Cardone v. Accredited Surety & Casualty Co.







Filed 10/3/11 Cardone v. Accredited Surety & Casualty Co. CA2/2






NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS



California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.



IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

ALDO CARDONE, Plaintiff and Appellant, v. ACCREDITED SURETY & CASUALTY CO., INC., Defendant and Respondent.

B226219 (Los Angeles County Super. Ct. No. BC418863)

APPEAL from a judgment of the Superior Court of Los Angeles County. Malcolm H. Mackey, Judge. Affirmed.

J. Kim, a Professional Law Corporation and Johnny Kim, for Plaintiff and Appellant.

Law Offices of Hausman & Sosa, Carlos E. Sosa and Larry D. Stratton, for Defendant and Respondent.



* * * * * *
Plaintiff and appellant Aldo Cardone appeals from a judgment entered following a grant of summary judgment in favor of defendant and respondent Accredited Surety & Casualty Co., Inc. (Accredited). Appellant, a general contractor, brought an action against Accredited stemming from a payment of $10,000 on a surety bond to a claimant who contended that appellant had abandoned a construction job. He alleged that Accredited should not have paid the claimant because she filed and dismissed an action against him concerning the abandoned project. Accredited cross-claimed, seeking reimbursement of the $10,000 amount in accordance with an indemnity agreement appellant executed at the time he received the bond. The trial court granted summary judgment as to the complaint and cross-complaint on the basis of undisputed evidence that Accredited paid the claim in good faith, thereby incurring no liability to appellant and entitling it to reimbursement from appellant.
We affirm. The trial court properly granted summary judgment on all claims raised in the second amended complaint, even though the pleading was filed while the summary judgment motion was pending. It likewise properly granted summary judgment on the cross-complaint, as the undisputed evidence showed that Accredited had the contractual right to dispose of the claim, and it did so in good faith and in compliance with the applicable statutory and regulatory scheme.

FACTUAL AND PROCEDURAL BACKGROUND
Accredited’s Payment.
Accredited, a corporation authorized to conduct a general suretyship business in California, issued contractor’s license bonds as one aspect of its business. In March 2006, appellant applied for a contractor’s license bond from Accredited. Following appellant’s execution of an indemnity agreement and premium payment, Accredited issued contractor’s bond No. 10042370 to appellant doing business as AC Enterprises. The contractor’s bond required appellant to “comply with and be subject to” Business and Professions Code section 7000 et seq. As part of the indemnity agreement, appellant was obligated to “indemnify Surety from all liability and loss, expenses, and damages incurred as a result of furnishing bond,” and he further agreed that Accredited had “the exclusive right to determine the disposition of any claim or suit . . . .” The penal sum of the bond was $10,000. As of the date of issuance, appellant’s address on the bond and ascertained through the Contractors State License Board (CSLB) was 1417 West Third Street, Los Angeles, California 90017 (Third Street address).
Earlier, in August 2005, Elizabeth McMillian had entered into construction contracts with Bret Rowe, appellant and ACEnterprises/H911 for residential remodeling at 1617 and 1621 Crescent Place in Venice. The written contracts were signed by Rowe, but bore contractor’s license number 610341, which was the same number that appeared on appellant’s contractor’s bond and his CSLB records. Between August 2005 and June 2006, McMillian paid $240,948.25 on the contracts. By June 2006, the projects were six months behind schedule, with no explanation for the delay from appellant or Rowe. After Rowe stopped coming to the job in July 2006, McMillian hired another contractor to complete the work.
In August 2006, McMillian filed a complaint for breach of contract against appellant, Rowe and ACEnterprises/H911. Following a series of defaults, the trial court entered a default judgment in the amount of $192,217.45 in March 2007. In August 2007, appellant successfully moved to have the default judgment set aside on the ground he was not properly served. On April 3, 2008, the parties settled the matter and the trial court dismissed the action in its entirety with prejudice.
On April 14, 2008, McMillian made a claim against appellant’s contractor’s bond. In a notarized proof of claim form signed under penalty of perjury, she averred that in August 2005 she had entered into a series of construction agreements with appellant and that appellant had abandoned the projects. Beyond her proof of claim form, McMillian provided several documents to Accredited in support of her claim, including construction contracts and proposals, cancelled checks made out to appellant and/or Rowe, and invoices and receipts. Though the documents identified the contractor as ACEnterprises/H911, they bore appellant’s contractor’s license number. Moreover, the checks were alternately made out to appellant, Rowe or AC Enterprises. McMillian claimed she suffered $192,217.45 in damages for appellant’s failure to perform under the construction agreements.
On April 18, 2008, Accredited wrote to appellant at the Third Street address reflected in the current CSLB records to ascertain his position with respect to McMillian’s claim. The letter stated that Accredited would complete its investigation without appellant’s input if he failed to respond within 21 days. Ten days later, the letter was returned with a notification from the United States Postal Service (USPS) that it was unable to forward the letter. On April 29, 2008, Accredited purchased a “locate report” which yielded a New York address for appellant. Accredited then sent the same letter to that address and it was not returned by the USPS. Receiving no response from appellant, Accredited wrote to him again on May 12, 2008, allowing him 15 days to protest any payment on the bond. Appellant did not respond.
After evaluating McMillian’s claim, Accredited determined it was valid and paid McMillian $10,000 upon her execution of a release and satisfaction of claim. Thereafter, Accredited provided a notice of payment to the CSLB and forwarded the matter to Phoenix Management Solutions, LLC (Phoenix) for collections.
In September 2008, appellant received a notice of suspension from the CSLB for the failure to comply with bond payment. According to appellant, that was the first time he learned of McMillian’s claim on his contractor’s bond. Accredited refused to retract or rescind its payment to McMillian after appellant provided information about McMillian’s dismissed lawsuit. As a result of the indefinite suspension of his contractor’s license, appellant was unable to work and lost his previous clients.
Pleadings and Summary Judgment.
In July 2009, appellant filed a complaint against McMillian, Accredited and Phoenix, alleging claims for breach of contract, negligence, fraud, conversion, defamation and intentional infliction of emotional distress arising from Accredited’s $10,000 payment to McMillian. He filed a first amended complaint in September 2009 which alleged the same claims against the same parties. Accredited and Phoenix answered separately, generally denying the allegations and asserting several affirmative defenses. Accredited cross-complained, alleging claims against appellant for breach of contract, declaratory relief, money paid and implied indemnity. It alleged that pursuant to the terms of the indemnity agreement it was entitled to reimbursement of its $10,000 payment.
Accredited moved for summary judgment on the complaint and cross-complaint in February 2010. It argued that it had a contractual right to determine the disposition of McMillian’s claim and that the undisputed evidence showed it disposed of the claim in accordance with the indemnity agreement and applicable law. In support of the motion, it submitted the declaration of claims adjuster Brenda Ferrell as well as pleadings, correspondence and information from McMillian contained in its claims file. In March 2010, while the summary judgment motion was pending, the parties stipulated to take a pending demurrer and motion to strike off calendar, to allow appellant to file a second amended complaint and to dismiss Phoenix from the action.
Appellant filed the second amended complaint (SAC) in April 2010, which alleged causes of action for declaratory relief, breach of the implied covenant of good faith and fair dealing, negligence and unfair business practice against Accredited, and causes of action for fraud and defamation against McMillian (who ultimately never appeared in the action). Appellant alleged that Accredited was not entitled to reimbursement because it “volunteered” payment on an invalid claim.
Appellant also opposed the motion for summary judgment. He argued first that the summary judgment was not directed to the claims alleged in the SAC, and second, in view of the dismissal with prejudice of McMillian’s complaint, that there was a triable issue of fact as to whether Accredited paid an invalid claim. In support of his opposition, he submitted his own declaration, in which he averred that Rowe had entered into the McMillian contracts without his knowledge or consent, and that he was not a party to those agreements. He also sought judicial notice of McMillian’s complaint, a tentative ruling to set aside appellant’s default, a minute order dismissing the complaint and McMillian’s default prove-up.
In reply, Accredited submitted excerpts of appellant’s deposition. Appellant testified that he entered into an oral agreement for a sum certain with McMillian to make drawings for the work to be performed on the properties at 1617 and 1621 Crescent Place. He further testified that he had moved from the Third Street address in January 2008, but did not advise the CSLB of his new address until June 2008. During that six-month period, he rented a post office box and put in a request to have his Third Street address mail forwarded to the post office box.
Each party filed evidentiary objections to the other’s declarations. The trial court sustained Accredited’s objections to appellant’s declaration and overruled appellant’s objections to Ferrell’s declaration. At the May 11, 2010 hearing, the trial court granted summary judgment on the complaint and cross-complaint, finding that Accredited had a contractual and statutory obligation to investigate the claim and that it paid the claim in good faith. It found that Accredited’s failure to discover McMillian’s dismissed complaint failed to create a triable issue of fact, as the undisputed evidence showed that Accredited had attempted to contact appellant multiple times to ascertain additional information about the claim.
The trial court thereafter entered judgment in favor of Accredited and this appeal followed.

DISCUSSION
Appellant contends that the trial court erroneously granted summary judgment on the complaint because the order was directed to the first amended complaint rather than the SAC. He further argues that summary judgment on the cross-complaint was erroneous because there was a triable issue of fact as to whether Accredited’s payment was voluntary because McMillian could not have recovered against him directly. We find no merit to appellant’s arguments.

I. Standard of Review.
“‘The purpose of the law of summary judgment is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.’ [Citation.]” (Walker v. Countrywide Home Loans, Inc. (2002) 98 Cal.App.4th 1158, 1168–1169.) A “motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” (Code Civ. Proc., § 437c, subd. (c).)
In order to meet its initial burden to defeat the plaintiff’s claims, “the defendant must present evidence that would preclude a reasonable trier of fact from finding that it was more likely than not that the material fact was true [citation], or the defendant must establish that an element of the claim cannot be established, by presenting evidence that the plaintiff ‘does not possess and cannot reasonably obtain, needed evidence.’ [Citation.]” (Kahn v. East Side Union High School Dist. (2003) 31 Cal.4th 990, 1003.) Only if the defendant meets this burden does the burden shift to the plaintiff to show the existence of a triable issue of fact with respect to the cause of action or defense. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.)
When a plaintiff moves for summary judgment, “section 437c, subdivision (p)(1) provides a plaintiff meets the burden of showing there is no defense to a cause of action ‘if that party has proved each element of the cause of action.’ Upon meeting that burden, the burden shifts to the defendant ‘to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.’” (Oldcastle Precast, Inc. v. Lumbermens Mutual Casualty Co. (2009) 170 Cal.App.4th 554, 564–565; see also Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2008) ¶ 10:235, p. 10–89 (rev.# 1, 2006).)
“We review de novo the trial court’s decision to grant summary judgment. [Citation.] The court’s stated reasons for granting summary judgment are not binding on us because we review its ruling, not its rationale. [Citation.]” (Walker v. Countrywide Home Loans, Inc., supra, 98 Cal.App.4th at p. 1168.) “Thus, a reviewing court may affirm a trial court’s decision granting summary judgment for an erroneous reason. [Citation.]” (Coral Construction, Inc. v. City and County of San Francisco (2010) 50 Cal.4th 315, 336.) We independently decide whether the undisputed facts warrant judgment for the moving party as a matter of law. (Intel Corp. v. Hamidi (2003) 30 Cal.4th 1342, 1348.)

II. General Suretyship Principles.
Although the Insurance Code identifies surety bonds as a class of insurance (see Ins. Code, § 100, subd. (5)), a surety bond is different in form and substance than other types of insurance. (Washington Internat. Ins. Co. v. Superior Court (1998) 62 Cal.App.4th 981, 989 (Washington Internat.); Airlines Reporting Corp. v. United States Fidelity & Guaranty Co. (1995) 31 Cal.App.4th 1458, 1464 (Airlines Reporting).) “An insurer undertakes to indemnify another ‘against loss, damage, or liability arising from an unknown or contingent event,’ whereas a surety promises to ‘answer for the debt, default, or miscarriage of another.’ [Citation.]” (Airlines Reporting, supra, at p. 1464.) “A surety bond is a written instrument in which the surety agrees to answer for the debt, default, or miscarriage of the principal. [Citations.] The surety relationship is a tripartite one, in which the obligee, rather than the principal, is protected by the surety’s promise to pay if the principal does not, in exchange for which promise the principal pays the premium for the bond. [Citations.]” (First National Ins. Co. v. Cam Painting, Inc. (2009) 173 Cal.App.4th 1355, 1364–1365 (Cam Painting).) Moreover, while an insurer has no right of subrogation against the insured, a surety is entitled to reimbursement from the principal for amounts paid to the obligee for the principal’s default. (Cates Construction, Inc. v. Talbot Partners (1999) 21 Cal.4th 28, 48; Washington Internat., supra, at p. 989; Cal. Code Regs., tit. 10, § 2695.1(c).)
“‘In general, a surety bond is interpreted by the same rules as other contracts. [Citation.] That is, we seek to discover the intent of the parties, primarily by examining the words the parties have chosen.’ [Citation.] The extent of the surety’s liability must be gathered from the language used when read in the light of the circumstances surrounding the transaction. Further, when a bond is given to satisfy a statutory obligation, the relevant statutory provisions are incorporated into the bond. [Citation.]” (Cam Painting, supra, 173 Cal.App.4th at p. 1365.) Here, appellant was required by statute to obtain a contractor’s bond for the benefit of any homeowner contracting for home improvements with him or any person damaged by his violation of the statutory provisions governing his contractor’s license. (Bus. & Prof. Code, §§ 7071.5 & 7071.10.)
By statute, “[a] surety who has assumed liability for payment or performance is liable to the creditor immediately upon the default of the principal, and without demand or notice.” (Civ. Code, § 2807.) The surety’s liability is coextensive with that of the principal. (Civ. Code, § 2809; City of Cypress v. New Amsterdam Cas. Co. (1968) 259 Cal.App.2d 219, 225.) Once liability arises, a surety may act to settle the action. (Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co. (1996) 47 Cal.App.4th 464, 485 (Arntz Contracting).) “If a surety satisfies the principal obligation without legal proceedings the principal is bound to reimburse the surety for what he has disbursed.” (Pacific Indem. Co. v. Hargreaves (1939) 36 Cal.App.2d 338, 343; accord, Ragghianti v. Sherwin (1961) 196 Cal.App.2d 345, 351 [“a surety may be entitled to reimbursement by his principal whether or not the surety’s payment on behalf of his principal was compelled by actual legal proceedings”].) A surety’s right to indemnification is limited to amounts paid in good faith to satisfy the principal’s obligation. (Arntz Contracting, supra, at p. 482.)

III. The Trial Court Properly Granted Summary Judgment.
A. Summary Judgment on the Second Amended Complaint Was Procedurally Proper.
At the time Accredited filed its summary judgment motion, the operative pleading was appellant’s first amended complaint. The causes of action alleged in the first amended complaint against Accredited were breach of contract, negligence and conversion. While the summary judgment motion was pending, appellant filed the SAC, which alleged causes of action against Accredited for declaratory relief, breach of the implied covenant of good faith and fair dealing, negligence and unfair business practice. Rejecting appellant’s argument that the filing of the SAC was sufficient to defeat summary judgment, the trial court ruled that the motion adequately addressed any new claims raised in the SAC. We agree.
“Summary judgment provides a court with a procedure to pierce pleadings in order to determine whether a trial is truly necessary to resolve the dispute between the parties. [Citation.]” (Jordan v. City of Sacramento (2007) 148 Cal.App.4th 1487, 1492; see also Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 588 [“‘The very mission of the summary judgment procedure is to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial’”].) Here, notwithstanding that appellant’s causes of action were labeled differently in the first amended complaint and the SAC, the facts alleged to support those claims were the same. In both pleadings, appellant alleged that he was sued by McMillian and that, ultimately, the action was dismissed with prejudice. He alleged that McMillian presented a claim to Accredited after the dismissal which sought recovery on the same claims raised in the dismissed complaint. He alleged that Accredited paid McMillian’s claim and then sought reimbursement from him for the payment amount.
In the first amended complaint, appellant alleged that Accredited breached its contract and acted negligently by not conducting any further investigation before paying McMillian’s claim, and that it converted his bond premium by paying an invalid claim. Similarly, in the SAC, appellant alleged that he was entitled to declaratory relief, Accredited breached the implied covenant of good faith and fair dealing, acted negligently and violated the Business and Professions Code by paying an invalid claim. Appellant’s “new” allegations were simply that Accredited had not altered its course of conduct during the time since appellant had filed the first amended complaint. He alleged: “Accredited continues to insist that it has a right to be indemnified and has even brought an affirmative cross-claim against Plaintiff for repayment of the $10,000 paid McMillian based on her fraudulent claim.”
In ruling on a motion for summary judgment, the court is not bound by the label attached to a cause of action. Instead, the court looks to the substance of the allegations: “‘The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues: the function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings.’ [Citations.] The complaint measures the materiality of the facts tendered in a defendant’s challenge to the plaintiff’s cause of action. [Citation.]” (FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 381.) Here, the summary judgment motion and the evidence offered in support thereof were designed to show that Accredited had the contractual right to dispose of McMillian’s claim and it did so in good faith. The evidence was undisputed that appellant agreed Accredited would have the “exclusive right” to determine the disposition of any claim; McMillian submitted a proof of claim with supporting documents; and, after appellant failed to respond to several inquiries regarding the claim, Accredited determined that McMillian had demonstrated that appellant had abandoned the construction projects and failed to complete them for the stated price—both violations giving rise to liability under the contractor’s bond. This evidence was adequate to show there was no triable issue of fact raised by the claims in the first amended complaint as well as those raised in the SAC.^[1]
B. Summary Judgment was Properly Granted on the Cross-Complaint, as the Undisputed Evidence Established Accredited’s Right to Reimbursement.
Accredited’s cross-complaint sought reimbursement of all amounts expended in settlement of McMillian’s claim, alleging that it was entitled to reimbursement both according to the indemnity agreement and by statute. The trial court ruled that, in light of appellant’s stipulation that Accredited acted in good faith in resolving McMillian’s claim, there was no triable issue of fact and Accredited was entitled to reimbursement as a matter of law. We find no basis to disturb this conclusion.
The undisputed evidence showed that in applying for his contractor’s bond, appellant signed an indemnity agreement that obligated him to “indemnify Surety from all liability and loss, expenses, and damages incurred as a result of furnishing bond . . . .” He further agreed that Accredited had “the exclusive right to determine the disposition of any claim or suit” and “that an itemized statement of loss and expenses by Surety shall be prima facie evidence of the fact and extent of [his] obligation to Surety . . . .” The evidence established that after McMillian submitted her claim to Accredited, it sought information from appellant about the claim, using the address on file with the CSLB. Accredited also attempted to contact appellant at a New York address to allow him to protest the claim. After appellant failed to respond, Accredited paid the claim. Appellant stipulated that Accredited acted in good faith in disposing of the claim.
A surety bond is construed according to the same principles governing contract interpretation. (Top Cat Productions, Inc. v. Michael’s Los Feliz (2002) 102 Cal.App.4th 474, 477.) Likewise, “‘[a]n indemnity agreement is to be construed like any other contract with a view to determining the actual intention of the parties [citations]. The paramount rule governing the interpretation of contracts is to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as it is ascertainable and lawful [citation].’” (City of Chino v. Jackson (2002) 97 Cal.App.4th 377, 382.) Where no extrinsic evidence is offered to interpret the agreement, it is solely a judicial function to interpret the written instrument. (Id. at pp. 382–383.) Here, there was no extrinsic evidence offered to construe the language of the contractor’s bond and indemnity agreement. Given the undisputed evidence of Accredited’s payment of McMillian’s claim, the plain language of the indemnity agreement obligated appellant to reimburse Accredited. (Civ. Code, § 2847 [“If a surety satisfies the principal obligation, or any part thereof, whether with or without legal proceedings, the principal is bound to reimburse what he has disbursed, including necessary costs and expenses”]; Airlines Reporting, supra, 31 Cal.App.4th at p. 1464 [a surety is entitled to reimbursement by its principal].)
Appellant argues that, notwithstanding the unambiguous contractual obligation requiring that he reimburse Accredited for its payment made in settlement, he presented a triable issue of fact as to whether his liability was clearly established by McMillian’s claim or whether Accredited acted as a volunteer by paying an invalid claim. (See Ragghianti v. Sherwin, supra, 196 Cal.App.2d at p. 351 [where a surety’s payment on behalf of a principal is made without the obligee having filed suit, “reimbursement will be allowed only where it can be shown that liability was clearly established and that the suit would have been a mere formality]”; Schlitz v. Thomas (1923) 61 Cal.App. 635, 638 [“To entitle a guarantor or surety to reimbursement, contribution, or subrogation on account of payments made in behalf of his principal it must appear that such payments were made under compulsion, that is, under a legal obligation, and not as a mere volunteer”]; Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2010) ¶ 6:3732, p. 6l-119 (rev. # 1, 2009) [“The principal may assert as an affirmative defense that the surety chose to pay an invalid claim”].) Appellant argues that evidence showing McMillian had filed a suit against him for breach of contract for the work to be performed at 1617 and 1621 Crescent Place, and dismissed that suit with prejudice prior to submitting her claim, demonstrated a triable issue as to whether Accredited paid an invalid claim.
In the context of approving a settlement, the court in General Ins. Co. of America v. Singleton (1974) 40 Cal.App.3d 439 (Singleton) described what a surety must show to demonstrate legal liability for a claim. Like the indemnity agreement signed by appellant here, the indemnity agreement there gave the surety company the exclusive right to determine whether a claim should be “‘paid, compromised, defended or appealed’”; provided that the surety’s claim determination was final and conclusive as to the principal; and further provided that an itemized statement of the expenses incurred by the surety would be prima facie evidence of the principal’s reimbursement obligation to the surety. (Id. at p. 443.) Though not disputing the surety’s entitlement to dispose of a claim by way of settlement, the appellants there argued that the surety should not be entitled to indemnification until it proved that it was legally liable for the settlement amount. (Ibid.)
The Singleton court found no merit to their argument, explaining that “‘[p]rovisions in indemnity agreements granting to the indemnitor the right to compromise and settle claims, and providing that vouchers and other evidence of payment shall be prima facie evidence of the propriety thereof, have been upheld as not against public policy and enforced by the courts.’ [Citation.]” (Singleton, supra, 40 Cal.App.3d at pp. 443–444.)” The court explained that such provisions facilitate settlement and avoid unnecessary litigation. (Id. at p. 444.) In the absence of any evidence of bad faith, the court concluded that the settlement served as presumptive evidence of legal liability. (Id. at p. 443.) As the court explained, “[t]o require plaintiff to establish a case against the defendants [the indemnitors] in the same manner that a claimant against the indemnitee would have been obligated to do, would defeat the purpose of the clauses in the indemnity agreement allowing the indemnitee to settle claims.” (Id. at p. 444.)
Here, similarly, the language of the indemnity agreement required appellant to indemnify Accredited for all liability, loss and expenses; gave Accredited the exclusive right to dispose of any claims; and provided that Accredited’s itemized statement of loss would be prima facie evidence of appellant’s indemnity obligation. The evidence was undisputed that Accredited settled McMillian’s claim for the penal amount of the bond, and appellant stipulated that Accredited acted in good faith in settling the claim. Under these circumstances, there was no triable issue of fact as to appellant’s—and hence Accredited’s—legal liability for the claim.
Nor do we find that evidence of McMillian’s dismissed lawsuit created a triable issue of fact.^[2] The contractor’s bond incorporated and required appellant to comply with Business and Professions Code section 7000 et seq. (See Cam Painting, supra, 173 Cal.App.4th at p. 1365.) Moreover, as a surety insurer, Accredited was required to comply with the Fair Claims Settlement Practices Regulations set forth in the California Code of Regulations, title 10, section 2695.10. (See Cates Construction, Inc. v. Talbot Partners, supra, 21 Cal.4th at p. 49.) The statutory and regulatory scheme specified the duties and obligations of both the surety and the principal once a claim is filed. Accredited was required to accept or deny the claim within 40 days of its receipt. (Cal. Code Regs, tit. 10, § 2695.10(b).) In making its determination, Accredited was obligated to diligently investigate the claim, but it was precluded from “persist[ing] in seeking information not reasonably required for or material to resolution of a claim dispute.” (Cal. Code Regs, tit. 10, § 2695.10(d).) Accredited attempted to contact appellant four days after receiving the claim, but its correspondence was returned because appellant had failed to inform the CSLB of his change of address as required by Business and Professions Code section 7083. Accredited notified McMillian of the need for additional time to contact appellant, conducting an independent investigation in an ultimately unsuccessful effort to locate him. (See Cal. Code Regs., tit. 10, § 2695.10(c).)
In May 2008, Accredited again attempted to contact appellant to advise him of his right to protest any payment on McMillian’s claim. (See Bus. & Prof. Code, § 7071.11, subd. (f) [“Prior to the settlement of a claim through a good faith payment by the surety, a licensee shall have not less than 15 days in which to provide a written protest. This protest shall instruct the surety not to make payment from the bond on the licensee’s account upon the specific grounds that the claim is opposed by the licensee, and provide the surety a specific and reasonable basis for the licensee’s opposition to payment”].) Again, appellant did not respond. Accredited settled the claim, obtaining a release from McMillian. (See Cal. Code Regs., tit. 10, § 2695.10(f).) At that point, appellant had 90 days from the date of settlement to indemnify Accredited or risk suspension of his contractor’s license. (Bus. & Prof. Code, § 7071.11, subd. (f)(2).)
We reject appellant’s contention that Accredited should not have paid the claim because it should have independently discovered the existence of the dismissed lawsuit. Adopting appellant’s position would essentially impose an additional duty on Accredited outside the scope of the statutory and regulatory scheme. The law is clear, however, that “[a] surety’s liability under a contractor’s license bond is established by statute, and no burden may be imposed on the surety other than those specifically set forth by statute.” (All Bay Mill & Lumber Co. v. Surety Co. (1989) 208 Cal.App.3d 11, 15; see also Faj, Inc. v. Surety Co. of the Pacific (1977) 68 Cal.App.3d Supp. 20, 22 [“The obligation of the surety arises out of the statute and as such is limited in its exposure to conditions set forth by statute. Thus, no greater burden may be imposed upon the surety than that specifically set forth by statute”].) The undisputed evidence established that Accredited complied with the governing statutes and regulations in investigating McMillian’s claim. That appellant showed an investigation beyond what was required might have yielded information that may have led Accredited to question the claim failed to create a triable issue of fact.
DISPOSITION
The judgment is affirmed. Accredited is to recover its costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

_____________________, J.
DOI TODD
We concur:

____________________________, P. J.
BOREN

____________________________, J.
CHAVEZ

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