Grace Winkler Cranley and Michael J. Weber, counsel and partner with Dinsmore & Shohl LLP, have penned a great piece on the “novel scenarios” that this new “novel virus” has presented surety companies, contractors and project owners. The eight hundred pound gorilla in the room is clearly identified by these authors, “A surety faced with bond claims due to a declared default of its principal or interruption of performance due to the pandemic needs to address additional issues beyond the more traditional decisions made to assess the liability of its principal and the surety’s bonded obligations.” A bonding company’s appetite for contract surety bonds may be constricted depending on how defaults are negotiated between the interested parties or ultimately settled by the courts.
Check out the complete piece at The COVID-19 Potential Impact on Contract Surety. Certainly this is one of the first of MANY that will consider the ramifications of the current pandemic-driven crisis, and timely it is. COVID-19 is likely NOT the last serious threat that the construction industry will face in the coming decade.
Contract surety bonds guarantee obligations related to specific contracts, both construction and commercial services. A bid bond Is a bond which provides financial assurance that the bid has been submitted in good faith, that a contractor will enter into a contract at the amount proposed, and will provide the appropriate performance and payment bonds if so required. These bonds are used by obligees (project owners) to pre-qualify contractors that submit proposals. A performance bond guarantees performance of the terms of a contract. These bonds frequently incorporate payment bonds (labor and materials) as part of the contract surety bonding package. A payment bond guarantees the payment of subcontractors, laborers, and materials suppliers associated with a project. Payment bonds are issued for the protection of those parties that supply labor or materials and to eliminate the likelihood that they will file mechanic’s liens against the project property. A maintenance bond guarantees upkeep (maintenance) of the completed project for a specified period of time after completion. These bonds provide protection for defective workmanship and materials.National surety bond leader, Surety One, Inc. is a specialist in providing for the bonding needs of general and specialty contractors. We offer contractor surety bonds, i.e., performance bonds to all applicants in EVERY state. Call (800) 373-2804 or email Underwriting@SuretyOne.com to discuss your particular needs.