July 2019

Surety bonds required for dentists enrolled as DMEPOS suppliers

Beginning June 1, the National Supplier Clearinghouse began sending letters to Medicare-enrolled dentists notifying them that a surety bond of at least $50,000 per office location may be required to initiate or continue their Medicare enrollment as a supplier of durable medical equipment, prosthetics, orthodontics and supplies. Prior to 2019, dentists were exempt from this rule, “Medicare Program: Surety Bond Requirement for Suppliers of Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS),” published by the U.S. Centers for Medicare & Medicaid in 2009. According to the Centers for Medicare & Medicaid, as of April 2019, 1,365 dentists were enrolled as DMEPOS suppliers in Medicare, which amounts to an estimated 100 dentists in California who should have received the letter. CDA Practice Support and The Dentists Insurance Company report that some members upon receipt of the letter have called with questions about their obligations and whether they meet the surety bond exception 42 CFR 424.57(d) (15)(i)(c). According to the Centers for Medicare & Medicaid, as of April 2019, 1,365 dentists were enrolled as DMEPOS suppliers in Medicare, which amounts to an estimated 100 dentists in California who should have received the letter. CDA Practice Support and The Dentists Insurance Company report that some members upon receipt of the letter have called with questions about their obligations and whether they meet the surety bond exception 42 CFR 424.57(d) (15)(i)(c). Because a dentist acts exclusively as a DMEPOS supplier when furnishing an oral appliance prescribed by another practitioner, the dentist will not typically qualify for the surety bond exception. Similarly, dentists who supply DMEPOS and perform tasks that involve device fitting and assessing the patient for that device do not meet the exception in the regulation that applies “only to services in which the diagnosis, prescription and fitting occur ‘as part of’ the physician service,” according to the CMS fact sheet dated June 1. For example, oral appliance therapies for sleep apnea are considered DMEPOS items that require a written order from the treating physician. As such, dentists who are furnishing oral appliances for sleep apnea are required to have and maintain a surety bond of at least $50,000 per office location. In other terms, as reported June 17 by the ADA, “CMS said the surety bond exception only extends to physicians who are both prescribing and filling the product in the course of their own ‘physician service.’” The letter from National Supplier Clearinghouse outlines one of three actions that the supplier must take within 60 days of the date of the notice: Provide proof of a valid surety bond. Voluntarily terminate their DMEPOS enrollment. Provide proof that all DMEPOS items provided are for the supplier’s own patients as part of their physician service. CMS notes in its fact sheet that it will deactivate suppliers’ billing privileges if they fail to obtain, timely file or maintain the specified surety bond. http://www.cda.org/news-events/surety-bonds-required-for-dentists-enrolled-as-dmepos-suppliers

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legislation

Performance Bonds – Will the Liability Ever End?

Construction contracts for commercial projects, including the ongoing boom in apartment projects, routinely require the general contractor and/or the subcontractors to provide performance bonds. Performance bonds are also typically required on government construction projects. Note: Contracts that require performance bonds usually also require payment bonds, such that the term “payment and performance bonds” is often used. There is less concern about long-term post-completion exposure on payment bonds because payment bonds interact with the statutory periods for filing mechanic’s lien. This article addresses only performance bond issues. The purpose of a performance bond is to provide a means of insuring timely completion of contractually required work. Unfortunately, performance bonds are often improperly treated like long-term tail insurance obligations that impose liability on the surety and bonded contractor long after the bonded work has been fully completed and accepted. In post-completion construction defects claims, performance bonds tended to be incorrectly viewed in the same light as Commercial General Liability (CGL) insurance coverage, with the confusion perhaps arising in part because performance bonds are often issued by insurance companies. But unlike CGL insurance, the bonded contractor is responsible for repaying the bonded surety every penny (including attorney’s fees) that the surety is required to pay or incurs as a result of a bond claim. To make matters worse, before issuing performance bonds to a corporation or company (i.e., an Inc. or LLC), sureties typically require company owners and their spouses to sign personal guarantees making them personally responsible for repaying the surety if their company fails to reimburse the surety on a bond payment claim. Those personal guarantees of the bond effectively do an end-run around the construction company’s corporate shield and place the company owners, their spouses, their homes and other personal assets directly at risk when a performance bond claim is asserted. Most performance bond forms have a clause that attempts to limit the bond obligation to a period of one or two years after the bonded-contractor completes the work. For example the AIA A312 – 2010 Performance Bond form states: “Any proceeding, legal or equitable, under this Bond may be instituted in any court of competent jurisdiction in the location in which the work or part of the work is located and shall be instituted within two years after a declaration of Contractor Default or within two years after the Contractor ceased working or within two years after the Surety refuses or fails to perform its obligations under this Bond, whichever occurs first. If the provisions of this Paragraph are void or prohibited by law, the minimum period of limitation available to sureties as a defense in the jurisdiction of the suit shall be applicable.” Despite its effort to limit the duration of the bond, the two-year limit stated in A312 (and in other bond forms) is invalid and unenforceable in South Carolina and in a number of other states because such provisions are viewed as an attempt to shorten the statutory time limits applicable to filing breach of contract claims. As such, the duration of performance bonds is typically governed by the running of the statute of limitations (the duration of which often presents a jury trial issue) and expiration of the statute of repose, and in South Carolina the statute of repose may not apply in cases involving claims of gross negligence. As a result, the surety, the bonded contractor, and the contractor’s owners and their spouses remain subject to potential long-term liability under a performance bond for construction defects claims that may be filed many years after the contractor’s work was fully completed and accepted. Such exposure can also impede a contractor’s ability (bonding capacity) to bid and receive future bonded contract work. The best way to avoid the problems and personal liability associated with performance bonds is to not provide one. Well-established, financially stable, and reputable contractors can rightfully question the need for a bond to ensure completion of their work. Owners and contractors can protect themselves by use of retainages and by ensuring progress payments do not get ahead of the amount work actually performed. But many owners and contractors will insist on performance bonds as part of the way they do business, and in those cases the bonded contractor needs to examine a means of controlling the duration of their risk. At Nexsen Pruet we work with contractors and subcontractors to provide them with a mechanism to limit their performance bond obligations upon completion of their work, thus fairly balancing the purpose of the performance bond against the unintended consequences of continued long term post-completion liability and the associated adverse impact on bonding capacity. https://www.jdsupra.com/legalnews/performance-bonds-will-the-liability-61019/

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Canada: Performance Bonds: The New Form 32 Under Section 85.1 Of The Ontario Construction Act

Following up on our previous bulletin, Performance Bonds: What Project Finance Lenders Should Know, in this bulletin, we compare the widely used Canadian Construction Documents Committee’s Performance Bond Form 221-20021 (“CCDC Form”) with the new Form 32 – Performance Bond that is mandated for certain projects by the Ontario Construction Act2 (“Form 32”). Background Pursuant to section 85.1 of the Construction Act and section 12 of the accompanying General regulation, all “public contracts” with a contract price of $500,000 or more require the contractor to furnish both a performance bond and a labour and materials bond that, in each case, must be in the prescribed forms and have coverage limits of at least 50% per cent of the contract price.3 The Act defines a “public contract” as a contract where the owner is the Crown, a municipality or a broader public sector organization, but excludes contracts where the contractor is an architect or engineer from the application of that section.4 Thus, the provision is meant to capture all government-procured construction contracts with a contract price of $500,000 or more. In the context of public-private partnership (“P3”) and alternative financing and procurement (“AFP”) projects, section 1.1(4) of the Act clarifies that the “public contract” for the purposes of section 85.1 is not the typical project agreement between a special purpose vehicle and the government entity, but rather the “dropdown” construction contract or design-build contract between that special purpose vehicle and the contractor.5 Section 3 of the General regulation further stipulates that the minimum coverage limits for the bonds are capped at $50 million for P3 or AFP projects – i.e., the 50% requirement does not apply to projects with a contract price greater than $100 million.6 As with the other new provisions of the Act, the requirements of section 85.1 do not apply to contracts where the procurement process was commenced before July 1, 2018.7 Under section 1(4) of the Act, a procurement process begins whenever a request for qualifications, request for quotation, request for proposals, or a call for tenders is first made.8 In the context of projects procured by Infrastructure Ontario, for example, this would be the date that the request for qualifications is issued for a typical procurement. Notably, a market sounding or a Request for Expression of Interest issued by Infrastructure Ontario does not on its own constitute the commencement of a procurement process.9 Form 32 Form 32 to the Construction Act was developed by the Ministry of the Attorney General of Ontario in close consultation with the Surety Association of Canada and other industry stakeholders. It is intended to be a complete, detailed code of conduct governing the relationship between the surety, the owner, and the contractor, and is designed to address some of the deficiencies of the very short and potentially ambiguous CCDC Form. Form 32 is significantly longer and more detailed as compared to the CCDC Form. Unlike the CCDC Form, which is a 1 page document, Form 32 (in blank form, together with Schedules and Appendices) is 12 pages long. It sets out a detailed claims regime addressing, among other things: specific parameters for written notice (including various prescribed forms), a mandatory pre-notice meeting and post-notice conference, specific timelines for the surety’s investigation and response, a regime for necessary interim work and mitigation work, specifics regarding the owner’s direct expenses to be paid by the surety, and a detailed checklist of documents that must be delivered to the surety when a claim is made. Mandated Timelines A key new feature of Form 32 is that it introduces mandatory timelines for notice, investigation, and response following an alleged default. The CCDC Form does not mandate such timelines, instead relying on the reasonableness of the parties. Under the new Form 32, after receipt of a demand under the bond from the owner in the form of Schedule A to Form 32, the Surety must, within four business days, deliver to the owner an acknowledgement in the form set out at Schedule B. Furthermore, within twenty business days, the Surety must deliver a complete written response to the demand, based on its investigations and review, in the form of Schedule C. The surety must also propose a “Post-Notice Conference” within five business days or such longer period as may be agreed. Other Differences between the CCDC Form and Form 32 An apparently minor but consequential difference between Form 32 and the CCDC Form is the definition of “Contract” in the preamble. Form 32 incorporates not only the underlying contract but also “amendments made in accordance with its terms”. This language is not effectual on its own but where the underlying contract includes terms allowing minor variances and amendments, this more incorporative language may offer better protection against a surety who claims to having been discharged due to a variation in the contract without their consent. As noted above, article 1 of Form 32 imposes an express notice requirement and details the necessary procedure for declaring a principal in default. While notice to the surety was always a functional requirement due to the need to declare the principal in default, this new term makes this requirement express and adds procedural clarity. Section 1.2 also establishes a procedure for notice in cases with multiple sureties. Article 2, which requires a “Pre-Notice Meeting”, and article 5, which requires a “Post-Notice Conference”, provide the parties with a mandatory regime for meetings and communications both before and after the declaration of default. This appears to codify, and reinforce, the common recommendation that the bond parties communicate openly and often in respect of the bonded work and any potential issues. Article 3 imposes an express obligation on the surety to investigate a declared default and sets a timeline for their response to the obligee’s notice. This codifies the surety’s common law right to investigate defaults prior to responding to a claim but notably circumscribes that right by imposing a time limit on any investigations and establishing requirements for the response. Article

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Global Surety market size is expected to reach USD 28.77 billion by 2027

In terms of revenue, the global surety market is expected to grow to US$ 28.77 billion by 2027 from US$ 15.33 billion in 2018. The demand for surety is highly propelled with the increasing demand for restoration of ageing infrastructure of developed economies worldwide. However, shortage of skilled professionals in the surety industry is restraining the surety market growth to certain extent. Download Sample Copy @ a href=”https://www.bigmarketresearch.com/request-sample/3206913?utm_source=ANIL-HTN” target=”_blank”>https://www.bigmarketresearch.com/request-sample/3206913?utm_source=ANIL-HTN Top Market Players: American Financial Group, Inc., AmTrust Financial Services, Inc., Chubb Limited, CNA Financial Corporation, Crum & Forster, Hartford Financial Services Group, Inc., HCC Insurance Holdings, IFIC Surety Group, Liberty Mutual Insurance Company, The Travelers Indemnity Company The global surety market is highly fragmented with local players, banks and global companies operating in the market. Also, major and small players are trying to come up with innovative solutions to attract a large base of customers. Currently, the surety market is experiencing a high growth in the developing economies of South America region. This is due to the growing number of construction activities and government regulations in the region. On the basis of bond type, contract surety bond is the leading segment of the global surety market. In the construction industry, contract surety bond is highly used particularly for public construction projects. Contract Surety Bond is also known as contractor bond; contract bond is a type of surety bond that is used by the investors and developers in the construction business, as a guarantee that the terms and condition of the contract will be fulfilled. The contract bond protects against the losses incurred due to the contractor’s failure to complete the project or meet the contract specification. Surety providers evaluate the principal builder’s financial merits and charge a premium in accordance with the likeness of occurrence of an adverse event. The overall surety market size has been derived using both primary and secondary source. The research process begins with exhaustive secondary research using internal and external sources to obtain qualitative and quantitative information related to the surety market. It also provides the overview and forecast for the global surety market based on all the segmentation provided with respect to five major reasons such as North America, Europe, Asia-Pacific, the Middle East and Africa, and South America. Also, primary interviews were conducted with industry participants and commentators in order to validate data and analysis. The participants who typically take part in such a process include industry expert such as VPs, business development managers, market intelligence managers, and national sales managers, and external consultant such as valuation experts, research analysts, and key opinion leaders specializing in the Surety industry. http://hitechnewsdaily.com/2019/07/global-surety-market-size-is-expected-to-reach-usd-28-77-billion-by-2027/

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Trade Credit Insurance Market Is expected to Witness Significant Growth between 2019 to 2025

“Global Trade Credit Insurance market report studies historical factors and market influencers, key strategies that helped the market to grow as well as, the ones hampering the market potential. This report presents facts on historical data from 2011 to 2019 and forecasts until 2025, which makes it a valuable source of information for all the stakeholders globally. This Trade Credit Insurance Market report gives relevant market information in readily accessible documents with clearly presented figures, graphs, and statistics. This study gives data on patterns and improvements, and spotlights on Markets and materials, limits and on the changing structure of the Trade Credit Insurance Industry. The key motivation behind the report is to give a proper and key examination of this industry. Read More … https://marketresearchupdates.com/2019/07/02/trade-credit-insurance-market-expected-witness-significant-growth-2019-2025-top-key-players-atradius-coface-zurich-credendo-group-qbe-insurance-cesce-allianz-marsh-aon-axa/

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