THE SURETY & FIDELITY ASSOCIATION OF AMERICA
MEMORANDUM
TO: Government Affairs Advisory Committee
FROM: Lenore S. Marema
DATE: October 30, 2008
SUBJECT: Overview of the State Legislative Session
The following summarizes key state legislation affecting surety and fidelity bonds that SFAA has been working on most recently with the AIA. The Annual Report can be found on the SFAA website. This report contains recent activity since the September reports on contract and commercial surety, which can be found on the SFAA website.
Note: Because the level of state legislative activity is low right now, most states have adjourned and others are in recess until after the elections, the Monthly State Legislative Report for October is combined into one report, rather than distributed in separate reports by line of business—contract, commercial and fidelity bonds.
Status of the State Sessions
Only Michigan and New Jersey are active in their regular sessions at this time. Unlike all the other states, for New Jersey and Virginia 2008 was the start of a new two-year session, which is why there are new introductions listed below for New Jersey. Bills introduced now will carry over to 2009. The following states technically still are in session, but all are either in recess or in some informal or perfunctory proceedings: Massachusetts, Ohio, Pennsylvania and the District of Columbia. Illinois has had an extraordinarily long session by way of a series of special sessions. The legislature now is adjourned until November 12, and it remains to be seen if the legislature will be called back for yet another session. New York comes back on November 18 for a special session to deal with budget issues, which most likely will include a broad range of tax increases, possibly including an increase in the insurance premium tax.
Some states have started pre-filing bills for 2009: Alabama, Florida, Iowa, Kentucky, Montana, North Dakota, Nevada, New Hampshire and Virginia.
The November and December editions of the SFAA Monthly State Legislative Report will focus on legislation anticipated in 2009, including a summary of pre-filed bills to date, and SFAA’s legislative goals and priorities.
Recent Developments in Contract Surety Legislation
Enactments. The Michigan budget bill for 2009, HB 5808, continues the Department of Transportation (DOT) program of assistance for small, minority- and women-owned businesses, which includes surety bonding.
Pennsylvania SB 1019 requires recreational vehicle dealers to post a $30,000 license bond. The bond would serve as security for any claim of an agency of the Commonwealth for moneys due, including but not limited to, unpaid taxes, fees, licenses, payment of a criminal penalty or fine after conviction, payment of a civil fine or penalty or monetary amount after the entry of judgment.
Recent Introductions. SFAA still is waiting for the text of New Jersey AB 3423/SB 2339, which appears to permit the bidder to submit an irrevocable letter of credit as a performance guarantee.
Recent Developments in Commercial Surety
Enactments. Two new laws enacted in Massachusetts have requirements for public official bonds. Massachusetts HB 5018 creates the Clean Energy Technology Center. The officers and employees of the Center must post a bond if they have access to the Center’s cash or securities. The Board of Directors of the Center will prescribe the amount of the bond and a blanket bond is permitted. SB 2786 creates the Walpole Economic Development and Industrial Corporation. Each of the seven members of the Board of Directors of the Corporation must post a$50,000 surety bond conditioned on the faithful performance of their duties.
Pennsylvania HB 2294 requires debt management services providers to be licensed and bonded. Right before the bill was enacted, it was amended so that the bond amount is “greater than the total amount of Pennsylvania consumer funds that the licensee will hold directly or in trust at any time.” As originally drafted, the bill would have set the bond amount at $100,000.
Pennsylvania SB 100 requires home improvement contractors to be licensed and to obtain $50,000 in liability coverage for personal injuries and $50,000 of liability coverage for property damage.
Recent Introductions. New Jersey AB 3353 would permit the establishment of workers compensation programs and group self-insurance plans through collective bargaining. Existing law permits the use of a surety bond to secure the liabilities in a self-insurance plan.
New Jersey SB 2116 would limit the amount of the appeal bond in civil actions to the total value of the monetary judgment or $50 million, whichever is less.
New Jersey SB 2221 would enact the Uniform Trust Code of the National Conference of Commissioners on Uniform State Law (NCCUSL). The bill would provide that trustees would be required to furnish a bond to secure the performance of their duties when the court or surrogate decides that it is necessary to protect the interests of the beneficiaries. A bond also could be required if it is in the terms of the trust and the court has not dispensed with this requirement. Even if the trustee resigns, any liability of the trustee or of the sureties on the bond for the acts and omissions of the trustee would not be discharged or affected by the trustee's resignation.
Dead for 2008. New Jersey AB 2497 would have required agents of athletes to register and post a $100,000 license bond. The bill was withdrawn from further consideration recently.
Recent Developments in Fidelity Bonds
Enactments. California SB 1007 requires exchange facilitators, which are those who are engaged in the facilitation of like-kind exchanges of property pursuant to federal tax law, to be licensed and to post one of the following: a fidelity bond or bonds in an amount not less than $1 million from an insurer licensed in the State, or cash, securities, or an irrevocable letter of credit for the same amount. SFAA believes that while the new law states that a fidelity bond is required, it suggests that a surety bond is intended. The new law allows third parties to make a claim on the fidelity bond, which as a matter of practice does not work for fidelity bonds. During the legislative session, we wrote to the sponsor inquiring about the language and explaining the differences between surety and fidelity bonds, but the bill sponsor did not address our concerns. SFAA is addressing the problem by working with the Commissioner of Corporations and the Commissioner of Financial Institutions in the implementation of the bond requirement.