In uncertain times such as these, your relationship with your bond company is especially important. As part of their underwriting process, they have teams of analysts monitoring the legal, economic and political climate across the country – some across the World. The branches share local knowledge with the home office who, in turn, disseminates it to the branches.
For example, because we are a member of the Surety Association of Massachusetts, we recently received this email:
Members,
We have been made aware of efforts by public owners in other states to shift the risk of COVID-19 (and potential future pandemics) onto the contractor. Specifically, there have been reports of contract language aimed at restricting or prohibiting a contractor’s ability to make a claim for an adjustment to contract sum and/or contract time.
The following language was added just prior to a bid via an addendum to a Wayne County Schools project in Ohio:
“Contractor acknowledges and agrees that it assumes all risk associated with impacts resulting from the Coronavirus (COVID-19) pandemic, that the Contract Sum and the bid submitted by Contractor has factored in the risks associated with impacts from COVID-19, and that impacts resulting from or related to COVID-19, including but not limited to acts of government, acts of public authorities, and any instances that may constitute a force majeure event, shall not be a basis for a Contractor to make a claim for an adjustment to the Contract Sum”
And further:
“impacts resulting from or related to COVID-19 […] shall not be a basis for a Contractor to make a claim for an adjustment to the Contract Sum, and/or to terminate or suspend the Contract except […] for an [sic] no-cost extension of the Contract Time […]”
Fortunately other state chapters have experienced some success in pushing back against owners on this issue. We encourage members to maintain awareness of this language, and SAM will remain available to intervene on behalf of our member companies as needed. As always, we encourage each member to develop their own risk mitigation strategies.
Best regards,
The Surety Association of Massachusetts
In the spirit of collaboration, if you come across any onerous contract provisions that you feel should be shared or, more importantly, addressed by the Surety Association of Massachusetts or the Surety Association of America, please notify your agent who will be happy to pass it on to the local Surety Association Chapter. We are all in this together. Using the surety as the enforcer can help preserve your relationship with an owner who introduces onerous language.
Remember, on bonded work, the surety is signing off on the same contract provisions that you are. Your interests are aligned. As annoying as the underwriting questions can be, take the time to find the answers. You may choose to move forward and accept the risk, hopefully with your surety’s support, but at the very least, you will be aware of the risk.
