Surety Bonds & Construction Guarantees Flashcards
7 cards from real CRIS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Surety Bonds & Construction Guarantees flashcards as text
What is a subdivision bond (completion bond) in the context of real estate development?
Answer: A bond guaranteeing that a developer will complete required public improvements such as roads and utilities
A subdivision bond guarantees that the developer will complete required public improvements (roads, sidewalks, utilities) that local government approval conditions imposed on the development.
What is a general indemnity agreement in the surety bonding relationship?
Answer: An agreement signed by the principal and indemnitors requiring them to reimburse the surety for any losses, costs, and expenses paid
A general indemnity agreement requires the contractor and often their principals and spouses to fully reimburse the surety for any losses or expenses the surety incurs on their behalf.
What does 'single limit' or 'aggregate work program limit' mean in surety bonding capacity?
Answer: The total outstanding bonded work amount the surety will support for one contractor at any given time
The single limit is the maximum total dollar value of bonded projects the surety will have outstanding for a single contractor at any one time, controlling aggregate exposure.
What is the primary role of a surety bond producer (agent) in the bonding process?
Answer: The producer acts as an intermediary who helps contractors secure bonds and assists in presenting the underwriting submission to the surety
A surety bond producer serves as an intermediary between the contractor and surety company, assisting with the underwriting submission, securing bond approval, and often helping navigate the claims process.
What is a 'consent of surety' document used for in construction bonding?
Answer: A document in which the surety acknowledges and consents to modifications or extensions to the bonded contract
A consent of surety acknowledges that the surety agrees to contract modifications, extensions, or changes without releasing its obligations under the bond.
On a Design-Build project, what additional risk does a surety assume on a performance bond compared to a traditional design-bid-build contract?
Answer: The performance bond obligation extends to both design and construction performance, exposing the surety to professional liability risk
In Design-Build delivery, the performance bond covers both design and construction obligations, adding professional liability and design error exposure that traditional construction-only performance bonds do not carry.
What is the surety's 'right of subrogation' after paying a performance bond claim?
Answer: The right to step into the position of the obligee and pursue the defaulted principal and responsible third parties to recover losses paid
Through subrogation, a surety that pays a bond claim is legally substituted into the obligee's position and may pursue the defaulted principal and any other responsible parties to recover its losses.