Letter in Opposition to H.3113/H.3225, Legislation Relation to Subcontractor Default Insurance

On behalf of the National Association of Surety Bond Producers (NASBP), a national trade association representing firms employing surety bond producers, including licensed resident and non-resident agents placing contract surety bonds in the Commonwealth of Massachusetts, we strongly oppose H.3113/H.3225. This legislation amends paragraph two of Section 8(a) of Chapter 149A of the Massachusetts General Laws by allowing construction managers at risk (CM@R) to use a subcontractor default insurance (SDI) policy in lieu of the otherwise required performance and payment bonds “for some or all trade contractors.” NASBP opposes this legislation because, unlike performance and payment bonds, which are complete transfers of risk to the regulated surety company and benefit both the project owner and the trade contractors, SDI does not benefit either the owner or unpaid trade contractors. Rather, it only benefits the CM@R, which seeks through SDI, to address subcontractor defaults partially, as policy deductibles and co-pays apply, and to enhance its profits on the project in the event that no defaults occur.

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