Enacted on 02/28/2008, a new law referred to as HB 199 was put in place in the state of New Mexico. HB 199 cancels the existing contractors’ license bond requirement under which the bond amounts are minor and based on the size of projects completed; the law also substitutes it with a $10,000 bond from a state licensed surety. Payments from the surety bond can solely be used to cure code breaches of a licensee. Any claims made opposing the bond must be within two years after the final inspection or within two years of issue of a certificate of occupancy, whichever is sooner. The entire aggregate liability of the surety can not surpass the face amount of the surety bond; there is also a 30 day cancellation condition. The final language of the new law is considerably enhanced from the original bill draft. Multiple groups worked on the new bill including SFAA, AIA and CNA Surety.

The SB 1432, which became effective on January 1, 2009, amended California’s law for claims toward home improvement contractors. The new law states that a homeowner may make a claim against the contractor’s bond only if the damages happened when the homeowner did not intend on selling the home. The law also makes a change to the time limit of making the claim, based on the contractor’s licensing period.

The surety underwriting procedure can often be viewed as being an agonizing ordeal for insurance agents as well as applicants needing to obtain bonds. Many times, the entire process can be very aggravating and stressful if an applicant is under a specific deadline or needs a bond very quickly. Here are some items that the surety company will most likely require. It is important to know what crucial information that a surety company or agency will require in order to be approved for any type of surety bond.

Like insurance, the surety industry is recurring. In the mid 90s, the surety industry was very pliable, and there was little underwriting being performed. A combination of the slowing economy and the poor underwriting practices from years prior caused the surety industry to suffer for the first five of five consecutive years in 2000. However, a booming economy led to more bond approvals and issuance, even for applicants that were less than qualified.

Fortunately, these losing years caused the market to fluctuate almost overnight underwriting standards were tightened and premiums increased substantially. Capacity quickly became an issue for contractors, particularly at both the small and large ends of the spectrum. Small, emerging contractors were finding it increasingly more difficult to obtain any bonding capacity and large contractors were also feeling the affects of the more stringent industry. The market has fluctuated over the past couple of years, and contract bonds and some commercial bonds can still be difficult to obtain. Some items that are crucial to obtaining prior to applying for a surety bond are:

A surety bond is a form of credit. The underwriter requiring financial information from an applicant is making a credit decision without ever meeting the contractor or applicant.. There may be a substantial amount of paperwork required; however, it may be the extra paperwork required that will get an applicant approved for a bond. An underwriter will most likely request the following:

Business financials It is beneficial and most often a requirement that these are prepared by a CPA. If it is a new company, submitting the most recent business financials will suffice.