Insurance Regulatory and Development Authority of India (IRDAI) has set up a task force to solve the bottlenecks and drive the growth of surety bond insurance in the Indian market. The task force comprises representatives from insurance companies, banks and reinsurers. https://www.asiainsurancereview.com/News/View-NewsLetter-Article/id/89324/Type/AIRPlus#
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MANKATO — A couple suing Mankato Township for approving the proposed Blue Earth County shop project has posted a $1.2 million surety bond sought by the county to cover cost increases if the project is needlessly delayed by the suit. In late April, homeowners Patrick Lease and Lynn Koosman-Lease filed a lawsuit against the township, alleging the board’s granting of a conditional-use permit for the facility was “directly contrary” to the township’s land-use ordinance. In March the Mankato Township Board voted 2-1 to approve Blue Earth County’s plans for the facility, which would serve as a base for county snow and road crews, on the corner of County Roads 90 and 16 just south of Mankato. Residents near the site threatened to file a lawsuit if the Township Board gave the go-ahead. The Leases live next to the proposed shop site. Although the suit is against the township, the county asked the court to require a surety bond so that if the township prevails and the county’s project is delayed the court could order that part or all of the bond be paid to the county to cover increased costs because of the delay. In a recent order, District Court Judge Kristine Weeks said the county estimated that because of inflation and other issues, the cost of the project could increase by $1.2 million if the start date was delayed until May 2025. The county already has been sending out and accepting various bids on building the shop. Weeks ordered the surety bond but also noted there’s no way of knowing if the price might increase or even decrease if the project is delayed. While the heart of the case hasn’t been presented in court, Weeks in her order for the bond noted: “Townships have wide latitude in making decisions about special use permits. “A township’s decision to approve a (conditional-use permit) will be independently reviewed to determine whether there was a reasonable basis for the decision, or whether the township acted unreasonably, arbitrarily, or capriciously.” The judge wrote that even if the township’s “decision is debatable, so long as there is a rational basis for what it does, the courts will not interfere.” The lawsuit seeks a nullification of the permit and a permanent injunction on the project. Mankato Township earlier answered in court that the complaint should be dismissed. The project needed a conditional-use permit because the proposed site is within an area zoned as an agricultural district. The suit alleges the permit is illegal because it didn’t meet a range of requirements needed to allow an industrial use in an agricultural zone. https://www.mankatofreepress.com/news/local_news/couple-suing-over-blue-earth-county-shop-posts-1m-bond-as-suit-proceeds/article_dea25184-7a74-11ef-9fa9-57fcaeaa857e.html
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Could this be the future of construction insurance? Construction & Engineering By Lauren Johnson Sep 30, 2024 The construction insurance industry is seeing a subtle, yet steady, shift with contractors assuming more risk than ever before. So says Michael Cusack, executive vice president of Alliant Specialty. “On the surety side, the evolution of the product has been moving slowly for the last 100 years,” Cusack said. “But over time, it will become more of a liquid instrument. Not anytime soon, but eventually, surety will act more like a letter of credit in certain situations.” Overall global infrastructure construction output will grow at an annual average rate of 5.2% in 2024 to 2027, following the expansion of 10.7% in 2023, according to WTW’s Global Construction Rate Trend Report: Q1 2024. Cusack emphasized that while this transformation is far from imminent, the evolution will likely benefit larger players in the construction industry. “That capability will be preserved for only the bigger balance sheet players because there will be more volatility around a liquid form of surety security,” he said. This shift aligns with how contractors are assuming more risk as they take on higher deductibles and manage their risk portfolios more effectively than insurance companies. The focus on contractors managing risk isn’t just a trend for Cusack; it’s a fundamental shift that he believes will shape the future of the industry. The contractors who can develop sophisticated internal risk management systems will thrive. “Contractors are taking on more deductible risk and manage that risk effectively using in-house protocols, and the ones that can do that will be the most successful,” Cusack said. “Construction jobs are getting much bigger, and the risks are becoming more complicated. If contractors can develop the systems and the personnel to manage risk, they can do it more efficiently and therefore be rewarded for that.” So why the shift? Contractors, especially well-managed ones, are being rewarded for taking on more risk, according to Cusack. The construction industry’s margins are tight, and competition is fierce. This dynamic is setting the stage for contractors who have the resources and discipline to navigate these risks themselves, with insurance taking on a more supplementary role. “The better-managed firms that have the discipline, the data, and the protocols around managing risk are being rewarded for assuming that risk and managing it more efficiently,” Cusack said. “The margins in the industry for contractors, the stipulated fees, aren’t changing. It’s a commoditized industry. The only way for contractors to generate more margin opportunity is around assuming more risk and managing that risk more effectively.” What does this mean for the insurance companies? Cusack believes it’s all about competition and the redistribution of risk. Insurance companies are still essential, especially as inflation drives up the value of insurable risks, but contractors who can manage their own risks are beginning to carry more weight. “I think the risk is going to reside where it belongs,” he said. “The contractors who can properly manage it will be rewarded, and the ones who can’t, will be paying a premium for risk transfer.” The construction industry isn’t just about hammering nails; it’s about data, discipline, and risk management. The insurance exposure isn’t shrinking, but the landscape is changing. “The projects are getting so large, and the losses are getting so big. Social inflation, within the court system, is still out of control in many jurisdictions,” Cusack said, adding that this only makes effective risk management more critical. Cusack’s insights illustrate a broader trend in the construction and insurance industries: a shift toward greater self-reliance for contractors and a transformation of how risk is managed. Insurance companies aren’t being phased out, but their role is evolving as contractors, particularly those with the right tools and expertise, take on more responsibility for their own risk. This evolution could signal a major reshaping of the industry. Contractors with larger balance sheets, access to vast amounts of data, and disciplined risk management strategies will be in the driver’s seat, while those unable to adapt may find themselves on the back foot, relying on insurance companies to pick up the slack. As projects grow in scale and complexity, and with external pressures such as inflation and legal challenges continuing to rise, the industry’s landscape is becoming more nuanced. Contractors are stepping up, taking on more risk—and insurance companies are watching closely. https://www.insurancebusinessmag.com/us/news/construction/contractors-are-taking-on-more-risk–and-theyre-getting-rewarded-for-it-507717.aspx
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CARSON CITY, Nev.-Insurance regulators in two states have ordered a pair of unlicensed surety companies to stop underwriting after finding they have issued illegal bonds, including at least one purportedly backed by the Caribbean-domiciled Certusia Reinsurance Co. The Nevada and Georgia insurance departments issued cease-and-desist orders this month against Las Vegas-based Global Bonding; a predecessor company, Millennium Bonding Enterprise; and the companies’ principal, Robert Joe Hanson. Nevada regulators called Global Bonding and Millennium “a significant threat to the public,” charging that the companies have marketed themselves as a “treasury-approved provider” of surety bonds and as a “federally approved alternative.” Neither company is licensed as an insurer, and neither is listed by the U.S. Treasury Department as an acceptable surety for federally funded projects. In an interview, Mr. Hanson conceded Global Bonding’s lack of a license or Treasury listing but insisted that he is acting properly as an individual surety using federally approved forms. He said he will contest the insurance department orders. Global Bonding has caused problems for at least one company bidding on a federal project, though. The U.S. Army Corps of Engineers recently rejected a towboat construction bid by Horizon Shipbuilders Inc. of Bayou La Batre, Ala., because its Global Bonding bid bond failed to pass muster, documents show. Bond documents failed to make clear whether the surety was being provided by Global Bonding itself-which did not qualify as an acceptable surety-or by Mr. Hanson individually, the Corps of Engineers concluded. In addition, a $50 million asset reportedly backing the bond was held by Global Bonding rather than Mr. Hanson, the Corps found. This $50 million asset was a debenture issued by Hexagon Consolidated Cos. of America, a company whose top officers were sued for fraud by the Securities and Exchange Commission in March, government documents show. The SEC charged, among other things, that Hexagon claimed assets of as much as $318.6 million when the company, in fact, was worthless. The SEC revoked Hexagon’s stock registration earlier this year. Mr. Hanson said that the Horizon decision resulted from a “misunderstanding” that the Corps of Engineers did not give Horizon time to clarify. He also said he was not aware of Hexagon’s problems with the SEC at the time of the bond proposal. The Georgia and Nevada cease-and-desist orders followed reports in the Augusta, Ga., Chronicle that Global Bonding had also issued a $1.7 million performance bond covering construction of an office building by the Augusta Neighborhood Improvement Corp. In documents on that project, Mr. Hanson reported that his bond was backed by a $10 million corporate note provided by Certusia, a Nevis-based company that announced its entry into the U.S. surplus lines market last month. A lawyer for Certusia, though, denied that the reinsurer did any business with Global Bonding. The bond was issued “without the knowledge of Certusia, without the consent of Certusia and without Certusia receiving any of the premium collected,” said Thomas Novak, a partner with Sills, Cummis, Radin, Tischman, Epstein & Gross in Newark, N.J. Mr. Hanson disputed this, saying that a Certusia officer authorized the reinsurer’s participation and that Certusia received premiums. He declined to name the officer or say how much Certusia collected. Certusia, meanwhile, appears to be carrying out the large-scale reorganization that one of its officials promised when it opened an office near West Palm Beach, Fla., last month and announced plans to write surplus lines risks. Whether the changes meet with the approval of U.S. regulators and buyers remains to be seen. In a Sept. 30 financial statement, the reinsurer previously reported holding $1.19 billion in assets, including a disputed claim to pine forest acreage in Fiji valued at $568.8 million and a $3 million “letter of guarantee” from a Mexican credit union that was shut down by Mexican federal regulators in 1999 (BI, Nov. 17). In the month after that statement, though, Certusia wrought huge changes in its corporate structure and asset base, according to a new financial statement as of Oct. 31. Certusia and two affiliates are now units of a Bermuda holding company, International Capital Holdings (Bermuda) Ltd., the new statement says. The holding company, in turn, is owned by three corporate shareholders: Union Commercial L.L.C., a company incorporated in Florida at the end of August; and Underwriting Management Group Inc. and Commercial Acceptance Indemnity Inc., both based in Nevis. The investment in the Fiji pine forest and other assets included in the Sept. 30 statement are gone. Instead, the new statement reports that Certusia’s holding company has $1.7 billion in assets, including $1.6 billion in 10-year zero-interest bonds contributed by Union Commercial and Underwriters Management. Little information is given about the bonds, though the statement says that principal payments will be made by “dedicated third-party financial institutions to the order of independent regulated trustees” appointed by Certusia. Repayment on the bonds is guaranteed by a company identified as “AA Guardian National Financial Guarantee Trust,” the statement says. AA Guardian could not be located. Mr. Novak declined to comment on the guaranty company or answer questions about the bonds. Certusia principal Mel Derutledge did not respond to several messages seeking comment. Certusia’s Oct. 31 statement includes an audit opinion from M. Irvin Boncamper, a St. Kitts accountant and business consultant who has previously served as an auditor, director or owner of two failed offshore insurers. In the 1990s, Mr. Boncamper was the auditor and a shareholder of Keyes International Insurance Co. Ltd., a short-lived Caribbean insurer that claimed a net worth of $2.4 billion but disappeared after being hit with a $1.5 million surety bond claim. The claimant later named Mr. Boncamper, Keyes and others in a civil fraud lawsuit seeking to recover on the bond. In early 2000, Mr. Boncamper took over ownership of International Casualty & Surety Co., a New Zealand company whose previous managers had been indicted for bankruptcy fraud. Despite Mr. Boncamper’s announced plans to recapitalize it, IC&S was ordered into liquidation in New Zealand about eight months later. Mr. Boncamper,
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MALVERN, Pa., May 09, 2024–(BUSINESS WIRE)–The SuretyDIGIT Coalition announced their launch today. The goal of the coalition is to bring stakeholders together to modernize and digitize surety bond operations. Due to the innate multi-party nature of the surety bond industry and the bonding process, insurance carriers (sureties), brokers, agents, solution providers, government agencies, obligees, (and others) need to work together to reinvent processes with a digital focus. The coalition is committed to paving the path toward digital adoption and bringing together thought leaders and solution providers to impact the industry through digital transformation. SuretyDIGIT’s mission is to bring the industry together to demonstrate the support for saving the industry time and money by wide-spread digital adoption of the entire surety bond process. “By joining the SuretyDIGIT coalition, NASBP and its members can stay at the forefront of surety bonding digital transformation and innovation with other interested parties. This critical, collective endeavor offers the promise of unlocking a digital future for surety bond processing and bringing needed efficiencies and added security to surety transactions,” said Mark McCallum, CEO of National Association of Surety Bond Producers (NASBP). “At its core, the journey toward digitizing the surety bond industry is uniting all stakeholders and gaining alignment and uniformity. As the Surety Digit Coalition expands, so does the knowledge, expertise, and perspectives. Together, we are able to unite all stakeholders on a common path toward digital adoption,” said Peter Miller, President and CEO of The Institutes. The coalition aims to bring all parties together to strategically align on a digitally focused future for the surety bond process, with an initial focus on: The SuretyDIGIT Coalition welcomes prospective members and encourages organizations, individuals, solution providers, insurance organizations, and associations to join. The list of 20+ initial business members is available on the coalition’s website. For more information about the coalition or to join, please visit https://www.suretydigit.org/ or contact [email protected]. About SuretyDIGIT Coalition The Surety Digitization, Innovation, and Transformation Coalition (SuretyDIGIT) is a group of aligned stakeholders – welcoming to government, surety industry partners, associations, and others – fostering a belief in the value of sharing conversations about driving the digital bond process. The coalition’s objective is to digitize key components of the surety bond process such as digital signatures, seals, POAs, bonds and their electronic delivery and authentication. For more information, please visit https://www.suretydigit.org/.
Knight Specialty Insurance Co., the Delaware-domiciled excess and surplus lines unit of Knight Insurance Group, provided the $175 million surety bond posted Monday by Donald Trump in his New York civil fraud case. Knight Insurance is part of the Hankey Group of Cos., a Los Angeles-based financial services group. Donald Hankey, chairman, confirmed to Business Insurance Tuesday that Knight Specialty provided the bond to Mr. Trump. “It was an opportunity to step in and make a little bit of money and take very little risk, so we’re happy with the transaction and happy we could help” the former president, Mr. Hankey said. Collateral was first submitted in the form of “grade-A investment-grade bonds” and then put in all-cash, he said, adding that the company was satisfied with the collateral. The bond guarantees that if Mr. Trump loses his appeal and fails to pay, the bond will cover a portion of the judgment. The bond prevents New York Attorney General Letitia James from seizing Mr. Trump’s assets, including properties such as 40 Wall Street in Manhattan, Trump Tower, his Mar-a-Lago estate in Florida and various golf courses, according to news reports. Mr. Trump originally needed to post a bond for $454 million, but a state appeals court on March 25 stayed enforcement of Justice Arthur Engoron’s judgment on condition that Mr. Trump post the smaller $175 million bond within 10 days. Attorneys for Mr. Trump had argued that he lacked the cash to secure a bond for the full judgment after being rejected by more than 50 bond companies. On Feb. 16, Justice Engoron found Mr. Trump had engaged in fraud by overstating his net worth by billions of dollars to secure better loan and insurance terms. Mr. Trump has denied wrongdoing in the case. Knight Specialty writes various coverages in addition to surety bonds, including casualty, commercial auto, general liability, inland marine, homeowners and private passenger auto, and has a financial strength rating of A- from A.M. Best Co. In 2022, Best described the Knight companies’ balance sheet strength as “very strong.” Separately, Chubb Ltd. Chairman and CEO Evan Greenberg recently wrote to Chubb customers to explain the company’s decision to issue a surety bond for Mr. Trump guaranteeing the $83.3 million verdict in the defamation case brought by writer E. Jean Carroll against the former president. The letter was issued after Chubb came under scrutiny following the disclosure that it had provided the means to allow Mr. Trump to meet a deadline to post a bond while he appealed that judgment. Chubb declined to issue the larger appeal bond in the civil fraud case, according to news reports.
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https://www.acq.osd.mil/dpap/policy/policyvault/USA000941-20-DPC.pdf
BEFORE ISSUING A BOND, A SURETY WILL EVALUATE A COMPANY USING THE THREE C’S: (1) CAPITAL, (2) CAPACITY, AND (3) CHARACTER. AND WHILE SURETYSHIP IS NOT A FIELD THAT CHANGES OFTEN, A SMALL SHIFT TOWARDS RELYING MORE ON CHARACTER IN THAT EVALUATION HAS BEEN MAKING ITSELF MORE VISIBLE IN RECENT YEARS. Suretyship encompasses many traditional practices and is not always amenable to emerging trends. However, even the smallest change that occurs within the field can have a major impact. In evaluating a potential principal, sureties have gone back to focusing more on a potential principal’s character. As explained below, while construction companies seeking bonds have always focused on having sufficient capital and capacity, they now also must focus on having good character. Just like how homeowners need homeowner’s insurance in the case of a flood or earthquake, builders and developers need bonds when taking on projects in case they develop issues with things like design, subcontractors, or supplies. However, while insurance and bonds may seem similar, they are actually very different. Bonds are more analogous to a form of credit that involves three parties where the bonding company (the surety) guarantees to the owner of the project (the obligee) that the contractor (the principal) will perform all its obligations under the contract. Subsequently, if the principal does not perform its duties, the surety must step in to ensure completion of the project and will then look to the principal for all the losses it incurs in doing so. Due to the risks associated with underwriting a bond, a surety will meticulously evaluate a potential principal before deciding to issue a bond. In doing so, as is industry practice, the surety will focus on the three “C’s”: capital, capacity, and character. Capital A surety must ensure that a principal has the financial wherewithal to be able to complete a project and fulfill its obligations under a contract. As such, a surety will evaluate a principal’s cash on hand, its assets, and its current lines of credit. This is not, however, limited to a present-day analysis. It will also include an analysis of the principal’s future capital, because the surety will need to learn how much cash the principal may require from the surety in case someone makes a claim against a bond or if the principal may not have sufficient funds to complete the project. Capacity When a surety looks at a principal’s capacity, it looks at the ability of the principal to complete the project under the contract. In addition to examining financial ability, the surety looks at a principal’s technical ability and ability to close out the bonded contracts. A principal is technically able to perform the work if it employs or can secure the necessary manpower to timely perform it.1 Additionally, the surety must be assured that those people have the necessary expertise to do the work correctly. This includes on-site laborers, as well as administrative staff, such as accountants and project managers. A principal’s ability to close out the bonded contracts is even more important. To assess this, the surety will look to a principal’s past projects to see what projects were ultimately completed. In addition, the surety will attempt to learn how the principal performed on a project that was known to have difficult issues. Character While character has always been an important “C”, sureties are placing more and more weight on a principal’s character, because it is the key to a successful relationship between the principal and the surety. In evaluating character, a surety company will assess whether a company is trustworthy enough to fulfill its obligations under the contract. A surety will look to the principal’s reputation in the market, including successes with prior projects and operational integrity, such as promptly paying its suppliers. A surety will also look to whether the principal is good at communication, whether it is trustworthy, and whether it is honest in conducting business. The relationship between a surety and a principal is generally not a short one, especially if it involves multiple bonds for multiple projects, which is not uncommon. The surety and the principal must communicate regularly regarding any and all disputes that may arise, including those with supplies, laborers, or contractors.2 While the surety and the principal need not agree all the time, the surety must believe that the principal is doing everything it can to fulfill its obligations under the contract and that the principal will provide ready access to its books, records, and other necessary information.3 As such, communication, trustworthiness, and honesty are extremely important characteristics for a principal to have. Character is evaluated not only in the potential principal, but also in the individual indemnitors who are the personal guarantors for the surety bond. Specifically, if the surety incurs losses on the principal’s behalf and the principal has insufficient funds to indemnify the surety for the losses, the individual indemnitors are responsible for the rest. As such, it is important for the surety to assess the same characteristics for the indemnitors. Without good character in a potential principal and indemnitors, a surety will be extremely hesitant to issue a bond. Even if the principal has enough capital and the necessary capacity to complete a project, it means nothing if the surety cannot trust the principal to make a good-faith effort to complete the project and fulfill its obligations under the contract. https://www.jdsupra.com/legalnews/the-three-c-s-of-surety-bond-62597/
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Chubb Chairman and CEO Evan Greenberg insists his global P/C insurer has strong fundamentals, but warned at the same time that the ongoing pandemic crisis will spur unpredictable revenue challenges affecting many lines of coverage. Broadly speaking, the insurer will likely take hits on the liability side and earnings via at least a temporary reduction in premium revenues, Greenberg explained during an April 22 investor call held to discuss Chubb’s Q1 2020 earnings. “Our growth momentum, particularly in our commercial [property/casualty] business globally, continued into April, and we continue to experience improved rate to exposure,” Greenberg said. “As we go forward, offsetting that, will be a meaningful impact to growth from the health and economic crisis as exposures in important areas shrink for a time, with the impact varying by country.” Reduced Exposures Consumer-related lines including travel insurance, A&H “discretionary purchases” and automobile insurance will all take hits, as customers ride out stay-at-home orders or quarantines. Commercial lines are also vulnerable, he said, “where exposures are reduced while businesses are closed, or as they reopen and are diminished, or simply go out of business.” He expects trade credit, surety and workers compensation to also be affected by reduced exposures. “It will be pretty broadly based,” Greenberg said, noting the pandemic “has created exposures for clients and industries broadly.” Beyond that, Greenberg emphasized that the company does not give specific forward guidance, and that it is hard to specify how much of a revenue impact it will face in the months ahead. “In this case the degree of revenue impact is simply unknowable,” Greenberg said, though he added that Chubb’s fundamental condition is otherwise solid and thriving. “We are and will continue to benefit in terms of growth from improved technical conditions, as many insurance companies take actions to reduce exposures or improve their rate to exposure to correct for inadequate underwriting,” Greenberg noted. In trying to draw a parallel to past events, Greenberg said that for now, the COVID-19 crisis seems manageable even with its uncertainties. “From what we know now, this will be a manageable, cat-like event,” Greenberg said. “However, from an exposure we really don’t discretely price for … its impact is additive to our normal projected loss exposure. In a sense, it is like terrorism exposure was before 9/11.” Business Interruption Greenberg emphasized multiple times that the insurer’s capital position is “strong,” and insisted “Chubb will continue to operate at a high level.” He noted, for example, that the insurer is working to keep its 33,000 employees around the world safe by way of “aggressive work-from-home protocols” and reiterated that they have secure jobs with no-layoffs during the crisis. He also said the company is maintaining standards about how it supports customers and distribution partners, and also extending payment terms and taking other measures to support clients and others facing pandemic stresses. “We are operating around the globe as a normal company during abnormal times,” Greenberg said. Greenberg strongly opposed the pressure from states and trial attorneys to force carriers to retroactively cover business interruption claims for COVID-19 losses. He spoke on the topic recently. “That is retroactively changing contract and increasing our exposures,” Greenberg said. “That is unnecessary harm and would do great damage.” He had harsh words for trial attorneys seeking to force the change through the court system. “Lawyers and the trial bar would come to torture the language on our standard industry forms and try to prove something exists that actually doesn’t exist, and try to twist the intent when the intent is very clear,” Greenberg said. “The industry will fight this tooth and nail. We will pay what we owe.” https://www.insurancejournal.com/news/national/2020/04/27/566365.htm
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A recent decision from the D.C. Circuit Court of Appeals provides notice to construction performance bond owners and sureties that a bond owner may forfeit its rights under a bond if timely notice of default is not provided to the surety. See Western Surety Company v. U.S. Engineering Construction, LLC, — F.3d —, 2020 WL 1684040 (April 7, 2020) In this case, the appellate court affirmed a district court’s summary judgment decision dismissing claims against a surety under a construction performance bond because the surety had not received timely notice of a default and therefore was prejudiced by its inability to have an opportunity to cure the default. Subcontractor U.S. Engineering Construction, LLC (“U.S. Engineering”) contracted with sub-subcontractor United Sheet Metal for sheet metal work relating to the construction of a new South African embassy in Washington, D.C. U.S. Engineering paid the premiums for a construction performance bond from Western Surety Company to ensure completion of United Sheet Metal’s work. The parties entered into an AIA A312-2010 contract for the performance bond, which included a requirement under Section 3 for U.S. Engineering to provide Western Surety with notice if it considered declaring United Sheet Metal in default. The bond did not explicitly state the required timing for such notice. United Sheet Metal failed to perform under its contract and U.S. Engineering terminated its subcontract with United Sheet Metal without any prior notice to Western Surety. In fact, U.S. Engineering waited more than eight months after terminating United Sheet Metal before notifying Western Surety of the default, which notification only occurred when it filed a notice of claim against the bond. The district court granted Western Surety’s motion for summary judgment on the basis that timely notice was not provided under the bond. In affirming that decision, the appellate court determined that U.S. Engineer’s delay precluded a claim under the bond. Western Surety was harmed by the delay because “[b]y unilaterally completing United Sheet Metal’s remaining contractual obligations before notifying Western Surety, U.S. Engineering deprived Western Surety of its contractually agreed-upon opportunity to participate in remedying United Sheet Metal’s default.” The appellate court concluded that, “because the bond expressly provides the surety with the opportunity to participate in curing the subcontractor’s default, we hold that it is a condition precedent to the surety’s obligations under the bond that the owner must provide timely notice to the surety of any default and termination before it elects to remedy that default on its own terms.” This case serves as a reminder for construction companies and sureties to review and follow the terms of a bond before taking any actions to enforce it, and that timely notice may be required in order to give the surety an opportunity to cure the default, even if not the bond does not explicitly state a deadline for such notice.
