Bonds, Insurance & Stop Payment Notices

1. Bonds, Insurance & Stop Payment Notices These materials have been prepared by the CASBO San Diego- Imperial Section Purchasing Professional Council (or CASBO Associate Member). They have not been reviewed by State CASBO for approval, so therefore are not an official statement of CASBO

2. Long Beach, CA April 5, 2013 Presented by: Gretchen M. Shipley; Fagen, Friedman, & Fulfrost GuiselleCarreon, Director of Purchasing, Grossmont Union High School District CASBO Fall Classic Workshop: Bonds, Insurance & Stop Payment Notices

3. Bonding Insurance Stop Payment Notices Agenda

4. Bonding

5. Basics • Types • Bid • Payment • Performance • Purpose • Essential elements Bonding

6. Surety • Admitted Surety Insurer as defined in CCP § 995.120 • A.M. Best rated A- or better • A.M. Best Financial Size Category VII or better • Reject bonds issued by a surety who does not meet or exceed these criteria. Bonding

7. Bonding So this just happened to your construction project… …what do you do?

8. Process of Enforcing Bonds • Contract unable or unwilling to contract • Contractor’s material breach • Dealing with the contractor • Bankruptcy • Approval from surety • Notice of termination to contractor Bonding

9. Bonds claims process • Notice of tender to surety • Likelihood of takeover • Retention of completion contractor • Takeover agreement Bonding

10. Insurance

11. Different types • Worker’s Compensation • Employers Liability • Commercial General Liability • Includes coverage for bodily injury, death, property damage and motor vehicle liability • Builders Risk Insurance

12. Determining limits: assessed risk / tiered Construction agreement should list minimum coverage amounts for each policy of insurance required Construction agreement should also list subcontractor insurance requirements Insurance

13. Owner Controlled Insurance Program (“OCIP”) • Government Code section 4420.5 • School districts exempt from $50,000,000 project cost threshold • Implementation • Required determination • Considerations Insurance

14. Owner Controlled Insurance Program (“OCIP”) • Completed operation coverage insurance • Bid specifications • Additional insurance coverage & surety insurance • Developing safety requirements • Collective bargaining agreements Insurance

15. “Pop quiz, hotshot” Which of the following is not one of the factors that must be considered when implementing an OCIP program: • Serious and willful workers compensation violations • Number of workplace complaints to Cal/OSHA during the past 5 years • Workers’ compensation experience modification factor • Injury prevention programs

16. Definition • Elements of a valid stop payment notice • 20 day preliminary notice • Contents • Timely filed • How much to withhold? • For how long? • Lawsuit Stop Payment Notices

17. How much to withhold? • 125% • For how long? • Unconditional release/withdrawal • Release bond • Failure to file a counteraffidavit • Failure to timely commence an action • Lawsuit to enforce dismissed • Lawsuit Stop Payment Notices

18. Lawsuit • Timing • Service on the public entity • Tender a defense • Stay away! Stop Payment Notices

19. Effect “Public Works Contract” Period for Recording Notice of Completion Completion of a Public Work of Improvement Stop Payment Notice Fee New & Standardized Service Requirements SB 189

20. Q & A

21. Guiselle Carreon: carreon.guiselle@gmail.com Gretchen Shipley: gshipley@fagenfriedman.com Thank you!