Surety Bond Quarterly - Fall 2017 - 16

complete all of the remaining bonded
work and continue to make its quarterly payments under the financing
agreements as it continued to pick
up and perform non-bonded work.
However, to the same degree
the above producer was beneficial
in positioning the surety and principal in order to obtain a favorable
outcome, a producer who does not
understand the industry can prove
detrimental. In this example, after
the obligee declared its principal in

default on a large private project for
delayed performance, the surety, by
imbedding a construction consultant on site, took action to assist the
principal in improving its project controls to enhance its ability to capture
delays and disruptions caused by the
obligee. Ultimately, the effort proved
successful, and the obligee rescinded
its default of the principal. However,
shortly thereafter the principal's producer, presumably at the principal's
request, demanded that the surety's

claims team retract its involvement
and oversight of the project since
the project was no longer in default.
The resulting retreat of the surety's
claims team eventually proved disastrous for the bonded principal, which
could not itself adequately maintain
project controls to capture and assert
financial harm caused by ongoing
obligee inefficiencies. This course
of action resulted in the principal
sustaining substantial losses on the
project. The resulting deterioration
of the principal's financial condition
ultimately rendered it unbondable,
as the surety would not extend further surety credit to the principal on
subsequent jobs. Had the producer
communicated with the surety about
the value of the consultant's services
and then communicated this import
to the principal, it could have saved
the principal from suffering such a
substantial loss and assisted both
itself and the surety in retaining a
premium producing account.
In a final example, one of the surety's large premium producers also
represented an obligee on the bonded
project. The obligee asserted facially
improper claims against the surety's
performance bond for damages allegedly resulting from the defective
work of the surety's then-insolvent
principal. While the producer could
have been a conduit for bridging the
gap between the surety's and his client's respective positions, the producer elected to apply pressure on
the underwriting arm of the surety
in an unsuccessful attempt to force
a settlement that was clearly unjust.
The result of this pressure by the producer was lengthy and costly litigation that cost the obligee more than
it was able to recover from the surety
through settlement. Inevitably, if the
producer had chosen to act impartially, he would have been able to reset
his client's expectations on the front
end and save both his client and the
surety a great deal of time and money.
Practical Ways for a
Surety to Engage the Producer
So what can the surety do to better
position itself for the day when the

16

SURETY
868990_BKD.indd
1

BOND QUARTERLY | FALL 2017

11/08/17 4:01 pm


http://www.bkd.com/cre http://www.bkd.com/cre

Table of Contents for the Digital Edition of Surety Bond Quarterly - Fall 2017

NASBP Upcoming Meetings & Events
2017–2018 Executive Committee
From the CEO: Advice for the Advisor!
How Can Construction Contractors Expedite Payment on Federal Contracts?
The Growing Importance of the Bond Producer in the Efficient Resolution of Claims
Practical Tools to Help Jump-Start Your Company’s Cyber Plan
Bond Agency Owners: The Hardest Part is Letting Go
New Software Selection and Implementation is not a Weekend Project
Is Canada Soon to Have Its Version of the Miller Act?
2017 NASBP Resource Directory
Surety Bond Quarterly - Fall 2017 - Intro
Surety Bond Quarterly - Fall 2017 - cover1
Surety Bond Quarterly - Fall 2017 - cover2
Surety Bond Quarterly - Fall 2017 - 3
Surety Bond Quarterly - Fall 2017 - 4
Surety Bond Quarterly - Fall 2017 - 5
Surety Bond Quarterly - Fall 2017 - 6
Surety Bond Quarterly - Fall 2017 - 2017–2018 Executive Committee
Surety Bond Quarterly - Fall 2017 - 8
Surety Bond Quarterly - Fall 2017 - From the CEO: Advice for the Advisor!
Surety Bond Quarterly - Fall 2017 - How Can Construction Contractors Expedite Payment on Federal Contracts?
Surety Bond Quarterly - Fall 2017 - 11
Surety Bond Quarterly - Fall 2017 - 12
Surety Bond Quarterly - Fall 2017 - 13
Surety Bond Quarterly - Fall 2017 - The Growing Importance of the Bond Producer in the Efficient Resolution of Claims
Surety Bond Quarterly - Fall 2017 - 15
Surety Bond Quarterly - Fall 2017 - 16
Surety Bond Quarterly - Fall 2017 - 17
Surety Bond Quarterly - Fall 2017 - Practical Tools to Help Jump-Start Your Company’s Cyber Plan
Surety Bond Quarterly - Fall 2017 - 19
Surety Bond Quarterly - Fall 2017 - 20
Surety Bond Quarterly - Fall 2017 - Bond Agency Owners: The Hardest Part is Letting Go
Surety Bond Quarterly - Fall 2017 - 22
Surety Bond Quarterly - Fall 2017 - 23
Surety Bond Quarterly - Fall 2017 - 24
Surety Bond Quarterly - Fall 2017 - 25
Surety Bond Quarterly - Fall 2017 - New Software Selection and Implementation is not a Weekend Project
Surety Bond Quarterly - Fall 2017 - 27
Surety Bond Quarterly - Fall 2017 - 28
Surety Bond Quarterly - Fall 2017 - 29
Surety Bond Quarterly - Fall 2017 - Is Canada Soon to Have Its Version of the Miller Act?
Surety Bond Quarterly - Fall 2017 - 31
Surety Bond Quarterly - Fall 2017 - 32
Surety Bond Quarterly - Fall 2017 - 2017 NASBP Resource Directory
Surety Bond Quarterly - Fall 2017 - 34
Surety Bond Quarterly - Fall 2017 - 35
Surety Bond Quarterly - Fall 2017 - 36
Surety Bond Quarterly - Fall 2017 - 37
Surety Bond Quarterly - Fall 2017 - 38
Surety Bond Quarterly - Fall 2017 - 39
Surety Bond Quarterly - Fall 2017 - 40
Surety Bond Quarterly - Fall 2017 - 41
Surety Bond Quarterly - Fall 2017 - 42
Surety Bond Quarterly - Fall 2017 - 43
Surety Bond Quarterly - Fall 2017 - 44
Surety Bond Quarterly - Fall 2017 - 45
Surety Bond Quarterly - Fall 2017 - 46
Surety Bond Quarterly - Fall 2017 - cover3
Surety Bond Quarterly - Fall 2017 - cover4
https://www.nxtbook.com/naylor/SBPQ/SBPQ0118
https://www.nxtbook.com/naylor/SBPQ/SBPQ0417
https://www.nxtbook.com/naylor/SBPQ/SBPQ0317
https://www.nxtbook.com/naylor/SBPQ/SBPQ0217
https://www.nxtbook.com/naylor/SBPQ/SBPQ0117
https://www.nxtbook.com/naylor/SBPQ/SBPQ0416
https://www.nxtbook.com/naylor/SBPQ/SBPQ0316
https://www.nxtbook.com/naylor/SBPQ/SBPQ0216
https://www.nxtbook.com/naylor/SBPQ/SBPQ0116
https://www.nxtbook.com/naylor/SBPQ/SBPQ0415
https://www.nxtbook.com/naylor/SBPQ/SBPQ0315
https://www.nxtbook.com/naylor/SBPQ/SBPQ0215
https://www.nxtbook.com/naylor/SBPQ/SBPQ0115
https://www.nxtbook.com/naylor/SBPQ/SBPQ0414
https://www.nxtbook.com/naylor/SBPQ/SBPQ0314
https://www.nxtbook.com/naylor/SBPQ/SBPQ0214
https://www.nxtbookmedia.com