surety bonds in florida

Establishing trust between multiple parties is an important goal for achieving success in any project or business dealing.  Surety bonds in Florida, broadly speaking, are a solution to the age-old dilemma of not knowing whether or not the people you are interacting with are indeed trust-worthy professionals operating in good faith.  Purchasing a surety bond allows a company to project confidence and trustworthiness to its clients by demonstrating a legal commitment to financial responsibility and ethical business practices.  Across all fifty states, including Florida, surety bonds are required to guarantee compliance with licensing and permitting laws across a wide variety of industries.

A surety bond is a legally-binding, mutual contract between three parties that helps to guarantee that specific tasks will be completed to the full expectations set forth within the agreement.  It ensures that the parties will abide by the law from the initiation of the contract to its completion.  The arrangement involves the following three parties:

  1. The principal, which is typically the business or contractor that will be performing the work.  This is the purchaser of the surety bond.
  2. The obligee, who is the entity—usually the owner (or general contractor if a subcontractor obtains bond)—requiring the bond and to whom the bond would be paid in the event that the principal fails to deliver on the conditions of the contract.
  3. The surety, which is the insurance company backing the bond in the event of a claim by the obligee.  If the principal fails to deliver on its end, the surety may be obligated to find another contractor to complete the contract, provide financial assistance to their principal, or reimburse the obligee for the financial loss incurred.  The surety will then likely seek reparations from the principal.

In Florida, surety bonds come in two main types: 1) contract surety, which is commonly used in the construction industry and 2) commercial surety, which is geared more towards satisfying the security requirements of public entities and governments.  Our primary focus is on contract surety in respect to construction.

Within the construction industry, there are four types of surety bonds:

  1. Bid bonds, which guarantee that a contractor will enter into a contract AND provide the required Performance & Payment Bonds if awarded the bid for a project.
  2. Performance bonds, which guarantee that the work will be completed on time and to the required standards set forth by the contract/specifications and by any other applicable laws.
  3. Payment bonds, which provide financial protection to any subcontractors/suppliers assisting the principal with services or materials necessary for the completion of the job.
  4. Maintenance bonds, which protect from losses arising from faulty construction materials or defective workmanship.  They also guarantee that the principal will provide maintenance on the completed project for the duration of time specified by the contract.

Surety bonds are a cost-effective solution to establishing an appropriate level of trust and legal requisites in the fulfillment of a contract obligation.  It allows for the parties involved to feel more confident in the arrangement by making clear what are each party’s responsibilities.  This prioritizes professionalism and integrity on the part of the principal and ultimately helps build their business by winning more bids and establishing new business relationships.  Meanwhile, the surety collects a small premium for assuming the financial risk and the obligee can breathe easy, knowing they’re protected from major losses.

For more information on surety bonds for your business, call the experts at Alter Surety Group at (305) 517-3803.

What did the construction industry learn from Michael, Harvey and Irma? The first day of June signals graduations, weddings and the sweet, sweltering days of summer vacation. Unless you live in or near Gulf and Atlantic coastal communities, then it means hurricane season is here. The 2018 hurricane season was brutal with 15 named storms, 8 hurricanes and 2 major hurricanes delivering devastation to the U.S. and Caribbean nations. Forecasters predict 14 tropical storms would form, of which 7 would become hurricanes. Preparation and risk management are necessities, not luxuries. Labor shortages in the construction trades are still prevalent. If, or rather when, another major storm hits we can anticipate more contractor, sub-contractor and labor shortages. By vetting ahead of time, construction workers can pretty much pick and choose when it comes to a storm-induced labor shortage. The same applies to general contractors that need to hire extra crews quickly. Spotting reliable construction operations or sources of additional labor ahead of disaster is good practice. Know who not to do business with, too. Material shortages are a given in disaster situations. Vetting suppliers and researching availability early in the hurricane season is also prudent. Seek out information on surplus or shortage estimates for critical rebuilding materials and possible alternate sources. Review licensing, lien laws and payment laws in any state your company works in, or plans to work in, as the laws can vary and change. By verifying that all construction legal paperwork and procedures are up to date before disaster strikes, cooler heads and quicker decisions prevail, allowing for a more agile response to post-storm construction contracting. It’s not the wind. It’s the water. Water management infrastructure and flood mitigation in areas near or below sea level are critical in determining the outcome in terms of damage to a community hit by a hurricane. Torrential rains and storm surge cause greater loss than the initial storm in many instances. Contractors and construction companies operating in areas seriously at risk for flood loss should be ready to secure assets and move materials, as well as know how to maneuver safely at flooded job sites. Large or small, a construction firm or contractor should have a disaster management plan in place. Managing during the crises, getting back to normal as quickly as possible, and recovering losses as soon as possible are the goals. What should a disaster management plan address?
    • Identify risks – This entails discussion of the most likely hazards and disaster events and worst-case scenarios. In Florida and Texas, hurricanes should be front and center in any plan. Other issues to address include fire, explosion, chemical spills, active shooter, etc.
    • Establish preventative procedures – While there is no prevention for hurricanes, reducing losses before, during and after a storm by focusing on personal safety, securing facilities and materials, and disaster training are important.
    • Develop a response plan – For every scenario imaginable and applicable, have a plan. Get response protocols down to a fine point, and address all possible variations. Play the “what if” game. Ensure that each part of the plan is adaptable, and have back-up communication plans in place to circumvent disruptions in normal communications. Don’t forget document preservation and management, whether digital or hard copy.
    • Tell everyone – Communicate the plan to all personnel. Identify who will do what, where and how. Train people to meet their assigned responsibilities in a disaster setting with confidence and competence.
  • Drill – Test the plan to find holes or weaknesses. The middle of a hurricane is no time to practice disaster response. Schedule hurricane drills and update the plan as needed. Keep records of results and work on improving and refining as part of the company’s overall risk management policy.
Payment Bonds and Performance Bonds from top rated sureties add a layer of confidence and protection during hurricane season. Advanced preparation and putting a detailed disaster management plan in place exhibits good business practice and proactive risk mitigation to sureties. For suggestions on ways to improve your bond underwriting risk factors and obtain the best rates available, contact the professionals at Alter Surety Group at (305) 517-3803 or visit