Blog Posts Categorized: Contractors - Page 5

The claims process is a crucial part of any bond. It�s important to understand what happens when a claim is filed against a bond so that you can know your responsibilities and what�s expected of each party involved. Here�s what you need to know.

What is a Surety Bond?

A surety bond is a legal contract that brings together three parties in a legally binding agreement. The purpose of a surety bond is to protect one party in the agreement against financial loss resulting from the actions of another party, through a third party�s issuance of a guarantee. These three parties are referred to by the role they play in a surety bond agreement:

• The obligee is the party that gains protection by requiring the purchase of a surety bond.
• The principal is the party required to obtain the surety bond for the protection of the obligee.
• The surety is the company that underwrites and issues the surety bond.

Surety bonds are used in many industries. They�re broadly categorized as:

• License and permit bonds, which are required as part of the process of licensing or registering a business and guarantee that the principal will conduct business in a lawful and ethical manner.
• Contract bonds, which guarantee that contracted work will be done in accordance with all contract terms and provisions and provide financial protection for the obligee in the event of contract default or non-performance.
• Court bonds, which are required by a court in specific situations to guarantee compliance with court orders, protect property belonging to plaintiffs and/or defendants in contested legal matters, or ensure that fiduciary responsibilities live up to their obligations.

What Can Trigger a Claim on a Bond?

The principal�s violation of the terms and conditions of a surety bond can trigger a claim on the bond. For example, a construction contract might violate the terms of a contract bond by failing to complete the work as specified in the bond. The obligee would suffer a financial loss from having to hire another contractor to complete the project. That would constitute grounds for filing a claim against the contract bond.

As another example, if a court-appointed executor of an estate embezzled funds from the estate, causing a financial loss to the beneficiaries of the estate, the court, as obligee, would have grounds to file a claim against the bond to offset that loss.

The best way for any principal to avoid claims being filed against a surety bond is simply to avoid violating the terms and conditions of the bond in the first place. As they say, an ounce of prevention is worth a pound of cure.

What Does the Claims Process Involve?

The surety�s first priority is to ascertain the validity of any claim submitted against the bond. The surety will investigate the matter and reject the claim if it is determined to be illegitimate. If the claim is found to be valid, however, the surety will ensure that the claimant is compensated.

The ultimate burden of paying claims belongs to the principal, as virtually all surety bonds include a clause that indemnifies the surety. In some cases, if a settlement cannot be reached, the surety will simply inform the principal of the amount that the principal must pay directly to the claimant. In other cases, the surety will pay the claimant initially and then collect reimbursement from the principal. Sometimes, the surety will make an arrangement that allows the principal to reimburse the surety in installments over a specified period of time.

Have Bond Questions?

There are a number of factors to consider when choosing a surety bond provider. The agents at Single Source Insurance are experienced and happy to help answer your questions. Contact us today to see what our experienced surety bond professionals can do for you.

Some contractors find it challenging to obtain surety bonds, which can put them at a disadvantage in competing for and securing jobs. New York has established a program to assist them in getting the surety bonds they need for projects sponsored by state agencies or agencies of the City of New York. The New York Surety Bond Assistance Program (known as NYSBAP) provides a guarantee of up to 30% on bid, payment, and performance bonds through Empire State Development. The guarantee can also be used to secure a bond line.

Who is Eligible for NYSBAP?

The eligibility criteria for NYSBAP address the size, credit, financial condition, experience, and ownership of a contracting business. Specifically, the contractor or contracting firm must qualify as a small business or MWBE (Minority or Woman-Owned Business Enterprise), with:

• Gross average revenue of at least $400,000 in each of the preceding two fiscal or calendar years but not more than $5 million in the most recent year
• A minimum credit score of 600
• At least two years of business history and experience doing the same kind of work as required by the contract opportunity in question

Certain criteria also apply to the bond line or surety bond for which a contractor can receive an NYSBAP guarantee:

• A maximum bond line or project size of$2 million
• The project must be sponsored by an agency of the state of New York or New York City

Pre-Assessment

The approval of a given contractor to participate in NYSBAP is not solely the result of meeting a surety company�s underwriting requirements. Empire State Development also reviews every application. To get an idea as to whether you might be eligible for NYSBAP, complete the pre-assessment questionnaire.

NYSBAP offers programs in partnership with New York State Small Business Development Centers for contractors aiming to qualify for NYSBAP guarantees. One-on-one technical assistance as well as classes and workshops are offered at various locations throughout the state.

The Application Process

The detailed eligibility guidelines provided by NYSBAP identify certain documents a contractor may need to furnish in support of an application. The application itself is available on the NYSBAP website in both PDF and MS Word formats. Once your application is completed, send it to Empire State Development. Please note that a manual signature is required in order for an application to be considered.

How Much Does It Cost?

There are no fees or costs associated with the bond line and bid bond guarantees from Empire State Development. Payment and performance bonds are a different matter. For those guarantees, the surety company issuing those bonds may require an Irrevocable Letter of Credit from a participating bank, which typically carries a charge to the contractor of approximately 1%. That charge is in addition to the bond premium the contractor will pay to the surety company.

Single Source Insurance Can Help

We are more than happy to accept bond guarantees issued by Empire State Development through the NYS Bond Assistance Program. Contact us today to see what we can do for you.

When California contractors apply for their license, they need to get a license surety bond. Keep reading for a rundown of the basics of getting your license and bond.

California contractor licensing

The Contractors State License Board, a division of the Department of Consumer Affairs, is the licensing entity for California contractors. If the cost of a contract is more than $500, a license is required to perform the contracting work. To be eligible for a license, applicants must meet the following criteria:

• At least 18 years old
• Possess a valid Social Security number or an Individual Taxpayer ID number
• At least four verifiable years of experience (within the previous 10 years) as a foreman, contractor, supervisor, or journeyman in the classification being applied for

Licensees do not have to be residents of California, and education may be counted as years of experience.�California contractors licenses are issued based on the kind of work the contractor will do, and contractors can add more than one classification to their license:

• Class A�general engineering contractors
• Class B�general building contractors
• Class C�specialty contractors

Specialty contractors choose from several areas of expertise, including concrete, drywall, roofing, and solar. Contractors that specialize in asbestos removal might be required to pass an exam.�The California Contractors License Law & Reference Book provides detailed information about this license and the classifications—get familiar with it before submitting your application.

Contractor bonds

A surety bond bond is a common requirement to obtain many licenses, including contractor licenses, across the U.S. And contractors often need several different surety bonds. In California, contractors need:

• $15,000 license bond (increased from $12,500 January 2016)
• $100,000 wage bond if applicant is an LLC
• $12,500 qualifying individual/qualifier bond (if applicable)
• $15,000-$150,000 disciplinary bond

The license bond protects consumers if the contractor breaks state law and consequently, the terms of the bond. The $100,000 wage bond for LLCs protects employees from nonpayment of wages. Qualifying individuals are the direct supervisors of operations and ensure the business is in compliance with the law at all times. Under some circumstances, California requires that person to be bonded. See the license application to find out if you will need that bond. The disciplinary bond may be required by the Board if the licensee has been disciplined in the past.

Ready to get your California contractors bond? Get in touch with Single Source Insurance today!

North Carolina electrical contractors need to get a license and a surety bond�keep reading to find out how to get yours.

Getting licensed

North Carolina electrical contractors’ licenses are issued by the state’s Board of Examiners of Electrical Contractors. Contractors are licensed by classification:

• Limited classification�Can work on projects valued at no more than $50,000 and 600 volts
• Intermediate classification�Can work on projects valued at no more than $130,000
• Unlimited Classification�Can work on any project regardless of value

On the application, contractor applicants must list one or more qualified individuals, those who have taken the required exam and passed, and those who are authorized to perform electrical contracting work under the licensee. The application asks for other general business information, such as the address, DBA, and phone numbers, and licensure carries an annual fee as well:

• Limited license�$85
• Intermediate license�$130
• Unlimited license�$180

North Carolina practices reciprocity with several states, so electrical contractors from Alabama, Florida, Georgia, Mississippi, Ohio, South Carolina, Texas, West Virginia, Louisiana, and Virginia can fill out a reciprocity application instead.

North Carolina electrical contractors that let their license lapse for more than a year need to reactivate it, which they can do by filing for reactivation and completing 16 hours of continuing education.

Why do electrical contractors need a bond?

Like any contracting profession, working as an electrical contractor can be risky business. To protect the state and the Board from liability, licensees get a surety bond. By getting the bond, contractors promise to assume liability when a customer suffers financial damage as a result of their illegal business practices. This means that if work is not performed as contracted, or an electrical contractor breaks a law while working on a project, the customer can file a claim on the contractor’s surety bond. If the claim is proven and paid out, the contractor must reimburse the surety.

Licensees with an intermediate or unlimited classification are subject to the surety bond requirement:

• Intermediate�$50,000 bond
• Unlimited�$130,000 bond

The cost of these surety bonds varies depending on a review of the applicant’s financial history. Ready to get a North Carolina electrical contractor’s bond? Get the licensing process started by getting in touch with Single Source Insurance today!

Photo by�Igor Ovsyannykov�on�Unsplash

Arizona contractors are licensed by the state Registrar of Contractors. They also need surety bonds�keep reading to find out how to get licensed and bonded.

Getting licensed

Arizona contractors are licensed by classification, which means they’re licensed to perform specific work. There are numerous classifications, all requiring varying years of experience and different combinations of Arizona’s four contractor exams, which can be taken online. Regardless of the applicant’s type of business (sole proprietorship, LLC, corporation, etc.), a qualifying party must be designated on the application. The qualifying party needs to pass the exam(s) and have the required number of years of experience.

Listed is some of the information the Registrar of Contractors requests from contractor applicants:

• Passed exam results
• Completed project verification forms
• Proof of payment for background checks for applicant and qualifying party
• Completed experience verification forms
• Fees based on the classification being applied for
• Completed application form
• License surety bond

Arizona contractors’ licenses are good for two years. Applications and all required documentation and fees can be mailed to the Registrar:

Registrar of Contractors P.O. Box 6748 Phoenix, AZ 85005-6748

They can also be delivered in person here:

1700 W. Washington St., Suite 105 Phoenix, AZ 85007-2812

Arizona contractors’ license surety bonds

Arizona contractors need to get a continuous license surety bond, which means the bond is valid as long as the premium is being paid. Their bond amount depends on both the type of construction work they’ll be licensed to perform, and on the business’s anticipated annual gross volume (abbreviated AGV below).

Residential general contractors
• AGV less than $750,000—$9,000 bond
• $750,000 or more—$15,000 bond

Residential specialty contractors
• AGV less than $375,000—$4,250 bond
• $375,000 or more—$7,500 bond

Commercial general contractors (including general engineering contractors)
• AGV $150,000 or less—$5,000 bond
• More than $150,000 and less than $500,000—$15,000 bond
• More than $500,000 and less than $1,000,000—$25,000 bond
• More than $1,000,000 and less than $5,000,000—$50,000 bond
• More than $5,000,000 and less than $10,000,000—$75,000 bond
• More than $10,000,000—$100,000 bond

Commercial speciality contractors
•AGV $150,000 or less—$2,500 bond
• More than $150,000 and less than $500,000—$7,000 bond
• More than $500,000 and less than $1,000,000—$17,500 bond
• More than $1,000,000 and less than $5,000,000—$25,000 bond
• More than $5,000,000 and less than $10,000,000—$37,500 bond
• More than $10,000,000—$50,000 bond

If a contractor has a dual license, their bond amount is found by adding the commercial and residential bond amounts.�Arizona residential contractors need another surety bond in addition to the license bond. They need to pay $200,000 into the Registrar’s Residential Recovery Fund, either in cash or with a surety bond. The Fund is an additional layer of financial protection for consumers, serving a similar purpose to the license bond.

Ready to become an Arizona contractor? Get started by getting bonded with Single Source Insurance!

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Most states require contractors to be licensed, but regulations vary widely across the U.S. This guide covers the basics for Tennessee contractors.

Who needs a Tennessee contractor license?

In Tennessee, contractors are licensing by the state’s Board for Licensing Contractors. Contractors need a license if they are working on a project costing $25,000 or more and if they are acting as:

• Prime contractor
• Subcontractors performing electrical, plumbing, roofing, and HVAC if that portion of the project totals $25,000 or more
• Masonry subcontractors only if�that portion of the project�totals $100,000 or more
• Construction management

Prime contractors contract directly with the project owner, while subcontractors contract with contractors to perform their work. Tennessee licenses contractors by class and gives them a project monetary limit, meaning they cannot bid on a project or projects over their limit. The classifications correspond to the type of work the contractor will be doing and include residential, industrial, and commercial building, demolition, carpentry, mechanical, HVAC, plumbing, etc. The monetary limit is determined on a case-by-case basis based on the Tennessee contractor applicant’s financial statement and experience. Contractors who bid outside their license limit or without proper licensure may have their license held by the Board for up to six months.

How to get licensed

Tennessee’s Board for Licensing Contractors is a division of the state Department of Commerce & Insurance. They can apply online or the completed application package can be mailed to the Board:

Tennessee Board for Licensing Contractors 500 James Robertson Parkway Nashville, TN 37243-1150

All contractors must pass the Tennessee Business and Law exam and may also be required to pass a Trade exam. They must submit a financial statement with their application, either a review�if applying for a monetary limit of $1,500,000 or less�or an audit�if applying for a monetary limit of more than $1,500,000. The Tennessee contractor application is detailed, and applicants will need to meet varying qualifications and provide different information depending on the type of license they are seeking.

Tennessee contractors’ license applications are reviewed and approved by the Board at their meetings in the months of January, March, May, July, September, and November. Contractors�should be sure to turn in their applications by the 20th of the month prior to the Board meeting. In some instances, the applicant might be required to meet with the Board, and will be informed if the meeting is waived or not.

Contractor licensing in Tennessee is complicated, so communicate with the Board and any lo cal government agencies to ensure you apply for the correct licenses and permits.

Surety bonds for Tennessee contractors

Tennessee contractors’ surety bonds vary depending on their financial statement submitted with their license application, on the type of work they’re doing and where the work is done.

A home improvement contractor�needs a license and a�$10,000 surety bond in the following Tennessee counties:

• Bradley
• Davidson
• Hamilton
• Haywood
• Knox
• Marion
• Robertson
• Rutherford
• Shelby

Shelby County requires various other surety bonds of contractors, including a performance bond. The city of Knoxville requires $10,000 surety bonds of electrical contractors, gas installation and servicemen, and mechanical contractors. Johnson City requires many types of Tennessee contractors to obtain permits and surety bonds.

Due to Tennessee’s complicated licensing procedures, it’s important to contact both the state Board for Licensing Contractors and the appropriate agencies in the cities and counties in which you plan to do business.

Ready to start the licensing process? Single Source Insurance can help you get a Tennessee contractor surety bond!