Why you need to avoid claims at all costs
Transcript: Surety Bond Claim Process
Woman: I bought my surety bond last week. I'm protected from clients suing me now right?
JW: Not quite. Actually, the public is now protected from your actions.
Woman: Oh, ok. So if a claim is filed against me the bonding company pays it right?
JW: At first, yes...However, they are going to come back to your business and you personally for reimbursement.
Woman: They can't do that!?!?!
JW: Actually...they can. Remember the indemnity agreement they made you sign before they issued the bond? By signing that you agreed to pay for any claims and legal costs the bonding company incurs from your claims.
Woman: That's ridiculous! I'm going to find a bonding company that won't make me pay for claims.
JW: Unfortunately, indemnity agreements are an industry standard. Indemnification is rarely waived and is typically only done for Fortune 500 companies. You need to remember, bonds are not insurance for you, they insure the public. From your standpoint, they are a form of credit.
JW: Yep! Think about it. Without the bonding company providing the bond to guarantee you, you would have to post cash. You only paid the bonding company a percentage of the bond amount so they could vouch for you. Either way you are responsible for your claims.
Woman: I guess I didn't think of it that way. Well I obviously don't want to have to pay for any claims. What can I do to avoid them?
JW: You need to make sure you follow all the rules of the government and meet the terms of any contracts. If you have a dispute with a client, your best claim procedure is to document, document, document...and if possible, always try to resolve it prior to it becoming a claim. You don't want to deal with it, trust me!
Woman: Well what happens if there is a claim?
JW: The bonding company will listen to their side of the story and provide you an opportunity to provide your side of the story. If the bonding company agrees with you, they will help you fight it. If they believe you are in the wrong, they are required to pay the claim. After paying it out, they will go to you for reimbursement of the claim amount and their legal fees.
Woman: You're right, I definitely don't want to deal with that. I'll be sure to treat my clients right, even the ones that are a thorn in my side. I don't want someone else deciding to pay out on my behalf so I'll be sure to always resolve disputes myself when possible.
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