Risk Issues in Bond Forms and Project Agreements

  • Beware of Inadequate or Fraudulent Surety Bonds - This article, coauthored by NASBP's General Counsel and Director of Government Relations, Mark H. McCallum (now NASBP's CEO), and SFAA’s General Counsel, Edward G. Gallagher, is reprinted with permission from a special advertising section in Engineering News-Record. Full ENR Surety Supplement
     
  • Know Your Bond Before You Sign - This article, coauthored by NASBP’s General Counsel and Director of Government Relations, Mark H. McCallum (now NASBP's CEO), and SFAA’s Director of Underwriting and Assistant Counsel, Robert J. Duke, provides insight to terms of a bond form, such as language that triggers the surety's liability, varies the burden of proof, increases the surety's monetary liability beyond the original penal sum of the bond, limits the surety's response options, and lengthens the time the surety remains liable. This article was published in the November 2008 issue Construction Business Owner magazine.
     
  • Contract Terms and Conditions from a Surety Perspective - This article, coauthored by NASBP’s General Counsel and Director of Government Relations, Mark H. McCallum (now NASBP's CEO), and SFAA’s Director of Underwriting and Assistant Counsel, Robert J. Duke, describes how a surety company typically reviews the terms of a construction contract to determine its exposure under a performance bond. This article was published in the June 2008 issue Construction Business Owner magazine.
     
  • Getting Directly to the Point of the Contested Matter: Dispute Mitigation & Resolution in ConsensusDOCS Construction Forms - This article, written by the NASBP's General Counsel and Director of Government Relations(now NASBP's CEO), Mark H. McCallum, describes how the ConsensusDOCS forms use a multi-method, graduated approach to defuse project disputes and how their approach precludes a role for the project design professional as initial arbiter, a point of departure from other industry standard form families. The article was published by the American Bar Association's Fall 2008 Forum on the Construction Industry.
     
  • The Importance of Surety Bond Verification - This article, coauthored by NASBP's CEO, Mark H. McCallum, and SFAA’s General Counsel, Edward G. Gallagher, is reprinted with permission from the American Bar Association. The article is from the Public Contract Law Journal, Vol. 39, No. 1 Winter 2010.
  • The Advantages of ConsensusDOCS Developed Standardized Agreements -This article, coauthored by NASBP's CEO, Mark H. McCallum, and SFAA’s Associate Counsel, Robert J. Duke, addresses the attributes of the ConsensusDOCS forms that set them apart from other standarized forms. The article was published in November 2009 issue of Construction Executive magazine. 
     

  • “Snakes in the Grass: Understanding Contractors' Risk Management and Insurance”

    Most sureties have identified “deal killer” issues that present undue risk to the client’s bottom line or to that of the surety. There are similar risk management and insurance issues that present undue risk to the client’s bottom line or to that of the surety, including the following:

    • Manuscript or restrictive additional insured endorsement from subcontractors;
    • Exclusions in the Commercial General Liability (CGL) policy such as broad residential exclusions, subsidence exclusions which also exclude bodily injury;
    • Joint venture exclusions showing up in the CGL and excess policies;
    • Non-drop down provisions in the excess when there is a broader underlying policy;
    • OCIP (Owner Controlled Insurance Policy) programs with short completed operations tails, low limits, or limits shared between dissociated projects, and unfunded self-insured retentions; and
    • Pollution policies which include mold coverage, but exclude it for damage to the work in progress.

    Do not overlook insurance coverage as an important avenue of financial protection and financial risk. It is essential to dig into the details of each policy and to make sure that the insurance underwriter has clarified any coverage questions and that the client has adequately sought solutions to protect themselves from uninsured or unfunded exposures that can materially impact the client’s financial statement.