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HomeMy WebLinkAbout1989-11-07; City Council; 10337; Revised standards for reviewing surety bondsCIT. OF CARLSBAD — AGENDA JILL AR« /0/3"5~7 MTG II 1 7 IS") DEPT CA TITLE:REVISED STANDARDS FOR REVIEWING SURtj I x oUlNlJo DEPT. HD. CITY ATT^^y? CITY MGR~5L> O LLJ § 01o. RECOMMENDED ACTION: If Council concurs, your action is to adopt Resolution No. 3*1 " revising standards for review and acceptance for surety bonds. ITEM EXPLANATION The City requires a subdivider's written promise to construct and complete improvements which will be accepted by the City at a future date to provide surety bonds in an amount equal to the estimated costs of those improvements plus a contingency fee guaranteeing their construction. In the event the subdivider fails or refuses to satisfactorily complete the construction of those improvements, the City may call on those surety bonds for the funds necessary to complete those improvements without cost to the City. In order to effectively review and accept surety bonds, the City is guided by Resolution No. 8108 adopted in 1985. (Copy attached) . Basically, that resolution requires an insurance company issuing surety bonds to maintain a policy holder's surplus of $12.5 million or more and to be rated "A" or better in "Best's Key Rating Guide". In 1986, Best's changed its financial size category so that a company with $12.5 million policy holder's surplus is rated Class V. Resolution No. 8108 referred to Class XI which is now $750 million. Use of this standard would overly restrict the market to only the largest insurance companies which often do not issue surety bonds. Accordingly, it is recommended that the City Council adopt the attached resolution updating and revising the size category. In addition, there are surety companies which meet or are anticipated to meet all of Best's financial tests to be rated "A" or better and size V or better but have not accumulated five years of experience. The proposed resolution would allow the City Manager and City Attorney to accept bonds written by such a surety company when it can be shown by convincing evidence that its financial responsibility is equal to or better than those standards except for years of experience. FISCAL IMPACT There will be no cost to the City. Revising the size standard will allow subdividers greater access to insurance companies while maintaining City standards at a high level. It will eliminate the great drain on staff time dealing with numerous requests by insurance companies to accept bonds under the old policy. EXHIBITS Resolution No. O t> O OO A AO, Q2 . O u. 0 °>Q 0 < < Q 0. CD CO Z -J VINCENTCITY ATTORNEY1200 CARLSBCARLSBAD, CA1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 89-387 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA REVISING STANDARDS FOR REVIEWING INSURANCE AND SURETY BONDS. WHEREAS, the City requires contractors, builders, subdividers, and other persons doing business with the City to have various types of insurance; and WHEREAS, it is necessary to ensure that the insurance and surety companies selected by those persons meet certain financial and performance standards, NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. Insurance or surety companies securing or insuring any obligation or risk of which the City is a beneficiary or an additional insured shall meet the following minimum standards: a. Authorization to conduct the business of insurance, of a type required by the transaction, in the State of California as evidence by listing by the State Insurance Commissioner. For liability insurance, the City may accept a surplus line carrier provided the City is provided with a copy of a surplus line carrier affidavit. b. A rating in the latest available "Best's Rating Guide" of "A" or better and a financial size of $10 million (currently Class V) or better. If a company is not rated by Best's, or does not possess sufficient years of experience to be rated, the City Attorney and City Manager may approve such company if it produces sufficient evidence that its financial t ' A Qrf O) CO UJ §(/> > 1- *SS§O MI co 0 u. 0 "o o < S CD 7\ •** O i_ > * <5 UJ CO O K i = o — H ^ ffl> ^ Q C/5 . CO CC t OO 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ^"~ ^ i \ i responsibility and performance capability is equal to or better than the Best's rating requirement. PASSED, APPROVED AND ADOPTED at a Regular Meeting of the! City Council of the City of Carlsbad on the 7th day of November 1989, by the following vote, to wit: AYES: Council Members Lewis, Kulchin, Pettine, Mamaux and Larson NOES : None ABSENT: None l^&^^^J^f^ M%£/<*CIAUDE^. LEtflS', Mayor ATTEST : 1 /^~) ALETHA L. RAUTENKRANZ, City Glerk (SEAL) . Q<ffl «U> S K * §» "I O IU <8? 51 2. .'§ >• IAJ 2 1" g Q O X ^ CO2 O *" </J ? < < ^0 1 ± 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 8108 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA ESTABLISHING STANDARDS FOR REVIEWING INSURANCE AND SURETY COMPANIES. WHEREAS, the City requires contractors, builders, subdividers, and other persons doing business with the City to have various types of insurance; and WHEREAS, it is necessary to ensure that the insurance and surety companies selected by those persons meet certain financial and performance standards, Therefore the City Council of the City of Carlsbad resolves as follows: Insurance or surety companies securing or insuring any obligation or risk of which the City is a beneficiary or an additional insured shall meet the following minimum standards: a. Authorization to conduct the business of insurance, of a type required by the transaction, in the State of California as evidenced by listing by the State Insurance Commissioner. For libility insurance the City may accept a surplus line carrier provided the City is provided with a copy of a surplus line carrier affidavit. b. A rating by "Best's Rating Guide" of "A", "Class XI" or better. If a company is not rated by Best's the City Attorney and City Manager may approve an insurer or surety if the company produces sufficient evidence that its financial responsibility and performance capability is equal or better than the Best's rating requirement. Q 03 55 * >_ > > otu 1 2 3 4 5 6 7 8 Q 10 11 12 13 * 14 = * § 1533 o ^ J -10 16 17 18 19 20 21 22 23 24 25 26 27 28 PASSED, APPROVED AND ADOPTED at a regular meeting of the City Council of the City of Carlsbad, California held on the 16th day of July ? 1985 by the following vote to wit: AYES: Council Members Casler, Lewis, Kulchin, Chick and Pettine NOES: None ABSENT: None MARY H. CALLER, Mayor ATTEST: ALSTHA L. RAUTENKRANZ, City Cl*rk 2.