Environmental Surety Bonds: Toxic or Not?!?

If you are an environmental firm – contractor or engineer – and had to provide a surety bond on an environmental project, I bet you’ve scratched your head at least once in the process. Worse yet, if you’re a contractor that regularly posts surety bonds and requested a bond for a project with an environmental spin, you probably not only scratched your head, you may have pulled out your hair.

Here’s the deal: The sureties that will bond a straight-forward construction jobs are many. The ones that will provide a bond when the word “environmental” creeps into the picture are few.

Aside: The main reason for this phenomenon is a disconnect between actual risk and perceived risk. This breakdown starts with the reinsurers that provide their services to the primary sureties. Now don’t get me wrong, there are definitely situations where more strings may be attached to environmental guarantees which create additional risk…but not often.

To be exact, I know a half dozen or less sureties that will actually write an environmental bond – even though a few more talk a good game. Of those, half will want your blood type, first born, and all the money in your bank account as collateral.

When you get right to it, if your business can support a “normal” surety bond, the same basic rules apply to an “environmental” one. There is however this thing called “supply and demand” that will drive up the premium rate a percentage point or more, and you should expect to pay between two and three percent (closer to three). BUT, you actually can BUY an environmental bond for an environmental project without posting a high percentage of collateral.

Always remember, if your business is operating soundly, then your business can qualify for surety bonds – even for some that glow in the dark.

So, surf the web and find a surety agent or bonding company that indicates they provide bonds on environmental jobs. Flush out the sayers from the doers and make sure the surety company is “Treasury listed” and regularly provides bonds for environmental work. Ask for several references of other environmental firms they bond, and call them! Its old fashioned and it works.

Also, watch out for bond aggregators (or as I like to say…aggravators). Those agents and so-called agents who resemble late night TV attorneys are really “B” level marketing machines twice or more removed from the bonding companies that provide surety bonds. You are more likely to deal with amateurs and you will pay more because there are more mouths to feed… but that’s a whole ‘nother blog topic.

Follow this advice and your quest to get that environmental job bonded will have a happy ending.

Please contact us if you have any additional questions about environmental surety bonds.

Brook Smith
President, Smith Manus Surety Bonds