Repost

Audit alleges W.Va. DEP violated state law for nearly a decade

In a report presented to the joint Post Audit Committee, legislative auditors contend that the state Division of Environmental Protection has been skirting a law designed to make sure that coal mine reclamation bonds are on solid financial ground. Coal companies have to get the bonds to guarantee the land will be repaired once the mining is over. But, the audit report says the DEP ignored a stipulation that said insuring agencies have to be approved by the U.S. Treasury with a T-Listing. That certifies the insurers have suitable assets and financial practices. First Surety Corporation got into the business in 2006 and insures hundreds of bonds worth about 48 million dollars. However, the agency does not have the financial credentials that auditors say the law requires. “The legislature is very committed to requiring a T-Listing for these bills, surety bonds and so forth, that protect the land in West Virginia as its being mined for coal,” West Virginia Senate President Mitch Carmichael, (R) Jackson, said. The DEP’s general counsel says the agency interprets the law as having two paths to insure the reclamation bonds. One is for a company to have a T-Listing, the other is by the permission of the West Virginia Insurance Commissioner. Carmichael questioned the lawyer about the DEP’s stance. “Mr. President, my testimony is that the agency thought that there were two avenues pursuant to that rule by which a company would be allowed to submit surety bonds to the state,” Jason Wandling, General Counsel for the W.Va. DEP said. “And one of those avenues would be, would not include T-Listing?” Carmichael asked. Wandling replied, “That’s correct Mr. President.” “I’m at a loss as to how you obtain that understanding of it,” Carmichael said. “I accept that you have to say that.” The legislative auditor says insuring reclamation surety bonds without a T-Listing has a four-year time limit and that First Surety Corporation’s four-year grace period expired in 2010. “Our view is that that stopped in 2010,” Aaron Allred, W. Va. Legislative Auditor said. “And that DEP has allowed this company to continue to issue mine reclamation laws in violation of state law now for nine years.” https://wchstv.com/news/local/audit-alleges-wva-deprotection-ignores-state-law-for-nearly-a-decade

Audit alleges W.Va. DEP violated state law for nearly a decade Read More »

legislation

The Sword Of Damocles Hangs Over Miller Act Sureties And Brokers: Scollick Case Stayed Sixty Days For Mediation, But Outcome Remains Uncertain

On August 6, 2014, plaintiff-relator Andrew Scollick filed a complaint in the United States District Court for the District of Columbia against eighteen defendants for multiple violations of the False Claims Act (“FCA”) in connection with an alleged scheme to submit bids and obtain millions of dollars in government construction contracts by fraudulently claiming or obtaining service-disabled veteran-owned small business (“SDVOSB”) status, HUBZone status, or Section 8(a) status, when the bidders did not qualify for the statuses claimed. United States ex. rel. Scollick v. Narula, et al., No. 14-cv-1339 (D.D.C.). Unique in this case were not the claims against the contractors, who were alleged to have falsely certified their status or ownership. Rather, what set this case apart was that Scollick also named as defendants the insurance broker who helped secure the bonding that the contractor defendants needed to bid and obtain the contracts, and the surety that issued bid and performance bonds to the contractor defendants. Scollick alleged that the bonding companies “knew or should have known” that the construction companies were shells acting as fronts for larger, non-veteran-owned entities violating the government’s contracting requirements—and thus the bonding companies should be held equally liable with the contractors for “indirect presentment” and “reverse false claims” under the FCA. This suit appropriately seized the attention of the surety industry, which had never before faced similar claims or the threat of trebled damages liabilities under the FCA. Pursuant to the Miller Act (40 U.S.C. §3131), contractors who bid on government construction contracts are required to post bid bonds (to ensure a contractor will undertake the contract if the bid is accepted), performance bonds (guarantees that the contractor will complete the project per contract specifications), and payment bonds (to ensure that those who furnish labor and materials for the project will be paid). A construction contract cannot be awarded and cannot commence unless the required bonding is in place. Surety bonding is subject to underwriting, which provides government contracting officers with reasonable assurances that the contractor’s organization and financial ability can satisfy the obligations of the construction contract. The claims alleged in this suit have the potential to fundamentally rewrite the “rules of the road” for the underwriting and due diligence requirements for the entire industry. The surety defendants were initially dismissed. United States ex. rel. Scollick v. Narula, et al., 215 F. Supp. 3d 26, 30-31 (D.D.C. 2016). But Scollick amended his complaint to add factual allegations that the bonding defendants necessarily engaged in underwriting and due diligence efforts that should reasonably have revealed that the contractors lacked the skill, resources, and experience to carry out the scope of work, and should have reasonably revealed that these contractors did not qualify for SDVOSB or HUBZone set-asides. Scollick specifically alleged in the Amended Complaint that the bonding defendants “knowingly facilitated the fraud scheme and knowingly caused false claims to be submitted to the government” by providing surety bonds when they “knew, or should have known, that the Defendants were concealing material information from the government” regarding their eligibility for these set-aside contracts. Scollick further claimed that “[h]ad the government known . . . it would not have entered the contracts at issue . . . [and] premiums and fees knowingly derived from the fraud scheme, and thereby indirectly charged to the government, were paid [to the insurer].” In a stunning reversal, the court issued a second opinion in July 2017 reinstating the claims against the broker and the surety on the grounds that the plaintiff-relator had adequately alleged that the bonding defendants had knowledge of the scheme and were sufficiently complicit in the alleged misconduct to allow these claims to proceed against them. Scollick, 2017 WL 3268857 (D.D.C. July 31 2017). Specifically, the court pointed to allegations that the insurance defendants knew or should have known that the contractors were violating federal contracting requirements because the insurance defendants conducted on-site inspections of the contractors’ offices, which would have revealed that there were “shell compan[ies] dependent on the resources and capabilities of [other defendants],” who dominated and controlled the entity held out to qualify for SDVOSB set-asides. Even though neither the broker nor the insurer directly presented false claims or made false statements to the government, the court permitted the plaintiff-relator’s theory of “indirect presentment” to proceed. Notably, the court pointed to specific statements in the bond forms—e.g., Standard Form 25, which states, among other things, that the performance guarantee extends to “all the understanding, covenants, terms, conditions, and agreements of the contract.” In United States v. Sci. Applications Int’l Corp., 626 F.3d 1257 (D.C. Cir. 2010), the D.C. Circuit held that where a defendant fraudulently sought payment for participating in a program designed to benefit third parties rather than the government itself, “the government can easily establish that it received nothing of value from the defendant and that all payments made are therefore recoverable as damages.” Thus, under a Standard Form 25 performance guarantee, a Miller Act surety may incur reverse False Claims Act liability for a bonded contractor’s violation of that guarantee. For more than five years, the surety industry has been watching this case and waiting to see if the Sword of Damocles would actually fall on sureties and brokers involved in issuing Miller Act bonds on government projects. The issues raised by this suit, especially whether insurance companies and brokers might be subject to FCA liability and treble damages if they offer underwriting and Miller Act sureties to contractors who submit fraudulent claims or certifications to the government, have already elevated the stakes and raised a significant flag of caution to brokers and sureties involved in issuing Miller Act bonds on government construction projects. On August 28, 2019, the parties jointly requested a sixty-day stay of proceedings to pursue mediation, which request was granted on September 13, 2019. If the case is not settled at mediation, the parties must submit by November 12 a joint proposal for further proceedings. An adverse outcome against the surety defendants in this case

The Sword Of Damocles Hangs Over Miller Act Sureties And Brokers: Scollick Case Stayed Sixty Days For Mediation, But Outcome Remains Uncertain Read More »

Government Announces Million Dollar Settlement with Surety for Alleged Violations of False Claims Act

In the summer of 2017, a District Judge sitting in the District of Columbia issued a decision holding that a surety could be held liable under the False Claims Act where it becomes aware of facts suggesting that a bonded principal is fraudulently participating in a government set-aside program and nonetheless continues to do business with that principal. United States ex rel Scollick v. Narula, 2017 WL 3268857 (D.D.C. July 31, 2017). Although the Narula decision arose in the context of a motion to dismiss, where the court’s findings are limited to determining the viability of the claims as plead, the decision has drawn close scrutiny (and criticism) from professionals across the surety industry. Many underwriters have exercised additional caution prior to bonding set-aside contractors due, in large part, to the draconian penalties that may be imposed for violations of the False Claims Act, including treble damages. The close scrutiny and additional caution unfortunately appear to have been well-founded. On September 4, 2019, the United States Attorney’s Office for the Western District of North Carolina announced that it had entered into a settlement agreement with a surety to resolve allegations that the surety violated the False Claims Act by bonding a general contractor that submitted false claims to the government for services performed under fraudulently obtained government contracts. The surety agreed to pay $1,040,035.20 to resolve the government’s allegations. The government alleged that South Carolina general contractor Claro Company, Inc. (“Claro”) made materially false, fictitious, and fraudulent statements and representations, or material omissions, to gain entry into and to continue participation in the 8(a) program and that Claro’s surety knew or should have known that Claro was not eligible for 8(a) set-asides. The government contended that the surety knew or should have known that Claro was not controlled by a socially and economically disadvantaged individual, and that it was affiliated with and controlled by another entity and/or individuals that did not meet the SBA’s definition of being socially and economically disadvantaged; that neither the affiliation nor control were disclosed to the SBA; and that Claro made material misrepresentations regarding its financial status to the SBA in order to avoid early graduation from the 8(a) program. The government further contended that despite the foregoing allegations, the surety continued to do business with Claro by bonding its projects and therefore allowing it to continue to fraudulently bid for contracts under the preferences in the 8(a) program. In announcing the settlement, the government acknowledged that the claims resolved in the settlement are allegations only and there has been no determination of liability against the surety. As of this writing, detailed information regarding the government’s investigation and allegations are not publicly available. It is, thus, not clear at this time whether this settlement marks the next step in a trend by the government (and qui tam plaintiffs), which started with Narula, to pursue recovery under the False Claims Act against sureties, or if this settlement is a one-off due to the unique facts and circumstances of the Claro matter. We all hope it is the latter.

Government Announces Million Dollar Settlement with Surety for Alleged Violations of False Claims Act Read More »

bond

More claims about where and when RI biz was ‘operating illegally’

PROVIDENCE, R.I. (WPRI) — A construction bonding company that was recently said to be based in Providence was allegedly “operating illegally” in five states according to an arrest warrant filed in a toxic dumping scandal. Records show Leo Rush, 77, of Pelham, New Hampshire, has owned a number of performance bonding firms, including Newport Insurance Company that listed Westminster Street as its address on its website. Contractors are required to buy bonds to cover the cost of a project if something goes wrong, with the insurer accepting the potential multimillion-dollar risk in exchange for a percentage of the total cost of the project. The bonds protect taxpayers, and state regulators have told Target 12 municipalities are required and expected to check if the bonds are legitimate. Rush pleaded not guilty to five counts of mail fraud and five counts of wire fraud last month in U.S. District Court in New Hampshire for allegedly selling bogus bonds from 2012 to 2019. A warrant executed last summer to search Rush’s New Hampshire home alleged he made more than $1 million in one year around 2007 selling “fake bonds” to companies around the country. The document also stated over the course of about a year, ending last September, Rush deposited approximately $230,000 in sales into his account from “fake surety bonds” sales. The Target 12 Investigators first reported allegations about Rush’s businesses in July 2017, when Coventry developer John Gauvin came forward with claims about a Rush bond he said was “not worth the paper it was written on.” Gauvin had hired Julian Development to clear a large piece of land in Plainfield, Connecticut in 2013, but later discovered the bond the contractor presented to the town was written by Rush’s Great Northern Bonding, which was not licensed in Connecticut. ulian Development co-owner Jason Julian has been arrested in Fairfield in a toxic dumping scandal that also allegedly involved town officials Joseph Michelangelo and Scott Bartlett. The warrant pointed out “Cease and Desist Orders have been issued in Connecticut, Rhode Island, New Hampshire, Massachusetts and Florida, all barring Rush’s companies from issuing insurance.” Gauvin has filed a suit against Julian Development for using a fraudulent bond for his project, and he said he is planning to sue the Town of Plainfield for not inspecting the document. Up until last year, the Newport Insurance website listed the Alice building on Providence’s Westminster Street as its address, but the site now states the company is based in Haiti. The Rhode Island Department of Business Regulation (DBR) told Target 12 in 2017 state regulators had “often frustrating” contact with Rush as far back as 2007 when the first of several cease and desist orders was issued. Rush has told Target 12 multiple times his bonds are legitimate and he has done nothing wrong. Gauvin said his 7-year ordeal has cost him about $500,000 in legal fees, delayed his project by several years and showed how “toothless” cease and desist orders are. “The biggest thing I discovered was how many municipalities, state and federal agencies did not know how to validate a surety bond,” Gauvin said. “Of they just decided to play Russian Roulette and hope that the project goes smoothly.” https://www.wpri.com/target-12/more-claims-about-where-and-when-ri-company-was-operating-illegally/

More claims about where and when RI biz was ‘operating illegally’ Read More »

legislation

Non-Signatory Surety Bound By Arbitration Clause in Incorporated Contract

An arbitration provision in a contract typically applies only to the contracting parties. Where, however, the contract is incorporated by reference into a second agreement, if it is broad enough, the party to the second agreement–although a non-signatory to the original agreement–may find that the arbitration provision applies to them as well. This was the result in a case before the Second Circuit involving a surety on a performance bond. In Federal Insurance Co. v. Metropolitan Transportation Authority, No. 18-3664 (2d Cir. Aug. 30, 2019) (Summary Order), a surety on a performance bond brought suit against the public transportation authorities that contracted with the contractor principal. The public authorities moved to dismiss the claim based on the arbitration clause in the underlying contract. The underlying contract had a broad arbitration clause, which provided that the “parties to this Contract hereby authorize and agree to the resolution of all disputes arising out of, under, or in connection with, the Contract” through arbitration. The underlying contract and all of its terms were expressly incorporated by reference into the performance bond. The district court concluded that the surety was bound by the arbitration On appeal, the Second Circuit affirmed. The court made two significant findings. First, the court agreed that the district court had properly concluded that the dispute was subject to determination under the arbitration provision in the underlying contract. Because the broad arbitration clause was not restricted to the immediate parties, the court held that it was effectively incorporated by reference into the performance bond. The court found the language of the arbitration provision sufficiently broad to bind the surety even though it was a non-signatory to the underlying contract. Second, the court held that the question of arbitrability was for the arbitrator to decide. This was because the contract used “any and all” language when describing the disputes to be resolved, which was “clearly and unmistakably” broad enough to require the issue of arbitrability to be decided by the arbitrator and not the court. https://www.natlawreview.com/article/non-signatory-surety-bound-arbitration-clause-incorporated-contract

Non-Signatory Surety Bound By Arbitration Clause in Incorporated Contract Read More »

Nevada Crypto ATM Operators Now Require Money Transmission License

Nevada’s regulatory stance on cryptocurrency kiosks has shifted, now requiring a state money transmission license Speaking with CoinDesk, BitAML Senior Advisor Annelise Strader said Nevada abruptly and without announcement changed its regulatory stance on cryptocurrency kiosks. Following the last legislation session closing in May without passing a proposed cryptocurrency bill, Strader says the state’s regulatory team changed its interpretation of what constituted a money transmitter within the state. Kiosks must be licensed by the state and will require a surety bond requirement. Priced at $5,000 per kiosk, surety bonds are paid to the state as an insurance mechanism for customers against business failure. Strader first spoke with the state regulator on behalf of a BitAML customer caught in the red tape. Months followed before an answer was given, Strader said. Following up with the Nevada Division of Financial Institutions, state regulator Julie Hanivold said they were waiting on the cryptocurrency regulation bill to pass before taking action. The regulator began reviewing the matter one year ago. With the bill failing to pass, the regulator self-determined to reinterpret current statutes concerning state money transmissions. Under the new interpretation, any transfer of value–money, credit, virtual currency, or other–falls under the license. Businesses and proprietors must apply and complete a checklist to obtain a license. Included in the list is a surety bond requirement of $10,00 upfront plus $5,000 for each location. Bond requirements max out at $250,000. Hanivold said all requirements are publicly posted on the state’s website but they have no future plans of issuing a press release on the matter. The regulator does plan on calling back a dozen or so businesses that have inquired over the past year. Paraphrasing her conversation with Hanivold and confirmed by CoinDesk, Hanivold said: “We’re not going to go hunting and penalizing any kiosks, but six months down the road if any action hasn’t been taken, [we will begin notifying owners.]” https://www.coindesk.com/nevada-cryptocurrency-kiosks-now-require-money-transmission-licenses

Nevada Crypto ATM Operators Now Require Money Transmission License Read More »

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

Surety bonds required for dentists enrolled as DMEPOS suppliers Read More »

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/

Performance Bonds – Will the Liability Ever End? Read More »

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

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

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/

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

Scroll to Top
Document