Step One: Get a Copy of the Bond
Step Two: Send the Required Notice
Step Three: Please Respond to our Inquiries
Step Four: Remember: Your Customer/our Principal is Primarily Liable for the Claimed Debt. (The bond is a secondary source of recovery. A bond claim is not a substitute for collection through normal business channels.)
Step Five: Please Give your Customer the Courtesy of Notifying Us When and If your Claim is Paid or Reduced.
Step Six: Don't Lose your Claim once you have perfected it.
A payment bond is an obligation by our principal and by our company to pay certain obligations of our principal if our principal fails to do so. Most payment bonds limit our liability only to those claims that have either been filed with us strictly in accordance with the requirements of the written terms of the bond we have written or in accordance with one of several laws that govern such claims.
Rarely are payment bonds written as blanket obligations to pay all of the debts of a contractor or subcontractor related to a construction project.
As you can see, any generalization about payment bonds, or what must be done to make a timely claim, is very difficult. We are often not in control of the form of bond used. This will differ from project to project and from obligee to obligee. Your first step in making any payment bond claim is to determine what the bond says, whether or not you are even covered, and what requirements must be met to comply with the bond.
The best place to get a copy of any payment bond is from the obligee who required the bond. They asked our principal to furnish such a bond either to meet statutory requirements, to protect themselves from your claims, or to provide you with additional security to get paid on the project. They will have the original fully executed bond in their possession and should readily furnish you with a copy of the bond. There are certain statutes that also require an obligee to furnish you a copy of the bond on request, sometimes upon the payment of their costs of copying and mailing.
When we approve the issuance of a payment bond, it is often issued in the offices of one of our agents. Whether issued through our office or an agent's office, the copy of the bond in our file will often be incomplete. We may have a copy with our signature or that of our agent, but once it is delivered to the principal, we may not have a copy of the bond with our principal's signature. In some cases, the principal may decide not to deliver the bond, in which case it is not effective. The only way to know if a fully executed and delivered bond protects you is to contact the obligee and request a copy of the bond.
As a general rule, you will not know what rights you have against a subcontract bond until you have read the bond. If we bonded a prime contractor (one in direct contract with the project owner) on a federal, state, or local public works project, there is a somewhat greater chance that you can follow the steps required by the applicable laws and have a good claim without having first reviewed the bond.
If you are of the class of claimants protected by the bond, and you have determined that you wish to take at least the preliminary steps necessary to preserve and perfect you rights under our bond, you will need to send the notices required by the bonds. If the statute or bond requires certain wording or a sworn statement, that must be done. If the bond or statute requires certified mailing, that must be done. The deadlines are strictly enforced and are not extended for holidays or weekends in some cases. Send the notices to everyone that the statute or bond requires. While fax and email have become convenient means of communicating, most bond forms and statutes do not recognize these as acceptable means of perfecting claims.
We cannot waive or relax any of the notice requirements without our principal's consent. Our principal cannot waive or relax any of the notice requirements without our consent. Our consent, if granted, would only be done in rare circumstances and would have to be done in writing and signed by an officer of the company. Occasionally, a claimant will claim that they called our office and that "someone told them"or that "they understood" that they didn't have to send some notice or that something less than the statutory requirements would suffice. No one at SureTec has authority to waive or relax notice requirements over the telephone or e-mail.
Please note: Only SureTec employees have any authority to deal with claims. Many of our bonds are written through surety bond producers and insurance agents. While they are a tremendous resource to us in the claim process, they do not have the authority to accept your payment bond claim or commit SureTec to any course of action.
Within a relatively short period of time of our receipt of a claim or notice, you will receive a letter from us acknowledging the claim. You may be requested to complete and return a proof of claim. A general claims information sheet will usually accompany the letter, outlining additional information we may require. Inasmuch as some laws and bond forms require notice of claims within relatively short periods of time, many notices are sent simply as a matter of precaution when payment has been delayed and not because of any serious concern over non-payment. That's the first question we will ask. Are you simply protecting your rights or do you believe there is a problem? Please let us know what you think.
The bond is usually a secondary source of recovery. A bond claim is not a substitute for good credit practices and collection through normal business channels.
Our principal is primarily liable for the debts it incurs. In the vast majority of cases, you are going to be paid what you are owed by our principal in the ordinary course of business. We are not a means of speeding up the normal payment process. If our principal does not owe the money until it has been paid, either because of a contingent payment clause in your contractor or purchase order, an agreement, or your custom and practice, we will generally not be obligated to pay it either. That may differ from state to state. If our principal questions the amount of your invoices, the quality of your work, or your entitlement to payment, you will generally need to work that out with the principal. We have limited ability to intercede in the day to day payment practices of the contractors we bond. Rather, we are there as a financial safety net if the contractor fails, funds are legitimately owed, and all required notices have been given in a timely manner.
Our principals pay many claims before we even have a chance to acknowledge them. When you are paid, please let us know. This allows us to clear the claims record and devote more time to more serious claims situations. A faxed letter on your letterhead to (512) 732-2663 simply stating that you have been paid, and are withdrawing your claim will suffice in most situations. In some cases, we may need formal releases or even recordable releases.
If you have filed a mechanic's lien, please contact us for an appropriate release form. Click here for a simple confirmation that your claim has been paid.
When you promptly advise us of payment, you free up our resources and you clear up what might otherwise be holds on the contractor's bonding line. Your customer will appreciate it and so will we.
Most bonds and statutory schemes have relatively short time frames in which a claim must be paid or the claimant must file suit. Keep these time frames in mind.