provides plans impliedly 

warrants that they are sufficient for construction). The Spearin doctrine has been adopted in 

Oregon. Barbour & Son v. Highway Comm., 248 Or 247,433 P2d 817 (1967). 

If the owner completed repairs before or during the suit without adequate notice to the 

contractor, a spoliation defense may hold. Recovery may also be barred where the owner seeks 

costs for reconstruction that go beyond merely repairing the defective work. The defense is 

known as "betterment." 

**** 

STEP #5: 

IF YOU THINK THE OWNERS' CLAIMED REPAIR COSTS ARE 

EXCESSIVE, HIRE YOUR OWN CONTRACTOR TO BID THE WORK 

Owners' attorneys usually obtain a bid from a licensed contractor to perform the repairs. Often, 

the defendants believe the repairs contained in the bid are excessive or redundant ("belt and 

suspenders"). It usually is therefore advisable to obtain a bid from a licensed contractor on 

behalf of the defense. The differences in the bids can be stark. An alternative bid (or bids) can 

provide good leverage for settlement and reduce the potential recovery at trial. 

2518294,1

Peter 1. Viteznik 

Attorney at Law 

Kilmer Voorhees & Laurick, P.c. 

732 NW 19th Avenue 


Tel 503-224-0055 ext 219 

Fax 503-222-5290 

Mr. Vitezllik's practice emphasizes construction, business. real estate and insurance coverage litigation. 

Mr. Viteznik has also handled a wide variety of real estate and construction related transactions. Mr. 

Viteznik is recognized as one offhe premier construction litigators in the Pacific Northwest, and he has 

handled cases throughout Oregon and Washington, as well as Idaho and California. Mr. Viteznik is 

currently the treasurer of the Oregon State Bar's Construction Law Section and is a frequent lecturer on 

topics related to construction and real estate litigation. Mr. Viteznik has also authored articles on a wide 

variety of topics related to construction and real estate matters. 

Mr. Viteznik has successfully handled a wide variety of large-dollar disputes related to construction. real 

estate, and insurance in both federal and state court and has also prevailed ill several significant cases 

before the Oregon Court of Appeals. 

Mr. Viteznik's practice is unique in that he has extensive experience in representing a wide variety of 

litigants involved in construction defect disputes, including developers, owners, general contractors, 

subcontractors, material suppliers, and design professionals. Mr. Viteznik also represents material 

suppliers, contractors, and owners in prosecuting and defending payment claims and is extensively 

experienced in construction lien matters. Mr. Viteznik also handles cases involving insurance coverage 

and commercial disputes.


Michael E. Farnell is a founding partner of Parsons Farnell & Grein, LLP, a law firm focusing on 

insurance coverage, commercial litigation, and transactions. He represents policyholders in 

insurance coverage disputes with insurers in Oregon and Washington. He provides coverage 

advice and litigation to, among others, developers and contractors in construction defect disputes, 

businesses in intellectual property disputes, employee benefit plans in fiduciary and fidelity 

disputes, and attorneys in malpractice lawsuits. 

Mr. Farnell has been recognized in each of the past five years as one of the top attorneys in 

Oregon by Oregon Super Lawyers and is the only policyholder representative among insurance 

coverage attorneys listed. He also has authored numerous articles on insurance coverage, 

including Oregon's CLE chapter entitled Actions Against Insurers. He is a frequent lecturer to 

attorneys and other professionals concerning insurance coverage, and has spoken to groups such 

as the International Foundation of Employee Benefits Plans and Oregon AssocIation of Defense 

Counsel.

OSB - CONSTRUCTION LAW SECTION 

OR & WA CONSTRUCTION LAW: COMPARISON AND CONTRAST 

INSURANCE ISSUES AFFECTING CONSTRUCTION DISPUTES 

I. THE COVERAGE GRANT: WHAT IS INSURED 

A. Oregon Rules for Interpretation ofInsurance Policies 

1. ORS 742.016: "Except as provided in ORS 742.043 [re oral binders], every contract of 

insurance shall be construed according the terms and conditions of the policy." 

2. Hoffman Construction Company v. Fred S. James & Company, 313 Or 464, 469-71 

(1992): 

(a) 

(b) 

(c) 

Intent of the parties to insurance contract is determined from the policy terms; 

Ambiguity: words are capable of more than one reasonable interpretation in light 

of the terms ofthe policy as a whole; 

Construction against insurer occurs only if insured's proffered interpretation is 

reasonable within plain meaning of policy. 

B. Key Requirements of the Coverage Grant 

1. Property DamagelBodily Injury During the Policy Period 

(a) Coverage is triggered by the date of property damage, not the time the damage is 

discovered or liability is determined. 

(b) McCormick & Baxter Creosoting Co. v. St. Paul Fire & Marine Ins. Co., Inc., 324 

Or 184, 201, 923 P2d 1200 (1996) (occurrence-based coverage triggered by actual 

injury during the policy period). 

2. What is "Property Damage" 

(a) 

Policy Definition: "Property damage means: 

(1) Physical injury to tangible property, including all resulting loss of use of 

that property. All· such loss of use shall be deemed to occur at the time of 

the physical injury that caused it; or 

(2) Loss of use of tangible property that is not physically injured. All such 

loss shall be deemed to occur at the time of the 'occurrence' that caused 

it." 

(b) 

Appellate Decisions Construing Definition: 

(1) Wyoming Sawmills, Inc. v. Transportation Ins. Co., 282 Or 401,406, 578 

P.2d 1253 (1978): 

(i) 

Cost to replace defective studs in building is not covered. 

Page 10f13 


PARSONS FARNELL & GREIN, LLP 

1030 SW Morrison Street 


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(ii) 

Inclusion of word "physical" in the definition of property damage 

"negates any possibility that the policy was intended to include 

'consequential or intangible damage,' such as depreciation in 

value, within the term 'property damage. '" 

Note: dicta in decision states that labor to repair defective 

conditions could be "property damage" if repair work causes 

physical injury to other parts of building. 

(2) Purely economic loss is not covered "property damage." 

(i) Drake v. Mutual of Enumclaw Ins. Co., 167 Or. App. 475, 484, 1 

P.3d 1065 (2000) (economic loss due to loss in value of inheritance 

not injury to tangible property). 

(ii) General Ins. Co. of Am. v. Western Am. Development Co., Inc., 43 

Or App 671, 675, 603 P.2d 1245 (1979)(decreased market value 

due to presence of easement is not "property damage").\ 

(3) MW Builders, Inc. v. Safeco Ins. Co. of America, 2009 WL 995050, *4 (D 

Or) (on remand): 

(i) 

(ii) 

"[P]oor workmanship is not an 'occurrence' and therefore, no 

coverage exists where the only damage suffered was to the 

insured's property and not that of a third-party." 2009 WL 995050, 

*4 (citing Oak Crest Construction Co. v. Austin Mutual Insurance 

Co., 329 Or. 620, 626-27 (2000)). 

"Applying Oregon law, the Ninth Circuit affirmed this court's 

earlier ruling and held that "[f]or a claim of faulty workmanship to 

give rise to 'property damage,' a claimant must demonstrate that 

there is damage to property separate from the defective property 

itself." 2009 WL 995050, *5 (quoting MW Builders, Inc. v. Safeco 

Ins. Co. of America, 267 Fed.Appx. 552, 554 (9th Cir 2008»). 

(4) State Farm Fire and Casualty Co. v. American Family Mutual Ins. Co.,_ 

Or App _, A142944 (Or App April 6, 2011) (complaint did not allege 

potentially-covered property damage where none of the allegations allege 

damage to property other than the defective components of the EIFS 

cladding system). 

3. What is an "Occurrence" 

(a) 

(b) 

Accidental injury to property. 

Contract vs. Tort Liability - Insurer's View: 

(i) An "occurrence" refers to tort liability, not contractual liability. For 

coverage to arise, there must be liability based on breach of a duty beyond 

the contractual undertaking. 


www.pfglaw.com Page 2 of 13 Michael E. Farnell


a. Oak Crest Construction Co. v. Austin Mutual Ins. Co., 329 Or. 620, 

998 P.2d 1254 (2000) (costs to correct deficiencies in insured's 

painting of cabinets is not an "occurrence" as obligation arises solely 

in contract, even if there is an allegation that contract was negligently 

performed). 

b. Kisle v. St. Paul Fire & Marine Ins. Co., 262 Or. 1, 495 P.2d 1198 

(1972) ("damages caused by a failure to perform amount to mere 

breaches of contract, for which no tort action will lie.") However, Oak 

Crest also holds that where contract claims implicate or are 

accompanied by breach of a duty outside the contract, such as tort 

liability for negligent construction, such tort liability constitutes an 

"occurrence" despite the alternative contractual liability claim. 

(ii) 

Practice Tip: consequential injury to other property resulting from a 

defective condition is generally considered an "occurrence," while costs to 

correct defective conditions represent merely an obligation to complete a 

contractual undertaking. 

(c) 

Contract vs. Tort Liability - Policyholder's View: 

(i) 

(ii) 

"[T]here is nothing in the basic coverage language of the current CGL 

policy to support any definitive tort/contract line of demarcation for 

purposes of determining whether a loss is covered by the CGL's initial 

grant of coverage. "Occurrence" is not defined by reference to the legal 

category of the claim. The term "tort" does not appear in the CGL 

policy." American Family Mut. Ins. Co. v. American Girl, Inc., 268 Wis2d 

16, 37-39, 673 NW2d 65, 75-76 (2004). The touchstone of coverage is 

accidentally caused property damage - nothing more and nothing less. 

Oregon law acknowledges that breach of contract claims for the negligent 

performance of a contract can be covered. In Oak Crest Canst. Co. v. 

Austin Mut. Ins. Co., 329 Or 620, 627, 998 P2d 1254 (2000), the Oregon 

Supreme Court quoted itself in Kisle v. St. Paul Fire & Marine Ins., 262 

Or 1, 495 P2d 1198 (1972), for this holding: 

"We find [that] there is a significant distinction between negligent 

performance of a contract and a complete failure of timely 

performance. We hold that damage caused by the latter is not 

caused by accident." 

The court then went on to explain its holding in Oak Crest: 

We recognize, as we did in Kisle, that the same conduct might be 

actionable under both tort and contract theories. However, 

applying the foregoing principle to the facts in the summary 

judgment record in the present case, we conclude that, as alleged, 


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Page 3 Of13 

Michael E. Farnell


plaintiffs claim arose solely from a breach of contract and, 

therefore, is not covered by the policy. Although the record 

establishes that plaintiff spent approximately $ I 0,000 for the repair 

of a subcontractor's "deficient" painting work, it cannot support a 

conclusion that the problem with the cabinetry and woodwork 

painting resulted from the subcontractor's breach of a duty to act 

with due care. Had the facts demonstrated that the claimed 

problem with the cabinets and woodwork was the result of that 

kind of breach, or that plaintiff might be liable to the owners in 

tort for other damage, that might have qualified as an "accident" 

within the meaning of the commercial liability policy. But 

plaintiff here failed to establish that a question of fact existed in 

that regard, as plaintiff was required to do to show that there had 

been a covered event under the policy. 

Id. at 628-29 (emphasis supplied and footnote omitted). Critically, the 

Oak Crest opinion rests on· the underlying conduct and whether it 

constituted an accident of some kind. The question is not the label affixed 

to the cause of action but rather whether unexpected and unintended injury 

results. 

(iii) 

Valley Forge Ins. Co. v. Am. Safety Risk Retention, 2006 US Dist LEXIS 

24915, at *17, 2006 WL 314455, *6 (D Or 2006) (ruling that 

"construction defects at issue in the underlying litigation are properly 

considered as accidents, or occurrences, causing the property damage."). 

C. The Duty To Defend 

(iv) Coverage exists for damages because of property damage. Unless an 

exclusion applies, nothing precludes coverage for a claim denominated 

"breach of contract" but which seeks damages because of property 

damage. 

1. Policies Require Defense of a "Suit" 

(a) 

(b) 

Must be a "suit" to create a duty to defend 

Policies define "suit" to include more than a lawsuit. 

2. Allegations of "Suit" determine duty to defend 

(a) 

Ledford v. Gutoski, 319 Or. 397,400 (1994): duty to defend arises if complaint 

alleges facts which create potential that any claim is covered. 

All allegations are presumed to be true 

Ambiguities are resolved in favor of insured 

If any claim is covered, must defend entire suit 


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(b) 

Cases Cited by Insurers Seeking to Limit Duty to Defend 

(i) Ferguson v. Birmingham Fire Insurance Co., 254 Or. 496, 505-506 (1969) 

(insurer not obligated to speculate as to facts outside the complaint to 

determine whether a defense obligation exists). 

(ii) Martin v. State Farm Fire and Cas. Co., 146 Or. App. 270 (1997) 

(hypothetical, unalleged facts do not create duty to defend). 

(c) 

Cases Cited by Policyholders Seeking to Expand Duty to Defend 

(i) Fred Shearer & Sons, Inc. v. Gemini Ins. Co., 237 Or. App. 468, 475-77 

(2010) (where complaint allegations do not address an insured's 

relationship with insurer, insured may go outside four comers of 

complaint to establish insured status). 

(ii) GE Prop. & Cas. Ins. Co. v. Portland Community College, CV 04-727- 

HU, 2005 WL 2044315, *6 (D. Or.) ("the question [of whether a defense 

obligation exists] is whether, on the allegations contained in the 

[complaint], a court would allow [the plaintiff] to put on evidence of [a 

covered claim]."); See also Schnitzer Inv. Corp. v. Certain Underwriters 

at Lloyd's of London, 197 Or. App. 147, 158 (2005) affd, 341 Or. 128 

(2006); Fireman's Fund Ins. Co. v. Ed Niemi Oil Co., Inc., CV 03-25-MO, 

2005 WL 3050460, *1 (D. Or.) (not reported in F.Supp.2d) ("Based on 

this formulation, it is clear that precise allegations of events and the timing 

of those events are not necessarily required."); Westport Ins. Corp. v. 

Harvest House Publishers, Inc., CV 05-6287-HO, 2006 WL 696295, *3 

(D. Or.) (not reported in F.Supp.2d) (same) (citing Ed Niemi Oil, 2005 

WL 3050460, * 1); Mutual of Enumclaw Ins. Co. v. Gutman, 172 Or. App. 

528, 535, n. 3 (2001) (Where complaint alleged that insured falsely 

imprisoned plaintiffs, but did not allege whether the imprisonment was 

intentional (which would not constitute an occurrence) or negligent (which 

would constitute an occurrence), duty to defend existed because "the 

evidence could show" covered conduct). 

D. The Duty To Indemnify: Obligation of the insurer to pay those damages the insured becomes 

legally obligated to pay which fall within policy coverage. The actual, not alleged, facts 

determine duty to indemnify. 

1. ABCD Vision v. Fireman's Fund Ins. Cos., 304 Or. 301, 307, 744 P.2d 998 (1987); 

2. Northwest Pump & Equipment Co. v. American States Ins. Co., 144 Or. App. 222, 227, 

925 P.2d 1241 (1996). 


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II. 

HOT BUTTON EXCLUSIONS 

A. Overview 

1. EIFS exclusions 

2. Fungi exclusions 

3. Exclusions limiting scope of property damage coverage 

(a) 

(b) 

(c) 

(d) 

Damage commencing prior to policy period 

Property damage known prior to the policy period 

Claims in process 

Work completed prior to policy period 

4. Condominium / Multi-Unit Residential Building construction ("MURB") exclusions 

5. Insured v. Insured exclusions in homeowners association policies 

6. Deletion of subcontractor exception to "your work" exclusion 

B. Insurer's Approach 

1. Exclusions are absolute and unambiguous. 

2. How broad are the scope and reach of the exclusions 

(a) 

(b) 

(c) 

(d) 

Does EIFS exclusion apply to all damage, or just that caused by EIFS See 

Summit Custom Homes, Inc. v. Great American Lloyds Ins. Co., 202 S.W.3d 823, 

831 (Tex. App. - Dallas, 2006) ("Thus, the EIFS exclusion is broad in its reach 

and clearly encompasses the allegations in the underlying pleadings."). 

Does fungi include dry rot 

When did damage commence / When did claim first commence / When was work 

completed / When did insured obtain knowledge of property damage 

How many units constitute a "multi-unit residential building" 

3. Any suit by a homeowners association potentially violates insured v. insured exclusion. 

4. In the absence of a subcontractor exception, a general contractor may have no coverage 

for damage to a completed project. 


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Page 6 of 13 Michael E. Farnell


C. Policyholder's Approach 

1. Examine specific language within each exclusion to determine applicability. 

(a) 

(b) 

(c) 

(d) 

(e) 

Does the cladding system in question fit within the definition ofEIFS provided by 

the exclusion 

Does an EIFS exclusion apply to EIFS work performed by subcontractors See 

Devington Condominium Ass'n v. Steadfast Ins. Co., 2007 WL 709032 (W.D. 

Wash., 2007). 

What definition is provided for fungi, if any 

Do the complaint's allegations indicate the timing of the work or of the damage 

Does the number of units specified in the MURB exclusion involve the complex 

as a whole or each individual building or structure Does the project qualify as a 

condominium or townhouse Do the statutory definitions, building codes, and 

building practices take townhouses outside the scope of multi-unit definitions 

2. Statutory Incorporation: Does the exclusion's application render coverage provided less 

than that required statutorily 

(a) Statutory requirements for insurance imposed on contractors under ORS 701.105. 

OAR 812-002-0380 further defines required insurance. 

• Evaluate statutory requirements and administrative rules at time of 

issuance of the policies in question. 

(b) 

Oregon law requires that insurers provide policies that meet at least the minimum 

statutory requirements of coverage. Parties to an insurance contract are presumed 

to have knowledge of valid laws, which thereby become an integral part of 

policies upon property within the limits to which they apply. NW Amusement Co. 

v. Aetna Co., 165 Or. 284, 288, 107 P.2d. 110 (1940); See ORS 731.022 ("No 

person shall transact insurance in this state *** without complying with the 

applicable provisions of the Insurance Code."). To the extent asserted exclusions 

purport to exclude coverage for liability caused by a contractor's work, they may 

contravene public policy. 

3. Illusory Coverage: Does the exclusion's application gut too much of the coverage grant 

such that the policy provides only an illusion of coverage 

(a) 

(b) 

Does a policy with an EIFS exclusion issued to a customer the insurer knows to 

be exclusively an EIFS applicator provide any meaningful coverage 

Does a policy with a multi-unit exclusion issued to a condominium developer 

provide more than an illusion of coverage . 


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Page 7of13 Michael E. Farnell


(c) 

(d) 

Does an exclusion that bars coverage for breach of fiduciary duty claims asserted 

by unit ownerslHOA's against an HOA director render D&O coverage illusory 

Who else has standing to assert breach of fiduciary duty claims against a director 

What good to a general contractor is a policy without a subcontractor exception if 

the result is no coverage for any and all work the contractor performs 

4. Insured v. Insured exclusion may not apply if unit owners sue along with HOA; may not 

apply to defense obligation. See Megavail v. Illinois Union Ins. Co., 2006 WL 2045862 

*3 (D. Or.) ("Even if the exclusionary clause were to apply, *** the clause still would not 

be a complete bar to defendant's obligation to defend the underlying lawsuit. Defendant's 

duty to defend is triggered by the presence of the uninsured plaintiffs."). 

III. 

"BAD F AlTHO) CLAIMS 

A. Overview: Though the term bad faith is widely used in insurance cases and among practitioners, 

it may not be the most accurate nomenclature in Oregon for extra contractual claims against an 

insurer, because subjective ill will is not required to support an extra contractual claim. See, e.g., 

Farris v. Us. Fid. and Guar. Co., 284 Or 453, 459 (1978). Extra contractual tort-based "bad 

faith" claims under Oregon law generally fall under two broad headings: claims based on 

unintentional conduct and claims based on intentional conduct. Oregon law also provides 

support for contract-based "bad faith" claims. 

1. Tort-based "bad faith" claims involving unintentional conduct: An insurer's negligence 

in performing its duties under the contract may give rise to liability in tort because 

insurers are held to a standard of care that exists independent of the terms of the contract. 

Georgetown Realty v. The Home Ins. Co., 313 Or 97, 110-111, 831 P2d 7 (1992); see 

also Maine Bonding v. Centennial Ins. Co., 298 Or 514,693 P2d 1296 (1985). Thus, an 

insurer's negligence in handling a defense or its unreasonable failure to pay a settlement 

within policy limits may expose the insurer to tort liability. 

(a) 

Breach of Fiduciary Duty: La Noue Development, LLC v. Assurance Co. of 

America, 2005 WL 1475599 (D Or) (discussing breach of fiduciary duty claim in 

connection with the duty to settle) (citing Safeco Inc. Co. of Am. v. Barnes, 133 

Or App 390, 397 (1995) (also discussing breach of fiduciary duty claim in the 

duty to settle context). 

(b) Negligence: Eastwood v. American Family Ins. Co., 2006 WL 2934260, **3-4 (D 

Or 2006) (claim seeking extra contractual damages for failure to settle) (ruling 

that negligence and breach of fiduciary duty claims were redundant, and 

dismissing breach of fiduciary duty claim); and 

(c) Negligence Per Se: Abraham v. T. Henry Construction, Inc., 230 Or App 564, 

569,572,217 P3d 212 (2009) (review allowed, 348 Or 523 (2010») (after finding 

that special relationship did not exist between homeowner and contractors, court 

found that a special relationship was unnecessary for a negligence per se claim 


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Page 80f13 Michael E. Farnell


where a standard of care independent of the contract exists. While in "most cases, 

the 'independent standard of care' derives from a 'special relationship' between 

the contracting parties," Oregon appellate courts "have also held, however, that a 

standard of care expressed in a statute is considered to be independent of the 

terms of the contract.") (citations omitted). 

2. Tort-based "bad faith" claims involving intentional conduct: 

(a) 

(b) 

Breach of the Implied Covenant of Good Faith and Fair Dealing: Thompson 

v. Allied Mutual Ins. Co., 2000 WL 264318, * 1 CD Or 2000) (allowing claim for 

tortious breach of the covenant of good faith and fair dealing to proceed in the 

absence of a special relationship where the allegations pleaded outrageous 

conduct). 

Intentional Infliction of Emotional Distress / Outrageous Conduct: Mancuso 

v. American Family Mutual Ins. Co., 2009 WL 130259, *3 (D Or 2009) (citing 

Lewis v. Oregon Beauty Supply Co., 302 Or 616, 626 (1987) ("Plaintiff's socalled 

'Outrageous Conduct' claim is actually a claim for intentional infliction of 

severe emotional distress.")). Oregon law does not require the existence of a 

special relationship to establish an lIED claim. Mancuso, 2009 WL 130259, *4 

(quoting Delaney v. Clifton, 180 Or App 119, 130-31 (2002)); and 

(c) Intentional Interference with Economic Relations: Employers' Fire Ins. v. 

Love It Ice Cream, 64 Or App 784, 670 P2d 160 (1983); MLM Property, LLC v. 

Country Casualty Ins. Co., 2010 WL 678149, **3-8 (D Or 2010) (granting 

summary judgment against insured because insured had failed to establish fact 

question regarding fourth element of claim -- improper means or improper 

purpose); Columbia Aircraft Manufacturing Corp.y Affiliated FM Ins. Co., 2008 

WL 717723 (D Or 2008) (denying insurer's motion to dismiss claim for 

intentional interference with economic relations because insured "has pleaded 

sufficient facts to state the claim for intentional interference.") 

3. Contractual "bad faith" claims: 

(a) 

Breach of Covenant of Good Faith and Fair Dealing: 

(1) Breach of the implied covenant of good faith and fair dealing sounds in 

both contract and tort under Oregon law. Barton v. Hartford Ins. Co. of 

Midwest, 2005 WL 758255, *1 (0 Or 2005) (citing Swanson v. Legacy 

Health Syst., 169 Or App 546,551 n. 3, 554 (2000) (discussing plaintiffs 

claim for breach of the covenant of good faith and fair dealing "only in the 

context of the alleged contractual relationship between the parties")). 

(2) A primary difference between a contractual claim and a tort claim for 

breach of the covenant of good faith and fair dealing is the measure of 

damages. Under a contract-based claim, the insured is limited to contract 

damages - i.e., a plaintiff may recover damages that are caused by the 

breach and that are foreseeable and not speculative. Stuart v. Pittman, 235 

Or App 196, 230 P3d 958 (2010). Breach of contract claims in the 


"v,Nw.pfglaw.com Page 9 of 13 Michael E. Farnell


insurance setting follow traditional contract rules with respect to 

recoverable damages. 

(3) A party can breach the covenant of good faith and fair dealing without 

breaching an express term of the contract. McKenzie v. Pacific Health & 

Life Ins. Co., 118 Or App 377, 380 (1993). 

(4) Courts have held that a contractual claim for breach of the covenant of 

good faith and fair dealing can be supported by evidence of an insurer's 

violation of the Unfair Claims Settlement Procedures Act (ORS 746.230). 

Ivanov v. Farmers Ins. Co. ojOregon, 344 Or. 421,430 (2008); Galicia 

Orozco v. County Mut. Ins. Co., 2010 WL 2507528, *3 CD Or 2010). 

(5) Because it is contract-based, a claim for contractual breach of the covenant 

of good faith and fair dealing carries with it the right to attorney fees under 

ORS 742.061. Eastwood v. Am. Family Mut. Ins. Co., 2006 WL 2934260, 

*5 (D Or 2006). 

(b) 

Incorporation of Unfair Claims Settlement Practice Act into Contract: 


(1) Query: Might violations of the Unfair Claims Settlement Practices Act 

(ORS 746.230) provide the basis for a pure breach of contract claim by 

virtue of Oregon's statutory incorporation doctrine 

1. An insurer's refusal to defend its insured under a liability policy gives rise only to a 

breach of contract claim, for which punitive and emotional distress damages cannot be 

recovered. Farris v. Us. Fid. and Guar. Co., 284 Or. 453,458 (1978). 

2. "[T]he duty to indemnify cannot be extended by estoppel. The scope of an insurer's risk 

is determined by the terms of the policy, not by the conduct of the parties subsequent to 

execution." Northwest Pump & Equip. Co. v. American States Ins. Co., 144 Or. App. 

222, 227 (1996) 

3. "[E]stoppel cannot be invoked to expand insurance coverage or the scope of an insurance 

contract." ABeD . .. Vision, Inc. v. Fireman's Fund Ins. Companies, 304 Or. 301, 307 

(1987). 


1. If an insurer undertakes to defend its insured against a third-party claim, the carrier 

assumes control of the defense and settlement negotiations and, therefore, stands in a 

special relationship with the insured. Georgetown Realty v. The Home Ins. Co., 313 Or. 

97, 110-11 (1992). That kind of relationship carries with it a standard of care that exists 

independent of the insurance contract. Id.; See also Shin v. Sunriver Preparatory School, 

Inc., 199 Or. App. 352, 366 (2005). 

2. "Where ... a liability insurer agrees to defend its insured against third-party claims, a 

failure to defend adequately is actionable at law. The duty to defend includes the duty to 


'l-vww.pfglaw.com 

Page 10 Of13 

Michael E. Farnell


settle the case within the policy limits if it would be reasonable to do SO." Goddard ex 

reI. Estate of Goddard v. Farmers Ins. Co. of Oregon, 173 Or. App. 633, 637 (2001) 

(citing Maine Bonding v. Centennial Ins. Co., 298 Or. 514, 519 (1985); Eastham v. 

Oregon Auto. Ins. Co., 273 Or. 600, 608 (1975); Kriz v. Gov't Employees Ins. Co., 42 Or. 

App. 339 (1979), rev. den. 288 Or. 571 (1980)). Failure to reasonably attempt to settle the 

claim within policy limits is actionable negligence by the insurer. Goddard, 173 Or. 

App. at 637. 

3. As noted in La Noue Development, LLC v. Assurance Co. of America, "implicit in [the] 

holding" of Safeco Inc. Co. of Am. v. Barnes, 133 Or. App. 390, 397 (1995), "is that a 

breach of fiduciary duty for failing to settle may exist even in the absence of coverage." 

La Noue Development, LLC v. Assurance Co. of America, 2005 WL 1475599, *6 (D.Or., 

2005). 

4. As explained in Abraham, a special relationship is unnecessary for a negligence per se 

claim where a standard of care independent of the contract exists. 230 Or App at 572. In 

the insurance context the Unfair Claims Settlement Practices Act, ORS 746.230, et seq., 

and the rules promulgated thereunder set forth standards of care imposed on insurers 

independent of the terms of the insurance policies, which ground negligence per se 

claims against insurers in the same way the Abraham court found an independent 

standard of care applicable to a contractor in the Oregon Building Code. Insureds may 

find support for such a claim not only in Abraham but also in the Oregon Supreme 

Court's decision in Bob Godfrey Pontiac v. Roloff, 291 Or 318, 328 (1981). While ORS 

746.230 has been held not to create a private right of action, see Farris v. Us. Fid. and 

Guar. Co., 284 Or 453, 458 (1978), according to Roloff there is an important distinction 

between "creating" or "recognizing" a new cause of action and using a violation of a 

statutory duty as the basis for finding liability under an existing common law cause of 

action, such as negligence per se. Roloff, 291 Or at 328 (citation omitted). 

IV. 

COVERAGE FOR PLAINTIFF'S ATTORNEY FEES 

A. Overview - Policy provisions that may - or may not, depending upon your perspective - cover 

plaintiff s attorney fees include the coverage grant ("those sums that the insured becomes legally 

obligated to pay as damages because of ... 'property damage. "'), and the "costs taxed" language 

of the supplementary payments provision. 


1. In 2004, Magistrate Judge Ashmanskas determined in MW Builders, Inc. v. Safeco Ins. 

Co. of America, et aI., Civil No. 02-1578-AS (December 15,2004), that attorney fees are 

not "costs" and, therefore, may not be covered. Note, however, that the court's 

conclusion was preceded by the conspicuous statement that "neither party cites any legal 

authority on the point." Slip. Op. at 40. 

2. In 2005, Judge Haggerty determined in California Insurance Co. v. Stimson Lumber Co., 

2005 WL 627624 (D Or), that attorney fee awards against an insured are covered not as 

defense costs, but under the insuring clause in a standard COL form. 


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Page 11 Of13 Michael E. Farnell



1. Oregon appellate courts have not directly addressed coverage of attorney fee awards 

under CGL policies. At least one recent Oregon trial court has addressed the issue, 

finding that a plaintiff s attorney fee award is covered under the Supplementary Payments 

provision as "costs taxed against the insured." See Truck Insurance Exchange v. Uptown 

Heights Condominiums, LLC, Multnomah County Circuit Court Case No. 0808-12049. 

2. Insureds will also rely on the logic of foreign courts finding coverage for such awards, 

including Employers Mutual Casualty Co. v. Philadelphia Indemnity Ins. Co., 169 Cal. 

App. 4th 340 (2008) (attorney fees and costs pursuant to settlement agreement were 

"taxed against the insured" within the meaning of supplementary payments provision 

requiring insurer to pay all costs taxed against the insured) (citing Prichard v. Liberty 

Mutual Ins. Co., 84 Cal. App. 4th 890, 912 (2000); Insurance Co. of North America v. 

National American Ins. Co., 37 Cal. App. 4th 195,206-207 (I 995)); Mut. of Enumclaw v. 

Harvey, 115 Idaho 1009, 1013,772 P.2d 216 (1989) ("Though the word 'costs' as a legal 

term ·of art may be ambiguous, it is not so from the perspective of the ordinary person 

unfamiliar with the jargon of the legal and insurance professions standing in the position 

of the insured. *** The plain, ordinary and popular meaning of 'costs' is the expense of 

litigation which includes attorney fees."); Groom v. Home-Owners Ins. Co., 2007 WL 

1166050, *7 (Mich. App.) (not reported in N.W.2d) ("Although the term 'costs,' as a 

legal term of art, does not normally include attorney fees, because the CGL policy at 

issue does not define what constitutes costs, we must give the word its 'plain and 

ordinary meaning that would be apparent to a reader of the instrument.' * * * the ordinary 

understanding of the term "costs" includes an award of attorney fees."); R. W. Beck & 

Assoc. v. Providence Washington Ins. Co., 27 F.3d 1475, 1484 n. 13 (9 th Cir. Alaska 

1994); Littlefield v. Mack and Northland General Ins. Co., 789 F.Supp. 911 (N.D. Ill. 

1992). 

3. If attorney fees do not fall within the "costs taxed" provision, they may well constitute 

covered damages. In 2005, the District Court of Oregon issued an unpublished opinion in 

California Insurance Co. v. Stimson Lumber Co., 2005 WL 627624 (D. Or.), in which 

Judge Haggerty found that attorney fee awards against an insured are covered under the 

insuring clause in a standard CGL form: "an insured's obligation to pay attorney fees and 

expenses is equivalent to damages for which the insured has become legally obligated to 

pay, and are not defense costs." Citing City of Ypsilanti v. Appalachian Insurance 

Company, 547 F.Supp. 823, 827 (E.D. Mich.l982); Hyatt Corp. v. Occidental Fire & 

Cas. Co. ofNe., 801 S.W.2d 382,393 (Mo. Ct. App.1990). 

4. As a practical matter, an insurer may end up being responsible for an attorney fee award 

even if it is not covered under the terms of the policy. If a carrier has undertaken the 

defense of an insured, the carrier becomes a fiduciary bound to protect the interests of the 

insured. The duty to defend includes the duty to attempt settlement if it would be 

reasonable to do so. "The classification of an insurer as a 'fiduciary' when deciding 

whether or not it should settle within the policy limits is so prevalent as to not require 

citation to authority." Farris v. USF&G, 284 Or. 453, 460n.2 (1978); see also Goddard, 

173 Or. App. 633; Maine Bonding, 298 Or. at 519. If the carrier has an opportunity to 


www.pfglaw.com 

Page 12 of 13 Michael E. Farnell


settle the claims against its insured for an amount that is reasonable and within the limits 

of the policy, the insured will contend that a carrier's failure to settle constitutes a breach 

of fiduciary duty, rendering the insurer liable for all damages consequently suffered by 

the insured, including an award of attorney fees. 


wvvw.pfglaw.com Page 13 Of13 Michael E. Farnell

WASHINGTON INSURANCE LAW 

AFFECTING CONSTRUCTION 

DISPUTES 

James D. Mullins 

Mullins Law Firm, PLLC 

105 West Evergreen Boulevard, Suite 200 

Vancouver, W A 98660 

(360) 693-5883 (503) 285-4103 

jmullins@mullins-lawfirm.com

Jim received his undergraduate degree at Lewis & Clark College and 

his law degree from the University of Oregon School of Law. He is the 

attorney/owner of Mullins Law Firm, PLLC. A significant portion of his 

practice involves complex litigation in the state and federal courts in 

Oregon and Washington, and arbitration and mediation matters, for clients 

who come to him from throughout the Pacific Northwest and beyond. 

Insurance coverage matters are another significant portion of his practice. 

He regularly advises and represents policyholders concerning insurance 

coverage matters and their rights with and responsibilities to their insurance 

companies. He is a member of the Washington and Oregon Bars and is 

admitted to practice in the federal courts in these states and in the United 

States Court of Appeals for the Ninth Circuit. 

PAGE-2 

© 2011 MULLINS LAW FIRM, PLLC 

All Rights Reserved

TRUER WORDS WERE NEVER SPOKEN 

Prisco Serena Sturm Architects, Ltd. v. Liberty Mutual Insurance Co., 126 

F.3d 886 (7th Cir. 1997). 

The insurance industry "often ends up with policies that are, to put it 

charitably, convoluted * * *." 

* * * * * 

THE STRUCTURE OF A COMMERCIAL GENERAL 

LIABILITY ("CGL") INSURANCE POLICY 

1. Policy Declarations. 

Identifies the "Named Insured." States the dollar amount of 

coverage provided. Identifies the policy forms which together comprise the 

entire insurance contract. 

2. Coverage Grants. 

What events in general are covered For how much What 

additional benefits (such as defense against covered claims or medical 

expenses paid without considerations oflegalliabiIity) are provided by the 

policy 

3. Exclusions from Coverage. 

What events - otherwise generally within the Coverage Grants -- are 

excluded from coverage 

Be aware - exclusion clauses sometime include "an exclusion from 

the exclusion" which has the effect of "re-granting back" coverage!! 

4. Who is insured under the policy. 

The "Named Insured." 

PAGE-3 


All Rights Reserved

"Additional Insureds." 

5. Policy Conditions. 

Miscellaneous additional provisions. Most important from the 

insured's standpoint - the duty to promptly report a claim and the duty to 

cooperate with the insurance company in handling the claim. 

6. Definitions. 

Very Important!! Look for identified "words" or WORDS or words. 

These are defined terms. 

Defined terms are used throughout the policy and their meaning is 

not always what one might think based on normal English. 

* * * * * 

ANALYZING A CGL POLICY FOR COVERAGE FOR 

A CONSTRUCTION CLAIM. 

1. Is the contractor (or sub or supplier) the "Named Insured" or an 

"Additional Insured" under the policy 

2. Was there an "Occurrence" 

3. Did the "Occurrence" result in "Property Damage" 

4. Did the "Property Damage" occur during the "Policy Period" 

5. Is coverage excluded by an exclusion clause 

* * * * * 

PAGE -4 


All Rights Reserved

WAS THERE AN "OCCURRENCE" 

Typical CGL Policy Language -- 

[The insurance company] will pay those sums that the insured 

becomes legally obligated to pay as damages because of "bodily injury" or 

"property damage" to which this insurance applies. [The insurance 

company] will have the right and duty to defend the insured against any 

"suit" seeking those damages. 

This insurance applies to "bodily injury" and "property damage" 

only if: 

a. The "bodily injury" or "property damage" is caused by an 

"occurrence" that takes place in the "coverage territory"; and 

b. * * * 

"Occurrence" means an accident, including continuous or repeated 

exposure to substantially the same general harmful conditions. 

* All clauses are taken from the 1996 ISO Commercial General Liability Occurrence Form. 

All clauses © 1994 Insurance Service Offices, Inc. 

Washington's definition of an "accident" for insurance purposes. 

Yakima Cement Products Co. v. Great American Ins. Co., 93 Wash.2d 210, 

608 P.2d 254 (1980). 

The appropriate definition of "accident", as a source 

and cause of damage to property, is "an unexpected, 

unforeseen, or undesigned happening or consequence from 

either a known or an unknown cause". Hauenstein v. St. 

Paul-Mercury Indem. Co., 242 Minn. 354, 358-59, 65 

N.W.2d 122, 124 (1954). See also Viking Automatic 

PAGE - 5 


All Rights Reserved

Sprinkler Co. v. Pacific Indem. Co., 19 Wash.2d 294,297, 

142 P.2d 394 (1943); 7 A.L.R.3d 1262 (1966). Applying this 

definition, it is clear Yakima's unintentional and unexpected 

mismanufacture of the concrete panels is an "accident" as 

contemplated by the Great American policy. 

The opposite situation - a deliberate act with intended results - is 

not an "accident." 

Grange Ins. Co. v. Brosseau, 113 Wash.2d 91, 776 P.2d 123 (1989). 

Here, both policies provide coverage for an 

"occurrence," where bodily injury results from "an accident." 

For insurance coverage, this court has said that "an accident" 

is an unusual, unexpected, and unforeseen happening. Tieton 

v. General Ins. Co. of Am., 61 Wash.2d 716, 721, 722, 380 

P.2d 127 (1963); accord, Western Nat'[ Assur. Co. v. Hecker, 

43 Wash.App. 816, 822, 719 P.2d 954 (1986); Harrison 

Plumbing & Heating, Inc. v. New Hampshire Ins. Group, 37 

Wash.App. 621, 624, 681 P.2d 875 (1984). Moreover, an 

accident is never present when a deliberate act is performed 

unless some additional unexpected, independent and 

unforeseen happening occurs which produces or brings about 

the result of injury or death. The means as well as the result 

must be unforeseen, involuntary, unexpected and unusual. 

* * * 

* * * nothing in the record even remotely suggests that 

any additional unexpected, independent and unforeseen 

happening occurred which caused Anderson's death. 

In Washington, in most situations when interpreting a CGL policy, 

whether an event is an "accident" is judged from the standpoint of the 

insured -- a "subjective" standard. Did the insured intend or expect that 

something harmful would occur Not an "objective" standard - would a 

hypothetical "reasonable person" intend or expect that something harmful 

PAGE - 6 


All Rights Reserved

would occur But note there are some situations in which intent to do harm 

is presumed (such as sex abuse). 

Queen City Farms, Inc. v. Central Nat. Ins. Co. a/Omaha, 126 Wash.2d 

50,882 P.2d 703 (1994). 

* * * the average purchaser of insurance would 

understand that the policy language provides for coverage for 

damage resulting from most acts of ordinary negligence. As 

the Court of Appeals in this case recognized, an objective 

standard is inconsistent with insurance coverage for damage 

resulting from ordinary negligence. Thus, the driver who 

intentionally backs a car up, but does so negligently into the 

path of a vehicle having the right of way, has acted 

intentionally in a manner where it can be said that objectively 

an accident may occur. The average purchaser of insurance 

would reasonably understand from the policy language that 

coverage was provided under the occurrence clause. 

* * * 

We conclude that a subjective standard applies, based 

upon examination of the policy language, the lack of any 

objective standard set out in the policy (and the ease with 

which one could have been drafted if that is what the insurers 

intended), and the meaning which the average purchaser 

would give to policy language, i.e., that injury or damage 

resulting from acts of negligence, even though precipitated by 

an intentional act, would be covered under the occurrence 

clause. 

Queen City Farms also held that the insured has the burden of proof to 

show that, subjectively, damage was not expected or intended. 

In light of the conclusion in E-Z Loader that the 

burden of proof is on the insured to show that injury or 

damage was not expected or intended because the insured 

mus~ establish the loss comes within the coverage provision 

PAGE-7 


All Rights Reserved

of the policy, and in light of our holding above that a 

subjective standard for "expected or intended" applies, we 

conclude the burden of proof should be on the insured to 

establish that subjectively injury or damage was neither 

expected nor intended. 

In unreported decisions, federal courts applying Washington law 

have held that faulty construction - if it results in unintended consequences 

- is an "occurrence" under a COL policy. 

Mid-Continent Casualty Co. v. Titan Canst. Corp., 281 Fed.Appx. 766, 

2008 WL 2340493 (9th Cir., 2008). 

Under Washington law, an "occurrence" includes the 

"deliberate manufacture of a product which inadvertently is 

mismanufactured." Yakima Cement Prods. Co. v. Great Am. 

Ins. Co., 93 Wash.2d 210,608 P.2d 254, 257 (1980); accord 

Dewitt Constr. Inc. v. Charter Oak Fire Ins. Co., 307 F.3d 

1127 (9th Cir. 2002). Absent any allegation that the 

substandard construction in this case resulted from an 

intentional breach of contract by Titan, we conclude that the 

negligent construction of the Williamsburg project that 

resulted in breach of contract and breach of warranty claims 

constituted an "occurrence." 

Indian Harbor Ins. Co. v. Transform LLC, 2010 WL 3584412 (W.D.Wash., 

2010). 

Pure workmanship defects are not considered 

accidents or "occurrences," since COL policies are not meant 

to be performance bonds or product liability insurance. 

Mutual of Enumclaw Ins. Co. v. Patrick Archer Canst., Inc., 

123 Wash.App. 728, 733, 97 P.3d 751 (2004); see also M & S 

Indus., 64 Wash.App. at 922,827 P.2d 321. On the other 

hand, damages arising from workmanship defects can give 

rise to an "occurrence." 

PAGE - 8 

© 2011 MULLINS LA W FIRM, PLLC 

All Rights Reserved

DID THE "OCCURRENCE" RESULT 

IN "PROPERTY DAMAGE" 


"Property damage" means: 

a. Physical injury to tangible property, include including all resulting 

loss of use of that property. All such loss of use shall be deemed to occur at 

the time of the physical injury that caused it; or 

b. Loss of use of tangible property that is not physically injured. All 

such loss of use shall be deemed to occur at the time of the "occurrence" 

that caused it. 


All clauses are © 1994 Insurance Service Offices, Inc. 

Is the mere incorporation of faulty workmanship or a defective 

product/material into a project or structure, without subsequent damage to 

the remainder of the project or structure or to another object or person, an 

"accident" or "property damage" Case law from outside Washington is 

divided. Washington's rule seems to be that damage to other property is 

required. The logic is that coverage applies to "property damage" caused 

Qy an "occurrence." 

Note -- Yakima Cement Products did not reach this question because 

there was no evidence that the incorporation of defective panels into the 

building caused any diminution in value of the building. If there had been 

evidence that the incorporation of the defective panels resulted in loss of 

use of the building, then the correct decision would be that there was 

"property damage" to the building. 

PAGE - 9 


All Rights Reserved

Dewitt Canst. Inc. v. Charter Oak Fire Ins. Co., 307 F.3d 1127 (9th Cir., 

2002). 

We conclude that the alleged damage to the 

construction site caused by De Witt impaling it with 

unremovable piles is not "property damage" under the 

policies. For faulty workmanship to give rise to property 

damage, there must be property damage separate from the 

defective product itself. Yakima Cement, 608 P.2d at 258-59 

(no property damage occurred due to the incorporation of 

defective concrete panels where record was devoid of 

evidence that the building value was diminished). See also 

Marley Orchard Corp. v. Travelers Indem. Co., 50 

Wash.App. 801, 750 P.2d 1294, 1297 (1988) (stress to trees 

was property damage caused by the installation of a defective 

sprinkler system, unlike Yakima Cement where there was no 

damage separate from the defect). 

Simply because liability coverage is triggered by claims for property 

damage does not mean that only the damage claimed as the triggering 

"property damage" is covered. CGL policies cover not only damages for 

property damage, but also damages because of property damage. Once 

covered property damage exists, all consequential damages are "property 

damage" so long as they are within the policy definition of "Property 

Damage." 

Therefore, so-called "Rip and Tear" damages can be covered 

"Property Damage" -- even if the materials to be removed are the insured's 

own work -- if, as a result of the insured's faulty work, the work of another 

contractor was damaged. 

Mutual of Enumclaw Ins. Co. v. T & G Canst., Inc., 165 Wash.2d 255, 199 

P.3d 376 (2008). 

MOE concedes that some interior walls were damaged 

by water intrusion. However, MOE argues that the siding 

was largely undamaged. It reasons that the cost of removing 

and reinstalling the siding is not property damage. But 

PAGE - 10 


All Rights Reserved

"property damage," like "comprehensive general liability 

coverage," is a term of art and does not necessarily mean 

tangible damage to tangible property. It can include 

consequential damages, such as those alleged here. See 

Yakima Cement Prods. Co. v. Great Am. Ins. Co., 93 Wash.2d 

210,219,608 P.2d 254 (1980) (citing Labberton v. Gen. Cas. 

Co., 53 Wash.2d 180,332 P.2d 250 (1958) and Gen. Ins. Co. 

of Am. v. Gauger, 13 Wash.App. 928, 538 P.2d 563 (1975)). 

MOE focuses on the siding and argues that it was not 

damaged property under the insurance contract so it should 

not have to pay to have it remediated. But the subsurface and 

interior walls were not installed by T & G and damage to 

these areas was property damage covered by the policy. 

Removing and repairing the siding is simply part of the cost 

of repairing the damage to the interior walls and was properly 

treated as property damage by the trial court. 

* * * * * 

DID THE "PROPERTY DAMAGE" OCCUR DURING 

THE "POLICY PERIOD" 


This insurance applies to "bodily injury" and "property damage" 

only if: 

a. * * * 

b. The "bodily injury" or "property damage" occurs during the policy 

period. 



PAGE -11 


All Rights Reserved

In many cases, identifYing when the property damage occurs is 

simple, There is a distinct event which causes damage which is 

immediately (or shortly thereafter) noticed, But in construction situations, 

sometimes damage is progressive and not noticed until sometime after the 

event which caused the damage. Dry rot and water intrusion situations are 

examples. An "occurrence" is not necessarily one event resulting in a finite 

scope of damages. What events "trigger coverage and who has to pay how 

much if the insured has multiple insurance companies from the time of 

construction until the time the problem is discovered 

Gruol Canst. Co., Inc. v. Insurance Co. of North America, 11 Wash.App. 

632,524 P.2d 427 (Div. 1, 1974). 

The question then becomes which insurer covered the 

damage - the insurer at the time of the defective backfilling, 

at the time of the discovery of the dry rot, or all insurers 

providing coverage during the total time period of the 

undiscovered condition which progressively worsened. The 

answer is determined by a consideration of whether the term 

"accident" or "occurrence" as used in the policy must of 

necessity be a single isolated event or whether it can be a 

continuing condition or process. The question is not a novel 

one: 

The accident mentioned in the policy 

need not be a blow but may be a process. It is 

not required that the injury be the result of some 

contact with the bulldozer or the shelf or a rock 

hurled over from the shelf. It is not required to 

be sudden like an Alpine avalanche ... A 

glacier moves slowly but inevitably. 

Travelers v. Humming Bird Coal Co., 371 S.W.2d 35,38 

(Ky.Ct.App.1963). In McGroarty v. Great American Ins. 

Co., 43 A.D.2d 368,375,351 N.Y.S.2d 428,434 (1974), the 

court recognized that under certain circumstances an "ensuing 

result may truly be termed an accident, even though there is a 

lapse of time between the initial negligent act and the 

occurrence of the ultimate damage ... " See also City of 

PAGE - 12 


All Rights Reserved

Kimball v. Sf. Paul Fire & Marine Ins. Co., supra. Here, the 

resulting damage was continuous; coverage was properly 

imposed under the language of the policy on INA and 

Northwestern Mutual even though the initial negligent act 

(the defective backfilling) took place within the period of 

Safeco's policy coverage. 

According to Gruol, the insurance companies have the burden to 

establish apportionment of the loss among the policy periods, if they can. 

If they cannot, then the insurance companies are jointly and severally liable. 

Both INA and Northwestern Mutual argue that the 

court erred in finding them jointly and severally liable. They 

assert that Gruol had the burden of proving the amount of 

damage that occurred within the time limits of each policy. 

We disagree. In a dispute between an insured who has 

sustained damages of a continuing nature, and the insurance 

carriers providing coverage, the burden of apportionment is 

on the carriers. 

But - there is no coverage until the point when property damage 

actually occurs. An act of faulty construction without consequential 

property damage within the policy period does not trigger coverage. 

Walla Walla College v. Ohio Cas. Ins. Co., 149 Wash.App. 726, 204 P.3d 

961 (Div. 3, 2009). 

Gruol, Villella, and American National Fire Insurance 

require damage that is continuing. This means that the 

damage must occur first, followed by a continuing process. 

The College argues that the defective backfill caused a 

continuous process of damage to the tank. We disagree. 

Here, a process began, but property damage did not occur 

until the tank failed in September 2001, long after the policies 

had expired. 

PAGE - 13 

© 2011 MULLINS LA W FIRM, PLLC 

All Rights Reserved

If a CGL policy has conventional wording, then if an insurance 

company is liable at all under its policy, it will be liable to the full limits of 

its policy, even if the property damage occurred before or after its policy 

period, unless policy provisions provide otherwise. The company cannot 

allocate the amount of its coverage based upon the amount of time the 

company was "on the loss" or force its insured to pay a part of the loss 

which is allocated to time when the insured had no insurance. However, 

policy provisions which require allocation of the loss perhaps would be 

valid. 

American Nat. Fire Ins. Co. v. B & L Trucking and Const. Co., Inc., 134 

Wash.2d 413,951 P.2d 250 (1998). 

The Gruol court held when an insured sustains 

damages of a continuing nature, its insurers are jointly and 

severally liable. Gruol, 11 Wash.App. at 637-38,524 P.2d 

427. All insurers providing coverage during any portion of 

the total time period of the continuing damage were held 

liable for the total amount of the continuing property damage. 

We agree with Fjetland that Gruol stands for the proposition 

that all insurers on the risk during the time of ongoing 

damage have ajoint and several obligation to provide full 

coverage for all damages. 

* * * 

Usually, when a continuous trigger is utilized, costs 

are not apportioned between triggered policies, but insurers, 

rather, are held jointly and severally liable. 

* * * * * 

PAGE -14 


All Rights Reserved

IS COVERAGE EXCLUDED BY AN EXCLUSION 

CLAUSE 

At this point, most of the litigation regarding insurance coverage for 

construction disputes, it seems, concerns the exclusion clauses. The basic 

issues - whether a construction defect is an "occurrence" and what is or is 

not "property damage" - for the most part have been settled in the case law. 

The exclusion clauses which are most often litigated in construction 

defect coverage disputes are included in COL policies because of the 

"Business Risk" concept. In the view of insurance companies, risks which 

relate to the repair or replacement of the insured business' faulty business. 

The cost of such risks should be absorbed by the insured in the cost of the 

insured product or service and not shared by others in the cost of insurance. 

Windt, Insurance Claims and Disputes, § 11.1 o. 

Liability policies do not insure or guarantee either the 

insured's work or the insured's products. What such policies 

do provide coverage for is damages awarded by reason of an 

injury caused by the insured's work or product to some other 

property or to a person. 

In other words, the insurance company does not desire or intend to 

insure a contractor against the cost of correcting the contractor's faulty 

work in a normal CGL policy. Such coverage is obtained only through a 

performance bond. Insurance companies use coverage exclusions to 

attempt to avoid liability for the insured's own faulty workmanship, which 

is considered by the companies to be a "business risk" to be borne by the 

insured contractor. 

In reality, however, the risk of faulty workmanship often is not borne 

by the insured contractor. The risk is borne instead by the customers of the 

insured contractor because the insured contractor has no ability to pay for 

the cost of repairing faulty workmanship. 

PAGE - 15 


All Rights Reserved

The "Ongoing Real Property Operations Exclusion" -- 

This insurance does not apply to: 

j.( 5) That particular part of real property on which you or any 

contractors or subcontractors working directly or indirectly on your behalf 

are performing operations,. if the property damage arises out of those 

operations. 



This exclusion has not been extensively discussed in Washington 

cases. An argument could be made from Nationwide Mut. Ins. Co. v. 

Hayles, Inc., 136 Wash.App. 531,150 P.3d 589 (Div. 3, 2007), that this 

exclusion applies only to physical damage to land (as opposed to a building 

or other improvement to land). ("The average insured person would 

understand that this exclusion denies coverage for land damaged by the 

insured's 'operations. "') 

In an unreported opinion, the Washington Court of Appeal ruled that 

the meaning ofthe term "operations" is broad and so its application is 

factual. Whether it applies depends on whether the insured's activities 

constitute an "operation." Mutual of Enumclaw Ins. Co. v. One Beacon Ins. 

Co., 158 Wash.App. 1006, Not Reported in P.3d, 2010 WL 4008821 (Div. 

1,2010). 

Given the present tense grammar used, arguably this exclusion 

should apply only to property damage which occurs during on-going 

operations and have no application after operations have ended. See 

Lennar Corp. v. Great American Ins Co., 200 S.W.3d 651 (Texas App., 

2006). 

The "Faulty Workmanship" Exclusion 


j.(6) That particular part of any property that must be restored, 

repaired or replaced because "your work" was incorrectly performed on it. 

PAGE - 16 

© 20 II MULLINS LAW FIRM, PLLC 

All Rights Reserved

Paragraph (6) of this Exclusion does not apply to "property damage" 

included in the "products-completed operations hazard." 

The "Products - Completed Operations Hazard" Defined: 

Includes all bodily injury and property damage occurring away from 

premises you own or rent and arising out of "your product" or "your work" 

except: 

* * * 

(2) Work that has not yet been completed or abandoned. However, 

your work will be deemed completed at the earliest of the following times: 

(a) When all of the work called for in your contract has been 

completed. 

(b) When all of the work to be done at the job site has been 

completed if your contract calls for work at more than one job site. 

(c) When that part of the work done at a job site has been put to its 

intended use by any person or organization other than another contractor or 

sub-contractor working on the same proj ect. 

Work that may need service, maintenance, correction, repair or 

replacement, but which is otherwise complete, will be treated as completed. 



In Washington, this exclusion written in this format does not apply 

to "Rip and Tear" damages. Mutual of Enumclaw Ins. Co. v. T & G Const., 

Inc., 165 Wash.2d 255, 199 P.3d 376 (2008). (Cost to repair damage to 

siding (installed incorrectly by the insured contractor) necessitated by the 

repair to wall sheathing and interior walls (installed by different 

contractors) to fix the water intrusion damage caused by the insured 

contractor's faulty workmanship is not excluded by the "Faulty 

Workmanship" exclusion.) 

PAGE - 17 


All Rights Reserved

But see Schwindtv. Underwriters at Lloyd's of London, 81 

Wash.App. 293, 914 P.2d 119 (Div. 1, 1996) where the Washington Court 

of Appeals found faulty workmanship exclusion clauses (written much 

differently) excluded coverage for all faulty workmanship in building 

construction. ("Washington case law interprets such product exclusions to 

encompass entire buildings as defective products. This view is consistent 

with Washington courts' reluctance to interpret such general liability 

policies as a fonn of perfonnance bond, product liability insurance, or 

malpractice insurance.") 

As a result of the "carve-out" for "property damage" included in the 

definition ofthe "products-completed operations hazard," this exclusion 

should apply only to work that has not been completed or abandoned. See 

Farmington Cas. Co v. Duggan, 417 F.3d 1141 (lOth Cir., 2005). I.e., this 

exclusion does not exclude coverage for property damage after work is 

completed or abandoned. 

The "Your Work" Exclusion 


1. "Property Damage" to "your work" arising out of it or any part of 

it and included in the "products-completed operations hazard." 

This exclusion does not apply if the damaged work or the work out of 

which the damage arises was perfonned on your behalf by a subcontractor. 



In Washington, for insurance purposes, faulty work by a sub is 

deemed to be faulty work of the employing general contractor. See Mutual 

of Enumclaw Insurance Co. v. Patrick Archer Construction, Inc., 123 

Wash.App. 728, 735-76, 97 P.3d 751 (Div. 1,2004). ("There can be no 

question that the quality of the work perfonned, both by [the general 

contractorJ as well as by its subcontractors, was the responsibility of [the 

general contractorJ and no one else.") 

PAGE - 18 


All Rights Reserved

Note -- the last sentence of the "Your Work" exclusion is an 

"exclusion to the exclusion" and, insofar as this exclusion is concerned, 

"re-grants" coverage to a general contractor for the faulty work of a sub. 

But be aware - there are CGL policies in circulation which do not 

include the "exclusion to the exclusion" sentence for work of subs. In 

Washington, there is no coverage for a general contractor under these 

policy forms for faulty work of subs. See Red Oaks Condominium Owners 

Ass'n v. American States Ins. Co., 139 Wash.App. 1079, Not Reported in 

P.3d, 2007 WL 2171435 (Div. 1,2007). Note also that ISO Endorsement 

CG 22 94 removes the last sentence from the standard form of the "Your 

Work Exclusion" and so removes coverage for general contractors for the 

work of subs. 

In Washington, this exclusion does not apply to "Rip and Tear" 

damages. Mutual a/Enumclaw Ins. Co. v. T & G Canst., Inc., 165 Wash.2d 

255, 199 P.3d 376 (2008). 

The "Impaired Property" Exclusion 


m. "Property Damage" to "impaired property" or property that has 

not been physically injured, arising out of 

(1) a defect, deficiency, inadequacy or dangerous condition of "your 

product" or "your work;" or 

(2) a delay or failure by you or anyone acting on your behalfto 

perform a contract or agreement in accordance with its terms. 

This exclusion does not apply to the loss of use of other property arising out 

of sudden and accidental physical injury to "your product" or "your work" 

after it has been put to its intended use. 

"Impaired Property" means tangible property, other than "your 

product" or "your work," that cannot be used or is less useful because: 

PAGE-19 


All Rights Reserved

a. It incorporates "your product" or "your work" that is known or 

thought to be defective, deficient, inadequate or dangerous; or 

b. You have failed to fulfill the terms of a contract or agreement; 

if such property can be restored to use by: 

a. The repair, replacement, adjustment or removal of "your product" 

or "your 

work;" or 

b. Your fulfilling the terms of the contract or agreement. 



This exclusion has been found to be ambiguous in other 

jurisdictions. Serigne v. Wildey, 612 So.2d 155 (La. Ct. App., 1992) (the 

exclusion is "hopelessly ambiguous"); Computer Corner, Inc. v. Fireman's 

Fund Ins. Co., 46 P.3d 1264 (N.M.App., 2002) (the exclusion is 

"unintelligible from the standpoint of a hypothetical reasonable insured"). 

The Washington Supreme Court has held that this exclusion (written 

in a somewhat different format) applies to loss of use claims and not to 

physical damage claims. 

Hayden v. Mutual of Enumclaw Ins. Co., 141 Wash.2d 55, 1 P.3d 1167 

(2000). 

The "loss of use" exclusion applies to claims arising 

out of the loss of use of tangible property, which has not been 

physically injured, resulting from either the insured's delayed 

performance of a contract, or an insured's faulty performance 

of that contract. See M & S Indus., 64 Wash.App. at 926,827 

P.2d 321; accord Milgard Mfg., Inc. v. Continental Ins. Co., 

92 Or.App. 609, 759 P.2d 1111 (1988). This exclusion helps 

distinguish between that which is covered under the policy, 

i.e., the physical breakdown ofthe insured's product that 

results in some type of injury to person or property, and that 

PAGE - 20 

© 20 II MULLINS LAW FIRM, PLLC 

All Rights Reserved

which is not covered, i.e., the mere failure of the product to 

perfonn as well as warranted. This is true because 

'''presumably [ ] the latter is a typical business risk whereas 

the fonner is more likely to have catastrophic 

consequences. '" Sterilite Corp. v. Continental Cas. Co., 17 

Mass.App.Ct. 316, 458 N.E.2d 338, (1984) (quoting 

Honeycomb Sys., Inc. v. Admiral Ins. Co., 567 F.Supp. 1400, 

1407 (D.Me.l983)). 

* * * * * 

GENERAL TIPS FOR SEEKING COVERAGE 

1. START WITH THE POLICY DECLARATIONS. 

2. GET THE CORRECT POLICY - AND THE ENTIRE POLICY -- 

ALL ENDORSEMENTS AND RIDERS, AMENDMENTS, ETC. 

CROSS-CHECK AGAINST THE POLICY DECLARATIONS FOR 

COMPLETENESS. 

3. READ THE ENTIRE POLICY. 

4. REMEMBER - THE PURPOSE OF INSURANCE IS TO INSURE. 

COURTS SHOULD INTERPRET POLICIES TO GRANT COVERAGE 

IF IT'S ARGUABLY PROVIDED. TRUE AMBIGUITIES IN THE 

POLICY ARE CONSTRUED IN FAVOR OF THE INSURED. 

PAGE - 21 


All Rights Reserved

, .. 

" 

MAR 25 2011 

IN THE SUPREME COURT OF THE STATE OF OREGON 

I 

RICHARD ABRAHAM and JANICE ABRAHAM, husband and wife, as 

trustees for the Richard D. Abraham and Janice M. Abraham Trust, 

Plaintiffs-Appellants, 

' 

Respondents on Review, 

v. 

T. HENRY CONSTRUCTION, INC., an Oregon corporation; STELMEN 

PLASTERING, INC., an Oregon corporation; NORTHWEST GUTTER 

SERVICE, INC., an Oregon corporation; MILGARD MANUFACTURING, 

INC., a Washington corporati,on; STEVE PFENNING CONSTRUCTION, 

INC., an Oregon corporation; DAVID FARWELL, an individual dba David 

Farwell Masonry and David Oregon Farwell; ONE CUT CARPENTRY, 

LLC, tka One Cut Carpentry, Inc., aka Herold's Carpentry; and MADDOX 

ENTERPRISE, INC., an Oregon corporation, 

Defendants, 

and. 

KEITH A. LUCAS, an individual, dba Keith Lucas Development Properties; 

Defendant-Respondent, 

Petitioner or Review, 

and 

KEVIN G. MAYO, an individual, dba KGM Construction, 

Defendant-Respondent, 

Petitioner on Review. 

KEITH A. LUCAS, dba Keith Lucas Development Properties, 

Third-Party Plaintiff, 

v. 

ENERGY PRODUCTS, INC., an Oregon corporation, dba NW Builders 

Wholesale; RONALD L. HARDY, dba Hardy Plumb ing & Heating; JB 

INSULATION, INC., an Oregon corporation; KIRK'S CONSTRUCTION 

MARCH 2011

UNLIMITED, an Oregon corporation; MILWAUKIE PLUMBING CO., an 

Oregon corporation, dba MP Plumbing Co.; TOM'P ACHECO, fka' Tom D. 

Pacheco Masonry; and MEL WIELRICH; . 

Third-Party Defendants. 

Court of Appeals 

A136228 

8058073 (Control); 8058101 

PLAINTIFFS' PETITION FOR RECONSIDERATION 

Review of the decision of the Court of Appeals 

Opinion filed: September 2, 2009 

Author of opinion: Schuman, J. 

Joined by: Landau, Ortega, JJ. 

Maureen Leonard, OSB 823165 

520 SW 6th Avenue, Suite 920 

Portland, OR 97204 

Telephone: 503 224-0212 

Facsimile: 503 224-2764 

Robert K. Udziela, OSB 773766 

1515 SW 5 th Avenue, Suite 808 

Portland, OR 97201 

Telephone: 503 649-2435 

Facsimile: 503 649-3450 

Lisa T. Hunt OSB 023306 

1618 SW First Avenue, Suite 350 


Telephone: 503-517-0851 

Facsimile: 503-222-7288 

Attorneys for Respondents on Review Richard and Janice Abraham

Matthew J. Kalmanson OSB 041280 

Janet M. Schroer OSB 813645 

Hoffman Hart & Wagner, LLP 

1000 SW Broadway, Twentieth Floor 


Attorneys for Petitioner on Review Keith A. Lucas dba Keith Lucas 

Development 

Kenneth L Walhood OSB 944572 

Matthew H. Mues OSB 043722 

Blunck & Walhood, LLC 

2350 Willamette Falls Drive 

West Linn, Oregon 97068 

Attorneys for Petitioner on Review Kevin G. Mayo dba KGM 

Construction 

Cody Hoesly OSB 052860 

Larkins Vacura LLP 

621 SW Morrison Street, Suite 1450 


Travis Eiva OSB 052440 

The Corson & Johnson Law Firm 

101 E. Broadway, Suite 303 

Eugene, Oregon 97401 

Attorneys for Amicus Curiae Oregon Trial Lawyers Association 

Jon Chandler OSB 811851 

Oregon Home Builders Association 

375 Taylor Street NE 

Salem, Oregon 97303 

Attorney for Amicus Curiae Oregon Home Builders Association and . 

the National Association of Home Builders

INDEX OF AUTHORITIES 

Cases 

Abraham v, T. Henry Construction, Inc, 

SC S058073 (Control), S058101 (March 10,2011) ............... 1 

Sutter v, Bingham Constr" 81 Or App 16, 724 P2d 829 (1986) .......... 1 

Berry v, Branner, 245 Or 307, 421 P2d 996 (1966) ........................ 1,3 

Statutes and Rules 

DRS 12,080. "'t ••• It" ""., ,., ., •••••• , I.' '"~ ttt. II' ,. tt' II •••• ,. t .. It •• ' ",,," 1,2 

ORS 12.080(2), .. ,..... ," ......... '" "." .. ,.. ,' .,. ," ,.,' ,.,' ... ,.... ".,..,.2 

ORS 12.080(3) .. ,.. It ••• It'" , It •• t ••••• t., ••.•••••••• , I ••• , ., • t ••• t •••• " • I • t I 11 1, 2 

ORS 12.080(4), .," ,t. II It "t II" "1 II It 'I", II I" ,., II "_ •• ,, "" It"l' •••••••• 2 

ORS 12.110 ............. ,... ,.. ,..... t ......... , ••• " • , •••• I " I •••• , , •••• , , ••• t .... to ~ 1··· 

ORS 12.135 ... It' 

'" '" ,f,.,. It I •• ,." II ,.,. '" '"~ t" '" '" It. ",," It I. It .,. I •• 2 

Additional Authorities 

Or Laws 1991, ch. 968, § 2 .. " ....................... " .. " ............ " .... 2 

INDEX TO THE APPENDIX 

Abraham v, T. Henry Construction, Inc, """........"................"....."App-l

2 

I 

claim for property damage caused by a leaky roof. In 1991, ORS 12.080(3) 

was amended to include an exception for ORS 12.135, which addresses 

certain actions arising from, among other things, "the construction I« * * of 

any improvement to real property[.]" Or Laws 1991, ch. 968, § 2. 

There is considerable current litigation in the trial courts concerning 

whether ORS.12.080(3) applies to construction defect negligence claims, 

and whether it includes a discovery rule. Footnote 3 could be (and now is 

being) cited as a controlling decision that ORS 12.080(3) does not and can 

never apply to negligence claims arising out of construction activities. 

r 

I I 

j 

In addition, there may be "tort claims arising out of the construction 

of a house" that are controlled ·by 'the six-year limitations period of other 

subsections of ORS 12.080. Subsection (2) covers liabilities "created by 

statute;" subsection (4) addresses injuries to personal property. If tort claims 

are encompassed in these subsections, and if the tort claim arises out of 

construction of a house, the claim might be subject to a six-year limitations 

period, not a two-year period. 

Defendants did not challenge the timeliness of plaintiffs' negligence 

claim, only its viability. Plaintiffs did not ask the court to interpret ORS 

12.080 in the context of their negligence claim, nor has this court done so. 

However, this court's statement in footnote 3 that "Tort claims arising out of,

., . 

3 

the construction of a house must be brought within two years of the date that 

the cause of action accrues * * *," suggests to some a more sweeping 

analysis than the court actually engaged in. 

Modified language consistent with the issues decided' on this appeal, 

and consistent with the text where the footnote appears, would be: 

The statute of limitations for contract actions is six years. 

ORS 12.080(1). Tort claims ordinarily accrue when the 

plaintiff discovers or should have discovered the injury. 

Berry v, Branner, 245 Or 307,311-12,421 P2d 996 (1966). 

The Oregon Trial Lawyers Associationjoins in this petition for 

reconsideration. 

Respectfully submitted this 24th day of March 2011. 

Maureen Leonard OSB 823165 

Robert K. Udziela OSB 773766 

Lisa T. Hunt OSB 023306 

Attorneys' for Respondents on Review 

Richard and Janice Abraham

Abraham v. T. Henry Canst., Inc., w .. P.3d wwww (2011) 

350'0i-.29 

350 Or. 29 

Supreme Court of Oregon. 

Richard ABRAHAM and Janice Abraham, 

husband and wife, as trustees for the 

Richard D. Abraham and Janice M. 

Abraham Trust, Respondents on Review, 

v. 

T. HENRY CONSTRUCTION, INC., an Oregon 

corporation; Stelmen Plastering, Inc., an Oregon 

Corporation; Northwest Gutter Service, Inc., an 

Oregon corporation; Milgard Manufacturing, 

Inc., a Washington corporation; Steve Pfenning 

Construction, Inc., an Oregon corporation; 

David Farwell, an individual, dba David Farwell 

Masonry and David Oregon Farwell; One Cut 

Carpentry, LLC, tka One Cut Carpentry, Inc., 

aka Herold's Carpentry; and Maddox Enterprise, 

Inc., an Oregon corporation, Defendants, 

and 

Keith A. Lucas, an individual, dba Keith Lucas 

Development Properties, Petitioner on Review, 

and 

Kevin G. Mayo, an individual, dba KGM 

Construction, Petitioner on Review. 

Keith A. Lucas, dba Keith Lucas Development 

Properties, Third-Party Plaintiff, 

v. 

Energy Products, Inc., an Oregon corporation, dba 

NW Builders Wholesale; Ronald L. Hardy, dba 

Hardy Plumbing & Heating; JB Insulation, Inc., an 

Oregon corporation; Kirk's Construction Unlimited, 

an Oregon corporation; Milwaukie Plumbing 

Co., an Oregon corporation, dba MP Plumbing 

Co.; Tom Pacheco, tka Tom D. Pacheco Masonry; 

Synopsis 

and Mel Wielrich, Third-Party Defendants. 

eCC CV06060031; CAA136228; SC S058073 

(Control), S058101). Argued and Submitted 

Nov. 8, 2010. Decided March 10, 2011. 

Background: Homeowners filed suit against contractors, 

asserting claims for breach of contract and negligence due 

to alleged construction defects. Contractors filed motions for 

summary judgment. The Circuit Court, Clackamas County, 

RQpgrL .. IL .. HS-;!Il..Q.QD., J., granted motions. Homeowners 

appealed. The Court of Appeals, Scl:n!l1um, 1., 2.:tQ_QLApp. 

~.9A .• 211_.P'.JQ.212, reversed and remanded, and contractors 

appealed. 

HgJ!lJng; The Supreme Court, J:.gIm.s-;r, 1., held that 

homeowners' allegations of property damage against 

contractors stated claim for negligence. 

Affirmed. 

1 

2 

3 

4 

West Headnotes (10) 

Action,>~· 

Nature of Action 

Contract obligations are based on the manifested 

intention ofthe parties to a bargaining transaction, 

whereas tort obligations are imposed by law, 

apart from and independent of promises made and 

therefore apart from the manifested intention of 

the parties, to avoid injury to others. 

~gg!!g~n.c~ 'j,."". N.!JJJ.!rS-; .. !11)Q ... FQ.mL9LR..g.!1l9

Abraham v. T. Henry Const., Inc., .-- P .3d ---- (2011) 

350 Or: 2§~" . 

5 

Reference in construction contract, between 

homeowners and contractors, to performing the 

work in a workmanship like manner and in 

compliance with all building codes and other 

applicable laws simply reiterated the common law 

negligence standard that would have applied to 

contractors' work in the absence of a contract; it 

did not create or define any duty contractors did 

not already have. 

Negligence 0"~ 

Nature and F0l111 of Remedy 

8 

Contrl!Cls.,;" Acts or Omissions Constituting 

Breach in General 

If homeowner and a contractor enter into a 

contract to build a house, which provides that the 

contractor will install only copper pipe, but the 

contractor installs another type of pipe instead, 

and if the failureto install the copper pipe causes a 

reduction in the value of the house, homeowner is 

able to recover that amount in an action for breach 

of contract; this is a claim that is based solely on 

a breach of a provision in the contract. 

6 

7 

Common law negligence principles applynotwithstanding 

a contractual relationshipas 

long as the property damage for which 

the plaintiff seeks recovery was a reasonably 

foreseeable result of the defendant's conduct, and 

thus, a negligence claim for personal injury or 

property damage that would exist in absence of 

a contract will continue to exist unless parties 

define their respective obligations and remedies 

in the contract to limit or foreclose such a claim. 

Negligence ,;,;". N§nJrQ§.n9 .. t~QJJ!lQf.Ry..m9.~ty. 

Parties may limit tort remedies by defining their 

obligations in such a way that the commonlaw 

standard of care has been supplanted, or, in 

some circumstances, by contractually limiting or 

specifying available remedies. 

.c..Q.!).tr.1!.~J~ '~"" Acts or Omissions Constituting 

Breach in General 

9 

c.Qntr.!!!,;J~ ">" AQ1~.QLQmj~~jQIlS.CQJll)Ji.n.lJing 

Ur~§,s:h.i!1.Gy.!1cni!J 

"1"0 rts 'W"" DlJJy,Urc§Qn,.Pr.\VmIlgJ.ndcpgnQ9.D.,t 

pfContract 

If homeowner and contractor enter into contract 

to build house, which provides that contractor will 

install only copper pipe, but contractor installs 

another type of pipe instead, and if contractor 

installs pipe in defective manner and those pipes 

therefore leak, causing property damage to house, 

homeowner has claims in both contract and tort; 

homeowner can recover in contract both for 

failure to install copper pipe and for failure to 

perform contract in reasonably skillful manner, 

and homeowner also has tort claim for propelty 

damage to house caused by leaking pipes if 

homeowner can prove that the contractor's failure 

to meet standard of care caused the property 

damage. 

If homeowner and a contractor enter into a 

contract to build a house, which provides that the 

contractor will install only copper pipe, but the 

contractor installs another type of pipe instead 

(assuming both kinds of pipe comply with the 

building code and the use of either would be 

consistent with the standard of care expected of 

contractors), that failure is a breach of contract 

only, and that is so because the contract defined 

the contractor's obligation to use a particular 

material (and no other), which the contractor then 

failed to do. 

10 

Negligence .;;= .N,gtlJICllndFm:m.9LRcmc9y 

Homeowners' allegations of property damage 

against contractors stated claim for negligence, 

and common-law negligence principles remained 

the applicable standard of care, independent of 

terms of contract; in absence of contractual 

relationship, contractors would be subject to 

common law negligence claim by homeowners, 

and by merely reciting in construction contract 

the obligation to build homeowners' house in 

a reasonably skilled manner and in accordance 

with building code-and, by implication, in such 

way as to avoid foreseeable harm to homeowners 

~Mv""'Nm""""_~""",,.,.,....~,,,,,,m,, ..... ,,",,,,,,~,,,,,,,,m.v_n_""""""'=',,,"",,,,""'''''''_'''''''''''~=N=''>NNN''N''''''''""""""~""'N~''''''''~N''''''''''N''''~ __ '=·'ffl''''''N .. """""~_m''N~m'''''''''''''""'~''N'''·v>mN'''''','''~.,,mw'wV·''''''N''''''~"W.''''''''~·~'·h·~VNh,""N~N·'",,'·''''''''·~·~N·'''~"w·v ... ·. 

(//{stLa\\tNexr (~J 2011 Thcr0scn f~eutBrs .. No Clc~lm to lLS, Govc-rnrnenl VVO(k::''; /

Abraham v. T. Henry Const., Inc., www P.3d ---- (2011) 

--contractors did nothing to supplant the 

common law standard of care, nor did terms of 

coritract purport to limit the type or amount of 

homeowners' damages. 

On review from the Court of Appeals. * 

Attorneys and Law Firms 

M~nh~}y',r,Kil.Jmf!mmp, Hoffman, Hart & Wagner, LLP, 

Portland, argued the cause for petitioners on review and filed 

the briefs for petitioner on review Keith A. Lucas. With him 

on the briefs was J!lDQJ.M.,$.r;jU:9.9.I. K9.DnQth ... L,.\oYJlU1QQ.d., 

Blunck & Walhood, LLC, West Linn, filed the briefs for 

petitioner on review Kevin G. Mayo. 

Maureen Leonard, Portland, argued the cause and filed the 

brief for respondents on review. With her on the brief were 

Robert K. Udziela, Portland, and Li~iLLHunt, Portland. 

Cody Hoesly, Larkins Vacura LLP, Portland, and Travis Eiva, 

Corson & Johnson Law Firm, Eugene, filed the brief for 

amicus curiae Oregon Trial Lawyers Association. 

Jon Chandler, Salem, filed the brief for amici curiae Oregon 

Home Builders Association and The National Association of 

Home Builders. 

Before DE MUNIZ, Chief Justice, and DURHAM, 

tiM.MER, KISTLER, WALTERS, and LINDl:;R, 

Justices. ** 

Opinion 

BALMER,1. 

'k33 This case requires us to address an issue left open 

in 1f..!rri,LY, .... S ./d.t1igQ,.J.::H .. Q"r.,., ..;20J...... 1U,._J.8.'O .... P,JgJ .. 2. 

(2.008): Whether a claim for property damage arising from 

construction defects may lie in tort, in addition to contract, 

when the homeowner and builder are in a contractual 

relationship. Plaintiffs hired defendants 1 to build their house. 

Plaintiffs eventually discovered extensive water damage to 

the house. Plaintiffs then brought this action for breach 

of contract and negligence, alleging that the damage was 

caused by defendants' faulty work and failure to comply 

with the Oregon Building Code. Defendants moved for 

summary judgment on the grounds that the contract claim 

was barred by the statute of limitations and that plaintiffs 

could not bring a negligence claim because plaintiffs did not 

have a "special relationship" with defendants that implicated 

a standard of care independent of the contract. The trial 

court granted defendants' motions. On appeal, the Court of 

Appeals held that plaintiffs' contract claim was barred by the 

statute of limitations but that their negligence claim could go 

forward because the building code provided a standard of care 

independent ofthe terms ofthe contract. Abraham p. T HerlIY. 

Consfl'llcrion. Inc. ,.2JO.Qr,APl),.JQ:!..2.LZ.. f'J .. Q.2.J2..{2.0..Q9.). 

We affirm the decision ofthe Court of Appeals, although we 

do so on somewhat different grounds. 

We take the facts from the Court of Appeals opinion and 

the summary judgment record. Plaintiffs hired defendant 

Keith Lucas to be general contractor for the completion 

of their house, after substantial work had been done by 

other contractors. Plaintiffs signed a contract with Lucas that 

required him to perform all work "in a workmanship like 

manner and in compliance with all building codes and other 

applicable laws." Plaintiffs also contracted with defendant 

Kevin Mayo to do the framing for the house. 2 Plaintiffs' 

house was substantially complete by January 1998. More than 

six *34 years later, plaintiffs discovered extensive water 

damage, including rotting sheathing and framing, which they 

claim res~lted from defects in defendants' work .. J 

Plaintiffs filed this action alleging breach of contract and 

negligence. Plaintiffs' negligence claim presented three 

overlapping grounds for relief. Plaintiffs claimed that 

defendants were liable (I) under common law negligence for 

causing reasonably foreseeable harm to plaintiffs' property; 

(2) under a heightened standard of care created by the 

"special relationship" between plaintiffs and defendants, 

which defendants had failed to meet; and (3) under a theory 

of negligence per se for violating the building code. Plaintiffs 

sought money damages for the physical damage to the house, 

as well as for its diminution in value. Defendants moved for 

summary judgment, arguing that plaintiffs' contract claim was 

barred by the six-year statute ofJimitations contained in ORS 

12.080(1). Regarding each of plaintiffs' negligence theories, 

defendants argued that a "special relationship"-such as the 

one between a doctor and a patient or an attorney and a 

client-was required to bring a tort claim and that plaintiffs 

had failed to demonstrate that such a relationship existed. In 

a letter opinion, the trial court held that plaintiffs' contract 

claim was barred by the statute ofJimitations. The court also 

held that plaintiffs' negligence claim was barred bY./..Q!l.s.t. 

!dlt1gr..Ql.4P.q9..if!~·Hrlmg,:,... l!1( .•.,.JB8.(2r,AlP,.:'.1IL ...7.L P.~.g ... ~.74, 

rev. den., J3.6QL .. J2~ ..,]9P.1~L3B..{2Qo..J}, where the Court 

of Appeals, on similar facts, required a "special relationship"

Abraham v. T. Henry eonst., Inc., .. • P.3d __ ow (2011) 

35~6o;:.'29~' 

between the contracting parties for a plaintiff to bring a 

negligence claim and determined that such a relationship did 

not exist between a homeowner and a building contractor. 

Plaintiffs appealed, and the Court of Appeals affirmed the 

trial court's judgment on the contract claim and reversed on 

the negligence c1aim.;4, First, the court surveyed *35 the 

law governing tort claims between contracting parties and 

determined that plaintiffs could not bring a common law 

negligence action without establishing a standard of care 

independent ofthe terms ofthe contract. That standard of care 

could arise from a "special relationship" between the parties 

or it could be expressed in a statute or administrative rule. 

/lbrahCU1b.:2.:~QQr,i\p.p.i\L,5.62,,:2.:J]P'.:g;U2, The court stated 

that, when a contract imposes only the general obligation to 

take reasonable care to avoid foreseeable risks, that standard 

of care does not impose a tort duty independent ofthe contract 

and therefore cannot be the basis for a negligence claim. ld 

at 568. 217 P.3d 212 n2 (citing Jones. 188 Or.App. at 471 

IJLldj74). 

The court then examined whether plaintiffs had shown that 

they were in a "special relationship" with defendants that 

established a standard of care independent of the contract. 

The court noted that parties are in a "special relationship" 

when one party delegates to the other the authority to make 

decisions for her benefit, such as a client's relationship 

with her attorney. The court determined that plaintiffs had 

not established that they had delegated responsibility to 

defendants to make independent decisions on behalf of 

plaintiffs and in plaintiffs' interest. Rather, plaintiffs had 

entered into an arm's-length transaction with defendants in 

which each party acted for its own benefit. lei. at 572, 217 

P,3d .212. Accordingly, the Court of Appeals agreed with 

the trial court that plaintiffs and defendants were not in the 

kind of "special relationship" that imposed on defendants a 

heightened duty, the breach of which could be the basis for 

a tort action. 

The Court of Appeals, however, did agree with plaintiffs that 

a statute or administrative rule could establish a standard of 

care independent ofthe contract and that plaintiffs' allegations 

that defendants had failed to comply with the building code, 

thereby causing damage to plaintiffs' property, were sufficient 

to state a negligence. claim under that theory.,i ld. at 573. 

217 P.3d 212. The court also held that plaintiffs had '~36 

demonstrated that there was a genuine issue of material fact 

by providing an affidavit from their counsel stating that 

she had retained experts who would testify in support of 

the foregoing allegations. The Court of Appeals therefore 

reversed summary judgment on plaintiffs' tort claim and 

remanded the case to the trial court. 

On review, defendants argue that the Court of Appeals erred 

by holding that the building code created a standard of 

care independent of the contract between the parties. (1 

defendants' view, a party to a contract may bring a tort 

claim arising out of the breach of that contract only when 

the parties are in a "special relationship" that implicates a 

standard of care independent of the terms of the contract. For 

the reasons set out below, we conclude that neither a special 

relationship nor a statutory standard of care, such as the 

building code, is necessary to bring a negligence claim here. 

In our view, plaintiffs stated a common law negligence claim 

based on defendants' alleged failure to exercise reasonable 

care to avoid foreseeable harm to plaintiffs' property. That 

negligence claim is not foreclosed by their contract with 

defendants, because the terms ofthe contract do not purport to 

alter or eliminate defendants' liability for the property damage 

plaintiffs claim to have suffered. 

1 l J This case requires us to examine the circumstances 

in which harm to a person's property, caused by another, 

may be the basis for a contract claim or a tort c1aim-or 

both. Contract obligations are " 'based on the manifested 

intention of the parties to a bargaining transaction,' "whereas 

tort obligations are " 'imposed by law-apart from and 

independent of promises made and therefore apart from the 

manifested intention of the parties-to avoid injury to others.' 

" Conw({,l' v. Pacitlc Universifl'.J:2.:4.Qr.,,2J.J.,2:Jl,nAP,2.d 

8.J.8..Lt9..9..o.) (quoting Prosser and Keeton on the Law of Torts, 

§ 92,655-56 (W. Page Keeton, ed., 5th ed 1984) (emphasis in 

Com-val' )). Because tort liability is imposed by common law 

negligence *3i principles, that responsibility exists unless 

altered or eliminated by a contract or some other source of· 

law. In .Eq;;';;'QI.Qt.:L'y",PQr.t!ql7.d..,'>~9.hQQLQ41.JV(L,Ll.1Q3 .. QL I, 

7J4P,Zd.J.1Z6028.7), this court made that point with respect 

to common law negligence: 

"[U]nless the parties invoke a status, a relationship, or 

a particular standard of conduct that creates, defines, 

or limits the defendant's duty, the issue of liability for 

harm actually resulting from defendant's conduct properly 

depends on whether that conduct unreasonably created a 

foreseeable risk to a protected interest of the kind of harm 

that befell the plaintiff." 

Id at, 17, 734 P.2d 1326. Thus, Fazzolari lays out a 

framework to address whether a common law negligence 

claim is legally cognizable even when there is a contractual 

In

Abraham v. T. Henry Const.,lnc., '0, P.3d ---- (2011) 

350"b';:~'2'9v .. ' . """'" '···'.Y· ''',"W" 

relationship between the parties. In answering that question, 

we first consider whether plaintiffs alleged that defendants 

unreasonably created a foreseeable risk of harm to a protected 

interest, resulting in injury to plaintiffs. If so, we must 

determine whether the contract between the parties altered or 

eliminated defendants' common law duty to avoid harming 

plaintiffs. Ifit did not, then the contract does not bar plaintiffs 

from bringing a negligence action against defendants. 

Plaintiffs assert that contractors are subject to the common 

law negligence standard of care. See H.{dlT...i,~~,. 344 Or. at 

lfLLlBiLL1d 12 ("[A] person whose negligent conduct 

unreasonably creates a foreseeable risk of harm to others and 

causes injury to another ordinarily is liable in damages for 

that injury."). In HqzTt.,~,_ the defendant contractor had built 

an apartment building for a third party, which the plaintiff 

later purchased. The plaintiff discovered extensive water 

damage caused by the defendant's faulty work and brought 

a negligence claim. This court concluded that physical 

injury to a building caused by construction defects was 

property damage, rather than a purely economic loss, and thus 

actionable in negligence.ldlltJJ,18QPJgJ2. 

Defendants do not dispute that plaintiffs' alleged injury is 

property damage and not a purely economic loss. Defendants, 

however, assert that 1:iarl'M has no bearing on the present case 

because the parties in that case were not in "38 a contractual 

relationship. Although we agree that one difference between 

Harris and this case is plaintiffs' contract with defendants, 

that difference simply means that HClI'ris is not dispositive; 

it does not make Harris irrelevant. HClI'ris provides at least 

some support for plaintiffs' argument, because in that case 

this court recognized a negligence claim against a builder 

for the same type of injury alleged by plaintiffs-damage 

to property resulting from construction defects. Because 

1:i.Qrris recognized the same sort of negligence claim that 

plaintiffs now allege, under Eq;;;pl.q.ci, the question here is 

whether plaintiffs' contract with defendants "creates, defines, 

or limits" that negligence claim. 

~ The contract's reference to performing the work "in 

a workmanship like manner and in compliance with all 

building codes and other applicable laws" simply reiterated 

the common law negligence standard that would have applied 

to defendants' work in the absence of a contract. It did not 

"create" or "define" any duty defendants did not already 

have. The question then is whether that reference "limited" 

plaintiffs' claims against defendants. 

Nothing in this court's cases suggests that, by entering into 

a contract, a party necessarily waives tort claims against 

another party to the contract. See ESlev v. MacKen:ie 

E)I',f;ineerkiff.-1nc .. 324 Or. 372, 376, 927 P.2d 86 (] 996) 

(" '[A] contract will not be construed to provide immunity 

from the consequences of a party's own negligence unless 

that intention is clearly and unequivocally expressed.' ") 

(quoting Transamerica Ins. Co. v. U.S. Nat'l Bank. 276 Or. 

945, 951. 558 P.2d 328 ( 1976)). Indeed, this court has long 

recognized that tort and contract remedies may coexist. See 

d.~lunln.)!..li.kh.Qls. 92 Or. 223, 235, 180 t~jU 1919J (so 

stating); NmY!11qnY •. l.ld.f.i.l.q(.il1.[)J~y"glQPmr:l!!.c.Q.J!.l'.:".f.8LOr. 

47.49,.597..P..'QB.Q_Q_fJ.279) (certifying class action against 

contractor by plaintiffs alleging contract and tort claims 

arising from construction defects). In Oml'g(wwnl(}{i/ryy. 

Ih.HQ.!'l!§Lll.!s .•.('Q,'.JJJ.. Qr. ....27,8JJ.... P..29 ... 7. ..(J.. 99..~.1, this court 

summarized the case law discussing the choice between tort 

and contract remedies: 

"When the relationship involved is between contracting 

parties, and the gravamen ofthe complaint is that one *39 

party caused damage to the other by negligently performing 

its obligations under the contract, then, and even though the 

relationship between the parties arises out of the contract. 

the injured party may bring a claim for negligence if the 

other party. is subject to a standard of care independent of 

the terms of the contract. If the plaintiffs claim is based 

solely on a breach of a provision in the contract, which 

itself spells out the party's obligation, then the remedy 

normally will be only in contract, with contract measures 

of damages and contract statutes of limitation. That is so 

whether the breach of contract was negligent, intentional, 

or otherwise." 

The parties disagree as to whether Georgetowll allows 

common law negligence principles to provide the 

"independent standard of care" that must be identified for 

one party to bring a tort claim against the other, when 

the parties are in a contractual relationship. In defendants' 

view, GeOl'!f,'erOlVn requires a "special relationship" to exist 

between contracting parties before the negligent performance 

of contract obligations can be the basis for a tort claim. 

According to defendants, it is the nature of the relationship 

between the parties-such as the responsibility of one party 

to act for the other's benefit-that implicates an independent 

standard of care. Plaintiffs respond that Georr;etol1'11 requires 

only that there be some applicable standard of care 

independent of the terms of the contract, and they argue that

Abraham v. T. Henry Canst"lne" '" P.3d .-.- (2011) 

3500r::2S"'MM"""" 

such a standard can derive from a "special relationship" or 

from some other source of law, including the common law 

duty to use reasonable care to avoid injury to others. 

Defendants read (;eorgdPwn too broadly. Qgorgetoyvl/ was 

a negligence action by an insured against its insurance 

carrier seeking economic damages that the insured had 

sustained because of the carrier's failure to use reasonable 

care in defending the insured. Because the plaintiff was 

seeking economic damages, it was required to demonstrate 

a "special relationship" in which the defendant agreed to 

act in the plaintiffs fiduciary interest. Id~lf)-ll. 831 

P.2dl However, (imlXf~!.Qwn~ general statements about the 

intersection of contract and tort claims, quoted above, do 

not tum on whether a special relationship exists, but rather 

require only *40 a standard of care that is independent of 

the terms of the contract. See id at 110, 831 F.2d 7 ("[T]he 

pivotal question * * * is whether the allegedly negligent party 

is subject to a standard of care independent of the terms of 

the contract."). That standard could be "independent" of the 

contract either because a "special relationship" imposes a 

heightened standard of care (as in (if/Q.t:gr;.{QWnJ. or because 

the common law, statutes, or administrative rules impose 

liability regardless of the contractual relationship between 

the parties. See !J...QJ'~r..... y, ....,SQ.IQ!l1Q.!LSrl1.ith...!l.qE!.10:,.J4A .. QI:. 

)'&3.,j95,L~BP'.Jg2Jl{fQQ&J ("[O]utside source [s] oflaw" 

such as "industry standards, statutes, or regulations, could 

* * * provide a basis in law for liability" in a negligence 

action.). Furthermore, this court's case law is clear that 

economic losses, such as the ones suffered by the plaintiff 

in (i'Q.!'g~:'!!JH:l1, are recoverable in negligence only if the 

defendant is subject to a heightened standard of care, such 

as one arising out of a special relationship. See, e.g., OnilQ 

Pacific Com. v. Trustees o(Bronsoll. 315 Or. 149. 16061. 

843 P.2d 890 (1992) (so holding). For physical damage to 

real property, however, "this court's cases generally permit a 

property owner to recover in negligence." Harris. 344 Or. at 

31011. 180 P.3d 12. 

For those reasons, we agree with plaintiffs that 

[im.!.'gfi.!lYr.l and earlier cases support the conclusion that 

common law negligence principles apply-notwithstanding 

a contractual relationship--as long as the property damage 

for which the plaintiff seeks recovery was a reasonably 

foreseeable result of the defendant's conduct. Thus, a 

negligence claim for personal injury or property damage that 

would exist in the absence of a contract will continue to 

exist unless the parties define their respective obligations and 

remedies in the contract to limit or foreclose such a claim. 

Parties may limit tort remedies by defining their obligations 

in such a way that the commonlaw standard of care has 

been supplanted, see Ff:!77!!.IQr.LJ.J!.J.Q[.gLJ.],nAP2Q 

J.12.f (so stating), or, in some circumstances, by contractually 

limiting or specifying available remedies. See .K.::L.i..n!.L .. Y.. •. 

RQbr.t,~~.MQ{Q.r.(~Q.,nJQI. .. 4.4f,.2.4&,HLP .. 4~i.JJ:z&.cL9.I5) 

(illustrating proposition). 

1 ~ Defendants argue that this approach undermines the 

distinction between contract and tort and would permit *41 

every breach of contract to be brought as a tort claim. 

Defendants are incorrect. An example will help demonstrate 

the difference between actions taken in the performance of 

a contract that can be the basis for a contract claim only, 

and those that may also provide a basis for a tort claim. If 

an individual and a contractor enter into a contract to build 

a house, which provides that the contractor will install only 

copper pipe, but the contractor installs PVC pipe instead 

(assuming both kinds of pipe comply with the building code 

and the use of either would be consistent with the standard 

of care expected of contractors), that failure would be a 

breach of contract only.l That is so because the contract 

defined the contractor's obligation to use a particular material 

(and no other), which the contractor then failed to do. See 

GfQrg~:,[Qwn..J 13 Or. at 106.831 P.2d 7. (stating principle) . .8 

If the failure to install the copper pipe caused a reduction in 

the value of the house, the plaintiff would be able to recover 

that amount in an action for breach of contract. That would 

be a claim that, as this court stated in .Gr;grgIPJ.1'1J, "is based 

solely on a breach ofa provision in the contract[.]" JJ1Qr.gl 

JQ6,B1L.P,~g7 (emphasis added). 

~ On the other hand, if the contractor installed the PVC 

pipe in a defective manner and those pipes therefore leaked, 

causing property damage to the house, the homeowner would 

have claims in both contract and tort. The homeowner could 

recover in contract both for the failure to install copper pipe 

and for the failure to perform the contract in a reasonably 

skillful manner. See Cabal v. Donnell}', 302 Or. lIS, 121- 

22. 727 P.2d III (1986) (illustrating contract claim). The 

homeowner also would have a tort claim for property damage 

to the house caused by the leaking pipes if the homeowner 

could prove that the contractor's fai lure to meet the standard of 

care caused the property damage. See /Ii. (" 'We see no reason 

to preclude a [home buyer] from claiming *42 damages 

[from the home bui Ider 1 in contract and in tort.' ") (quoting 

li~Qfld\1'ard.x, Chirco Constl'7lCfion Co., 141 Ariz. S14. SIS- 

16.,..\282 P.2iLL;69, ] 271ill..&D). In those circumstances, the 

obligation to install copper instead of PVC pipe is purely 

contractual; the manner of installing the pipe, however,

Abraham v. T. Henry Const., Ine,,"- P.Sd ---- (2011) 

3'56 Or. 29 .........•...... 

implicates both contract and tort because of the foreseeable 

risk of property damage that can result from improperly 

installed pipes. 

We now return to the terms of the contract here to determine 

whether plaintiffs' claim sounded in common law negligence 

and, if so, whether the parties' contract altered or eliminated 

defendants' common law obligation to avoid reasonably 

foreseeable harm to plaintiffs' property or modified the 

remedies available to plaintiffs. 

The contract here provides: "All work shall be completed 

in a workmanship like manner and in compliance with 

all building codes and other applicable laws." The Court 

of Appeals apparently viewed that promise as implicitly 

incorporating the common law standard of care into the 

contract. In rejecting plaintiffs' argument that common law 

negligence principles provide an "independent standard of 

care," the court stated, "When a contract expressly or 

implicitly incorporates the general 'duty' to take reasonable 

measures to avoid foreseeable risks, that standard of care is 

not considered to impose an independent tort duty." !.!J,r.:g/Jp,lI.7..,. 

230 Or.App. at 568, 217 P .3d 212 n2. That determination, 

however, is inconsistent with this court's clear statement 

that if a contract "merely incorporates by reference or by 

implication a general standard of skill and care to which 

the defendant would be bound independent of the contract, 

and the alleged breach would also be a breach of this 

noncontractual duty," then a claim for negligence will lie. 

s..

Abraham v. T. Henry Const., Inc., --- P.3d ---- (2011) 

350Cyr.2S"'"", . 

Q 

Defendant Lucas also argues that the Court of Appeals erred in holding that the affidavit submitted by plaintiffs' counsel was 

sufficient to establish a genuine issue of material fact and therefore preclude summary judgment. We reject that argument without 

discussion. 

1 In Securiljl;!,L!n!r1T[LQJJ-'1Jgj!LJ'-,-,'lli!1:j£'l.F/leU~9_ (k_2...4J~25J_!1,.-2,JjlU'.".£q_JJ2all.2.SJ»), this court identified other situations in 

which a breach of contract would not give rise to tort liability, even in the context of medical malpractice, because the breach did 

not "fall[ 1 short of generally applicable professional standards of skill and care." 

~ Whether the contractor's failure to install the contractually specified pipe was intentional or was the result of negligence, the action 

would, in any event, be for breach of contract. See Georr,:etown. 313 Or. at 106. 83] P .2d 7 (so stating). 

End of Document 

@ 2011 Thornson Reuters, No claim to origin",1 US. Governomnl Works.

Sutter v. Bingham eonst., Inc., 81 Or.App. 16 (1986) 

724 P.2d829'w~'w' 

724 P.2d82 9 

Court of Appeals of Oregon. 

Richard J. SUTfER; Dennis P. Thomas; 

and Hall Boulevard Professional 

Village, a partnership, Appellants, 

v. 

BINGHAM CONSTRUCTION, INC., 

an Oregon corporation, Respondent, 

William Blue, an individual, Defendant. 

83-1783C; CA A3SS80. Argued and 

Submitted July 18, 1986. Decided Aug. 27, 1986. 

4 

Owners' interest in receIVIng building without 

leaky roof was sufficient interest in property 

prior to construction of building to invoke sixyear 

statute of limitations for action to recover 

damages for injury to "any interest of another in 

real property." QRS.J2.Q8QO). 

Limitation of Actions

Sutter v. Bingham Const., Inc., 81 Or.App. 16 (1986) 

724P.2d's2"s 

December, 1983. Pursuant to the terms of the written contract, 

defendant agreed 

" * * * to furnish his best skill and judgment and to cooperate 

with the Architect in furthering the interests of the Owner. 

He agrees to furnish efficient business administration and 

superintendence and to use his best efforts to furnish at all 

times an adequate supply of workmen and materials, and to 

perform the Work in the best way and in the most expeditious 

and economical manner consistent with the interests of the 

Owner." 

Plaintiffs alleged in their second amended complaint that 

defendant breached the contract 

" * * * by not performing its work in a workmanlike fashion, 

and by not using its best skill and judgment, and has not used 

its best efforts and skills to apply a roof to Plaintiffs' building 

which does not leak." 

QRSJ;.JJ.QOJ provides, in pertinent part: 

"An action for assaUlt, battery, false imprisonment, or for 

any injury to the person or rights of another, not arising on 

contract, and not especially enumerated in this chapter, shall 

be commenced within two years * * *." (Emphasis supplied.) 

In order for ORS)2,1J OLD to apply, the action must not arise 

on a contract and must not be an action specifically covered 

by another limitation. Plaintiffs argue both that their action 

does *19 arise on a contract and that it is especially provided 

for by either or both of these subsections ofQRSJ:: .Q.&Q: 

"(I) An action upon a contract or liability, express or implied, 

excepting those mentioned in ORS 12.070 and 12.110 and 

except as otherwise provided in ORS 72.7250; [or] 

,,***** 

"(3) An action for waste or trespass upon or for interference 

with or injury to any interest of another in real property, 

excepting those mentioned in .QRS J 2.0~.Q, 12.0@ and 

27J..24J * * * shall be commenced within six years." J 

Defendant contends that plaintiffs' action is not on a contract 

under the rllle ofSeclIrities-lnrermoulliain v. Sunset Fuel. 289 

Or. 243, 611 1>.2d 1158 (19801. 

" * * * I fthe alleged contract merely incorporates by reference 

or by implication a general standard of skill and care to 

which the defendant would be bound independent of the 

contract, and the alleged breach would also be a breach of this 

noncontractual duty, then QRS. J2.JJQ applies. * * * "2.89 

QL.Ht2.~.9., ... 6.1J .... P.2~i. ... I ... I .. ~ ..&. 

Under Securities-Intermountain, the two year statute would 

apply here because plaintiff alleged only a failure to perform 

in a workmanlike manner. That duty exists in the absence of 

any express agreement so to perform. 

Securities-Intermountain was followed by flf!.y.f:J.:i.r/.gr:. .. Y •.. King, 

222()r.,nJ •. (>4J. .... P..2.4.:3.2LL982J Beveridge was an action 

by a purchaser of land and a new house against the builder to 

recover for the defendant's alleged breach ofthe contract. The 

plaintiff alleged that the defendant had breached an implied 

term of the written contract that the defendant would construct 

the house in a workmanlike manner. The plaintiff argued 

that a six year limitation applied to the action under Q:RS 

J2.Q.&QLU and QRS12.QRQCD. The Supreme Court H83/ 

discussed both provisions and agreed with the plaintiff, 

concluding that 

" * * * ORS 12.II0(lj is not applicable either because the 

action does arise on contract or because the injuries here 

were to the interests of 'another' in real property and the 

action to "'20 recover damages for those injuries is especially 

enumerated in DRS 12.080m. * * *" 292 Or. JlL778-1.'2...Q41 

Pold 332. (Footnote omitted.) 

It is not clear whether Beveridge held that both QRS 

12 .. 0.8.0()) and QRSJ::Q8QL;) applied to the action or that 

either one, but not both, applied. The opinion implied that 

QRS.J2,.Q.8QCD applied, even though it appears that the 

plaintiff had alleged only a breach of a general standard 

of skill and care to which the defendant would be bound 

independently of the contract, that is, the implied obligation 

to p~rform in a workmanlike manner: 

"Except for the circumstance that the obligation to construct 

in a workmanlike manner was express rather than implied, 

the cause in Srhmauch [v. Juhnston. 274 Or 441. 547 P2g 

112..L19'ZQ) 1 was the same as that pleaded in the case at bar. 

If the cause predicated upon the express obligation was an 

action to recover damages for breach of contract, it would 

seem to follow that the cause on the implied obligation is also 

for damages for breach of contract." 2.2..0L .. a.L1.7.6 •. M.l.,P"..d 

:'UL 

That holding in Beveridge appears to contradict Securities 

Intermountain, where the court stated that an action in which 

the plaintiff alleged the breach of an express contractual 

obligation

Sutter v. Bingham Const., Inc., 81 Or.App. 16 (1986) 

724P:2d 829 ,~ .. , 

" * * * differs from a case in which a warranty of 

'workmanlike' performance or due care toward achieving th 

intended result is pleaded as an implied term of a general 

agreement to undertake professional services. Compare Bales 

f.{iI:EQ0LlJfuJ!..,J:..oole [246 Q.L~ 44.4 P2n...82.HL9671 ]." 

289 Or. at 263, 61.1 P.2d I J 58. 

Although the Supreme Court stated that it had allowed review 

in Beveridge "to consider whether some clarification or 

refinement of its decision in Securities-Intermountain should 

be undertaken," 222QXilL:Z:Z5,gA,}P.24JJ2, Beveridge only 

confuses the issue. 

1 In Tavlor v. Settecase. 69 Or.App. 222, 228, 685 P.2d 

470, rev. den. 298 Or. 68, 688 P.2d 846 (]984), we held that 

"the court's rationale in Beveridge was alternatively grounded 

in ORS 12.080(1) and 12.080(3) * * *." That was an action 

by the owner of an office building against the architect to 

recover damages for the installation of a malfunctioning or 

unsuitable heating and cooling system. Applying Beveridge, 

this court held that the action was to recover for an injury 

to "any interest of another in real property," to which the 

six-year *21 limitation of ORS 12.080(3) applies. We are 

persuaded by Beveridge and Taylor that plaintiffs action to 

recover damages for the leaky roof is also covered by ()13,~ 

l2'c)8QQ1. 

~ J ~ Defendant asserts three reasons why ORS 1.£,080CD 

should not apply to this action. First, it argues that QRS 

12.0.8.(20J applies only to actions where the injury to real 

property is caused by a "substantial invading force," citing 

8J!.t.f:LL TajgnLl[l:ijfjlJjuIIJd!§..!r.iJ.;L258 QLJ.±O. 4ii2jl.2cLUQ 

il2ll). That contention is clearly incorrect in the light of 

Beveridge and Taylor. Second, it argues that Q.RS 1 ;LQitQO) 

does not apply, because it "did not injure any interest 

that plaintiffs had in the property prior to construction of 

the building at issue." The court in Beveridge apparently 

held that the plaintiff's interest in receiving a nondefective 

house was sufficient to invoke ORS 12.08Qill. We do not 

understand how plaintiffs' interest in receiving a building 

without a leaky roof is distinguishable. Finally, defendant 

argues that Beveridge should be limited to cases involving the 

construction of residential homes. We did not recognize that 

distinction in Taylor, nor do we see a basis for the distinction 

in the broad language of QRSJ.2 .. Q8.QW: "any interest of 

another in real property." We *"832 hold that this action 

was timely commenced under QRSJ2.Q8QCn. 2 

Reversed and remanded. 

Parallel Citations 

724 P.2d 829 

Footnotes 

1 Defendant does not assert that any of the exceptions in ORS 12.0S0(1) or QRS 12.08..Qill applies. 

~ Because we reach this conclusion, we do not need to choose between the apparently contradictory holdings of Securifies 

Intermountain and Beveridge with respect to the question of whether this is an action arising on a contract within QJs5JLD.IDKl). 


© 2011 'TholTiSon Heuters. No clairn to ()riqinHI U.S (;overprnenr VVorks

Beveridge v. King, 292 Or. 771 (1982) 

643.J3:2d332 ....... ~- .... "...-....--.--, ......· 

... _._.w.w .. , 

643 P.2d332 

Supreme Court of Oregon, En Bane . .: 

John W. BEVERIDGE and Shirley A Beveridge, 

husband and wife, Respondents on Review, 

v. 

William D. KING, Sr., Petitioner on Review. 

CA 16889; SC 27693. 

Argued and First Submitted 

June 30, 1981. Supplemental Memoranda 

Filed Feb. 12, 1982.Deeided April 6, 1982. 

Action was brought to recover against contractor on theory 

that he failed to substantially perform under contract to 

construct house in workmanlike manner. The Circuit Court, 

Multnomah County, Charles S. Crookham, l, granted 

contractor summary judgment and dismissed complaint, and 

appeal was taken. The Court of Appeals, Buttler, l, ;5..Q 

()r,Apn.~8;5.,.2.21P.2gJJJ2., reversed, and contractor sought 

review. The Supreme Court, Lent, ]., held that the applicable 

statute of limitation was six-year statute, rather than statute, 

which provided two-year period for actions to recover for 

injuries to person or property arising from another person 

having performed construction of any improvement to real 

property, or statute which provided two-year period for 

actions for injury to personal rights of another, not arising in 

contract and not especially enumerated. 

Judgment affirmed. 

West Headnotes (I) 

1 Limitation of Actions ';F~ Breach of Contract 

in General 

Six-year statute of limitation was applicable to 

action based on theory that contractor failed to 

substantially perform under contract to construct 

house in workmanlike manner; statute, which 

provided two-year period for actions to recqver 

for injuries to person or property arising from 

another person having performed construction 

of any improvement to real property, was 

inapplicable, in that claim in question was not 

for bodily injury or physical injury to existing 

tangible property, and another two year statute of 

limitation was not applicable, either because the 

action arose on contract or because the injuries 

were to interests of "another" in real property 

and such an action was especially enumerated 

in certain statutory provision.QRS. L2.08Q(.\,J), 

12.JJQ{J), J2.U~(J). 


*i7lk-k332 James K. Belknap, Portland, argued the 

cause and filed briefs and the supplemental memorandum for 

petitioner on review. 

*772 Gary A. Gluesenkamp, Hillsboro, argued the cause 

and filed a brief and the supplemental memorandum for 

respondents on review. 

Opinion 

"773 LENT, Justice. 

Plaintiffs commenced this action more than two but less than 

six years after their cause accrued. The issue is whether 

the action is barred by the two-year statute of limitations 

prescribed in QR~LL_JJ.QlD.: 

"An action for * * * any injury to the person or rights 

of another, not arising on contract, and not especially 

enumerated in this chapter (ORS ch 12), shall be 

commenced within two years; * * *." 

We hold that the cause is not barred. 

It is not disputed that defendant was a builder of residential 

homes and that in 1975 plaintiffs entered into a written 

contract with defendant for the purchase of land and 

a new house that was under construction by defendant. 

After defendant purported to have completed construction, 

plaintiffs moved in and thereafter came to believe that there 

were numerous "things that had to be completed and fixed" 

by defendant and so advised him by letter dated September 

13,1976. 

In their complaint plaintiffs averred that defendant had 

contracted "to furnish all **333 labor and materials 

necessary for completing construction of the house," that 

an implied term of the written contract was that defendant 

would "construct the house in a workmanlike manner" and 

that he had "failed substantially to perform under said contract 

in that he failed to construct such residence in a good 

and workmanlike manner." Plaintiffs then pleaded some 

18 particulars of defendant's alleged failure to perform his


643~p~.2a332mm"........ '~".._~m~ •... ~ 

contract. Some of the particular complaints were of failure 

to complete certain work; some complaints were of the use 

of improper technique; and some complaints were a mixed 

bag of the first two categories. The damages sought were the 

amounts of money necessary to remedy the defects alleged. 

Defendant pleaded an affirmative defense that the action had 

not been commenced within two years from the date that 

plaintiffs were aware of "the breach of said contract as set 

forth in their complaint." J Plaintiffs moved 'k7i4 for partial 

summary judgment on the affirmative defense, contending 

that a six-year statute of limitations governed the case. In a 

memorandum in support of that motion and filed therewith, 

plaintiffs cited and quoted QJsS!2,Q~.Q{J1J\lJJLOJ, 

provide: 

which 

"(I) An action upon a contract or liability, express or 

implied, excepting those mentioned in QRS....ll..07Q and 

.L~.J.IQ and except as otherwise provided in QR.~n,.7.2.",..Q; 

"* * * 

"(3) An action for waste or trespass upon or for 

interference with or injury to any interest of another in 

real property, excepting those mentioned in ORS 12.050, 

12.060, 12.135 and 273.241; * * * 

"*** 

"shall be commenced within six years.";' 

Defendant moved for summary judgment, contending that the 

case was governed by 0 RS 12.1350 ), citing the. Court of 

Appeals' decision in Securities-Intermountain v. Sunset Fuel. 

4Q Qr,A,Plt .... 2.9 .. L 5.9.4. 'p.,2..~i.L1Q7.... CL9:Z9) . .J. QR,'$. .... J2.,.115.(.t). 

provides: 

"An action to recover damages for injuries to a person or 

to property arising from another person having performed 

the construction, alteration or repair of any improvement 

to real property or the supervision or inspection thereof, 

or from such other person having furnished the design, 

planning, surveying, architectural or engineering services 

for such improvement, shall be commenced within two 

years from the date of such injury to the person or property; 

provided that such action shall be commenced within 10 

years from substantial completion of such construction, 

alteration or repair of the improvement to real property." 

The trial court denied plaintiffs' motion, allowed 

defendant's motion and dismissed the case with prejudice. 

Plaintiffs appealed, and in their brief in the Court of Appeals 

both challenged and sought to distinguish the Court of 

Appeals' decision in Securities-Intermountain. By the time 

defendant filed his brief in the Court of Appeals, "775 

we had decided thatQRS. .. J.2..JJSU) is not applicable to 

this kind of claim.S£Ql,lri.li.~_~:ln!cn::n9\dn.t;!jHy,5I,ln§S;LJI1!~J. 

2.89QL241 •.. 61.LP',2.~tJ.U8._n2~Q). In his brief, therefore, 

defendant relied upon statements from our opinion and !=JRS 

l.2..!J.llil.i. Considering the case at bar en banc, the majority 

ofthe Court of Appeals concluded our decision in Securities 

Intermountain was not apposite, held that this action was 

upon a contract and was governed by ORS .12.080(U, and 

accordingly reversed. The dissenters in the Court of Appeals 

believed our decision in Securities-Intermountain required 

the opposite result. '.'


643P~2d332 

Defendant's position, however, is that plaintiffs' cause is 

really one for damages resulting from alleged negligence 

of the defendant in performing the services of his trade 

or calling. He contends that we have previously held that 

such actions are governed by ORS 12.11 O( 1 ), citing cases 

which we have previously discussed at length in Securities 

Intermountain v. Sunset Fuel, supra. See note 4, supra. 

Whatever may be true as to the continuing vitality of those 

decisions, such as Ashley v. Fletcher. 275 Or. 405, 550 P.2d 

1385 (1976); Lindemeier v. Walker, 272 Or. 682. 538 P.2d 

1266 (! 975 1; Bales for Food v. Poole, 246 Or. 253, 424 

p.29 892,11967); and Dowell v. Mossberg. 226 Or. 173,355 

P.2d Q2.1_lL9J21j, as applied to the fact situations which gave 

rise to them, we do not find them controlling upon the facts 

presented in the case at bar. ~ 

*777 *"335 In order for the part of QRSJ2.JJQUJ with 

which we are here concerned to control disposition of an 

action, two factors must be present: (1) the action must not 

be one "arising on contract" and (2) the action must be "not 

especially enumerated in this chapter (12)." 

Some of the above-cited cases discussed in Securities 

Intermountain involved actions for damages which we found 

to be for negligent "injury to the person," in the words of 

QR5J),LLQO), and our holding that those cases did not arise 

on contract and the fact that they were not actions especially 

enumerated elsewhere in ORS chapter 12 required that they 

be commenced within two years. The actions against medical 

practitioners were in that category. 

In other cases, not involving injury to the person, we found the 

cases to be for "injury to the * * * rights of another (plaintiff)" 

in the words of ORS 12.110(1 ), not arising on contract and 

not especially enumerated elsewhere in ORS chapter 12. 

As noted above, the plaintiffs, in support of their motion for 

partial summary judgment in the trial court, relied upon either 

0RSI2,Q8.Q(1) or QRS..J2,Q$.QUJ as being controlling. In 

other words, they contend that this is either an action upon 

contract, express or implied, or an action "for interference 

with or injury to (an interest of plaintiffs) in real property." 

If it is either of those kinds of action, it is not governed 

by ORS 12.11O( I ), as we have above stated, because the 

express language ofQ.RS J 2.)lQ{U excludes those categories 

of actions from its ambit. 

Ifwe accept, as did the majority of the Court of Appeals, that 

this is simply an action upon a contract under QRSJ2,Q8Q{l.), 

the judgment of that court must be affirmed, and the defendant 

loses. Ifwe assume, as *778 defendant necessarily contends, 

that it is not an action upon a contract, the defendant can 

prevail only ifthis is not an "action * * * for interference with 

or injury to any interest of another in real' property." 0lS5 

lZ.,Q .. 8 0(3), 

The cases upon which defendant relies, other than those 

dealing with "injury to the person," dealt with what 

o RS 12.11 Of 1) calls "injury to the * * * rights of 

another." (Emphasis added) ORS 12.080(3) deals with 

"injury to any interest of another in real property." (Emphasis 

added). An action for damages for injury to any interest of 

plaintiffs in the real property which was the subject of this 

sale is "especially enumerated" in ORS 12.080(3). 

Defendant does not take the position that his alleged 

misperformance injured property that still belonged to him, 

i.e., injured his own rights in the property; if he did, he 

could not rely uponQRS .. .L2,.JJ .. Q'OJ, which is concerned with 

injury to the rights of another. Necessarily, therefore, it is 

defendant's position that his alleged wrongdoing concerned 

the rights of another in that property. The only other persons 

who had any material rights in the real property were the 

plaintiffs, the contract purchasers of the property. This is 

because of the doctrine of equitable conversion. 

The parties to this case are the parties to a contract for the 

sale and purchase of real property. From the time they entered 

into an enforceable contract for the defendant to sell and the 

plaintiffs to buy the real property, the plaintiffs became the 

beneficial owners of the interests in this real property, and the 

defendant held legal title as security for the payment of the 

agreed purchase price. Pf.\n\!~hkf.\y..Pam!~hkf.\,22J .. QJ., .. J.4~, 

J.4.2=SQ,J4.9P,2Q4~Q.Ll .. 9Q.Q}. 

To sum up, defendant cannot prevail here upon any theory 

that a two-year statute of limitations is applicable. The twoyear 

period prescribed by ORS 12.135(J) is not applicable 

because of our construction of that statute in Securities 

Intermountain v. Sunset Fuel, supra. ORS 12~U OW is not 

applicable either because the action does arise on contract or 

because the injuries here were to the interests of "another" 

in real property and the action to "779 recover damages 

for ·.H336 those injuries is especially enumerated in QRS 

12J)8QW. Q 

The judgment of the Court of Appeals is affirmed. 


643 P.2d 332


64:n:;:2d~332'"' 'mm .. ~ ••. _,w.m~w •• " •• w",~, •••• w".,.~., .. w'W'·''''''""_''_,w ••.••• " •.•. " •• ,.,.~ ...... m'.·."· •• ,.~, ..... w,.· •• ". ,.", •• ,,,.,,, .• ~.,,,,,,,,, .... ,, 

* Tongue, J., retired effective February 7, 1982. 

1 Plaintiffs have not contended that the quoted language from the affirmative defense is a concession that the alleged defects constituted 

a "breach of said contract." 

2 None of the exceptions mentioned in QRSJlQ80LlJ,f)Jl.cllll are pertinent to decision in this case. 

J. Defendant's motion and the trial court decision both antedated our decision in Sec\lfities-Jnterjl]()Untain v. ~ullset Fuel, 289 Or. 243, 

.

Taylor v. Settecase, 69 Or.App. 222 (1984) 

685P~2a-47(r"--""-w""." 

685 P.2d470 

Court of Appeals of Oregon. 

Duane F. TAYLOR, Appellant, 

v. 

Philip K. SETTECASE, Howard P. Smith 

and Darwin V. Doss, dba Payne, Settecase, 

Smith & Doss Architecture, Respondents, 

Petition for 

C.A. Lantz Construction Co., an 

Oregon corporation, Defendants. 

No. 125774; CA A26S18. 

On Petitioner's 

Reconsideration Feb. 3, 1984.Decided 

July 18, 1984.Reconsideration Denied Aug. 

24, 1984.Appeal Dismissed Oct. 5, 1984· 

Plaintiff petitioned for reconsideration of a prior decision of 

the CQ.LJJ1..Qf./\pP9.il1.~,-9..9. .. Qr,Aj;m,.3.3.2..Q.nJ'.J .. £gJ18.A, which 

affinned grant of summary judgment in defendants' favor 

by a Circuit Court, Marion County, John M. Copenhaver, 

1. The Court of Appeals, Warden, 1., held that complaint 

seeking damages from architect for failing to properly 

recommend, engineer and install adequate heating and 

cooling units in commercial building which would be fit 

for the particular purpose intended, failing to properly 

insulate rooms and ceilings in the office building, failing to 

properly plan and specify appropriate heating and cooling 

units for the particular purpose intended, failing to properly 

remodel and construct a building so that leakage would 

not occur and render the premises unusable, failing to 

properly supervise construction and moving ofthe building in 

addition to properly supervising remodeling and renovation 

in accordance with parties' agreement alleged injuries to 

"any interest of another in real property" and therefore 

were outside ambit of two-year statute of limitations for 

improvements, as owner, tenant or otherwise at time such 

cause of action accrues and such claims were governed by 

statute of limitations governing actions for waste or trespass 

upon interference with or injury to any interest of another in 

real property. 

Petition for reconsideration allowed; fonner opinion 

withdrawn; reversed and remanded. 

West Headnotes (I) 

Limitation of Actions,,," p.\!rti.9.pJ!JI.I~:Qm};l.Qf 

l\gli'('}!1 

Complaint seeking damages from architect for 

failing to properly recommend, engineer and 

install adequate heating' and cooling units in 

commercial building which would be fit for the 

particular purpose intended, failing to properly 

insulate rooms and ceilings in the office building, 

failing to properly plan and specify appropriate 

heating and cooling units for the particular 

purpose intended, failing to properly remodel and 

construct a building so that leakage would not 

occur and render the premises unusable, failing 

to properly supervise construction and moving of 

the building in addition to properly supervising 

remodeling and renovation in accordance with 

parties' agreement alleged injuries to "any interest 

of another in real property * * *" and therefore 

were outside ambit of two-year statute of 

limitations for improvements, as owner, tenant or 

otherwise at time such cause of action accrues 

and such claims were governed by statute of 

limitations governing actions for waste or trespass 

upon interference with or injury to any interest 

of another in real property. QRSJ2,Q8.QL~), 

12,1JO(U· 

1 Cases that cite th is headnote 


*223 **470 1. Michael Alexander, Salem, for petition. 

Before GILLETTE, PJ., and WARDEN and ROSSMAN, JJ. 

Opinion 

*224 WARDEN, Judge. 

Plaintiff petitions for reconsideration of our earlier decision, 1 

in which we affinned the trial court's grant of a summary 

judgment in defendants' favor. We allow the **471 petition 

for reconsideration, withdraw our fonner opinion, reverse and 

remand. 

In this action for damages, plaintiff alleged that he had orally 

contracted with defendants to perfonn certain architectural 

services. ~ Defendants moved for summary judgment '~225 

on the ground that the action had not been commenced 

within the two-year limitation period under ORS 12.lliKll


685 P.2d 470 

and former ORS 12.135.:l. On the basis that **472 ORS 

12.11 (ill applies, the trial court granted the motion and 

entered judgment for defendants. Without reaching the issue 

of the applicable limitation period, we affirmed. 

*226 In affirming, we reviewed defendant's affidavitwhich 

was not opposed by counter-affidavit, or by anyother 

admissible evidence under ORCP 47 C-that, we stated, 

specifically controverted each of the allegations in plaintiffs 

complaint: 

"The affidavit establishes that defendants were orally 

employed to draw plans and specifications for remodeling 

plaintiffs building. It further establishes that the moving 

of the building, its construction or remodeling, and the 

design and installation of the heating system were all done 

by firms other than defendant. Plaintiffs complaint does 

not allege that defendant failed to properly draw plans and 

specifications for remodeling the building. With respect to 

the allegation in the complaint that defendant 'fail[ed] to 

properly plan and specify appropriate heating and cooling 

units * * *,' defendants' affidavit establishes that plaintiff 

only requested defendant to procure 'mechanical and 

heating engineers, Morrison, Funatake, Inouye, Andreus, 

Inc. who designed and oversaw the installation of the 

heating system.' " 7."gY!QL'.y,.sf~(lf~C(!'Sf.,§"-!lnp,.JlliSlL..A.Jm, 

;'\tJJt,)],.J.,QJ.J.P2,Q .. U.8..4. 

We concluded that the defendants' affidavit showed that there 

remained no material issue of fact. 

In his petition for reconsideration, plaintiff urges that, 

although the affidavit establishes that the moving, 

construction and remodeling of the building were performed 

under separate contracts, defendants nevertheless had a 

duty of supervision. That duty, argues plaintiff, was not 

sufficiently controverted by the affidavit. On reconsideration, 

we conclude that we read the complaint too narrowly and, 

therefore, failed to consider whether the limitation period of 

ORS 12.II.lli:D applies to this action.:1. We now consider 

which statute of limitation applies. 

*227 Defendants contend that plaintiffs action is barred by 

the two-year limitation of either QRS_LUlQ or J2.135( I l, 

relying on "guidelines set forth in Securjties Inr


685P:2!f470 ' 

conversion." 292..QL .. ..77..L.ilJ . .7Z77B,.6.41P.h.Jt:.U2. 

(Emphasis in original.) 

The court concluded: 

"QRS.L~,.L!QUJ is not applicable either because the action 

does arise on contract·.i or because the injuries here were to 

the interests of 'another' in real property and the action to 

recover damages for those injuries is especially enumerated 

in ORS,J2.080U)." )92 Or. at 778-79. 643 P.2d 332. 

The injuries alleged in the present case do not differ materially 

from the injuries alleged in Beveridge. Although the court's 

rationale in Beveridge was alternatively grounded in (lIS,) 

L;,Q~QLU and J2.,Q8QCn, we hold that in the present case the 

allegations of injuries are those to "any interest of another in 

real property * * *." ORS 12.080(3). Q Therefore, they are 

"especially enumerated in * * * chapter [12]" and are outside 

the ambit ofORS 12,J.lQ(Jj. 

Petition for reconsideration allowed; former opinion 

withdrawn; reversed and remanded. 


685 P.2d 470 

Footnotes 

L 

Tavlor v. Setfecasef)0.QI.App,JJ2,('Z1Y,2Q,U8.:!:09.8..4.). 

2. The complaint alleges: 

"III. 

"That in 1976, Plaintiff and Robert C. Young, orally contracted with PAYNE to act as Plaintiffs agent to perform certain 

architectural services in conjunction with plaintiffs aforesaid office building, including drawing up plans and specifications 

for the remodeling of the building and drawing up plans and specifications and providing for the heating and cooling systems 

of the building together with supervising construction and moving of the building in addition to remodeling and renovating the 

building so that the building could be used as a medical facility to meet plaintiffs needs as a doctor. 

,,*** 

"Y. 

"That in September, 1978, defendant PA YNE informed Plaintiff that the building was ready for occupancy and that defendants 

services were substantially completed, and plaintiff thereupon moved into the aforesaid office building and discovered that the 

heating and cooling units put in by PA YNE or PAYNE's agents or employees malfunctioned, and were unsuitable for building 

needs in that they over cooled or overheated and were improperly installed and should not have been installed at all because of 

their size and the size of the rooms in the bUilding. Plaintiff further discovered that PA YNE or PAYNE's agents or employees 

had improperly insulated the rooms and ceilings in the aforesaid office building for sound, and plaintiff further discovered that 

there was leaking in room 5 ofthe third floor in the glass lobby on the second floor. 

"VI. 

"That defendant PA YNE breached its contract with plaintiff in the following particulars, to-wit: 

"I) In failing to properly recommend, engineer and install adequate heating and cooling units which would be fit for the 

particular purpose intended; 

"2) In failing to properly insulate the rooms and ceilings of the aforesaid office building; 

"3) In failing to properly plan and specify appropriate heating and cooling units which would be for the particular purpose 

intended; 

"4) In failing to properly remodel and construct the building so that the leakage in room 5 ofthe third floor and the glass lobby 

on the second floor would not occur, and render the premises unuseable. 

"5) In failing to properly supervise construction and moving of the building in addition to properly supervising remodeling and 

renovating of the building in accordance with the agreement as aforementioned. 

"(VII.] 

"That Plaintiff has performed all conditions and obligations upon his part to be performed, pursuant to the agreement with 

defendant PAYNE. 

"VIII. 

"As a direct and proximate result of the breach of contract as aforementioned, plaintiff has been damaged * * *." 

lQJ~S.L2,LL()(U provides: 

"An action for assault, battery, false imprisonment, or for any injury to the person or rights of another, not arising on contract, 

and not especially enumerated in this chapter, shall be commenced within two years; provided, that in an action at law based 

upon fraud or deceit, the limitation shall be deemed to commence only from the discovery of the fraud or deceit."


685 'P:Zd 470 . 

Former ORS 12.135 (amended by Or.Laws 1983, ch. 437, § I), provided: 

"( I) An action to recover damages for injuries to a person or to private property arising from another person having performed 

the construction, alteration or repair of any improvement to real property or the supervision or inspection thereof, or from such 

other person having furnished the design, planning, surveying, architectural or engineering services for such improvement, 

shall be commenced within two years from the date of such injury to the person or property; provided that such action shall 

be commenced within 10 years from substantial completion of such construction, alteration or repair of the improvement to 

real property. 

"(2) For purposes of subsection (I) of this section, 'substantial completion' means the date when the contractee accepts in 

writing the construction, alteration or repair of the improvement to real property or any designated portion thereof as having 

reached that state of completion when it may be used or occupied for its intended purpose or, if there is no such written 

acceptance, the date of acceptance of the completed construction, alteration or repair of such improvement by the contractee. 

"(3) The limitations prescribed in subsection (I) of this section: 

"(a) Apply, in addition to other actions, to actions brought in the name of the state or any county or other public corporation 

therein, or for its benefit; and 

"(b) Do not apply to actions against any person in actual possession and control of the improvement, as owner, tenant or 

otherwise, at the time such cause of action accrues." 

4 The complaint alleges: 

"VII. 

"As a direct and proximate result of the breach of contract as aforementioned, plaintiff has been damaged as follows: 

"1) Plaintiff has been unable to secure tenants for office space which would be available due to defendants' breach as 

aforementioned and as a result, plaintiff has lost to date the sum of $16,170.00 as damages, representing rental loss for the 

third floor of the said office building. 

"2) Plaintiff has further lost the sum of $40,500.00 to date, which sum represents the loss of the use and rental value of the 

second floor of the said building; 

"3) Plaintiff continues to lose the sum of $2,700.00 per month in damages, from the date of filing this complaint, which sum 

represents the loss of rent and income for the second floor from the time of filing this lawsuit, until: 

"(a) the defective heating system is fixed; 

"(b) the second floor is remodeled; and 

H( c) tenants take possession of the second floor; 

"4) The sum of$17,015.50 as and for damages for the loss of use and income for the first floor of the said building." 

~. In which case QR~ 12.0tillU} would apply, providing a six-year statute of limitations. 

Q As the court noted in Beveridge, the plaintiff in Securities-Intermountain v. Sunset Fuel, supra, did not invoke QR,':>._12~S)JiQLl. 292 

Or at 779 n. 6, 611 P.2d 1158. 


.. >

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