Full Text

Download
Word
format

Need help downloading?

Contrary to the inference that might be drawn from the title to this presentation, contract bond sureties serve a valuable role in the construction process. They do a great many things, and they do them well. They help to screen out unqualified contractors. They provide sound financial guidance for their principals. They provide credit enhancement that allows the construction process to proceed on what might be an otherwise C.O.D. basis. They shore up many a contractor before anyone else even knows there’s a problem. And, they pay millions of dollars of claims every year and generally honor their obligations.

Why, then, have many of the owners and general contractors who are obligees on their bonds become so cynical about sureties? Why is their first inclination, in a default situation, to expect delay, indifference, second-guessing, and defenses based on obscure and arcane legal theories from a surety and its representatives? The answer lies, in part, with the fact that most of us don’t appreciate all of the things in the preceding paragraph that sureties do and do well. All we see is the principal for whom the process did not work and the natural reactions and emotions of human beings that must set about fixing something they never expected would break.

I spent nineteen years representing sureties in all sorts of claims situations[1]. I submit that the vast majority of the time my clients and I made responsible, professional decisions that promptly and fairly remedied the problem at hand. There are, however, those out there who would claim, sometimes accurately, that we took delay and indifference, second guessing, and arcane defenses to a new high or low, depending on their perspective. I don’t intend this presentation to be a "tell all" story of the secret tricks and traps of the surety claims industry. Indeed, I hope that those in the industry would agree that the information is useful, accurate, and calculated to educate those who would make claims against them. . .for we all prefer an educated party on the other side of the table. I also don’t pretend that this paper will be scholarly and legally authoritative. . .for everyone who reads it is as capable as I am, if not more so, of researching applicable case law. What I can provide, that not every reader can experience for himself, is practical advice gleaned from many years of sitting on the surety’s side of the table.

Full Text

You must have the free Adobe Acrobat Reader 4.0 (or greater) installed in your computer in order to view or print this paper. It is available as a free download from the Adobe Web site. If you do not have Acrobat Reader installed, click the link to the left to download it. If a menu window opens before the paper, choose the "View" option.