Washington surety professionals volunteered their time, knowledge, and expertise by answering questions about the surety industry and promoting the continuation of bonding requirements by state governments and local jurisdictions. NASBP Government Relations Director, Connie Lynch, and SAA’s Vice Present for Government Relations, Lenore Marema, also were present to answer questions.

Many thanks to the following volunteers:

Hani Rizkalla — SAFECO

Walter Weller — Marsh

            Larry Newton — Bush, Cotton & Scott

Helen Lally — Great American

Brian Schick — CBIC

Ed Bennett — ICW Group

Kip Vandeventer — Bratrud Middleton Ins. Brokers

Stacy Cutbirth — Bratrud Middleton Ins. Brokers

Visitors to the industry’s booth received NASBP, SAA, and SIO brochures and a chance to win a Seattle “monopoly” game. Game winners included: MN Representative Debra Hilstrom, District 46B;  NM Senator Ben D. Altamirano; Virginia Delegate Kenneth R. Plum, District 36; Ryan Miday, Legislative Director for New York Assemblyman Jeffrey Dinowitz; and, Michael Lucchi, a Monopoly enthusiast and the son of MD lobbyist Leonard Lucchi, who waited until after the exhibition was over to see if his dad was one of the winners. Follow-up letters describing surety issues and concerns for next year’s 2006 state legislative sessions will be sent to all attendees who stopped by the booth.

NCSL is a national, bipartisan organization dedicated to serving lawmakers and staffs of the nation’s 50 states, commonwealths, and territories, and is the largest association of its kind.

Next year’s NCSL meeting will take place August 16-20 in Nashville, TN, and the 2007 meeting will take place August 5-9 in Boston, MA. Surety professionals will be asked to follow their 2005 colleagues in volunteering for booth coverage.

Two Level I Summer Surety School Graduations!

The Red Team Outstanding Student was Jennifer Wise of The Gray Casualty & Surety Company in Metairie, LA.  Wanda Battles of Zurich Surety in Dallas, TX was named as the Yellow Team’s Outstanding Student. Photos of award recipients are below.

Congratulations to all graduating students!

The Arkansas Department of Insurance announced the FAQs after the article regarding the disclosure of producer compensation was published in the July-August issue of Pipeline.  

• ACCE staff, its Board of Trustees, and Committees;
• Membership categories and application;
• Calendar of events and meeting minutes;
• Accreditation process and accredited programs; and
• Construction career information.

Mark Benjamin, Morley Builders, Santa Monica, CA, was elected President of ACCE at its Annual Meeting July 20-23 in Providence, RI. Robert Segner, Professor at Texas A&M University, is Vice President. SIO is an Organizational Member, but will become an Association Member in 2006 and serve on the ACCE Board of Trustees. Marla McIntyre, SIO’s Executive Director, is a member of the Guidance Committee, which identifies potential candidates for accreditation and provides advisory services to them. She is also a Vice Chair of the Development Committee and is instrumental in developing and implementing a new marketing plan for ACCE.

How can you help ACCE?

• Join as an Individual Member ($150) or Organization Member ($1,500)
• Contribute to the Dan and Jehnell Dupree Construction Education Fund;
• Speak at ACCE accredited colleges and universities (use SIO’s materials and presentations for students);
• Make your contractor clients aware that graduates of ACCE accredited programs have completed coursework that prepares them for the challenges of construction.

Owners – Sample COAA Benefits with Special Mid-Year Membership Rate

Do you know any public or private owners who would benefit from membership in the Construction Owners Association of America (COAA)? Through October 15, 2005, COAA is offering a $125 membership good for the remainder of the year. Annual membership for owners is $350 for a full year. This is a great way to “sample” COAA membership benefits, which include the Fall Leadership Conference, Owners Perspective Magazine, an e-newsletter, free COAA Contract Documents, and more. For specifics, go to www.coaa.org and click on “Membership.” To obtain the special rate, the owner should indicate the Surety Information Office as the Associate sponsor. Membership for non-owner members is $1,000 per year.

COAA’s Spring Leadership Conference is November 9-11 in San Antonio, TX. SIO is an Associate Member. McIntyre serves on the Membership Committee and attends COAA’s spring and fall meetings.

COAA’s mission is to bring balance to the construction process by:

• Promoting partnerships and construction relationships with all parties in the construction process;
• Representing owners as a collective voice;
• Identifying and supporting the interests of its membership;
• Developing resources for owners, including contract documents; and
• Educating members through training, meetings, and publications.

My predecessor, Craig Hansen, initiated the MarshBerry resource during his year as President to provide our membership with benchmarking data on their surety operations (as opposed to surety being lumped into commercial lines), and to also provide insight into the subject of perpetuation. The initial year of this program has yielded some very interesting results. Here are some statistics that were generated from surveys of NASBP agents/brokers:

· 97% of current shareholders in NASBP agencies will be at or near retirement age in less than 10 years

· 45% have not transferred any stock in the past 5 years

· 37% have no perpetuation plan in place

· 81% intend on perpetuating, but almost 50% of the respondents do not have a funding plan in place for the perpetuation.

Our membership represents a high percentage of surety professionals in the business, and so these numbers are very significant. Throughout Craig’s term, he often noted that the opportunity for the surety professional has never been better. If one looks beyond the next year or so, who could argue with Craig’s comment, particularly given these statistics?

Volumes have been written on this subject, and the recent presentations by MarshBerry at the Regional Meetings provide a succinct and useful resource for our members to use when comparing their agencies to the MarshBerry information. I’d like to suggest that the younger members of NASBP should understand this issue, and become involved in the process. MarshBerry’s statistics also state that one in three producers truly succeeds, and it takes two buyers for every seller in an agency. High performance is needed, but the rewards can be tremendous. And, surety carriers are looking to partner with those producers who have plans in place and will be able to maintain a high level of performance on their behalf.

Younger producers cannot become candidates for agency perpetuation by themselves. Programs that develop and mentor the future leaders of an agency are essential and must be developed and energetically implemented by the older generation! Great success can be achieved for all players when the process is implemented effectively, and that is why the opportunity is so significant for the surety professional. There will be less people doing what we do in the future, but the economic value of our business should continue to grow. Technology will continue to transform our business, and those who set themselves up to take advantage of the new systems will be more productive and competitive than those who do not. As always, one’s education and resourcefulness will be a key differentiator. NASBP is focused on these areas, and we want to help you perpetuate your business.

A top priority for our members needs to be the development of leadership within their companies. Leadership by those who have a vested interest in the companies they own and build is essential for the long-term success of our current business model. The statistics indicate that the opportunity for those who are willing to dedicate the resources to this effort has never been better. We will continue to provide our members with data to facilitate their strategies in this area. As usual, Craig’s instincts were right on target!

Regional Meetings

Thank you to all of the members that attended the Regional Meetings in Vail, Baltimore and Las Vegas. Your hospitality was wonderful, the programs were well-designed, and the attendance at the business sessions was great. I’d like to extend a special thank you to the companies that sponsored various events at the meetings; our membership appreciates your support, and your commitment to our businesses!

My sense is that things are continuing to settle down. The economy, overall, is generating good activity, and our industry’s financial performance is improving. I specifically asked members at all of the meetings what the big issues were, and the top vote getters were: capacity for large programs, capacity for small contractors, producer compensation (in some areas), and the search for good people. The surety carriers were almost unanimous in their concern about the need for new blood in the agency/brokerage ranks, and suggested that a producer’s continuity plan is a key factor in their business planning process. Subcontractor default insurance continues to be of interest, particularly as it relates to where a completing surety would need to make a claim on the policy. In summary, we are working hard to reestablish our foundation through profitability and solid business practices, and those efforts appear to be generating improved results.

Ed Heine is Executive Vice President for the Payne Financial Group in Missoula, MT. He can be reached at  eheine@pfgworld.com.

The Councils adopted almost all of the recommendations proposed by a coalition comprised of the NASBP, American Insurance Association (AIA), Associated General Contractors of America (AGC), and The Surety Association of America (SAA) in its response to the proposed rule.

Specifically, the highlights of the new rule state that:

· “Any person signing a bid bond as an attorney-in-fact shall include with the bid bond evidence of authority to bind the surety.

· “An original, or a photocopy or facsimile of an original, power of attorney is sufficient evidence of such authority.

· “For purposes of this section, electronic, mechanically-applied and printed signatures, seals and dates on the power of attorney shall be considered original signatures, seals and dates, without regard to the order in which they were affixed.

· “The contracting officer shall: (a)Treat the failure to provide a signed and dated power of attorney at the time of bid opening as a matter of responsiveness; and (b)Treat questions regarding the authenticity and enforceability of the power of attorney at the time of bid opening as a matter of responsibility. These questions are handled after bid opening.”

The new rule makes it clear that if a power of attorney is not signed and dated, a contracting officer may throw out the bid. The new rule ends with procedures and criteria for the contracting officer to follow in determining authenticity and enforceability of the power of attorney, which may take place after bid opening.

This announcement is a victory for the surety and construction industries! NASBP members are encouraged to read the complete rule that can be viewed by clicking here.

Questions about the final rule should be directed to Connie Lynch, Director, Government Relations, at clynch@nasbp.org or 202/464-1173.

We devote a lot of this column to reinforcing the principle that the language in a bond makes a difference. There is no better example of this than the recent decision by Maryland’s Court of Appeals, that state’s highest court, in Nat’l Union Fire Ins. Co. of Pittsburgh v. David A. Bramble, 879 A.2d 101 (Md. 2005). In that case, the court strictly enforced a provision in the American Insurance Association’s (AIA) A312 payment bond form that obligated the surety to answer a claimant’s payment demand within 45 days and state the reasons for the surety’s failure to pay any claimed amounts.

The case concerned the claims of two subcontractors that alleged they were unpaid by the general contractor. Both made claims to the surety. In response to the claims, the surety sent a reply stating that it would investigate the claims and contact the claimants later. The surety did not pay the claims and failed to provide a reason for not paying within 45 days, as required by the payment bond.

The Maryland Appellate Court held that both subcontractors were entitled to judgment in the full amount of their claims based solely on the surety’s failure to answer the claims within 45 days. As such, the surety was denied the opportunity to assert any defenses to the subcontractors’ claims.

The lessons from this case are worth the attention of everyone in the surety industry.

· First, courts will hold the parties to the terms of their bargain. A bond is a contract and the failure of a party to do what is required by that contract may lead to liability; and

· Second, contractors and sureties need to treat bond claim notices, subject to a response provision like that found in the AIA A312 form, like a lawsuit. The failure to respond promptly could become, in effect, a “default judgment” against the surety, and the contractor via its indemnity agreement.

Surety bond producers have the opportunity to make their contractor customers aware of the problems posed by the Bramble decision. When contractors and sureties know and understand the responsibilities imposed by the AIA A312 bond form, and other forms modeled after it, they can take the steps necessary to avoid the pitfalls of letting claim notices slip through the cracks.

NASBP’s General Counsel is Susan McGreevy of Husch & Eppenberger LC, Kansas City, MO.

On August 15, 2005, the Small Business Administration (SBA) published a notice in Volume 70, Number 156 of the Federal Register regarding its intent to increase the guarantee fee on bonds, provided by sureties through the Surety Bond Guarantee Program (SBGP). To cover the expenses and liabilities of the SBGP, SBA charges a guarantee fee to participating small businesses and sureties.

SBA’s proposal would have raised the fee charged to sureties from its current level of 20% to 32%; this increase would not be charged to the small business participants. The proposal came about as a result of a prospective study, which revealed that the proposed increase was necessary to enable the SBGP to be self-supporting in the coming years and reduce the likelihood of needing a bailout from Congress. A 30-day comment period was provided, and the fee increase was to go into effect on October 1, 2005.

The SBA received a total of 38 written comments responding to the proposed fee increase. Two commenters supported the fee increase, while 36 opposed it. Three responses were from industry associations including NASBP’s letter and one jointly signed letter from the American Insurance Association and The Surety Association of America; three surety companies (each one a participant in the SBGP); 18 contractors (who have or had SBA guaranteed bonding through the SBGP); 13 surety “agents;” and one Certified Public Accountant. NASBP’s letter and the AIA/SAA joint letter strongly opposed the fee increase because of the potential damage the action could cause in serving as a disincentive to sureties to continue their participation in the program.

The September 28, 2005 issue of the Federal Register (Vol. 70, No. 187) contained the SBA’s final decision regarding the fee increase. Ultimately, the SBA decided to delay the implementation of the fee increase for six months to April 3, 2006. The reason for the delay? The SBA “believes that the expected increase in bond activity due to Hurricane Katrina justifies postponing the effective date of [the] fee increase…to permit SBA, Sureties, and small businesses to operate under the existing framework in the aftermath of Hurricane Katrina.” To view the entire final rule, click here.

NASBP Members Rise to Maroney’s Challenge

This year began the two-year election cycle for contributing to political action committees, such as NASBP’s SuretyPAC. Earlier this year, Chair Bill Maroney, City Underwriting Agency and NASBP’s Third Vice President, challenged more Association members to make donations to SuretyPAC and asked returning contributors to dig deeper into their pockets and increase their donations from the previous election cycle in 2003 and 2004.

The results? So far this year over $16,000 has been contributed to SuretyPAC as compared to the same point in time in the 2003-2004 election cycle when only $11,576 had been donated.

Bill would like to thank and recognize the following members who have contributed so generously this year and encourage others who have not yet contributed to consider making a donation as explained on the attached information form:

$100+ Agencies

Armitage & Co.; Elmont, NY

Howard Cowan Bond Agency, Inc.; Lubbock, TX

K and S Insurance Agency; Rockwall, TX

Minick & Company, Inc.; Albuquerque, NM

Gold Club Contributors ($500 or more)

Will Burke; Burke Insurance Group, Inc.; Las Cruces, NM

A. Howard Cowan; Howard Cowan Bond Agency; Lubbock, TX

Richard W. Daiker; K and S Insurance Agency; Rockwall, TX

Carl Dohn, Jr.; Dohn & Associates; Palatine, IL

Rod Higgins; Higgins & Rutledge Insurance; Boise, ID

Marla D. Hill; Howard Cowan Bond Agency; Lubbock, TX

Dick Minick; Minick and Company; Albuquerque, NM

William Maroney; City Underwriting Agency, Inc.; Lake Success, NY

John Rindt; JDW Insurance; El Paso, TX

Dominick J. Scotto; Armitage & Co., Inc.; Elmont, NY

Stephen Spencer; Insurance Associates; Rockville, MD

Michael Stong; Stong Surety; Riverside, CA

Silver Club Contributors ($250-$499)

Don K. Ardolino; J.D. Kutter Insurance Associates; St. Louis, MO

Adam T. Baron; Cassidy’s Associated Insurers, Inc.; Hagatna, Guam

Raymond Carmen; Armitage & Co.; Elmont, NY

David W. Cassidy; Cassidy’s Associated Insurers, Inc.; Hagatna, Guam

Mark S. Drengler; Surety Bonds & Ins Agency, Inc.; Powell, OH

Mark W. Edwards; McGriff, Seibels & Williams, Inc.; Birmingham, AL

Sarah Finn; IMA of Colorado Inc.; Denver, CO

Janice Fiscina; Armitage & Co., Inc.; Elmont, NY

Robert C. Fricke; Frank Siddons Insurance; Austin, TX

Thomas R. Guy; Guy, Hurley, Blaser, & Heuer; Troy, MI

Frank W. Hafner, Jr.; BB&T/Boyle-Vaughan Insurance; Columbia, SC

Brad Hall; Ralph J. Vanner & Associates; Williamsville, NY

Mark E. Kerin; The Kerin Agency, Inc.; West Hartford, CT

Jack Klein; Klein Agency, Inc.; St. Paul, MN

Charles C. Leach; Fuller & O’Brien, Inc.; Albany, NY

Dennis Lutz; Welsch, Flatness, & Lutz; University City, MO

Christopher M. McAtee; Brower Insurance Agency; Dayton, OH

Steven E. Minard; Minard-Ames Insurance Group; Phoenix, AZ

Jim Moore; Scheer’s Inc.; Westmont, IL

Sam Mullis; Mullis Newby Hurst LP; Dallas, TX

John Newby; Millis Newby Hurst LP; Dallas, TX

Thomas M. Padilla; Manuel Lujan Insurance; Albuquerque, NM

John C. Plate; USI DC Metro; Falls Church, VA

Richard Pratt; InterWest Insurance Services; Sacramento, CA

Jim Scheer; Scheer’s Inc.; Westmont, IL

Richard T. Thompson; McGriff’s, Siebels & Williams; Birmingham, AL

Bronze Contributors ($100-$249)

James J. Bovenzi; HRH ; Amarillo, TX

John Bustard; King & Neel, Inc.; Honolulu, HI

Larry Cramer; G. Siebers & Co.; Lee’s Summit, MO

Tony Fierro; K & S Insurance Agency; Rockwall, TX

Thomas Gentile; Turner Insurance & Bonding; Montgomery, AL

Jason Gusso; Gusso Surety Bonds, Inc.; Brandon, SD

Kurt Lundblad; Cedarleaf Agency; St. Paul, MN

Robert C. McLendon; Fisher-Brown Inc.; Panama City, FL

David C. Mitchie; Manuel Lujan Insurance; Albuquerque, NM

Carl Newman; Parker Smith Feek; Bellevue, WA

Aldo Pasquariello; Insurance Associates; Fairfax, VA

Stephen Michael Poleman; Rich & Cartmill, Inc.; Tulsa, OK

Thomas C. Phipps; Putnam Agency; Ashland, KY

Patrick Pribyl; Lockton Co.; Kansas City, MO

Gary Pyne; HMS Insurance Associates; Hunt Valley, MD

Edworth L. Ray; Conover Insurance; Pasco, WA

Dennis Scully; Mapes Insurance; Grand Rapids, MI

Arnaldo Soto, Jr.; Carrion, Laffitte & Casellas; Guaynabo, PR

Mike Specht; Minard-Ames Insurance Group; Gilbert, AZ

John Tauer; Cobb Strecker; Minneapolis, MN

Tom Titsworth; Twin T Insurance Agency; Colorado Springs, CO

Robert Trobec; Valenti, Trobec, Chandler; Troy, MI

Brian E. Wilcox; HMS Insurance Associates; Brooklandville, MD

Thanks to everyone!

         POSITIONS 

CNA SURETY CORPORATION currently has the following opportunities:

Underwriting Assistant (Part-Time) in its Quincy, MA office:

·       Responsibilities:  Review bond applications and execute agent requests; process new and renewal business; work with outside clients and home office underwriting personnel; and ensure all information, databases and files are organized and updated.

·         Requirements:  HS diploma or equivalent with 1-3 years in an office environment; strong communication skills; solid MS Office experience; and exposure to accounting, financial services or insurance industry preferred.     

·     Contact:  Lisa Young, Human Resources Coordinator, via e-mail at lisa.young@cnasurety.com, or fax resume to 312-817-1759. Visit www.cnasurety.com for more company information. EOE

     Surety Claims Analyst  in its Chicago, IL Office:

·         Responsibilities:  Investigation, analysis, negotiation, and settlement of contract surety bond claims.

·     Requirements:  Law degree plus 1-3 years of surety and/or a background in insurance, engineering or construction, equivalent industry experience in lieu of JD will be considered; and strong interpersonal and written/verbal communication skills are essential. Occasional overnight travel may be required.

·     Contact:  Lisa Young, Human Resources Coordinator, via e-mail at lisa.young@cnasurety.com, or fax resume to 312-817-1759. Visit www.cnasurety.com for more company information. EOE 

If your efforts have had an extraordinary impact in 2005, then you may qualify for SIO’s prestigious Awards for Excellence in Surety Bond Promotion and Tiger Trust awards.

The Silver and Gold Awards for Excellence in Surety Bond Promotion recognize Local Surety Associations that have conducted at least five or 10 relevant public relations activities respectively in a calendar year to promote contract surety bonds. The Platinum Award recognizes an individual member of the Surety Association of America (SAA) or National Association of Surety Bond Producers (NASBP) who has undertaken special initiatives to promote contract surety bonds.

SIO provides letters to winners’ supervisors, press releases to send to local media, and publishes articles about award winners in SIO, SAA, and NASBP newsletters.

The Tiger Trust was formed in 1984 to recognize SAA or NASBP members who have demonstrated an extraordinary commitment to the principles of suretyship and have achieved individual distinction by educating private owners about the value of contract surety bonds. The private sector offers the greatest potential for contract surety growth. Winners will be inducted to the Tiger Trust and receive the plaque and pin at the SAA or NASBP annual meetings.

For information about rules and criteria and to apply for these prestigious awards, visit SIO’s Web site, www.sio.org/surety/awards.html, fill out the nomination form, and submit the required documentation no later than February 10, 2006.

And don’t forget, SIO makes it easy to promote contract surety by providing free educational materials, CDs, and PowerPoint presentations. Visit www.sio.org/fstore.html to place an order today!