Archive for May, 2012

Change Orders Should Trigger Surety Bond Riders

Written by Surety Bond Expert on May 25th, 2012. Posted in Bond Types, Contract Bonds, Payment Bonds, Performance Bonds, Surety Bond Blog

 * Cheney Stadium, Tacoma, WA *
* Cheney Stadium, Tacoma, WA *

Baseball stadium project in Washington highlights surety bond risks in construction project change orders

Generally speaking, contract bonds (i.e. performance bonds) are issued for a specific project amount. A $10 million school renovation will require a $10 million surety bond. But what happens when the general contractor submits requests for change orders that result in cost increases over the $10 million? If the bond language does not specifically waive any notification requirements to the surety underwriting the bond, you can assume that additional coverage will be needed in the form of riders. But what if the bond provides a notification waiver and allows “authorized additions” to the contract, meaning the project additions can be completed without notifying the surety? Let’s say the GC on $10 million school project gets approval for a $250,000 change order form the school board. Does the performance bond amount automatically increase to $10,250,000? Not necessarily, according to Matthew Bouchard, partner with the law firm of Lewis & Roberts, P.L.L.C. in Raleigh, North Carolina, who recommend contract riders for any change orders. Mr. Brouchard states that surety bonds fall within the Statute of Frauds, and that “the dollar limit or ‘penal sum’ of the surety’s exposure is an essential component of the bonding company’s obligation, and therefore not susceptible to automatic increase.” One project where change orders went through without additional bond coverage is the Cheney Stadium project in Tacoma, Washington, home of the Tacoma Rainers. According to Washington State auditors, Tacoma city managers failed to require the general contractor to obtain a performance bond increase for $2.2 million in change orders that were approved for the original $23 million project, thus putting the city at risk for $2.2 million. Every state is different in how they may interpret the Statute of Frauds as it relates to surety bond contracts. But if you’re a obligee (project owner), it certainly is in your best interest to make it explicitly clear that any and all change orders require surety bond riders. As Mr. Bouchard wrote, “better to be safe than sorry.”

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Are You Driving Without Insurance?

Written by Surety Bond Expert on May 17th, 2012. Posted in Motor Vehicle Bonds, Surety Bond Blog

 * Car insurance still makes sense *
* Car insurance still makes sense *

If you are licensed in Ohio, California, Tennessee, Washington, Texas or New Hampshire, then it’s OK, with conditions.

As shocking as it sounds, some states do not require drivers to have a car insurance. Now, before your blood begins to boil, let’s take a closer look at the actual requirements for two of these states. Driving without car insurance doesn’t mean the same thing as driving without financial responsibility, unless you live in New Hampshire. So what are the requirements for these states that don’t have MANDATORY insurance requirements? We pulled some information from a recent MSN Money article on the subject.

New Hampshire

As long as you have not had a previous at fault accident, you do not need car insurance OR proof of financial responsibility in New Hampshire. More specifically, for 3 years from the date of a conviction and/or involvement in an automobile accident, or an administrative action otherwise requiring proof, a person is required to have an SR-22 insurance certificate in New Hampshire in order to operate a motor vehicle. Also, a second DUI will cause the same requirements to kick-in. If you are a responsible individual in New Hampshire, you are expected to obtain your own car insurance. In addition, you are expected to obtain uninsured motorist insurance. So when an uninsured motorist slams into you you and destroys your car, your uninsured motorist coverage is expected to pay for it. It makes sense, if you think about it. Shift all the responsibility away from people who don’t have any (responsibility) to begin with, and burden the rest of the people. It’s sounds a lot like welfare. James Van Dongen of the New Hampshire Department of Safety says the people without any insurance “tend to be people with lower incomes, or they’re young kids.” You gotta love New Hampshire!


Car insurance might not be mandatory in California, but it is the preferred method of meeting the state requirements for financial responsibility. Californians have a few options to meet the criteria set forth for drivers. Option one entails obtaining automobile liability insurance with the following minimum coverage limits:
  • Coverage of $15,000 for injury to one person
  • $30,000 to cover more that one person
  • $5,000 for property damage
Another option for drivers to prove financial responsibility is to post a surety bond in the amount of $35,000. Persons choosing this option would obtain a bond from a broker like for the required amount. Typically for people with good credit, the cost would be roughly $700. now surety bonds are much different that insurance. With insurance, if you have an accident, your liability insurance would cover most costs associated with the other drivers. With a surety bond, you are personally liable for up to $35,000! Several other options to meet California requirements include posting the full $35,000 via a cash deposit with the California Department of Motor Vehicles, or you could get a self insurance certificate from the DMV.

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New Motor Vehicle Dealer Bond Legislation in Iowa

Written by Surety Bond Expert on May 15th, 2012. Posted in Commercial Bonds, Iowa, Motor Vehicle Bonds, Surety Bond Blog

Iowa State Capital
* Iowa Legislature *
Legislative Detail: IA House Bill 2122 – 84th General Assembly The State of Iowa is considering HB 2122, introduced by Representative Dawn Pettengill and Representative Lee Hein, is “a bill for an act relating to motor home dealer and manufacturer licensing and the business hours of recreational vehicle dealers, making a penalty applicable, and including effective and applicability date provisions. Iowa HB 2122 would require motor home dealers to submit a dealer surety bond in the amount of $50,000 for their dealer licensing. The bill provides that the surety’s aggregate liability would be limited to the penal sum of the bond. The bill was introduced on January 26, 2012.

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