Md. Code Regs. 26.20.14.06

Current through Register Vol. 51, No. 21, October 18, 2024

Section 26.20.14.06 - Conditions of Bonds

A. Surety bonds are subject to the following conditions:

(1) The Bureau may not accept the bond of a surety company unless the bond is totally noncancellable by the surety, regardless of time or reason, including but not limited to nonpayment of premium or bankruptcy of the permittee during the period of liability;

(2) The Bureau may provide in the bond that the amount shall be confessed to judgment upon forfeiture;

(3) The bond shall provide that the surety and the permittee shall be jointly and severally liable;

(4) The bond shall provide that:

(a) The surety will give prompt notice to the permittee and the Bureau of any notice received or action filed alleging the insolvency or bankruptcy of the surety, or alleging any violations of regulatory requirements which could result in suspension or revocation of the surety's license to do business,

(b) If the surety becomes unable to fulfill its obligations under the bond for any reason, notice shall be given immediately to the permittee and the Bureau.

B. Collateral bonds shall be subject to the following conditions:

(1) The Bureau shall obtain possession of and keep in custody all collateral deposited by the applicant, until authorized for release or replacement;

(2) The Bureau shall value collateral at its current market value, not face value;

(3) The Bureau shall require that certificates of deposit be made payable to the Bureau, in writing, and upon the books of the bank issuing these certificates;

(4) The Bureau may not accept an individual certificate for a denomination in excess of $100,000, or maximum insurable amount as determined by FDIC;

(5) The Bureau shall require the bank issuing these certificates to waive all rights of setoff or liens which it has or might have against these certificates, and to agree in writing that these certificates are payable in full to the Bureau upon demand;

(6) The Bureau shall accept only automatically renewable certificates of deposit;

(7) The applicant shall deposit sufficient amounts of certificates of deposit, to assure that the Bureau will be able to liquidate those certificates before maturity, upon forfeiture, for the amount of the bond required; and

(8) The bank shall give prompt notice to the Bureau and the permittee of any notice received or action filed alleging:

(a) The insolvency or bankruptcy of the bank or the permittee, or

(b) Any violations of regulatory requirements which could result in suspension or revocation of the bank's charter or license to do business.

C. Letters of credit shall be subject to the following conditions:

(1) The letter may only be issued by a bank organized or authorized to do business in Maryland;

(2) The letter shall be irrevocable until released by the Bureau;

(3) The letter shall be payable to the Bureau in full upon demand and receipt from the Bureau of a notice of forfeiture;

(4) The Bureau may not accept a letter of credit in excess of 10 percent of the bank's capital surplus account as shown on a balance sheet certified by a certified public accountant, except when, before or at the time of issuance of the letter of credit, the issuing bank has set aside sufficient funds in a segregated deposit account, clearly marked for that purpose, to cover the bank's maximum liability under the letter of credit;

(5) The Bureau may not accept letters of credit from a single bank for any person on all permits held by that person in excess of three times the company's maximum single obligation, except when, before or at the time of issuance of the letter of credit, the issuing bank has set aside sufficient funds in a segregated deposit account, clearly marked for that purpose, to cover the bank's maximum liability under the additional letters of credit;

(6) Before accepting a letter of credit secured by a segregated deposited account, the Bureau shall require the bank issuing the letter of credit to execute a satisfactory waiver of all rights of setoff or liens which the bank has or might have against any segregated deposit account which secures the letter of credit;

(7) The Bureau may require in the letter of credit that the amount shall be confessed to judgment upon forfeiture; and

(8) The letter of credit shall provide that:

(a) The bank will give prompt notice to the permittee and the Bureau of any notice received or action filed alleging the insolvency or bankruptcy of the bank, or alleging any violations or regulatory requirements which could result in suspension or revocation of the bank's charter or license to do business, and

(b) If the bank becomes unable to fulfill its obligations under the letter of credit for any reason, notice shall be given immediately to the permittee and the Bureau.

D. A person with an interest in any collateral posted as a bond who desires notification of actions pursuant to the bond, shall request the notification, in writing, to the Bureau at the time the collateral is posted as bond.

E. Upon the incapacity of a bank or surety company holding the bond by reason of bankruptcy, insolvency, or suspension or revocation of a charter or license, the permittee is considered to be without bond coverage and shall promptly notify the Bureau. The Bureau, upon receipt of notification shall notify, in writing, any permittee who is considered to be without bond coverage due to the bankruptcy, insolvency, or suspension or revocation of a charter or license of a bank or surety company and specify a reasonable period, not to exceed 90 days, to replace bond coverage and inform the permittee that additional acreage may not be disturbed on the permit. If an adequate bond is not posted by the end of the period allowed, the permittee shall cease coal extraction and shall immediately begin to conduct reclamation operations in accordance with the reclamation plan. Mining operations may not resume until the Bureau has determined that acceptable bond has been posted.

Md. Code Regs. 26.20.14.06

Regulations .06 were previously codified as COMAR 08.13.09.15 a A_M, respectively. Recodification occurred in April, 1993. For a history of these regulations before April, 1993, see "Administrative History of COMAR 08.13.09 before April, 1993" which follows COMAR 26.20.01.
Regulation .06 amended effective March 22, 1999 (26:6 Md. R. 488)