If you have a business, you might have a surety bond. If you are a consumer, you might need to make a claim against a surety bond. Here’s all the information you need to know about surety bond claims.
When it comes to some bonds (License and Permit Bonds and Contract Bonds), a surety bond claim is a complaint that says you (the Principal) have not fulfilled your obligations and duties, or you have not followed the law.
Surety bond claims are understood to be intentional violations made by you or your business. They can also be misunderstandings with your customers, though.
Anyone can make a claim against your bond, and in most cases, the claim cannot be for more than the total amount of the bond. Claims can only be made against your bond during the time your bond is active.
More information about different bond claims can be viewed at the end of the article.
If a claim is filed against your bond, the surety company expects you to take care of the claim. This is your obligation under the indemnity agreement you signed when you purchased your bond.
If you fail to do this, the Surety will usually start an investigation to determine the claim’s validity. They will reach out to both you and the claimant.
One of two things will happen:
If the Surety finds the claim to be valid, they will remind you of your obligations under the bond. They will expect one of the following responses from you: a response to the claim, a resolution to the claim (this typically involves compensating the claimant for any financial loss or damages incurred) or a valid defense to the claim.
If you resolve the claim, the claim process ends.
If you fail to respond, resolve or provide a valid defense to the claim, the surety company will make a decision based upon the information and documentation provided by the claimant. In some cases, this could lead to the surety company paying the claim for you. If the surety company steps in and pays the claim for you, they will come to you for reimbursement of the settlement and any legal costs associated with it.
This is one way a surety bond differs from an insurance policy. While an insurance company does not expect to be paid back for a claim, a surety company does. You are responsible for cooperating with the surety company during the entire claim process. You are also responsible for paying back the surety company every penny they payout on a claim, including all costs associated with the claim.
If you are looking to make a surety bond claim, you’re on the other side of the fence. You are making a surety bond claim because you feel the surety bond obligations were not held up by the Principal.
Here are the steps you need to take to make a surety bond claim:
Look for this information in your contract or on your state’s licensing board website.
They might require you to submit a letter and/or other supporting documentation.
The claim will be determined to be invalid and no further action will be taken, or the claim will be determined to be valid. If the claim is valid:
Therefore, in the end, if a claim is considered to be valid, the bonded individual will be held responsible.
All surety bonds are different, therefore the claims will be different too. Here are some of the most common claims that could be made if you have one of the following bonds.
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