Author name: Bond-Pro Webmaster

US Fire’s attempt to compel $13.5M in collateral for three decommissioning bonds failed—New York court says no imminent loss or asset risk justifies injunction A New York Supreme Court judge has rejected efforts by Crum & Forster owned US Fire Insurance Company to compel affiliates of MLCJR, LLC to post $13.5 million in collateral tied to surety bonds issued for offshore oil and gas operations, ruling the insurer failed to demonstrate the kind of immediate harm required to obtain preliminary injunctive relief. Justice Margaret A. Chan denied two motions from US Fire, finding that the company had not met the “irreparable harm” standard necessary to justify forcing the plaintiffs to post security under a General Agreement of Indemnity (GAI). The dispute arises from three surety bonds issued by US Fire in favour of the Bureau of Ocean Energy Management (BOEM) and Union Oil Company of California (UNOCAL). The bonds, totalling $13.5 million, were issued to guarantee decommissioning obligations of three offshore operators—Energy XXI, EPL Oil & Gas, and Cox Oil Offshore—all of which filed for bankruptcy in 2023. Their cases were subsequently converted to Chapter 7 liquidation proceedings. Following those filings, both BOEM and UNOCAL issued claims under the bonds, prompting US Fire to demand collateral from the indemnitors, as permitted under Paragraph 3 of the indemnity agreement. That provision allows the insurer to demand irrevocable letters of credit or other forms of security, at its sole discretion, upon receipt of claims—even before paying out any losses. US Fire argued that the plaintiffs’ failure to post collateral risked undermining the contractual framework of the surety relationship. The GAI explicitly waives the indemnitors’ defences and states that specific performance is an appropriate remedy. But Justice Chan concluded that US Fire had not shown it was facing immediate financial exposure. The insurer acknowledged it had not yet paid any claims or established reserves related to the bonds, and offered no evidence that losses were imminent. “There has been no showing made on US Fire’s application that, beyond the existence of the BOEM, UNOCAL, and BOEM II claims and US Fire’s collateral demands, there is any risk of imminent—rather than remote or speculative—harm,” Justice Chan wrote. The court also distinguished the case from Atlantic Specialty Ins. Co. v. Landmark Unlimited, Inc., where injunctive relief was granted in part because the surety had set aside reserves and the indemnity agreement expressly stated that non-payment of collateral would constitute irreparable harm. US Fire’s GAI contained no such clause. While Justice Chan acknowledged that the insurer might ultimately be entitled to specific performance if it prevails on the merits, she emphasized that “the requirements for the grant of a preliminary injunction are more stringent” and demand a present, concrete threat of harm. With the motions denied, the underlying litigation – including US Fire’s counterclaims and demands for collateral – will proceed to a full hearing. https://www.insurancebusinessmag.com/us/news/claims/judge-denies-crum-and-forsters-us-fire-insurance-companys-13-5m-collateral-demand-in-bond-case-530526.aspx

Outdated processes and regulatory confusion are slowing down Canada’s surety industry just as infrastructure investments and complex projects ramp up By Chris Davis As Canada increases infrastructure spending, the industry should consider integrating AI-assisted surety practices to keep pace. Outdated bonding processes threaten project delays, forcing contractors and underwriters to adapt or risk falling behind.   With digitization and regulatory shifts accelerating, Dustin SanVido (pictured), a senior account executive at AI Insurance, has seen how the industry evolves. His message to skeptics and traditionalists? Stop blaming AI and embrace it.    A key example of this is how electronic authentication tools like DocuSign have virtually eliminated the need for paper bonds. This transformation has done more than speed things up. Processes are smoother, there are fewer errors, and transactions move faster.  “It’s scarce that you run into a municipality or a township still looking for that paper. We’ve completely adapted on the construction side,” SanVido said. “The industry is very happy, and we’re all making more money. At the end of the day, that’s what surety is here to do—to make the contractors money.”  Regulatory Shifts Are Reshaping the Industry  Beyond digital transformation, regulatory changes are also reshaping the surety landscape. The global surety market was valued at $18.19 billion in 2023, with revenue expected to grow to $27 billion by 2030, driven by evolving regulations and increased infrastructure investments.  One notable development is Ontario’s new Planning Act, which came into effect in late 2024. Under the old system, developers used irrevocable letters of credit and other direct collateralization methods with these owners requiring security—none truly protected their investment when developers were brought onto a project. The new framework changes that.  “This instrument is considered on-demand and provides similar security as an irrevocable letter of credit (ILOC)”, SanVido said. “Right in the bond framework, claimant places a default claim, and surety has 15 days to pay. This allows the contractor/developer to deploy capital elsewhere as opposed to tying up in a bank for an indeterminate amount of time.”  This fast-tracked claim process is great for developers but has made underwriters more cautious. “Bonding companies are more conservative in their underwriting because they won’t apply the same underwriting metrics, they would to a traditional contractor because of that claim trigger,” he said. But the rollout has been chaotic. The result? It was a slow and muddied transition. “There isn’t an agreed-upon framework in the wording itself,” SanVido said. “So, from township to township, city to municipality, no one uses the same framework yet. It’s a wait-and-see approach right now. The sureties will, long term, agree to a single common form, and it’s learning as we go.” Risk Assessment Is No Longer Just About the Three C’s For decades, underwriting in surety has been built on the “three C’s”: capital, character, and capacity. Capital measures financial strength. Character assesses organizational stability. Capacity ensures the contractor can handle the job. But now, two more C’s have entered the equation: cash management and communication. “Cash management has become a large concern with underwriters,” SanVido said. “They’re not just looking at whether there is money but how it’s being managed—shareholder loans, cash and debt balances, working capital efficiency.” Communication is just as crucial, as underwriters now factor in how responsive and engaged a contractor is. “We are in the age of AI; we’re in the age of remote work. Communication is becoming so much more important—promptness, accountability, transparency, availability,” SanVido said.” If you’re someone who’s quick to provide the information, if you’re open and spending the time learning and developing that relationship, it’s become such an important factor.” Estate bonds: Myths, costs, and the fight for awareness Beyond contract surety, fiduciary bonds play a critical role in estate administration, yet many misunderstand their necessity and function. Executors and administrators often assume that only large estates require bonding, leading to confusion about legal triggers and financial responsibilities. “I have requests where it is down to a $1,000 estate, $5,000 estates,” he said. “The triggers are in place; the legislation currently is still what it is.” Cost is another major misconception. Many believe estate bonds are prohibitively expensive, deterring executors from exploring their options. “When you get into seven-figure and eight-figure estates, that number can grow,” SanVido said. “Even at rates that are universally under 1%, those become big numbers, and that can be discouraging for people.” However, the biggest challenge isn’t cost—it’s awareness. Some professionals in the legal field don’t even realize when estate bonds are required, creating gaps in estate planning and administration. “It’s 2025, and I’m the only specialist out there who’s consistently teaching law firms, consistently trying to speak at Association events and educate them on the whole,” he said. Lawyers themselves often don’t understand estate bonding nuance, SanVido said. “The first conversation I have with a lawyer is, ‘I’ve practiced law for 30 years. I’ve never needed one of these things. How do we do this?’ That is the most common question I receive in the legal profession in Canada,” he said. To change that, he’s pushing education—seminars, webinars, conference presentations. He highlights how surety professionals need to reconsider how we provide typical bonding solutions to our product industries. The future: AI and specialized bonds are taking over Two forces are reshaping the future of surety: artificial intelligence and the rise of specialized bond instruments. But can AI truly replace human underwriters? SanVido is skeptical. “AI is coming; it’s already here in the United States surety market, and it’s only a matter of time before it’s adapted in Canada,” he said. “I think AI is accurate for tangible underwriting and administration. I think it’s great for suitable analytics and automating workflow processes. But I don’t believe that it can assess the character of an organization.” Surety relies on trust, relationships, and gut instinct. “I don’t think there’s a way that AI can currently replicate that,” SanVido said. At the same time, specialized bonds are gaining traction, as is the need for subcontractor bonding programs and mid-tier

WASHINGTON, DC / ACCESS Newswire / March 3, 2025 / The Surety & Fidelity Association of America (SFAA) and the National Association of Surety Bond Producers (NASBP) led a Legislative Fly-In with members from across the industry to educate Congress on the value of construction surety bonds and advocate for key legislative priorities. These important meetings with policymakers focused on expanding support for the bipartisan Water Infrastructure Subcontractor and Taxpayer Protection Act (S.570 / H.R.1285), which would strengthen the Water Infrastructure Subcontractor Finance & Innovation Act (WIFIA) program by requiring appropriate bonding for all projects, including public-private partnerships (P3s). This bipartisan legislation was introduced by Senators Mark Kelly (D-AZ) and Kevin Cramer (R-ND) and Representatives Mike Bost (R-IL) and Chris Pappas (D-NH) on February 13 of this year. Surety professionals held over 135 meetings with policymakers and staff to emphasize the significant savings that surety bonding provides to taxpayers across the country. Using data from the Ernst & Young (EY) study, The Economic Benefits of Surety Bonds, industry leaders reinforced that surety bonds safeguard taxpayer dollars, ensure project completion, protect subcontractors, suppliers and workers, and drive economic growth. “SFAA members engaging with federal policymakers is a vital part of our advocacy mission, ensuring Congress understands the essential role of surety bonds in supporting and safeguarding public infrastructure projects,” said Ryan Work, President and CEO of SFAA. “Working with our industry partner, NASBP, our critical engagement with Congress strengthens and engages members on key issues affecting our industry.” “The needs of the Nation’s critical infrastructure are readily apparent, and surety bonds guarantee that these projects will be delivered, protecting the investments of taxpayers,” commented Mark McCallum, CEO of NASBP. “The story of surety’s benefits is compelling and one that each new Congress must understand as it legislates for the country’s advancement. My thanks to all those surety professionals who took the time to tell the story to their members of Congress,” McCallum added. During these joint meetings, industry leaders emphasized the critical role of surety bonding in federal infrastructure projects. Discussions included the importance of bonding requirements for WIFIA, ongoing P3 projects, the Broadband Equity, Access, and Deployment (BEAD) program, and other initiatives supporting the nation’s infrastructure. NASBP and SFAA also hosted a special event featuring insights from former Congressman and U.S. Transportation Secretary Ray LaHood and a panel discussion with Jack Ruddy, the Majority Staff Director of the U.S. House of Representatives Transportation & Infrastructure Committee. SFAA and NASBP look forward to our continuing dialogue with Congress, the Administration, and Federal Agencies to advance key priorities that support projects across the country. To read the EY report and get additional information on the value of surety, visit www.surety.org/suretyprotects. The Surety & Fidelity Association of America (SFAA) is a nonprofit, nonpartisan trade association representing all segments of the surety and fidelity industry. Based in Washington, D.C., SFAA works to promote the value of surety and fidelity bonding by proactively advocating on behalf of its members and stakeholders. The association’s more than 425 member companies write 98 percent of surety and fidelity bonds in the U.S. For more information visit www.surety.org. https://www.accessnewswire.com/newsroom/en/government/surety-industry-unites-on-capitol-hill-to-advocate-for-key-legislative-priorities-994562

CHICAGO — PMC Casualty Corp. argues that an Illinois federal judge properly denied Virginia Surety Company Inc.’s motion to dismiss a lawsuit accusing it of failing to remit $20 million allegedly owed under a vehicle service contract reinsurance agreement. In a Feb. 25 opposition filed before Judge Matthew Kennelly of the U.S. District Court for the Northern District of Illinois, PMC says Virginia Surety does not identify a legitimate basis for reconsideration by establishing either a “manifest error” in the opinion or newly discovered evidence. https://www.harrismartin.com/publications/14/reinsurance/articles/54520/reinsurer-says-judge-properly-refused-to-dismiss-vehicle-service-contract-case

CHARLESTON, W.Va. (WCHS) — West Virginia Sen. Jim Justice has been issued a garnishment summons to pay more than $3 million in debts owed to an Illinois-based creditor after the senator failed to repay a bond, court records show. The summons, issued on Jan. 28 by the United States District Court, Western District of Virginia, states that Justice owes $3,179,383.83 plus $101,369.69 in interests to Western Surety after he allegedly broke a contract with the insurance company. According to the initial filing from Western Surety from August 2024, the debt came after Justice’s Bluestone Resources Inc. and Southern Coal Corp. was ordered to pay more than $2.7 million, plus additional fees, following a judgment from May 2020 in the District Court of Dallas County Texas that ruled in favor of Texas-based financial service business First National Capital which claimed Bluestone breached an equipment lease contract. Following the ruling, Chicago-based Western Surety Company executed a supersedeas bond on behalf of Bluestone Resources Inc. worth more than $3 million to allow for Justice’s company to file an appeal. However, according to the attorney representing First National Capital, the appeals court affirmed the decision and dismissed Bluestone’s petition for review in 2023, thus requesting Western Surety to pay the bond penalty. Sen. Justice now has the option of making a based on the judgment, file a “written answer with the court” or appearing before the U.S. District Court in Harrisonburg, Virginia on March 28. The garnishment summons is the latest in the senator’s financial woes with reports from Forbes in January that estimates $1 billion in debts owed by Justice, as well as a decline in asset valuation. The former governor-turned-senator has faced several legal challenges regarding finances related to both his coal companies and the luxury resort, The Greenbrier, which is owned by the senator’s family. https://wchstv.com/news/local/court-issues-garnishment-summons-to-sen-jim-justice-for-3-million-in-debts

The insurance sector offers significant growth potential despite challenges like outdated underwriting, trust issues, and complex processes. Opportunities exist in areas such as vehicle underwriting, SMB insurance, and surety bonds, with innovation-driven startups poised to capitalise on these gaps. Moneycontrol Opinion February 18, 2025 / 11:15 IST BY Mayank Jain Problems with Medieval Vehicle-Only Underwriting Motor insurance in India continues to rely heavily on vehicle-only underwriting, where premiums are based solely on the type of vehicle and city. This means that two vehicle owners with the same car in a given city are charged identical premiums, ignoring customer-specific factors like driving behaviour, vehicle usage, demographics, or CIBIL scores. The reliance on vehicle-only underwriting stems from third-party distribution, where 95% of new car premiums are distributed by OEM brokers (dominating the 0-4-year car market) and individual agents (dominating the 4-8-year market). These third parties withhold personally identifiable information (PII) from insurance providers to avoid disintermediation during renewal, leaving insurers unable to customise premiums. This has created a scenario where good customer cohorts – such as those with prime CIBIL scores (750+) or middle-aged (35-50 years) customers – end up subsidising high-risk segments. Despite attempts by existing players to address the issue, the complication persists. This creates a clear opportunity for another D2C insurer to emerge, provided they can develop an economically viable direct go-to-market (GTM) strategy. Alarming Trust Deficit in SMB Insurance Our conversations with SMB owners across industries and revenue scales revealed a glaring trust deficit in insurance. Businesses with revenues between ₹10-250 crore report severe pain points, particularly for non-health products like fire, marine, liability, and engineering insurance. This segment views online insurance as a compliance-driven market, where the cheapest policies are purchased solely to meet counterparty or lender requirements. However, SMBs cite a clear unmet need for protection-focused policies. They struggle with unclear policy terms, complex documentation, and surprises at the time of claim, which often result in rejections or reduced payouts. In fact, many SMBs believe insurers lack the intent to honour claims and are designed to reject them. We see this as a greenfield market, with opportunities for startups to take a full-stack approach – owning underwriting, distribution, and claims – while targeting specific industries or supply chains. For insurance-tech startups targeting SMBs, the key will be identifying specific market segments to target and crafting an economically viable GTM strategy. Surety Bonds: Unlocking Capital for Infrastructure In infrastructure and construction, businesses are required to provide guarantees during projects, traditionally through bank guarantees. Bank guarantees require collateral, often in the form of fixed deposits, which ties up valuable liquidity. With high capital costs, freeing this collateral could bring significant economic benefits to these sectors. Surety bonds, which are an unsecured alternative to bank guarantees and are issued by insurers, help solve this problem. While the commission for surety bonds is higher, they free up working capital for businesses. Although widely adopted in the U.S., this market is nascent in India, with IRDAI introducing the framework only in 2022. Insurers are still exploring how to underwrite these products, and service providers and beneficiaries lack awareness. Startups can play a key role in enabling adoption by educating the market and building underwriting capabilities. However, the market’s limited size and the complexity of the product mean it remains an emerging opportunity that calls for cautious optimism. Thinking Ahead Beyond these opportunities, the insurance sector also grapples with several other problem statements that present scope for innovation. In healthcare insurance, delays in cashless approvals are driven by mistrust between hospitals and insurers, aggravated by a lack of standardised medical coding, which leads to manual inefficiencies. In microinsurance, categories like crop and trip insurance are held back by manual claims processes – there is no automated or parametric claims system in place, even though it is feasible. In life insurance, mis-selling by agents – who prioritise commissions over customer needs – results in poor policies with low coverage and high churn, with over 50% of policies lapsing within five years. Ultimately, at its core, the insurance industry is burdened by an outdated tech stack and resistance to change. Nevertheless, the sector offers massive opportunities for startups willing to tackle specific pain points. Success in this sector will depend on the founders’ ability to develop economically viable GTM strategies, build trust, and leverage technology to modernise underwriting, distribution, and claims processes. (Mayank Jain, Principal, Stellaris Venture Partners.) Views are personal, and do not represent the stand of this publication. https://www.moneycontrol.com/news/opinion/ripe-for-disruption-opportunities-and-challenges-in-the-evolving-insurance-sector-12943480.html

According to the police, on January 4, they received information that forged documents were being submitted before the Cantonment Court for bail of an accused Bachhan Singh Bhond, who was arrested in a criminal offence registered at Kondhwa police station. Pune city police arrested 11 persons including two lawyers in connection with a racket of producing forged documents and fake sureties in various courts to secure bail for accused persons in serious offences. According to the police, on January 4, they received information that forged documents were being submitted before the Cantonment Court for bail of an accused Bachhan Singh Bhond, who was arrested in a criminal offence registered at Kondhwa police station. A police team led by police sub inspector Dhanaji Tone then laid a trap and nabbed a suspect, Santoshkumar Shankar Telang (32), a resident of Shewalwadi near Hadapsar at the court premises. Police nabbed five others identified as Jitendra Shivram Karangutkar (39) of Thane, Subhashan Shankar Totre (40) of Ambegaon and Dnyaneshwar Shinde (55) of Khed taluka in Pune district, Sanjay Manohar Padwal (42) and Sujit Sakpal (36) of Mulund in Mumbai. A key accused, Farhan alias Bablu Shaikh, managed to escape from the court, police said. Probe revealed the suspects allegedly appeared before the court as witnesses with fake names and submitted forged Ration cards, Aadhaar cards, 7/12 extract documents for the bail of an undertrial, Bhond, lodged in Yerwada jail. A first information report (FIR) was lodged at Wanavdi police station against the accused persons under sections 319 (2), 318 (4), 338, 336 (3), 340 (2), 3 (5) of the Bharatiya Nyaya Sanhita. During investigation, police arrested Darshan Ashok Shah (45) of Pune Camp on January 7 for allegedly providing fake rubber stamps to the wanted Farhan Shaikh. On January 9, police arrested Piraji alias Chandrakant Shinde (60) of Moshi and Gopal Kangne (35) of Pimpri for allegedly providing copies of bogus ration cards to the accused producing fake sureties in the courts. During investigation, police recovered 95 suspicious ration cards, 11 Aadhaar cards and various other documents from the accused persons. A press release issued on Monday mentioned that the statement of accused Telang was recorded before the court, in which he named Farhan Shaikh and three lawyers – Aslam Sayyad, Yogesh Jadhav and Narendra Jadhav, with whom he allegedly conspired to produce fake surety before the court to get bail for accused persons in different crimes for financial gains. Accordingly, police arrested advocates Aslam Sayyad (45) and Yogesh Jadhav, both residents of Hadapsar, on Sunday. During a press conference, Deputy Commissioner of Police (Zone 5) Rajkumar Shinde said so far the probe revealed that the racketeers allegedly played a role in getting bail for 32 accused persons in 24 serious crimes by producing fake surety in different courts in Pune city, Pune district and Pimpri Chinchwad. “These crimes include offences such as attempted murder and Arms Act cases. Appropriate legal action would be taken against these accused released on bail due to fake surety. Some of the courts have already initiated action. Further investigation is on.We are also probing the role of court staff in the racket, ” said Shinde. Police said more arrests are likely in this case. Police are probing into the financial transactions of the accused operating the fake surety racket. Police said the masterminds allegedly hired people by offering them up to Rs 2000 each, along with travel and food expenses, to appear before the court as fake witnesses and produce forged documents required as surety for fulfilling bail conditions. Also, police suspect up to Rs 4000 per fake document was paid to the accused allegedly involved in forgery. https://indianexpress.com/article/cities/pune/fake-surety-of-bail-racket-for-accused-in-serious-crimes-lawyers-arrested-9815666

Marc H. Silverman, Acting United States Attorney for the District of Connecticut, announced that JAMES KEATING, 52, of Paoli, Pennsylvania, was sentenced today by U.S. District Judge Victor A. Bolden in New Haven to 20 months of imprisonment, followed by three years of supervised release, for defrauding his former employer of more than $1.4 million. According to court documents and statements made in court, Keating was an Assistant Vice President and surety bond claims handler at Allied World Insurance Company (“Allied World”). He later served in the same capacity at Crum and Forster subsidiary U.S. Fire Insurance Company, where he also handled claims on Allied World surety bonds. All surety bond claims were handled through Allied World’s offices in Farmington, Connecticut. Between 2017 and 2021, Keating defrauded Allied World in two ways. First, he used a shell company, American Construction & Industrial LLC, to bill Allied World for unnecessary claims work that was not performed and took the proceeds for himself. Second, he solicited and received kickbacks from Allied World vendors through another Keating-owned company, Surety Risk Solutions (also known as “SRS” or “SR5”), without the knowledge of his employer. Keating also caused these vendors to use another company in which he had an undisclosed ownership interest, Kodiak Asset Recovery, for asset searches at vastly inflated prices. Keating profited nearly $1 million through American Construction & Industrial LLC, more than $350,000 in kickbacks through Surety Risk Solutions, and nearly $125,000 through Kodiak Asset Recovery. Judge Bolden ordered Keating to pay restitution of $1,226,603.97, which represents the loss to Allied World of $1,446,491.95, less $219,887.98 that he previously repaid as part of a civil judgment. On July 30, 2024, Keating pleaded guilty to wire fraud. This matter was investigated by the Federal Bureau of Investigation and prosecuted by Assistant U.S. Attorney David E. Novick. https://www.justice.gov/usao-ct/pr/pennsylvania-resident-who-defrauded-allied-world-insurance-company-sentenced-prison#:~:text=Marc%20H.%20Silverman%2C%20Acting%20United,release%2C%20for%20defrauding%20his%20former

On November 20, 2024, the Surety Bonds regulation (O.Reg. 461/24) came into force under Ontario’s Planning Act. This regulation provides land owners and those applying for planning approvals with the option to stipulate that a surety bond will secure their approval-related obligations. This type of surety bond is generally called a subdivision or development bond. Section 2 of the Surety Bonds regulation requires the bond to provide as follows: BLG’s Construction and Surety Group is available to answer questions about this new regulation and related considerations for your contracts, and its Municipal Group is available to assist with agreements under the Planning Act. This article provides an overview and is not intended to be exhaustive of the subject matter contained therein. Although care has been taken to ensure accuracy, this article should not be relied upon as legal advice. https://www.blg.com/en/insights/2024/12/the-new-surety-bonds-regulation-under-ontarios-planning-act