Chapter 122:15-1 EDGE Bond Guarantee Program Requirements

122:15-1-01 EDGE bond guarantee program-definitions.

(A) "Bid bond" means a bond conditioned upon the bidder on a contract entering into the contract, and furnishing the required payment and performance bonds.

(B) "Contract" means a written obligation of the principal requiring the furnishing of services, supplies, labor, materials, machinery, equipment, or construction. A contract does not include a permit, subdivision contract, lease, land contract, evidence of debt, financial guarantee, warranty of performance or efficiency, warranty of fidelity, or release of lien (other than for claims under a guaranteed bond). Contracts may include a maintenance agreement of two years or less which covers defective workmanship or materials only. With the development service agency's written approval, it can also include a longer maintenance agreement covering defective workmanship or materials, or a maintenance agreement covering something other than defective workmanship or materials. To qualify for such approval, the agreement must be ancillary to the contract for which the development service agency is guaranteeing a bond, must be required to be performed by the same principal, and must be customarily required in the relevant trade or industry.

(C) "Final bond" means a performance bond and/or payment bond.

(D) "Loss" means:

(1) In the case of a bid bond, the lesser of the penal sum or the amount which is the difference between the bonded bid and the next higher responsive bid. In either case, the loss is reduced by any amounts the surety recovers by reason of the principal's defenses against the obligee's demand for performance by the principal and any sums the surety recovers from indemnitors and other salvage; or

(2) In the case of a payment bond, the sum necessary to pay all just and timely claims against the principal for the value of labor, materials, equipment, and supplies furnished for use in the performance of the bonded contract and other covered debts, or, at the surety's option, the penal sum of the payment bond. In either case, the loss includes interest (if any), but loss is reduced by any amounts recovered (through offset or otherwise) by reason of the principal's claims against laborers, subcontractors, suppliers, or other rightful claimants, and by any amounts recovered from indemnitors and other salvage; or

(3) In the case of a performance bond, the sum necessary to meet the cost of fulfilling the terms of a bonded contract or, at the surety's option, the penal sum of the bond. In either case, the loss includes interest (if any), but loss is reduced by any amounts recovered (through the offset or otherwise) by reason of the principal's defenses or causes of action against the obligee, and by any amounts recovered from indemnitors and other salvage; or

(4) In addition, for each type of bond described in paragraphs (F)(1) through (F)(3) of this rule, loss shall include all reasonably and customary expenses incurred by the surety in adjusting claims, in meeting bond obligations and in securing, or attempting to secure, recoveries.

(E) "Obligee" means:

(1) In the case of a bid bond, the person requesting bids for the performance of a contract; or

(2) In the case of a final bond, the person who has contracted with a principal for the completion of the contract and to whom the obligation of the surety runs in the event of a breach by the principal.

(F) "Payment bond" means a bond that is conditioned upon the payment by the principal of money to persons who have a right of action against such bond, including those who have furnished labor, materials, equipment and supplies for use in the performance of the contract. A payment bond cannot require the surety to pay an amount that exceeds the claimant's actual loss or damage.

(G) "Performance bond" means a bond conditioned upon the completion by the principal of a contract in accordance with its terms.

(H) "Premium" means the amount charged by a surety to issue bonds. The premium does not include surcharges for extra services.

(I) "Principal" means an EDGE business enterprise who in the case of a bid bond, is the business bidding for the award of a contract. In the case of final bonds, principal means the EDGE business enterprise liable to complete the contract, and the business whose performance or payment is bonded by the surety.

Effective: 04/07/2014
R.C. 119.032 review dates: 12/06/2013 and 04/07/2019
Promulgated Under: 119.03
Statutory Authority: 122.90(B)
Rule Amplifies: 122.90
Prior Effective Dates: 9/26/03, 10/2/04

122:15-1-02 EDGE bond guarantee program.

(A) The development service agency guarantees sureties participating in the EDGE bond guarantee program against a portion of their losses incurred and paid as a result of a principal's breach of the terms of a bid bond or final bond on any eligible contract. The director of the development service agency or his/her designee shall develop the EDGE bond guarantee program application and procedures. The surety must obtain the development service agency's approval through the application process below before a guaranteed bond can be issued.

(B) A surety who desires to participate in the EDGE bond guarantee program shall submit an application to the division of minority business affairs in the development services agency. The director of the development services agency or his/her designee shall review and approve or disapprove the application. If the application is approved, the surety must enter into a participation agreement with the director in order to become a participating surety in the EDGE bond guarantee program.

(C) The participating surety may then submit EDGE bond guarantee program requests for guarantee to the development services agency. When submitting a bond guarantee program request for guarantee to the development services agencyfor a bond guarantee, the principal must certify that it meets the eligibility requirements set forth in section 123.152 of the Revised Code. The director of development services agency or his/her designee shall review the EDGE bond guarantee program request for guarantee and make a determination whether to approve the request based on program fund availability and principal's eligibility and said determination shall be final.

(D) The total amount to be bonded (e.g. all bonds combined under the contract: performance, payment and bid bonds) shall not exceed $1,000,000in face value at the time of the bond or bond's execution and must comply with the requirement set forth in section 122.90(A) of the Revised Code..

(E) Bid bonds and final bonds are eligible for a development services agency bond guarantee if they are executed in connection with an eligible contract and the director of the development services agency or his/her designee has approved a request for guarantee submitted as proscribed.

Effective: 04/07/2014
R.C. 119.032 review dates: 12/06/2013 and 04/07/2019
Promulgated Under: 119.03
Statutory Authority: 122.90(B)
Rule Amplifies: 122.90
Prior Effective Dates: 9/1/2006

122:15-1-03 Ineligibility of principal and surety; loss of program eligibility.

(A) A principal is ineligible for a development services agency bond guarantee under one or more of the following circumstances;

(1) An owner, officer, director, or general partner of the principal is under indictment for, or has been convicted of a felony involving protecting the integrity of business transactions or business relationships; or a final civil judgment has been entered stating that such owner, officer, director, or general partner has committed a breach of trust or has violated a law or regulation protecting the integrity of business transactions or business relationships; or

(2) A regulatory authority has revoked, canceled, or suspended a license of the principal, or an owner, officer, director, or general partner of the principal, which is necessary to perform the contract; or

(3) The principal has obtained a bond guaranteed by fraud or material misrepresentation.

(B) A surety is ineligible for a development services agency bond guarantee under one or more of the following circumstances:

(1) A regulatory authority has revoked, canceled, or suspended a license of the surety, or an owner, officer, director, or general partner of the surety, which is necessary to transact business as a surety insurer; or

(2) The surety has obtained a bond guarantee by fraud or material misrepresentation; or

(3) The surety has materially breached the EDGE bond guarantee participation agreement with the development services agency.

(C) A principal may lose eligibility for further development services agency bond guarantees if any of the following occurs under a development services agency-guaranteed bond issued on behalf of the principal:

(1) Legal action under the guaranteed bond has been initiated;.

(2) The obligee has declared the principal to be in default under the contract;.

(3) The surety has requested reimbursement for losses incurred under the bond; or.

(4) The principal committed fraud or material misrepresentation in obtaining the guaranteed bond.

(D) A surety may lose eligibility for further development services agency bond guarantees if any of the following occurs under a development services agency-guaranteed bond issued on behalf of the principal:

(1) The surety committed fraud or material misrepresentation in obtaining the guaranteed bond.

(2) The surety has materially breached the EDGE bond guarantee participation agreement.

Effective: 04/07/2014
R.C. 119.032 review dates: 12/06/2013 and 04/07/2019
Promulgated Under: 119.03
Statutory Authority: 122.90(B)
Rule Amplifies: 122.90
Prior Effective Dates: 9/26/2003, 10/2/2004

122:15-1-04 Bond servicing.

(A) The surety shall monitor the principal's progress on bonded contracts guaranteed by the development services agency in a reasonable manner determined by the surety, which may include job status reports from obligees of final bonds guaranteed by the development services agency The surety must maintain documentation of its monitoring and provide such documentation upon the request of the development services agency. In the event obligees do not respond to a surety's requests for job status reports, the surety may monitor progress of guaranteed bonded projects through the contractor's job schedules..

(B) A surety shall not charge a principal a premium amount greater than that authorized by the Ohio department of insurance. The surety shall not require the principal to purchase casualty or other insurance or any other services from the surety or any affiliate or agent of the surety. The surety shall not charge non-premium fees to a principal unless the surety performs other services for the principal, Ohio law does not prohibit the additional fee, and the principal agrees to the fee.

(C) No person may be named co-obligee or obligee or on a rider to the bond unless that person is bound by the contract to the principal (or to the surety, if the surety has arranged completion of the contract) to the same extent as the original obligee. In no event may the addition of one or more co-obligees increase the aggregate liability of the surety under the bond.

(D) There shall be no execution or approval of a bond by a surety after commencement of work under a contract unless the surety obtains prior written approval from the development services agency.

Effective: 04/07/2014
R.C. 119.032 review dates: 12/06/2013 and 04/07/2019
Promulgated Under: 119.03
Statutory Authority: 122.90(B)
Rule Amplifies: 122.90
Prior Effective Dates: 9/26/2003, 10/2/2004

122:15-1-05 Payment of loss on DSA guaranteed bond; collection.

(A) A surety shall submit claims for reimbursement of losses on a bond guarantee on a form approved by the development services agency according to the terms of the EDGE bond guarantee agreement entered into between the surety and the development services agency. Claims for reimbursement and any additional information submitted are subject to review and audit by the development services agency.

(B) Unless otherwise notified by the development services agency to the contrary, the surety must handle and process all claims under the bond, all settlements and all recoveries in the same manner and under the same standards as it uses for non-guaranteed bonds. The surety shall be entitled to reimbursement for the guaranteed share of losses, including financing of the bond principal to avoid an imminent default, as long as it paid the losses in good faith and in accordance with its normal procedures and reasonable industry standards. The surety shall pursue indemnity and recovery on account of such losses in accordance with its normal procedures and reasonable industry standards. The development services agency shall reimburse the surety for the guaranteed percentage of the cost of such indemnity and recovery efforts, and the surety shall remit to the development services agency the guaranteed percentage of all indemnity or recovery received by the surety.

(C) The payment by the development services agency of a surety's claim does not waive, compromise, or invalidate any of the terms, claims and defenses under the EDGE bond guarantee agreement, the Ohio Revised Code, Ohio Administrative Code or any other applicable law, regulation or policy.

(D) Within thirty days of surety's receipt of notification from the development services agency that a claim or any portion of a claim was improperly paid by the development services agency to the surety, the surety shall repay the specified amounts to the develoment services agency.

Effective: 04/07/2014
R.C. 119.032 review dates: 12/06/2013 and 04/07/2019
Promulgated Under: 119.03
Statutory Authority: 122.90(B)
Rule Amplifies: 122.90
Prior Effective Dates: 9/26/2003, 10/2/2004