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Can I resubmit my claim after a rejection of the bond?

A contractor did not respond to the surety bond deadline. The surety sent me an award letter for $15,000.00. I signed, notarized and returned via certified mail. Twelve days later the contractor's lawyer responded, stated that I paid them which means I settled with them. The bond rejected their offer stated I did not tell them that I settled with the contractor. My attorney advised me to pay to avoid foreclosure on their mechanic lien and CSLB found 25 violations with a referral to the State Attorney General.

1 reply

Jun 18, 2019

That's an interesting situation. Without knowing more about the specifics as to the dispute or why a contractor and the surety would deem the claim "settled", it's hard to fully understand the situation. But, if a surety made a settlement offer, if that offer was signed and notarized and sent back to the surety, and if a settlement agreement hadn't previously been entered into with the contractor - it would seem that the surety's offer should be binding upon acceptance. Further, payment of a contractor in full does not waive the right to bring action or make claims against that contractor for issues with their work.

Further, a mechanics lien can only be filed for amounts owed but unpaid - so, if payment has been made in full, a claimant must release their lien claim. And, if that claimant hasn't been paid in full, it wouldn't really follow that all claims against that contractor would be considered "settled" as a result of full payment, either.

Further, with the CSLB finding such a large number of violations, it's worth noting that should potentially serve as a cause of action or at least a claim against the contractor's bond, in and of itself. And, simply because the surety rejected one claim doesn't mean another claim can't be made.

If an owner wants to fight a claim but does not want to risk the foreclosure of their property, bonding off the filed lien might be an option, too. By bonding off a lien, an owner replaces their property with a surety bond that the owner has secured - and, if the foreclosure suit doesn't go as planned, then the claimant will recover from the bond rather than from the foreclosure of the property. For more information on that option, this resource should be valuable: Primer on Mechanics Lien Bonds and Bonding a Mechanics Lien.

As mentioned above, it's hard to know how these things will shake out, especially where there are a number of potential issues on either side. If the attorney that was consulted here is not an attorney who specializes in construction and/or real estate - particularly one with litigation experience - it would be wise to seek out an attorney who is familiar with enforcement proceedings and dealing with sureties in the construction industry. While an attorney with little experience in these areas may well be able to navigate the situation, they might not be as familiar with the ins and outs of balancing claims like these. With the claimant, the surety, and the CSLB all involved, it's important to assess multiple avenues. Regardless, further conferring with your attorney about how to proceed will help identify the best way to proceed.

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