Current Legislation

Current Legislation – Surety Association of Syracuse

Date Received – July 8, 2016

Please find attached an end of legislative session report for New York concerning legislation affecting surety and fidelity bonds for the 2016 session.  If you have any questions, please do not hesitate to contact us. 

NY Legislation 2016 Session

Date Received – June 7, 2016

Please find attached the latest comprehensive legislative report.  For your convenience, the report is divided by line of business—commercial surety, contract surety, and fidelity bonds.  As always, if you have any questions or comments, please do not hesitate to contact us. 

Contract Surety Legislation – May

Commercial Surety Legislation – May

Fidelity Bond Legislation – May

Date Received – May 10, 2016

Please find attached the latest comprehensive legislative report.  For your convenience, the report is divided by line of business—commercial surety, contract surety, and fidelity bonds.  As always, if you have any questions or comments, please do not hesitate to contact us. 

Fidelity Bond Legislation – April

Commercial Surety Legislation – April

Contract Surety Legislation – April

Date Received – April 11, 2016

Please find attached the latest comprehensive legislative report.  For your convenience, the report is divided by line of business—commercial surety, contract surety, and fidelity bonds.  As always, if you have any questions or comments, please do not hesitate to contact us. 

Fidelity Bond Legislation – March

Contract Surety Legislation – March

Commercial Surety Legislation – March

Date Received – March 9, 2016

Please find attached the latest comprehensive legislative report.  For your convenience, the report is divided by line of business—commercial surety, contract surety, and fidelity bonds.  As always, if you have any questions or comments, please do not hesitate to contact us. 

Fidelity Bond Legislation – February

Contract Surety Legislation – February

Commercial Surety Legislation – February

Date Received – February 19, 2016

New York SB 6315 would revise the existing retainage law for state and municipal construction contracts to define “substantial completion” for the purposes of releasing the remaining contract amount to the contractor. The bill provides that the project would be considered substantially complete when the work under the public contract is sufficiently complete in accordance with the contract so the public owner may occupy or utilize the work for its intended use.  The meaning of the term would apply to the entire project or a portion of the project if the contract provides for occupying or using a portion of the project.  The bill also would require the public owner to submit a punch list to the contractor within 14 days after the project reaches substantial completion after which the contractor would have seven days to submit a punch list to the subcontractors from whom the contractor is withholding retainage.

2015_NY_S_B__6315_(NS)_12-21-15_1205

Date Received – February 17, 2016

New York budget bills AB 9008/SB 6408, as amended, would authorize the use of design-build procurement for the following projects: the Jacob V. Javits Convention Center, the Empire State Station Complex, the James A. Farley Building Replacement, and the Pennsylvania Station New York Redevelopment.  The bill is silent on bonding requirements for these projects.

The bill also would expand the use of wrap-up insurance programs to permit them for bridge, tunnel or omnibus facility projects for New York City, public authorities, and public corporations.  Surety bonds can be included in such programs under current law.

The bill would authorize the New York City Transit Authority to enter into joint arrangements, which can include a public-private partnership.  The arrangement can be used for the planning, acquisition, design, construction, reconstruction, rehabilitation, establishment, improvement, renovation, extension, repair, operation, maintenance, development or financing of transportation facilities.  The bill does not include a bonding requirement.

The bill would require persons applying for a license to conduct combative sports matches to post a surety bond conditioned on compliance with the applicable laws and regulations.  An additional bond would be required to secure the payment of professional combative sports participants’ purses, salaries of club employees licensed by the State Athletic Commission (Commission), and the legitimate expenses of printing tickets and all advertising material.  The Commission would determine the amount required for these two bonds.

The bill also would require promoters for a professional wrestling match to post a minimum $20,000 bond conditioned on the payment of professional wrestler’s purses, salaries of club employees, the legitimate expenses of printing tickets and all advertising material, payments to sponsoring organizations, and the applicable state and local taxes.

2015 New York Assembly Bill No 9008 New York Two Hundred Thirty-Eighth Legislati

2015 New York Senate Bill No 6408 New York Two Hundred Thirty-Eighth Legislative

Date Received – February 10, 2016

Please find attached the latest comprehensive legislative report.  For your convenience, the report is divided by line of business—commercial surety, contract surety, and fidelity bonds.  As always, if you have any questions or comments, please do not hesitate to contact us. 

Commercial Surety Legislation – January

Contract Surety Legislation – January

Fidelity Bond Legislation – January

Date Received – September 30, 2015

The U.S House Rules Committee released the final conference report on the National Defense Authorization Act (NDAA), which is the annual defense policy legislation.  The federal  Construction Coalition was successful in having several provisions from its procurement reform legislation included in the final NDAA legislation in the conference report.

Included in the conference report are the two surety provisions from the Construction Coalition’s legislation.  One provision would increase in the SBA’s guarantee to sureties in its Preferred Surety bond guarantee program from  70% to 90%.  The second provision would require individual sureties play by the same rules as any other person or entity that provides collateral to the federal government.  Individual sureties would be required to pledge known and reliable assets to back their bonds, and to relinquish control of those pledged assets to the federal contracting officer, who would deposit them in the Federal Reserve system.

The conference bill, however, delays the effective date of both surety provisions to one year after the date of enactment so that the necessary regulations can be developed to implement both provisions.  The final report also eliminates a General Accounting Office (GAO the study of the impact of this change on the corporate and individual surety market.

We still are reviewing this 2,000 page bill and report and will provide more detailed information shortly.

Date Received – September 15, 2015

SFAA and the American Insurance Association (AIA) are preparing for the 2016 state legislative sessions.  The Government Affairs Advisory Committee (GAAC) will meet on October 7 to set our legislative priorities for 2016.  As part of SFAA’s legislative affiliation with the AIA, the AIA addresses our key surety and fidelity issues in the state legislatures as they arise.  AIA does considerable work on surety issues on a defensive basis, which is addressing bills that get introduced by others in the states.  Also as part of our affiliation with the AIA, the AIA also initiates and pursues legislation on issues that the sureties want addressed in the states, which is legislation that we want introduced to change existing laws or enact new ones.  Seeking to enact a bill usually takes more resources in terms of finding a bill sponsor and working the bill to enactment than defending against bills that others have introduced so our resource with the AIA is more limited on bills that we affirmatively seek action.

 We would like to hear from the local suety associations regarding:

 1).Any legislation that you think will be introduced in 2016 that impacts surety.  Many of SFAA’s members participate in the local AGC meetings or have contacts locally with the public owners and others from which they learn about upcoming legislation.  Attached is SFAA’s list of legislation that we think we may see in 2016 in the states.  If you have any information on prospective legislation in 2016 that you can add to this list, we would like to hear from you know so that we can best prepare for next year.

 2) Any law in your state that negatively impacts surety and fidelity bonds that needs to be changed.  For example, we know that Utah changed its three-year statute of limitation for making a claim on a fidelity bond so that the limitation would run from the date that the insurer denied all or part of a claim.  SFAA opposed the bill since an insurer likely would need a proof of loss in order to determine whether or not to deny the claim, and the claimant could indefinitely hold off the start of the limitations period by declining to submit a proof of loss.  SFAA suggested instead that the inception of a loss under a fidelity bond is the earlier of the date the insurer denies all or part of the claim and that the claim should be deemed denied if the insured is in breach of any obligations under the bond to file a proof of loss.  The GAAC will be looking at the Utah law in terms of seeking an amendment next year.  Please let us know about state laws that impact surety that should be changed.  We cannot promise that we will take on all requests received in 2016, but the GAAC will consider them all and chose priorities among them. 

 The GAAC requests your input by October 7.

Projected Legislative Issues in 2016

Date Received – May 22, 2015

Please find attached the latest comprehensive legislative report.  For your convenience, the report is divided by line of business—commercial surety, contract surety, and fidelity bonds.  As always, if you have any questions or comments, please do not hesitate to contact us.

Fidelity Bond Legislation – April

Contract Surety Legislation – April

Commercial Surety Legislation – April

Date Received – April 10, 2015

Please find attached the SFAA Comprehensive Legislative Reports, which summarize legislation that SFAA is tracking for the 2015 session.  As usual, these reports are prepared by line of business – contract surety, commercial surety and fidelity bonds.  If you have any questions, please do not hesitate to contact us.

Fidelity Bond Legislation-March

Commercial Surety Legislation – March

Contract Surety Legislation – March

Date Received – March 9, 2015

Please find attached the SFAA Comprehensive Legislative Reports, which summarize legislation that SFAA is tracking for the 2015 session.  As usual, these reports are prepared by line of business – contract surety, commercial surety and fidelity bonds.  If you have any questions, please do not hesitate to contact us.

Fidelity Bond Legislation–February

Commercial Surety Legislation – February

Contract Surety Legislation – February

Date Received – January 9, 2015

Governor Cuomo Signs School Construction Authority Reform Bill

Source:  Goldberg & Connolly Law Firm

This new law will dramatically improve the change order process for subcontractors working with the New York City School Construction Authority (SCA). The law takes effect immediately, with regard to all SCA contracts executed on or after December 17, 2014.

The new law now effectively “preserves” a subcontractor’s right to file a Notice of Claim against the SCA on an unresolved change order for up to three months after the amount claimed was denied by the SCA.  (The old, unclear and unfair claim trigger for the running of the crucial three month period was “accrual” of the claim.)

It has been stated that there are thousands of unresolved change orders pending at the SCA.  Even if the actual number is only a fraction of this amount, it still would mean that scores of contractors are being seriously harmed by the SCA’s unacceptably slow resolution of extra work and other disputes involving millions of dollars.   What has made this even worse, is that contractors and subcontractors on SCA projects have been disadvantaged in protecting their rights against the SCA because of this unfairness in the Public Authorities Law §1744, as originally written.

Prior to this amendment, under Public Authorities Law §1744, a contractor was precluded from bringing any lawsuit against the SCA unless:  (1) it had submitted, a detailed, written, verified notice of claim upon which such action is based to the SCA within three months after the accrual of such claim; and (2) a lawsuit is commenced within one year after the happening of the event upon which the claim is based.

However, often a contractor did not know that it even had a dispute until long after the time to submit a Verified Notice of Claim under §1744 had passed.  Historically, an “accrual” of claim against the SCA arises when a contractor’s “damages are ascertainable.”  The SCA could argue, therefore, that a contractor’s claim for extra work accrues when it first submits its change order proposal.  At that point, damages appear to be known, since the proposal itself values the work.  At the same time, however, a contractor would not know of a dispute until the SCA actually denies its change order proposal, or offers an amount that cannot reasonably be accepted.  Given the backlog of unresolved change orders, this process typically takes much longer than the statutorily required three months in which a claimant must submit a Verified Notice of Claim under §1744.  This has been patently unfair, until now.

The industry achieved a major victory by having the Public Authorities Law §1744 amended to replace the words “accrual of a claim” with “denial of a claim.”  The time to file claims against the SCA should, and now will, run from a denial of a claim arising under any SCA contract.

Date Received – December 31, 2014

Please find attached the SFAA Legislative Reports, which summarize legislation that has been pre-filed or introduced for the 2015 session.  As usual, these reports are prepared by line of business – contract surety, commercial surety and fidelity bonds.  If you have any questions, please do not hesitate to contact us.

Commercial Surety Prefiles 2015

Contract Surety Prefiles 2015

Fidelity Bond Prefiles 2015

Date Received – November 3, 2014

Please find attached the SFAA Federal and State Regulation Report, which summarize regulations that recently have been proposed or adopted.  As usual, these reports are prepared by line of business – contract surety, commercial surety, and fidelity bonds.  If you have any questions, please do not hesitate to contact us.

October Contract Report

October Commercial Report

October Fidelity Report

Date Received – March 08, 2014

Please find attached SFAA’s monthly state legislative reports, which summarize the key surety and fidelity issues that we have tracked and addressed in the last month.  The reports are prepared by line of business—contract surety, commercial surety and fidelity bonds.  If you have any questions or comments on the legislation contained in these reports, please don’t hesitate to contact us.

February Contract

February Commercial Report

February Fidelity Report

Date Received – September 25, 2013

The continuing problem of fraudulent individual sureties was made evident recently with the indictment of one individual surety and the sentencing of another. The U.S. Department of Justice recently announced a 23-count indictment charging Abel Martin Carreon with mail fraud, wire fraud, major fraud against the United States, aggravated identity theft, and money laundering. According to the indictment, between April 2005 and May 2011, Carreon submitted bonds to the government for contractors bidding various government contracts. Carreon listed fictitious individual sureties on the bond form and pledged as collateral common stock that did not exist or was substantially less than represented. In some cases, the collateral was pledged across multiple bonds. If convicted, Carreon faces a maximum statutory penalty for wire fraud, mail fraud, and money laundering of 20 years in prison.

In 2010, George D. Black, Sr., working through his company, Infinity Surety, was arrested on mail fraud charges for selling millions of dollars of fraudulent surety bonds, all purportedly backed by a house valued at far less than the aggregate value of bonds. The affidavit in support of the criminal complaint was based, in part, on an investigation the Texas Department of Insurance (TDI) performed on Black. SFAA provided information to TDI about bonds allegedly written by Black.

In August 2011, Black pled guilty to mail fraud. On September 6, 2013, the U.S. District Court for the Southern District of Texas sentenced Black to prison for 30 months followed by a supervised release of 3 years. The court also ordered Black to pay about $51,000 in restitution.

Date Received – August 14, 2013

On August 14, 2013, I had a telephone conversation with Gerald Folsom of the Federal Motor Carrier Safety Administration (“FMCSA”) to discuss the upcoming implementation of the $75,000 bond requirement for freight forwarders and property brokers.  Staff sought additional details and clarification to FMSCA’s response to SFAA on April 26, 2013 regarding the bond requirement.

  • Mr. Folsom stated that the implementation date remains October 1, 2013.  However, FMSCA will provide freight forwarders and property brokers until October 31, 2013 to file the new bonds.  On November 1, 2013, FMSCA will review its system to determine which freight forwarders and brokers have not yet filed the new bonds.  FMSCA then will send letters to these entities, which will have 30 days from the date of the letter to file the new bond.
  • The new requirement will be effected by filing a new form (BMC-84) to replace the existing form.  (This information is contrary to FMSCA’s initial guidance that the increase could be effected by rider.)  He stress that the bond is a “replacement” of the old bond.  FMSCA is revising the form to reflect the new amount and to include a reference to freight forwarders.  (Under the old law only property brokers had to furnish the bond.)  The new form will be posted to FMSCA’s website by October 1, 2013.
  • FMSCA will be publishing a Federal Register notice “sometime in August” that will provide details regarding the bond requirement.  It also will be posting “Frequently Asked Questions” to its website.
  • With respect to the following questions, Mr. Folsom confirmed that FMSCA is drafting regulations:
    • The law provides that the surety bond “shall be available” to pay any claims against a broker (or freight forwarder) for failure to pay freight charges if: 1) the broker consents; 2) the broker does not respond and the surety determines that the claim is valid; or 3) the claim is not resolved in a reasonable period of time and it is reduced to judgment against the broker.  How should a claim be handled if the broker or freight forwarder responds to the claim but does not consent (i.e it asserts that a claim is not valid), and the surety has determined that the claim is valid?  A surety is a third party that independently determines the whether a claim is properly payable.  The law does not seem to reflect this fact.  The surety would be in a difficult position of not paying a claim it has determined to be valid because the broker or freight forwarder did not consent.
    • In any action against a surety to recover a claim, the prevailing party shall be entitled to recover costs and attorneys’ fees.  Are such fees and costs a part of the bond penalty?  A bond penalty provides the surety the certainty regarding its maximum financial exposure.  If legal fees and costs are in excess of the bond penalty, the surety does not have such certainty.
    • The provisions regarding pro rata payments by the “surety provider” if the amount of security is insufficient does not address discharge. The regulations should stated that upon exhaustion of the bond penalty, the surety is discharged.  Further, the regulations should set clear deadlines for when claimants must submit their claims.

However, he did not know whether the regulations will be out before October 1, 2013.  I offered SFAA’s assistance in providing industry feedback regarding these issues.  He asked that we maintain contact.

As staff learns new information we will pass it on to you.

2013 July Reports

July_Contract_Report

July__Commercial

July_Fidelity__Report

SFAA Congressional Action Day–Wednesday May 8

Date Received – April 4, 2013

SFAA members again will be going to Capitol Hill to visit members of Congress in conjunction with the SFAA Annual Meeting.  Please help make Congressional Action Day a success again this year by joining us, Wednesday, May 8, 2013, as we tell Congress about the importance and benefits of fidelity and surety bonds.  We also will take this opportunity to address with Congress the current issues impacting the surety industry.  The Government Affairs Advisory Committee meeting on Wednesday morning will include discussion of our specific issues and talking points for the Hill meetings later in the day.

Although the SFAA meets with Congressional representatives and staff on specific issues, there is no substitute for constituent visits.  Your senators and representatives need to know you are out there, that your company is in their state, and that you care how they vote on certain issues.  Please make an appointment to meet with your personal representative and the members in Congress for the district in which your company is located.  Introduce your company, our industry and SFAA to that office.  Given the highly visible and controversial issues of government spending, tax and the national debt that are dominating the Congressional agenda, it is especially important that you participate in Congressional Action Day this year.  It will be particularly challenging this year to get Congress to focus on surety issues on its overcrowded docket.

A number of SFAA members have participated regularly in Congressional Action Day, and some have never done this before.  With the many issues facing our economy and our industry, it is more important than ever that all of you, as voters and constituents, tell Congress what is important.  Our Annual Meeting provides the perfect opportunity to reinforce SFAA positions on federal legislative and regulatory issues with existing legislators and to introduce our industry and its issues to new Members of Congress.  No experience is needed to participate in Congressional Action Day.

The timing of our Annual Meeting this year could prove to be an ideal opportunity for SFAA members to make their annual trip to the Hill as there are several surety issues pending for which we want Congressional action this year.  Fraudulent sureties remain a problem in the industry, and the individual surety legislation that SFAA and NASBP sought last year in the House has been reintroduced this year as H.R. 776, the Security in Bonding Act.  Just like last year’s legislation, H.R 776 provides that if a surety bond is accepted by the federal government from a surety not subject to regulation by the U.S. Department of the Treasury but based on a pledge of assets, the assets pledged must consist of “eligible obligations,” and the assets must be submitted to the government official required to approve or accept the bond.  The bill also would require the government official to place the pledged assets in a depository approved by the Secretary of the Treasury (currently the Federal Reserve Bank of St. Louis).

H.R. 776 is just common sense.  The security that stands behind every federal contractor’s obligations to the federal government should be governed by the same rules.  There should be either a corporate surety bond in place from a company approved by the U.S. Treasury or assets with readily identifiable value pledged and relinquished to the federal government while the construction project is ongoing.  The same rules should apply regarding the security that any federal contractor must provide to secure its obligations to the federal government.

This year’s bill, however, also contains a provision to increase the amount of the bond guarantee in the Preferred Surety Plan of the Bond Guarantee Program of the Small Business Administration (SBA) from 70% to 90%, which gives sureties another reason to urge their representatives to support this bill.

SFAA and NASBP have been working together persistently to eliminate the periodic review now required of all procurement thresholds.  We want to amend the law to exempt the Miller Act bonding thresholds from these reviews.  The Miller Act bond threshold was increased from $100,000 to $150,000 as a result of the most recent review.

We would be happy to schedule visits for you.  It is often more persuasive if you, as a voter, request the meeting personally.  The attached sample letter and information sheet on how to contact your representative can guide you through the process.  If your company has federal affairs representatives in Washington DC, you also should coordinate with them.  The last attachment is a form to fax or scan and email back to the SFAA.

SFAA is preparing a folder with position statements on our federal issues that SFAA members can take with them and leave behind in the offices of Members of Congress.  These materials will be distributed by email prior to the meeting of the Government Affairs Advisory Committee on Wednesday, May 8, so that SFAA members can review them and will be prepared to discuss them at the Committee meeting.  We will have copies of the issue kits at the Committee meeting for members to take with them to the Hill.

Thank you in advance for helping us educate Congress on the surety and fidelity business.

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New York — Mortgage Loan Originators – Emergency Rules Revised

Date Received – March 23, 2013

The bond amounts have been revised slightly for individual originators. Prior emergency regulations required a bond ranging from $10,000 to $150,000 based on loan volume. The rules now require a bond ranging from $10,000 to $100,000, which is in line with the law.  The rules also now provide a schedule of bond amounts for brokers and lenders providing bonds to cover mortgage loan originators in an amount ranging from $100,000 to $500,000.

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The New York Banking Department has re-adopted emergency regulations to implement AB 6924 (2009). The law requires mortgage loan originators to be covered by a surety bond. If the originator is the employee or exclusive agent of an originating entity subject to existing surety bond requirements, then the employer’s bond could be used to fulfill the requirement so long as that bond covers all mortgage originators not otherwise covered under a qualifying bond. Under existing law, mortgage brokers must post a bond in an amount ranging from $10,000 to $100,000 based on loan application volume. Mortgage lenders must post a bond in an amount ranging from $50,000 to $500,000, which is based on the volume of New York closed loans. Under the law, the Superintendent of Banks (Superintendent) is authorized to promulgate rules concerning the requirements for the originator’s surety bond. The law provides the bond amount must reflect the dollar amount of loans originated by the originator. The emergency rules implement the law exactly with respect to the coverage requirements for mortgage loan originators. The rules set forth a schedule for individual originators based on the aggregate amount of New York loans originated:

Required amount of bond                            Aggregate $ amount of NY loans originated

$10,000                                                           Less than $1 million

$15,000                                                           $1 million to $7,499,999

$25,000                                                           $7.5 million to $14,999,999

$50,000                                                           $15 million to $29,999,999

$75,000                                                           $30 million to $49,999,999

$100,000                                                         $50 million or more

If the bond is provided by an originating entity (mortgage bankers and mortgage brokers) covering its loan originators, then the amount of the bond must be in an amount equal to the aggregate of the individual bonds required for all covered mortgage loan originators, calculated as set forth above; provided, however, that the originating entity’s bond is capped at a maximum amount based on the number of originators the bond covers. If the originating entity has less than ten covered originators, the bond is capped at $100,000; if the originating entity has ten but not more than 15 covered originators, the bond is capped at $150,000; if the originating entity has 16 but not more than 24 covered originators, the bond is capped at $250,000; and if the originating entity has 25 or more covered originators, then the bond is capped at $500,000. The emergency rules provide that the Superintendent may require a larger bond if the “nature or business of a [mortgage loan originator] or originating entity requires in the reasonable judgment of the Superintendent such additional protection for consumers.”

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