License and Permit Bonds

1. Why are License & Permit Bonds needed?

They protect your city against claims arising from a license or permit issued to someone. They ensure compliance with laws, ordinances and regulations by license or permit holders. They increase city revenues by ensuring that fees and charges are paid on time. Consumers are protected because they may make a direct claim to the surety company if the license or permit holder acts contrary to your laws or ordinances.

2. How can License & Permit Bonds protect your community and your citizens?

A. Before a bonding company is willing to issue a License & Permit Bond, it subjects the licensee to an investigation. If the surety finds the applicant to be financially and otherwise qualified to successfully engage in the trade or profession, it issues the bond. This pre-qualification service is among the most important that a bonding company can provide to the local government and to the public.

B. The surety can strongly encourage compliance with the applicable laws, ordinances or regulations. It can do so by reminding the licensee of his obligations and of its option to withdraw his bond if the deficiency or noncompliance is not cured promptly. Historically, this has proven to be an effective tool in assisting the local government. As a last resort, the surety can cancel the bond, thereby voiding the license.

C. Finally, when all other efforts have failed, the surety pays losses and damages which occur. All corporate sureties have trained staffs of professionals to handle and pay claims promptly, efficiently and fairly.

Aren't these types of claims covered by liability insurance?

Generally, no! Unlike the bond, insurance cannot usually cover code violations. Public policy generally does not permit a person to insure against his own violations of law or regulation. Accordingly, a bond is needed to protect the public from this sort of violation, just as insurance is needed to protect against accidental acts or omissions. Liability insurance and surety bonds are both important tools for the protection of consumers who deal with regulated trades and businesses, although they perform different services.

3. Who should be bonded?
(Typical permits/licenses issued by a city government) Virtually every business or profession, which deals with the public, is a potential candidate for license and permit bonding. The following is a list of the License and Permits Bonds that are most commonly required by local governments:

*General Contractor
*Electrical Contractor
*Heating/AC Contractor
*Excavation Contractor
Driveway Permit
Garbage Disposa
Gas Appliance Installer
Highway Permit Peddler
Refrigeration Contractor
Roofing/Siding/Insulation Contractor
Sewer and Water Contractors

*Most common types of bonds required by municipalities. Every city, town, village, or other municipality should have these bonds. If your municipality requires licenses or permits of occupations other than those listed, you may consider enacting bond requirements of them also.

4. Proof of how L&P Bonds have helped communities like yours:
Upon inspection of a room addition, an Indiana City inspector issued a statement of code violations and stopped the contractor from doing any further work. The contractor then refused to correct and complete the work and refused to return the down payment. The surety paid ,500 to the homeowners.

A Texas consumer hired a cement contractor to install a new driveway. The work was found to be in violation of city codes, and a request was made to remove and re-pour the drive. The contractor failed to respond and the surety paid ,976 to have the project completed and approved by the city.

A North Dakota dairy farmer contracted an electrician to repair and install electrical wiring on his farm. The state inspector found that an improper and negligent failure to ground the electrical system caused problems with stray voltage. This resulted in injury to the livestock. The surety paid the full ,000 amount of the bond to the farmer.

A California resident contracted with a construction company to build a 35-foot driveway that encroached into a highway. The work was to be completed in three months. Three years later, the work was still not done. The surety paid the full ,000 amount of the bond to have the work completed.

A Minnesota electric contractor forwarded more than 200 requests for inspection to the Board of Electricity. He informed the Board that he was unable to reimburse that office for inspection fees and declared bankruptcy. The surety paid ,416 to cover the costs of inspection fees.