A defunct surety bond company that did business with minority building contractors has been ordered to pay $231,500 in fines, the Maryland Insurance Division announced yesterday.
Silver Spring-based United Capital Exchange and its principals, Stephen R. Woods and Dean A. Manson, were fined $230,000 for selling insurance in Maryland without a license and $1,500 for failure to honor valid claims, Jean E. Bienemann, the Insurance Division's senior staff attorney, said.
In addition, the company and its principals have been ordered to pay economic damages to three subcontractors, Ms. Bienemann said. The three worked on a project known as Dupont Circle, an urban renewal project in Middle Park Heights in West Baltimore.
United Capital Exchange failed to honor claims on surety bonds provided for the Dupont Circle project, Ms. Bienemann said. A surety bond is required to provide a financial recourse for other parties in the event that a contractor fails to perform work or provide materials as promised.
"We will not stand by and allow unauthorized acts of business of insurance and unfair trade practices of failing to honor claims," John A. Donaho, Maryland's Insurance Commissioner, said in a statement.
While operating without a state license, United Capital Exchange made or proposed to make 46 surety contracts for bid bonds, performance bonds and labor and material bonds, according to the Insurance Division.
The charges against United Capital Exchange came out during hearings in October and November before a state administrative law judge.
Several of the charges involved a minority contractor who was issued bonds by United Capital Exchange to be eligible for work, including the Dupont Circle project.
The contractor ran into financial difficulty and was forced to file for bankruptcy. When several subcontractors and material suppliers sought reimbursement under the surety bonds issued by United Capital Exchange, those claims were not honored, Ms. Bienemann said.
Edward Birrane, a former Maryland insurance commissioner and attorney for Mr. Manson, could not be reached for comment yesterday.
Ms. Bienemann said that, due to financial hurdles, minority building contractors often have difficulty obtaining surety bonds. United Capital Exchange, which has been ordered not to sell insurance in Maryland, sought to take advantage of that market, she said.