A client filed a claim against our surety bond. We disputed the claim of shoddy work. We had experts inspect the work and agree it was above industry standards. However the bond company investigated and found minor problems (though they were not replated to the scope of our work) and the bond company without giving us any say went ahead an settled the claim for more than double the actual cost of the job. We refunded the cost of the job to the bond company and they cashed the check. Now they are demamnding we pay the rest of the money that they (without giving us a chance to settle) paid to the claimant. What is our obligation at this point? What is our recourse? They are threatening to file something to the credit bureaa- can this affect my personal credit even though it is a corportation? Please adivse. Thank you for your time.
Surety bonds are typically guarantee by an indemnity provided by the owners or principals of the contracting company covered by the bond.
Therefore, the surety can usually seek to recover amounts paid under the bond from the company and/or the principal of the company.
As a result, an action by the bond company may affect your personal credit.
The short answer is that if use refuse to pay the surety will have to deicide if it wants to file a lawsuit against you and/or your company to collect the difference.
If they do it soulds like your principal defense is that the surety made a poor business decision to pay and that is not your responsibility.