The Insurance and Liens section: deadlines that decide who gets paid
12% of the Law and Business exam. Half of it is a calendar — 20, 30, 60 and 90 days — and the other half is knowing which piece of paper protects you.
This section punishes approximate knowledge. Most contractors know that liens have deadlines and that you need workers' comp. The exam asks which deadline, counted from what, for whom — and whether you are a direct contractor or a subcontractor changes the answer.
What CSLB says it covers
The official study guide lists three topics under Insurance and Liens (12%):
- Workers' compensation insurance — who must carry it, the exemption, what happens when it lapses.
- Business insurance — including the liability insurance an LLC licensee must carry.
- Liens and other remedies — preliminary notices, mechanics liens, stop payment notices, lien releases.
The numbers that get asked
| Rule | Number |
|---|---|
| Serve a preliminary notice after first furnishing labor or materials CSLB lien guidance; Law Book | 20 days |
| Record a mechanics lien, no notice of completion or cessation recorded CSLB lien guidance | 90 days |
| Record a lien after a notice of completion or cessation: direct contractor CSLB lien guidance | 60 days |
| Same, subcontractor or supplier CSLB lien guidance | 30 days |
| File the foreclosure suit after recording the lien CSLB lien guidance | 90 days |
| Labor must have stopped before a notice of cessation Law Book | 30 days |
| Bonded stop payment notice to a construction lender Law Book | 1¼ × the claim |
| Statutory waiver and release forms Civil Code §§8132–8138 | 4 |
| Employees that trigger workers' comp B&P §7125; CSLB | 1, even part-time |
| Minimum penalty, employing workers without coverage: sole owner / entity B&P §7125.4 (2026) | $10,000 / $20,000 |
| LLC liability insurance, five or fewer on the personnel of record B&P §7071.19 | $1,000,000 |
CSLB, “How to Prevent a Mechanics Lien”, “If a Mechanics Lien Is Filed”, waiver and release forms page and workers' compensation requirements page; Business and Professions Code as printed in the CSLB Law Book (2026). Checked 28 September 2026.
Where people lose points
- A late preliminary notice shrinks the lien; it does not kill it. Serve it after day 20 and you can still claim, but only for work or materials supplied from 20 days before the notice onward. No notice at all, and a sub or supplier has no lien rights.
- Who does not send one. The direct (prime) contractor and laborers do not need to give a preliminary notice. Subcontractors and material suppliers do.
- 90 → 60 → 30. With no notice of completion or cessation recorded, everyone has 90 days after completion to record a lien. Once the owner records one, the direct contractor has 60 days and subs and suppliers have 30. The question will tell you who is asking. Read it.
- Two different 90-day clocks. 90 days to record the lien, counted from completion. Then 90 days to file the foreclosure suit, counted from the date the lien was recorded. Miss the second and the lien is dead even though it was recorded on time.
- Property or money. A mechanics lien is a lien on the property. A stop payment notice (older books say “stop notice”) is a lien on the construction funds. On public works you cannot lien public property, so the stop payment notice may be your only remedy.
- Conditional before the check clears, unconditional after. An unconditional release is enforceable against you even if you have not been paid — the statutory form says so in capitals. Sign a conditional release to get paid; sign the unconditional one once the money is in the bank. On the owner's side: get a conditional release before paying and the unconditional one after; the owner may hold the next payment until it arrives.
- Progress releases keep some rights. A progress release does not waive retention or unpaid extras. A final release only keeps disputed claims for extras that are listed on it.
- One employee is enough, and some trades need it with none. Any contractor with even one employee, part-time included, must carry workers' comp or be self-insured. C-8 Concrete, C-20 HVAC, C-22 Asbestos Abatement, C-39 Roofing and D-49 Tree Service licensees must carry it even with no employees. A license qualified by an RME cannot claim the no-employee exemption, because the RME is an employee.
- A lapse suspends the license automatically. The suspension takes effect on the date coverage lapses, and work done while suspended is unlicensed work. Since 1 January 2026 the minimum civil penalty for employing workers without coverage is $10,000 for a sole owner and $20,000 for a partnership, corporation or LLC.
How the questions tend to read
A short job story with dates, and a question about who can still do what. Draw a timeline on your scratch paper. Two examples of our own, written the same way (not actual exam questions):
A drywall subcontractor starts work on 1 March and serves a preliminary notice on 1 April. The owner later disputes payment. For which work can the sub claim a lien?
Work done from 12 March onward — that is, 20 days before the notice. The notice was late, so the earlier work is lost, but the lien survives for the rest.
The owner records a notice of completion. The electrical subcontractor and the general contractor are both unpaid. How long does each have to record a lien?
The sub has 30 days; the general contractor has 60. Without the notice, both would have had 90 days from completion.
How to study it
- Draw one timeline from first delivery to foreclosure, with every deadline on it and who it applies to. Redraw it from memory until it is automatic.
- Read the four release forms once. CSLB publishes them. The warnings printed on them are the answers to half the release questions.
- Learn the five trades that always need workers' comp as a list: C-8, C-20, C-22, C-39, D-49.
- Budget. In our study plan Insurance and Liens gets about 2 hours in two weeks and 3½ in four.
Left out on purpose. The deadline for an owner to record a notice of completion is stated as 10 days in one part of CSLB's Law Book and 15 days in another and on CSLB's website. Until we can check it against the Civil Code itself we do not quote either. Older material also gives $500 as the limit for unlicensed work; the current minor-work limit in §7048 is $1,000.
Common questions
Can a general contractor lose lien rights by not sending a preliminary notice?
No. The direct contractor and laborers are not required to give one. Subcontractors and suppliers are.
Can I lien a school or a city building?
No. On public works a mechanics lien is not available; the stop payment notice is the remedy.
I have no employees. Do I need workers' comp?
You can file an exemption with CSLB, unless you hold C-8, C-20, C-22, C-39 or D-49, or your license is qualified by an RME. The moment you hire anyone, coverage is required.
Last reviewed 28 September 2026 against CSLB's mechanics lien pages, its waiver and release forms page (Civil Code §§8132–8138), its workers' compensation requirements page, and Business and Professions Code §§7071.19, 7125, 7125.2, 7125.4 as printed in the CSLB Law Book (2026). Laws change; confirm at cslb.ca.gov. Study guidance, not legal advice. We are not affiliated with CSLB or PSI.