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The Surety Bond Blog

07
Feb
2008

The Surety Bond Claims Process

Surety bond claims are as widely varied as the myriad bond forms, obligations, jurisdictions, parties and fact patterns one can imagine. They can be as simple as a parking ticket or as complex as the college football rankings or this year’s delegate counts

The process ultimately self-adjusts according to the individual case, but this entry should provide some general help and basic orientation. The most important aspects involve communications: immediate, concise, thorough and frequent contact with surety claims personnel; the complete disclosure of information; and continuous, real-time status updates. Surety claims persons are expected and required to treat all parties fairly, ethically, thoroughly and within legally prescribed time frames and in a courteous, professional manner. Give them all the information they request, in addition to what you would like them to have, and do it as soon as possible. Never be afraid to ask questions throughout the process. Like you many, if not most surety claims professionals had never heard of this obscure subject matter until shortly before they got involved with it. So, they are typically tolerant of what you may feel are “stupid” questions.

Search the Internet for situations similar to your own. Talk to your peers to the extent possible. Browse and ask questions here, you may find an answer if you seek only basic information. Oftentimes, the bond obligee, agent, broker or underwriter can help as well, especially with finding the correct claims contact at the surety. If a statutory bond is involved, often the governmental entity requiring the bond can assist.

Learn About Bond Claims

Why You Need To Avoid Claims At All Costs [Video]

Depending on the ramifications of the outcome of the claim, you may need to obtain highly-specialized surety claims experts, e.g., legal, accounting or construction consultants. This may not be the time for old buddy who went to law school, but to get on the search engines. Most find that this is money well spent. Look at it this way: Four Minute Oil Change is not the place for the 90,000 mile tune-up, no matter how well-intentioned. Sometimes, you have to go back to the dealer, who put the thing together. If you are facing a tough situation, you should be aware that others involved may consider it routine. Prepare accordingly.

There is a fair amount of printed matter available on the law of surety claims, but much of it concerns complex construction and is prepared for the benefit of the surety itself. These books tend to be weighty tomes, nationwide in scope, written by and for specialists. But they may also be very helpful orienting the layperson and should not be overlooked. Despite the fact these are law books mostly written by surety attorneys, these
American Bar Association (ABA) publications – scroll down to “Fidelity and Surety Law” may be worth your while.

If your surety claim involves highly technical construction issues, in addition to legal ones, you will have to search accordingly. For example, often construction contract surety claims may involve liquidated damages (LD) due to delays. Books like: Construction Scheduling: Preparation, Liability and Claims by Wickwire et al, Guide to Construction Contract Surety Claims Schwartzkopf et al., are excellent points of reference. Internet searches within bookseller sites of may yield similar titles.

Unfortunately, surety bond claims happen. Typically, they are not painless, nor are they insurmountable. The above resources can give some guidance and a rough template of how to proceed.

Guest Author: Surety Insider, LLC

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Eric is the Webmaster of JW Surety Bonds. With years of experience in the surety industry, he is also a contributing author to the surety bond blog.

Latest posts by Eric Weisbrot (see all)

Comments (12)

Category: Commercial Bonds, Contract Bonds, General Bonding

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12 Responses

  1. Pingback: "House speaker questions whether State Bond Commission has authority over surety bond - Surety Bond Forums

  2. We are a trucking company who has offered our services to various brokers. A few of them have failed to pay for our services, but have been paid by there clients. These brokers, who have failed to pay us or refused to pay us, have closed previous business and opened new business or are out of business. Since they have failed to pay but have been paid can we go after the shipper or consignee who received the benefit or our services, even if they have paid the broker who failed to pay us??

    1. Fernando,

      Contact the Federal Motor Carrier Safety Administration. They would have either a BMC-84 surety bond or a BMC-85 trust fund in place that will allow you to recoup up to $10K.

  3. I was a an elevaor subcontractor hired by another elevator company to install an elevator at a navel base. The general contractor was making payment to the the elevator company that contracted with us. We never received any payment because the elevator company went out of business. I contacted the surety bond company and I was informed that I did not file the bond within the 90 days. The company that filed the lien informed me that I have 180 to file the claim against the bond. Can you please advise. An intend to file a lien letter was send after 2 1/2 months from the last day of work. However the lien was received 3 days after the 90 days. Who is right, the lien company or the surety bond company. Please advise.

  4. Suzy,

    As a surety bond agency we don't handle much in terms of claims. That responsiblity is done by the carrier. Therefore, I don't have much to offer you in terms of advice.

    However, since there is a discrepency as to whether or not the bond covers your work at this point, I would contact an attorney that can assist before you get stuck with the bill.

    Sorry I couldn't assist more!

    1. Mamie,

      Yes, background checks are not a part of our surety bond application process.

      However, background checks may be required by who ever is requiring the bond of you. Is anyone requiring a bond of you? If so, who?

  5. Is this right?? A homeowner terminated a licensed contractor to build a pool. He then hired an unlicensed contractor to finish the contract. After the work was completed, the homeowner then filed a claim on the licensed contractor's bond. The surety company paid the claim. Can the surety pay a claim when the work was done by unlicensed contractor's. Is this worh fighting?

  6. Seegie,

    It sounds like something is missing from the story, as the surety would not pay a claim triggered by faulty work of an unlicensed contractor.

    Could you provide more information so I can assist further?

  7. The Surety company sent a letter to the home owner every month for 6 mo. requesting copies of contracts, invoices, licences of the contractor's and copy of the checks. The homeowner sent only copy of the checks paid. The surety company then sent a consultant to evaluate the project. When the consultant sent his report to the Surety Company they then paid the claim to the home owner. The surety is now suing for their losses. The report only states what the homeowner had paid to complete the project.

  8. I guess I'm wondering if it is legal for a Surety Company to pay a claim when the work was completed by unlicensed contractors? The homeowner claimed abandonment, but he actually terminated the licensed contractor. And the Surety Company has this information. This situation is very confusing and exhausting for my family.

    1. Seegie,

      Unfortunately, I can't offer legal information, as it's outside our realm of knowledge. It may be best for you to contact an attorney to determine your next steps.

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