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Maryland individual-surety extender bills fail to advance as legislative session ends

  

NASBP scored a major state legislative victory this week, as two bills it opposed failed to pass the Maryland Senate by the conclusion of the legislative session.

The bills' failure to advance ended the chances for “an extension of the 2006 law permitting the use of individual surety bonds on state and municipal construction projects,” said Larry LeClair, Director of Government Relations for NASBP.

“NASBP wishes good riddance to the 2006 law as it never benefitted small businesses, but instead left them vulnerable to unregulated and unscrupulous individual sureties,” LeClair said.

The 2006 law allowed individual sureties to write bonds at the prime contract level for Maryland public works projects without having to obtain a certificate of authority from the state insurance commissioner. Two extender bills, S.B. 851 and S.B. 377, would have pushed the law's sunset back five years to 2019, instead of this September.

S.B. 851 also would have allowed individual sureties to undergo a registration process instead of obtaining a certificate of authority, as would be required of a corporate surety.

Jack Andryszak, a lobbyist retained by NASBP to fight the bills, said that a certificate means a surety is subject to the same regulations as any insurer in the state. A registration system would not be the equivalent of a certificate of authority, and the measure therefore was “a tiger with no teeth” in terms of regulating individual sureties, he said.

NASBP pointed to a 2013 Maryland Insurance Administration study that recommended the law be allowed to sunset this year. The study also cited cease-and-desist orders against individual sureties in various states, and said only two Maryland projects involved bonds from individual surety bonds since the law took effect.

Andryszak, a partner of the law firm of Popham & Andryszak, P.A., said the 2006 bill “had what the sponsor felt was a legitimate purpose,” which was to help smaller contractors obtain bonding. But the individual surety law amounted to a “failed experiment,” and the chance of it being revived in future legislation “is greatly diminished,” he said.

Resources are available to help smaller and emerging contractors position themselves to become bondable, noted LeClair. Those include NASBP resources, such as SuretyLearn.org, bonding programs through the U.S. Small Business Administration’s (SBA) Office of Surety Guarantees, and state programs, such as the Maryland Small Business Development Financing Authority.

In addition, observed Andryszak, some sureties are gearing their businesses to focus on small contractors.

“Not every contractor is qualified to receive surety credit but the surety industry, the producers, are making outreach efforts to assist those smaller contractors in reaching their goal of qualifying for surety credit,” Andryszak stated. “The more people who can qualify for bonds the more business we write,” he added.

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