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Bond Claim FAQs

It's common to have questions about bond claims. There are tons of rules and lots of confusion. Dig through some of the most frequently asked questions here.

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What is a Payment Bond Claim?

To protect contractors and suppliers on the job, prime contractors working on public projects are required to post a payment bond, which is a type of surety bond, under the state Little Miller Act. The payment bond is secured by a surety company, who must meet certain qualifications to guarantee they have the finances to secure the value of the project. When someone goes unpaid on the state, county or municipal project, they can make a claim for payment directly against the payment bond.

What’s the difference between a bond claim and a mechanics lien?

When you’re unpaid for materials or labor furnished to a private project, the law allows you to file a mechanics lien against that property. When working on a state, county or municipal project, of course, the government isn’t going to tolerate claims against its interest in the land. So, while a mechanics lien filing attaches to and is secured by the physical property, a bond claim attaches to and is secured by the payment bond. In a lot of ways, since properties can be over-leveraged and complex to foreclose upon, claims against payment bonds are cleaner, simpler and faster than mechanics lien claims.

Read more: What’s the Difference Between a Mechanics Lien & a Bond Claim?

What is the Bond Claim Process?

The bond claim process isn’t all that different from a typical mechanics lien process. For a full breakdown of the process: How Does the Payment [Surety] Bond Claim Process Work? However, here are the 5 basic steps that must be taken to make a proper bond claim and get you paid.

Video: How to Make a Payment Bond Claim

STEP 1: SEND A PRELIMINARY NOTICE

Many states require some sort of preliminary notice to be sent on public construction projects to secure the right to make a bond claim. It’s important to understand the notice and timing requirements of the state you are working in to ensure you’re protected in case of nonpayment. Some states that require preliminary notices have deadlines that run from the beginning of the project, while others merely require it before filing your claim. However, even if not required, it’s always a good idea to send one anyway.

STEP 2: “FILING” THE BOND CLAIM

The next step in the bond claim process, is, of course, the bond claim itself! This step is simple enough, but because of the complexity of the state law requirements and the chance of error, it’s worth using a reputable bond claim processing technology like Levelset to file the claim for you.

Filing is in quotations because a bond claim isn’t technically filed anywhere. Rather it needs to be sent (usually by certified mail) to any parties that are required by the state Little Miller Act. However, typically the GC, the contracting entity (“project owner”), and surety are required, in addition to any others.

The biggest mistake you can make when filing your bond claim, however, is not getting the claim filed on time. Each state has separate deadlines for when these bond claims are due. You must get the bond claim prepared correctly, and filed in the right place all before the state’s deadline. To determine the deadline to file a bond claim in your project’s state, consult Levelset’s industry-leading state bond claim resources.

STEP 3: REPLY TO BONDING COMPANY WITH BACKUP

After your bond claim is filed, you’ll be contacted by the payment bond surety to advise that a claim has been opened and to request you reply with backup materials about your claim and a sworn statement of claim. You’ll need to return this sworn statement and any backup documentation you have that provides support for your claim. Return these documents as quickly as possible to keep the claim moving along. Your claim will be delayed as long as you delay returning the materials.

STEP 4: FOLLOWUP WITH THE BONDING COMPANY

Once you’ve filed your bond claim and returned your bond claim sworn statement and information, the bonding company will contact their customer (i.e., the prime contractor). They will notify them of the claim and provide an opportunity to respond or contest the claim. Prime contractors will often delay responding to the bonding company, which delays your claim. A great way to keep the ball rolling is to follow up with the surety to pressure them to approve the claim.

STEP 5: FILE AN ENFORCEMENT ACTION

Hopefully, you’ve been paid and this step is unnecessary. But, if your bond claim is either denied or delayed unreasonably, it may be time to file a lawsuit against the surety to enforce your bond claim. An enforcement action is a full lawsuit; so consider this the final/last resort step.

Read More: 4 Steps to Take After Filing a Bond Claim – How to Get Paid

Summary

Article Name

Bond Claims

Description

Everything contractors & suppliers need to know about Bond Claims. Guides, FAQs, form templates, and tools to make Bond Claims easy and fast for you.

Author

Scott Wolfe Jr.

Publisher Name

Levelset

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Bond Claim Frequently Asked Questions

The Bond Claim process can be complicated. And you're stressed about payment or some other payment dispute. Here are some questions about the Bond Claim process and the Little Miller Acts that may be on your mind. It will help you feel at ease knowing that you're doing the right thing for your business.

What is a Bond Claim?

When unpaid on a public construction project, contractors can file a claim against the project's payment bond. A general contractor is typically required under the state Little Miller Act, to take out a payment bond to ensure the completion of the public works project. Filing a bond claim is an effective way to secure your right to be paid, similar to how a mechanics lien works on a private project.

See: How Payment Bonds Work

Is a Bond Claim right for me?

Bond claims essentially guarantee that subcontractors, material suppliers, equipment lessors, and other project participants are paid for any services, labor, or materials provided to the improvement. Are you waiting for payment on a public project? Bond claims are available to contractors and suppliers on state, federal, and municipal construction projects to claim payment for work provided on a job.

Will a Bond Claim get me paid?

Similar to mechanic liens, bond claims are inexpensive to file and very effective. A properly filed bond claim provides your company security in receiving payment, as it obligates a surety company (usually a well-funded insurance company) to your claim directly, and it puts substantial pressure on the prime contractor’s relationship with their surety.

What is a Little Miller Act?

Each state has rules governing certain aspects of public projects within the state. Like the Federal Miller Act, from which these state-by-state public works regulations got their “Little Miller Act” names, a state’s Little Miller Act requires both payment bonds and performance bonds for certain public works projects. Since public property is shielded from being encumbered by mechanics liens, these bond requirements for public works projects provide alternative security to protect construction participants against nonpayment.

If unpaid on a public project subject to the Little Miller Act bond requirements, the supplier or subcontractor can make a claim against the payment bond. If the prime contractor is unable to fully perform their contractual requirements on the project for some reason, then the state can look to the performance bond for compensation to get the project finished.

See: Payment Bonds vs. Performance Bonds

When are Little Miller Acts and their protections used?

As mentioned above, Little Miller Acts provide an alternative to mechanics lien protection against nonpayment on public projects, since public property is shielded from liens. This means that in order for Little Miller Act bonding requirements to apply, the underlying project must be on public property (and, generally, originally contracted for by a public entity).

Also as noted above, there are often monetary thresholds for the original contract, below which the requirements of a Little Miller Act do not apply. Some states require payment bonds to be furnished for the protection of sub-tier parties on every public works project, but in many states the project has to be of a significant size in order for the requirements to apply.

With the rise of public private partnership (“P3”) projects, there can be some confusion as to whether the requirements imposed by a state’s Little Miller Act apply. This can be a complex issue, and is dependent on the laws of the state in which the project is located.

See: Public Private Partnerships (P3s)- What's the Protection?

Who has requirements under Little Miller Acts?

Each state sets forth requirements for parties who have contracted directly with the public entity for whom the work of improvement is being undertaken. This generally applies to “General Contractors” in the sense of contractors who have subs, or other sub-tier parties, with whom they are working on the project, but certain requirements may also apply to “direct contractors” who have a contract with the public entity but have no sub-tier contracts themselves. While requirements change from state to state, there is often a threshold contract value, below which the requirements of the state’s Little Miller Act do not apply.

You can visit our Resources Page and click on your state for a full breakdown of all the rules and requirements.

Who can file a Bond Claim under the Little Miller Acts?

The specific parties to whom protection is available pursuant to a state’s Little Miller Act is dependent on the state in which the public works project took place. However, broadly speaking, protection is extended to first and second-tier subs and suppliers or equipment rental companies. Unlike the Federal Miller Act, protection under Little Miller Acts may also extend to even lower-tier subcontractors and suppliers parties, but this is state-dependent. It is unusual for suppliers to suppliers to qualify for Little Miller Act protection.

It’s important to note that parties who contract directly with the public entity, even if they do not consider themselves “general contractors” are generally not protected by a payment bond furnished pursuant to a Little Miller Act requirement.

You can visit our Resources Page and click on your state for a full breakdown of all the rules and requirements.

Do Bond Claim requirements and protections change according to the project location?

Yes. Little Miller Act bond claim requirements and protections vary from state to state. The threshold at which the requirements apply, the parties to whom protection is afforded, the timeline for making claims, and noticing and other requirements all depend on the project’s location. Just like mechanics lien rules and requirements, the procedures governing claims against bonds on public works are also set by the state in which the project was located.

You can visit our Resources Page and click on your state for a full breakdown of all the rules and requirements.

Do Bond Claim requirements and protections change according to the project type?

Kind of. As noted above, Little Miller Act requirements only apply to public projects, so private works of improvement are not subject to these rules. Also as noted above, the applicability of the rules with respect to P3 projects is a confusing gray area, with no hard and fast rules. Besides the above, however, some states have different requirements depending on the specific type of the underlying public project. For example, a public university project may be subject to different requirements than a highway project, or a municipal school project.

You can visit our Resources Page and click on your state for a full breakdown of all the rules and requirements.

When is a Bond Claim due?

The deadline for a payment bond claim can vary depending on which state the construction project is located. However, they are typically due within the first few months after last furnishing labor or materials to the project.

You can visit our Resources Page and click on your state for a full breakdown of all the rules and requirements.

Who is a Bond Claim sent to?

Most state Little Miller Acts determine who the bond claim is sent to. The majority of states require the claim to be sent to the bonded prime contractor; other states require that the claim be sent to the surety bond company, the contracting public entity, or any combination of the three. Furthermore, in a few states (such as Missouri, Kentucky and Vermont) the required parties will be determined by the terms of the bond itself.

See: Tip: Send Your Bond Claim to the Surety to Ensure Maximum Attention

In addition to that, there are a few states that require the bond claim to be filed in some capacity such as Louisiana and New Hampshire.

What happens if I make a mistake with respect to Little Miller Act requirements?

Making a mistake with respect to Little Miller Act requirements can occur on each side of the equation. A direct contractor can make a mistake by not obtaining a bond when required to do so, or obtaining an insufficient bond. In this case, they may be exposed to penalties, as well as direct liability for nonpayment to sub-tiers in the event a payment dispute arises. A party seeking protection against nonpayment from a payment bond obtained pursuant to Little Miller Act requirements has any number of ways to make a mistake.

Just like with mechanics liens (or bond claims on private projects) there are specific requirements that must be followed, notice requirements, deadlines, form requirements, and service/delivery /filing requirements must all be specifically met in order to qualify for protection. Making a mistake on any step can invalidate a claim, and result in a loss of protection.

Are Little Miller Act requirements and protections usually paired with anything else?

Little Miller Acts are one part of a scope of protections against nonpayment. In many cases, states also have prompt pay requirements that apply to public projects, as well as other potential protections. If a party has reached the point of making a claim against a payment bond on a project, there is a high likelihood that a payment demand or lawsuit against the specific non-paying party is also in the works, as well.

Do Bond Claims last forever?

Bond claims are only effective for a certain period of time. Once this time frame has passed, the bond claim will be invalid and unenforceable.

You can visit our Resources Page and click on your state for a full breakdown of all the rules and requirements.

What do I do after the Bond Claim is filed?

Once you've filed your bond claim, there are still some steps you'll need to take to ensure you get paid what you've earned. This involves sending copies of the claim to any interested parties, following up with the surety, and (as a last measure) filing an enforcement lawsuit.

See: 4 Steps to Take After Filing a Bond Claim

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How Does It Work to File a Bond Claim With Levelset?

Getting your bond claim filed with Levelset online is as easy as 1-2-3

Answer A Few Easy Questions

Answer a few simple questions about your job and the money owed to you. This will take 10 minutes or less.

Your Doc Is Assembled & Filed

Your document is assembled, sent to the appropriate parties.

You Get Paid.

You get paid. You'll get a copy of the final bond claim from us. Then, just work out with the contracting entity, surety, or other contractors to get paid and collect on your bond claim.

Bond Claim Guide, Forms, & Resources