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In September the Alabama Attorney General Office updated the state’s heath studio surety bond form. The updated form was recently made available online for download.

State agencies across the nation began establishing health club bond requirements after a number of businesses closed as a result of improper financial management or fraud. After declaring bankruptcy, their customers were left without a way to recover their prepaid annual membership fees. Health club bonds now provide a means through which clients can recover their funds if a health studio should suddenly close.

Section 8-23-3 of the Alabama Code requires every facility that sells contracts for health studio to file a $50,000 surety bond with the state. Those who plan to operate a health club studio in Alabama will submit their surety bond to the state along with other forms required for the licensing process.

Download the Alabama Health Studio Surety Bond.

Applicants will mail the original copy of their completed bond to:

Office of the Attorney General
Consumer Protection
P.O. Box 300152
Montgomery, Alabama 36130

For more information on health club licensing in Alabama, individuals may contact Rhonda Barber at (800) 392-5658 or (334) 242-7335.

This information was originally posted on the U.S. Small Business Administration’s events calendar.

Surety Bond Webinar

Event Topic
Obtaining a Surety Bond

Event Type
Webcast

Event Details
Are you ready to expand your business? Contractors with bonding are in a better position to complete for larger construction opportunities. Learn how to prepare your business for bonding, and much more in this free webinar covering:

• What is bonding?
• How to qualify for bonding
• Criteria for selecting a bond agent
• How bonding benefits contractors
• Why do I need a working capital line of credit?
• How to market yourself to surety companies
• How tools like the SBA Surety Bond Guarantee Program can help you qualify for surety bonds

This webinar is for
small construction firms who want to strengthen their ability to compete in public sector construction

When
Thursday, September 22, 2011 10:00 AM – 11:00 AM

Location
Parkview Tower
1150 First Avenue
Suite 1001
King of Prussia, PA, 19406, USA

Event Contact
Paula K. Watts
(610) 382-3086

Women in Pakistan once again find their rights being limited by their government’s stifling regulations. In April, the country’s parliament removed an amendment from its Code of Criminal Procedure that gave women in jail the right to bail via surety bonds.

The amendment had been added in 1997 to give women in jail the ability to post bail for almost any offense except those considered to be the most serious, such as terrorism, financial corruption or murder. The law required judicial officers to release accused women from prison if they provided a bail bond, a common surety bond type.

But this April, Pakistan’s parliament approved a government bill that omitted the previously approved provisos, thus removing the ability women have to be granted bail through a surety bond.

An article by the DAWN Media Group said the change would make life more difficult for Pakistani women. The article cited Barrister Masroor Shah, a lawyer based out of Islamabad, Pakistan’s capital city.

“’Earlier they could manage their release on a surety bond but now it will be very difficult to avoid imprisonment.’ He said now grant of bail is the sole discretion of the court. ‘Women have to follow lengthy legal process for bail.’”

Women may now only receive bail at the discretion of a judge on a case-by-case basis, which will inevitably lead to more Pakistani women being incarcerated over the long term. Women who are not granted bail will remain in jail for at minimum of six months for minor infractions.

Starting a small construction firm can be challenging, especially when contractors are unfamiliar with the surety bond process.

For this reason the U.S. Small Business Administration provides bonding services through its Office of Surety Guarantees. The program works with licensed surety providers from across the nation to help qualifying construction firms get the surety bonds they need.

To be eligible for an SBA surety bond guarantee, the following criteria must be met.

1) A business must be classified as “small” according to the Code of Federal Regulations, which provides a list of size standards by industry sector and subsector. For the construction industry, this means the company’s average annual receipts cannot exceed

• $33.5 million for general building and heavy construction contractors
• $14 million for special trade construction contractors
• $7 million for land subdivision contractors
• $20 million for dredging contractors

2) A business must be unable to get a bond without an SBA guarantee. In other words, the contractor has no other way to get the needed bond.
3) The public or private contract/subcontract cannot exceed $2 million. The SBA does not back surety bonds on projects that cost more than $2 million.
4) The business owner must submit financial credentials to the surety for review. Based on this information, the surety must conclude that the contractor will successfully fulfill the contract. If the financial credentials are not strong enough, the contractor will not qualify.
5) The contract must require a bond to be eligible. Projects for which a surety bond is optional do not qualify for an SBA backed surety guarantee.

Contractors who meet these criteria can apply for a bond backed by the SBA on the agency’s website. If a contractor’s application is approved, the SBA will charge the small business owner a fee that’s calculated as .729% of the contract amount. So if a project is contracted for $100,000, the contractor will pay the SBA a $729 fee for the bond, which is significantly lower than premiums charged by many surety providers. The SBA does not charge a fee to issue a bid bond.

If a contractor backed by an SBA surety bond should default and fail to fulfill the contract, the SBA will cover between 70 and 90% of the resulting losses and expenses incurred by the surety. In this way the SBA surety guarantee encourages sureties to underwrite bonds they might not typically issue to some small businesses.

The surety bond amount required of grain dealers in Missouri will increase from a minimum $20,000 and maximum $300,000 to $50,000 and $600,000 respectively. The new law will take effect August 28.

According to a July 11 Business Week article, the new law will

“require grain dealers to set aside more money as a safeguard against insolvency, though it will come too late for the roughly 180 farmers who lost about $27 million to a northeast Missouri grain dealer now in federal prison on fraud charges.”

The law was enacted to protect farmers from potential financial loss due to grain dealer failure in the future.

The surety bond amount required of each Missouri grain dealer is calculated individually as a percentage that’s based on how much grain a dealer sells.

Governor Jay Nixon signed the bill into law at a special ceremony Monday at a feed store in Mexico, Missouri.

Download Missouri SB356

Download the Missouri Grain Dealer Bond form

A new law went into effect June 1 to strengthen the authority the Oregon Department of Consumer and Business Services has to enforce laws regarding manufactured home dealers, also known as mobile home dealers. The goal behind Senate Bill 85 is to limit the access that those other than customers have to dealers’ surety bond funds. The law also ensures that harmed customers have access to the full bond amount as a means of reparation.

According to the law, the bond will:

“Be conditioned that the dealer will conduct the manufactured structure dealership without fraud or fraudulent representation and without violating any statute or rule relating to manufactured structure dealers, manufactured structure dealerships, transfers of interests in manufactured structures, alteration of manufactured structures or moving manufactured structures.”

A customer may make a claim on the bond to gain financial compensation after suffering loss or damage due to fraud committed by the manufactured structure dealer.

If multiple individuals make claims against a bonded dealer, the maximum amount payable under the bond for payment of claims by persons other than retail customers of the principal is $20,000. Retail customers have access to the full bond amount, which is issued for $40,000 for each year the license is valid.

All businesses that sell a manufactured/mobile home on behalf of another person in Oregon must maintain a valid operating license. This requires them to file a surety bond or a letter of credit with the state.

Get an Oregon Manufactured Structures Dealer Surety Bond

Download an Oregon Manufactured Structures Dealer Surety Bond Form.

Once applicants have the finalized, original copy of the surety bond in their possession, they will mail it to:

Oregon Department of Consumer & Business Services
Division of Finance & Corporate Securities
P.O. Box 14480
Salem, OR 97309-0405

For questions about dealer licensing process, applicants can contact the state’s licensing staff at (503) 378-4140 or dcbs.dfcsmail@state.or.us.

The passage of Colorado’s Senate Bill 31 modifies titling and registration procedures for those who own older vehicles.

Car collectors found the previous laws to be confusing because they were strewn throughout a few different statutes. A July 8 article by the Journal Advocate out of Sterling, Colorado said,

“Just about a year ago this week, Republican Rep. Marsha Looper, of Calhan, was approached by a group of her constituents who said they couldn’t make heads or tails of the laws governing collector cars — and neither could those responsible for administering the laws.”

Senate Bill 31 regrouped all of the regulations into one law and also altered some of the previous requirements. One such change was the elimination of a Colorado surety bond requirement that car owners had to supply when registering an older vehicle.

The new law gives car collectors a few options when applying to convert a re-builder’s title to a standard certificate of title. Instead of being required to provide a surety bond, the applicant has the choice to provide one of four financial guarantees:

• a savings account
• a deposit
• a certificate of deposit (must meet the requirements of section 11-35-101, C.R.S.)
• a surety bond

According to the law, the account, deposit, certificate or surety amount fixed will be determined by the director for an amount not less than twice the reasonable value of the vehicle, which is determined at the time of application.

Governor John Hickenlooper signed the bill on March 31, and it will go into effect in August.

Download the act in its entirety.

Colorado Senate Bill 13: Concerning Motor Vehicles Valued as Collector’s Items for Historical Reasons

The Surety & Fidelity Association of America (SFAA) is a trade association made up of of companies that collectively write the majority of surety and fidelity bonds in the United States.

The SFAA’s mission statement explains its goals in regard to the surety industry:

The Surety & Fidelity Association of America is a trade association that performs a leadership role in promoting and preserving the use of fidelity and surety bonds to protect public and private interests.

SFAA history

SFAA was founded in 1908 as the Surety Association of America (SAA). The industry’s Commerical Surety Fundamentals book says the SAA was initially founded to promote interests of the surety market, as well as standardize bond forms across the industry. The group changed its name to the Surety & Fidelity Association of America to emphasize the market’s crucial fidelity component.

SFAA resources

The SFAA provides a number of resources to those associated with the program, including legislative updates, bimonthly newsletters and free educational brochures. The association currently places a strong focus on gathering statistical data from and for companies that issue surety bonds in the U.S. The SFAA also works with the NASBP to promote surety bond use in private construction work through the Surety Information Office.

SFAA membership and subscription services

Surety companies can access SFAA services as full-fledged members if they meet certain qualifications and pay yearly membership fees. Other stakeholders, such as brokers, can access a limited amount of SFAA resources by enrolling in the association’s subscription program. Those not affiliated with the program at all can access certain parts of the association’s website as well as free resources the SFAA provides to the general public.

Surety companies interested in becoming members of the SFAA can download the application form on the association’s website. If approved, members will pay an annual fee based on an assessment that includes a study of the company’s premium writings for the past three years. Non-member subscribers could pay a wide variety of fees depending on the information to which they request access.

An Illinois court ruled Monday that an insurance company is responsible for paying claims made against its principal’s community currency exchange bonds.

Leading up to Hartford Fire Insurance Company v. Bank of America

The Illinois National Bank backed the business of two currency exchange establishments that did not have the funds necessary to issue money orders requested by customers. This allowed the exchanges to remain open, but it also forced them into debt with the bank. The bank eventually discontinued funding and sought a way to recollect funds used to guarantee the exchanges.

The Illinois Community Currency Exchange Act (ICCEA) requires Illinois community currency exchanges to maintain surety bonds as a means of insurance

“for any liability incurred by the currency exchange on any money orders issued or sold by the currency exchange . . . and for any liability incurred by the currency exchange in connection with the rendering of any of the services referred to in Section 3 of the ICCEA.”

As the obligee of the bonds in question, the Illinois Department of Financial and Professional Regulation (IDFPR) was inherently entitled to seek reimbursement on behalf of any creditors who could make a claim on the bonds. The IDFPR made the claims on behalf of the Illinois National Bank, which is a creditor.

Hartford denied the claims for reimbursement on April 17, 2009 and argued that when the bank paid the money orders that created the overdrafts, the institution released Hartford, as surety, from any payment requirements under the bond.

Differing views on bond coverage

Hartford then filed a legal complaint against Bank of America, Corus Bank and Illinois National Bank under the premise that the company was not accountable for paying claims made on the two community currency exchange bonds. In turn, Illinois National Bank filed a counterclaim that the terms of the community currency exchange bonds entitled them to recovery and requested damages in the amount of $123,009.23 plus costs.

Herein lies the crux of the case. Hartford argued that by paying the money orders, INB discharged all liability “on” or “in connection with” the money orders, thus relieving Hartford from the obligation of reimbursing the bank. INB argued, however, that the broad language and purpose of the bonds under the ICCEA should mean that the coverage still applied.

Conclusion

The key to this case was the connection the bonds in question had to the legislature’s intended consumer protection. By honoring the money orders despite the lack of funds had by currency exchanges, Illinois National Bank fulfilled the legislative purpose of the ICCEA, which is to protect consumers from the potential instability of currency exchanges.

The court granted INB’s motion for a summary judgment, which is an action for debt entered without the necessity of jury trial because there is no arguable issue. Summary judgment is awarded if the undisputed facts and the law make it clear that it would be impossible for one party to prevail if the matter were to proceed to trial.

Thus the court determined the language of the Illinois community currency exchange bonds clearly outlined that, as surety, Hartford was financially accountable for the claims INB made on the bonds.

SuretyBonds.com accessed the court decision text via Leagle, Inc., which posts court documents exactly as they appear when released, allowing quick and easy public access.