PIDC’s Small Contractor Workshop Series Tips

With more construction opportunities becoming available in the public and private sectors in the City of Philadelphia, PIDC hosted a 4-part Construction Workshop series to provide small contractors with the necessary tools for lasting success. Part 3 of the series was titled Understanding Contract Surety Bonding: An Orientation for Small Contractors led by strategic partner Ellen Neylan, President of Surety Bond Associates. This workshop covered the fundamentals of qualifying for construction bonding, determining costs, positioning your company for increases in bonding lines, and avoiding defaults.  It also covered how to choose the right bonding company for your growing needs.

PIDC offers a specific financing product for small contractors. The Contract Line of Credit Loan provides support to small, minority, women, veteran and disabled-owned businesses that need a line of credit to fund contract-related working capital.

To learn more: PIDC Small Contractor Workshop Series

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Bonds: An Important Weapon In Any Contractor’s Arsenal

It is vital that construction contractors, regardless of tier or trade, understand the basic principles of contract surety bonds. An understanding of how bonds are used in construction; and, importantly, how the surety company prequalifies the contractor is critical. Surety Bonds are mandated by various federal, state and local laws, but may also be required by the private sector as well. Recently, as part of WIPP’s Give Me 5 webinar series, bonding specialist Ellen Neylan owner of Surety Bond Associates, along with construction counsel, Jennifer M. Horn and Maria Panichelli of Cohen SegliasPallas Greenhall & Furman PC, discussed these issues in detail. Below are some highlights of the discussion.

The Performance Bond secures the contractor’s promise to perform the contract in accordance with its terms and conditions, at the agreed upon price, and within the time allowed. The Payment Bond protects certain laborers, material suppliers and subcontractors against nonpayment. Since mechanic’s liens cannot be placed against public property, the payment bond may be the only protection these claimants have if they are not paid for the goods and services they provide to the project.

In order to obtain a bond, the contractor must be prequalified. Sureties should not bond a contractor that does not meet their prequalification standards. The surety company’s pre-qualification process carefully analyzes the contractor’s entire business operation, much like a bank, because the surety is backing the promise that the contractor will perform the contract. The surety determines the contractor’s ability to meet current and future contract and financial obligations.

The parameters of bonding on a project are often dictated by the law. For example, the Federal Miller Act requires surety bonds for the “construction, alteration, or repair of any public building or public work of the United States for an amount greater than $100,000.” When filing surety claims against Miller Act bonds, subcontractors should be aware that timing is critical. Even though no notice is required, first tier subcontractors must wait 90 days from non-payment to give the bond principal a chance to make payments. In addition, all suits must be filed within one year of last work performed or materials supplied. It’s very important that the claim notice clearly state the amount being claimed, the name of the party to whom labor or supplies were provided, and that the subcontractor is making a formal claim against the bond principal.

The Surety will not pay claims without regard to their merits, but it should be expected to respond to claims promptly and, if denying a claim, offer an explanation. Finally, the Surety, with the aid of legal counsel, can assert all defenses of its bond principal, unless precluded by bond or contract language. Examples of defenses might include: breach of contract; recoupment/setoff; and failure to mitigate damages.

For more detailed information about this important topic, tune in to the recent webinar:

Construction – Bonding and Liens

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Surety Bond Associates Welcomes Commonwealth Insurance Company Customers

Surety Bond Associates is pleased to announce their commitment to former customers of Commonwealth Insurance Company by replacing their cancelled surety bonds.

Surety Bond Associates, also located in Bala Cynwyd PA, is a full service surety bond agency providing specialty surety bond services to small and mid-sized contractors, including dedicated programs and services for minority, women and veteran owned contractors.

“We are thrilled to welcome former customers of Commonwealth Insurance Company to the Surety Bond Associates family”, said Ellen Neylan, President of Surety Bond Associates. “As a veteran of the surety business for over 25 years, I understand how frustrating it must be for these businesses to navigate through the process of finding a surety partner willing to help them pick up the pieces and quickly replace their surety bonds. We represent numerous surety companies and are prepared to begin servicing the bond needs of former Commonwealth Insurance customers immediately.”

Contact Surety Bond Associates

For more information, contact Ellen Neylan at 610-617-1052 or ellen.neylan@suretybondassociates.com.

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Commonwealth Insurance Company of Bala Cynwyd PA in Liquidation

The Pennsylvania Insurance Department issued an order on March 19, 2014 to liquidate the Commonwealth Insurance Company of Bala Cynwyd PA.  The order was unanimously approved by Commonwealth Insurance’s board of directors and sole shareholder.

The failure cancelled surety bonds of many construction contractors and other businesses effective April 19, 2014, possibly leaving taxpayers liable to cover some of the firm’s losses.

Surety Bond Associates, also located in Bala Cynwyd PA, is a full service surety bond agency providing specialty surety bond services to small and mid sized contractors with a particular focus on minority, women and veteran owned contractors.  Surety Bond Associates is prepared to service the bond needs of former Commonwealth Insurance customers.

Contact us today to expedite replacement of your bond program.

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New $75,000 Freight Broker Bond (formerly $10,000 ICC Broker Bond)

When Congress recently passed the “Moving Ahead for Progress in the 21st Century, this sweeping legislation included extensive changes regulating the activities of Freight Brokers by the Federal Motor Carrier Safety Administration (FMSCA), including replacement of the former $10,000 ICC Broker Bond (BMC-84) with a new $75,000 Freight Broker Bond. In addition, Freight Forwarders, who were never subject to this requirement, must now also fulfill this $75,000 requirement.

The implementation date of October 1, 2013 is approaching fast, however, FMSCA will provide Freight Brokers and Freight Forwarders until October 31, 2013 to file the new bonds. On November 1, 2013, FMSCA will review its system to determine which Freight Brokers and Freight Forwarders have not yet filed the new bonds. FMSCA then will send letters to these entities, which will have 30 days from the date of the letter to file the new bond.

The new requirement will be effected by filing a new bond form (BMC-84) to replace the existing form. FMSCA is revising the form to reflect the new amount and to include Freight Forwarders. The new form will be posted to FMSCA’s website by October 1, 2013. A Freight Broker or Freight Forwarder that operates without registering could be fined as much as $10,000.

The new $75,000 Freight Broker / Freight Forwarder Bond will ensure compliance with the rules of the FMCSA, including timely payment. The law provides that the surety bond “shall be available” to pay any claims against a Freight Broker (or Freight Forwarder) for failure to pay freight charges if: 1) the broker consents; 2) the broker does not respond and the surety determines that the claim is valid; or 3) the claim is not resolved in a reasonable period of time and it is reduced to judgment against the broker.

Surety Bond Associates is a market for the new $75,000 Freight Broker / Freight Forwarder Bond. Apply now to avoid the $10,000 fine.

To receive a Quote, complete our Online Application today.

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Maryland Church Fights Unlicensed Individual Surety Over Bond on Failed Project

The Korean Seventh-day Adventist Church was supposed to be in business in Columbia by now.

The church’s 150 members signed a deal, put money down and watched bulldozers roll. But construction stopped in late 2008 and the congregation never recouped its investment. Thanks in part, church officials say, because a bond that was supposed to insure the project didn’t pay off. The worshippers now borrow a building from a sister church, meeting in the afternoon after the other congregation worships in the morning.

Where prayer fails, sometimes regulation succeeds. The church’s problems are being held out as evidence that the state needs to increase oversight of wealthy individuals guaranteeing small contractors who can’t get backing from licensed corporate surety companies.

These “individual sureties” and their brokers are pushing back, seeking legislation that would allow them to continue to back construction without regulation by the Maryland Insurance Administration.

For more information, click here

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Higher Surety Bond Guarantees will Help Small Businesses Secure Larger Contracts

The U.S. Small Business Administration has made regulatory changes to its Surety Bond Guarantee Program, including higher surety bond guarantee limits up to $10 million that will help construction and service sector firms secure larger contracts for work in areas impacted by disasters.

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New York Motor Vehicle Dealer Bond

SB 2913 would subject mobility dealers to the existing licensing and bond requirements for motor vehicle dealers. Mobility dealers are those who sell more than five mobility vehicles in a year. Such vehicles are specially equipped to transport a person with a disability and include mechanical devices such as wheel chair lifts or ramps. Current law requires motor vehicle dealers to post a $10,000 bond if they sold less than 200 vehicles in a calendar year, and a $25,000 bond is required if the dealer sells more than 200 vehicles in a calendar year.

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California Debt Service Provider Bond

SB 708 would require debt settlement service providers to be licensed and post a $200,000 surety bond conditioned on the licensee’s compliance with the proposed law. The bond would secure the payment of any funds owed to persons damaged by the provider s noncompliance with the law or any funds owed to the State for violations. An insurer authorized to do business in the State would have to issue the bond.

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Maryland Debt Service Provider Bond

SB 741/HB 1022 would require debt settlement service providers to register and obtain a $50,000 surety bond. The bond would have to be issued by a surety company authorized to do business in the State. The bond would be conditioned on compliance with the applicable state and federal laws and regulations. Both chambers passed a bill and later passed a conference committee report containing these bonding provisions.

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