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Make sure your Contractor is Bonded

We obviously love to write bonds.  It's what we do.

However, we also like to tell our contractors that it is not just a necessary evil, but can easily be an advantage in the marketplace. If you read the article below, there is always a worry about scammers.  So, if you are bonded, you can show that you are trustworthy and get MORE business.

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If you're dealing with storm damage, you may be looking for someone to help you.  You also need to be on the lookout for scammers.

Stephen Satterfield, who lives in Wayne Township, has had seven contractors come to his front door over the last two days. He said he's told each of them, "I'm waiting on insurance...write down your estimate."

Satterfield has two large trees that came down early Tuesday morning.  He's not the only one dealing with clean-up.

Joe Gibson, who lives across the street had 100-foot pine come down. He had it cut up and put along the curb Tuesday, after hiring one of the many who contractors who solicited him.

"We got estimates of $250 to $1,250 for the same job," he said. Gibson said he and his brother were careful to ask questions before hiring.

Jerry Gibson added, "Insurance and bonding is the biggest thing. You can't just take a chance and have (the tree) come on the house."

Robert Wilson, who owns Tree Buddies, agrees. Wilson was among those working in Gibson's neighborhood.

Wilson said it's important to see proof of insurance, get at least written three bids and never pay in advance.

"Normally if someone's in business, they won't ask for the money until the job is done. I wouldn't pay a dollar until the job's done," he said.

Another helpful hint? One of the contractors hoping to do Satterfield's job pointed out other jobs he was doing in the area, so Satterfield could see the work and get referrals. Storm victims can also contact the Better Business Bureau or attorney general's office to see if any complaints have been filed against the contractor they're thinking about hiring.

Consumers call follow the below tips to avoid getting scammed:

  • Take your time. Don’t let the contractor rush your decision.
  • Do your research. Know how much you can afford and what you want done.
  • Check with the Better Business Bureau and the Attorney General’s Office to see if complaints have been filed against the contractor.
  • Check to make sure the contractor is locally licensed, bonded and insured. A performance bond provides the most direct protection for the consumer.  Bonds that cover municipal code compliance may be helpful but would not offer direct monetary recovery for an aggrieved consumer.
  • If the contractor came to your door unsolicited, ensure you receive a notice from the contractor of your ability to cancel the contract within three days for a full refund before signing any contract.
  • Get a contract in writing that details what work is to be done and when it will be finished.
  • Never pay for the entire project before the work begins. Do not pay more than 1/3 of the total cost as a down payment.

From the Indiana attorney general's office:

Also this week, Indiana Attorney General Greg Zoeller has filed a lawsuit against door-to-door tree trimming company, Cutter’s Tree Service, for allegedly deceiving Indianapolis-area seniors into purchasing unneeded and overpriced landscaping services.

The complaint was filed in Marion County and names Terry Sizemore, Zack Sizemore and Bill Carr, Jr. as additional defendants in the case. The complaint also alleges the company misrepresented its employees’ qualifications and failed to meet state contract requirements.

“Door-to-door scammers victimize people by using fear tactics and urging immediate action so that the customer doesn’t have time to fully vet the contract or company,” Zoeller said. “The best way to avoid this scam is to arm yourself with knowledge – don’t rush into a decision, research the company and the work you need done, and get multiple price quotes. Hoosiers impacted by recent storm damage should be especially wary of door-to-door repair contractors out to make a buck.”

According to the Attorney General’s complaint, Zach Sizemore and Bill Carr, Jr. doing business as Cutter’s Tree Service approached an elderly couple unsolicited in May 2014 and offered to trim several trees on their property for $1,000. After payment was made, the defendants insisted that some of those same trees also needed to be “chained” for an additional $850. They then told the couple that the chained trees needed to be entirely removed for another $6,500. The couple wrote them a check for $3,250 as a down payment for the work with the remaining amount due upon completion.

While removing the trees, Terry Sizemore told the couple that their chimney was “loose” and needed to be fixed “immediately.” He attempted to get them to enter into a contract to replace the chimney for between $1,500 and $2,200. The couple declined and later had two separate chimney companies inspect their chimney. Both companies said the chimney did not need to be replaced, and if it did, the work would only cost about $500.

The defendants carried out a similar scheme against another elderly couple later that month. This time defendants charged the couple $500 for tree trimming services and an additional $1,500 for removal of the same trees.

In both of these cases, defendants falsely claimed to be licensed arborists and that Cutter’s Tree Service was in good standing with Angie’s List, an online consumer review service. According to the Attorney General’s complaint, both of these claims were untrue. Additionally, neither the company nor its employees had obtained proper local licenses to solicit in the community.

The Attorney General’s complaint also cites Cutter’s Tree Service for not meeting state contract requirements aimed at protecting consumers, such as including the approximate starting and completion dates of the home improvements, a notice of the consumers’ three day right to cancel the transaction, and the name of an agent to whom consumers could direct problems and inquiries.

The defendants are accused of violating the Indiana Deceptive Consumer Sales Act, the Indiana Home Improvement Contracts Act, the Indiana Home Solicitation Sales Act and the Indiana Senior Protection Act.

Zoeller advocated for the passage of the Indiana Senior Protection Act in 2013, which allows the state to seek stiffer penalties for those who prey on senior citizens, a group often targeted by scam artists and other criminals.

The state is seeking injunctive relief, consumer restitution, investigative costs and civil penalties.

Home improvement scams are one of the most common scams reported to the Attorney General’s Office. In 2014, the Attorney General’s Office received more than 800 home improvement-related complaints and has received 390 complaints in 2015 thus far.

Consumers who believe they have been scammed by a home repair or landscaping contractor can file a complaint with the Attorney General’s Office at www.IndianaConsumer.com or by calling 1-800-382-5516.

There are three parties to every surety bond

Surety Bond - The logo shows a two persons hand shaking and a contract document in an off white colored background.

1.The Principal – this is the person who is the primary payer on the bond. That is, the Principal is the one that everyone will want to pay FIRST. In a major construction project the General Contractor is the Principal on a large surety bond.
2.The Surety – this person is also known as the obligor. The Surety provides a guarantee that the Principal will not default on the bond; that is, that they will perform the job per the contract requirements. The Surety is generally a large insurance company. They have spent lots of time and resources through their underwriting department (more on that below) to verify that the Principal can perform. But if the Principal can not perform, then the Surety will make good.
3.The Beneficiary – this person is also known as the obligee. This is the person that wants a surety bond. In a major construction project this is the owner – or an agent of the owner (possibly, the developer). The Beneficiary requires that there is a surety bond for several reasons, including the transfer of risk (despite some increased cost), the protection against unforeseen risk.

This is a simple explanation/definition of a surety bond (sometimes called a surety guarantee, or fidelity bond). A fidelity bond / guarantee bond / surety agreement is a promise that someone (i.e., the commercial surety) will pay a specific dollar amount if someone else (called the Principal, e.g., the general contractor) fails to comply with some commitment as spelled out in a contract or other work-site agreement. So, what a surety agreement does is protect the Owner from a default by the Principal. The bond guarantee could also require that the commercial surety will perform, or get someone else who will perform, the job according to the specific terms in the contract.

The fidelity bond commitments are generally set forth in the bid requirements or specified in a contract. One of the places where we see these commitments are in construction contracts. In a typical construction contract, the surety guaranty protects the owner of the job site (sometimes referred to as the Obligee) against potential losses, which can arise from the general contractor’s failure to comply with the terms of the contract/fidelity bond.

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