What is a Bond Claim?

A lot of businesses get bonded without comprehending the exact conditions of the bond agreement. In a worst-case scenario, this could result in a surety bond claim. That is why it’s vital to comprehend how surety bonds work, and what they are.

Surety bond claims are legal proceedings that a bond obliged could take towards a bond principle, when the aforementioned is in violation of the law, or the terms of the bond itself.

To comprehend the way claims work, be sure to read up on what surety bonds are and the way they work. Different from insurance, surety bonds safeguard the clients and customers of the business acquiring the bond, instead of the business itself. These bonds are an agreement between the business (bond principal), the public or the customer (bond obligee) and the surety issuance and supporting the bond.

When an obligee believes they have been deceived by a business, a claim towards the business’s bond is their way of petitioning for compensation. If the claim is justifiable and successful, the obligee then can receive compensation up to the entire penal amount of the bond.

Reimbursement for a bond claim is prolonged by the surety that has issued the bond. Following the surety having reimbursed a claimant, the business needs to reimburse the surety for their coverage.

Types of Surety Bond Claims

These types of bond claims vary, subject to the kind of bond that a claim is made towards. Although each claim differs, there are 2 significant types of claims: construction bond claims and license bond claims.

Construction Bond Claims

A bond claim can be made towards construction bonds, which are occasionally also known as contract bonds. These types of bonds are the bonds that contractors require anytime they are contracted to work on a specific project. These bonds guarantee that contractors are going to complete their work as it is detailed in the project agreement, in addition to being adhering to state contractor guidelines.

License and Permit Bond Claims

These types of bond claims are made towards license bonds – the kind of bonds that businesses and individuals need to acquire when getting licensed in their state. These bonds are usually required by each state and occasionally also on a federal status. They guarantee that businesses adhere with local and federal business guidelines.

Whenever a business is found to be in violation of these guidelines, a claim can be made towards it. For instance, take the situation of a licensed and bonded vehicle dealer. If the vehicle dealer tampers with the vehicles he sells, sells a vehicle that was stolen, does not report or provide legal titles, deliberately provides false information to buyers, or defrauds them in any other way, a claim could be made towards their bond by the client.

Not adhering to these guidelines– or violating the agreement provisions– can lead to a claim by the owner of the project. In this situation, a claim is made towards the performance bond. A claim can also be made against a payment bond. This is typically carried out by sub-contractors, suppliers, and laborers when the contractor has not paid them what is owed in a timely fashion.