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Enforcing a BOND claim when the BOND information has changed and we stumbled on the update inforamtion through the CITY

As the Material Supplier, we filed a bond on the public property (K09863-19.1) is the project id in our Levelset account. We were later notified of updated BOND information. Erin Classen suggested I reach out to your to inquire what our next step since their BOND CO has since changed in the midst of the project.

1 reply

Jun 30, 2020

I'm not sure I totally understand your situation, but the following information should still be useful.

Can a contractor change bonds mid-job, without notice?

First, I'm not sure that a public entity would allow their contractor to replace their bond throughout the job, so I wonder what bond has changed. Generally, payment and performance bonds are provided to the public agency and don't change throughout the life of the job. Though, I suppose it's possible that it might change in rare circumstances. For clarity, it'd be useful to request the project's payment bond information from the GC and the public entity. They're actually required to provide the payment bond info to you under Sec. 2253.024 and Sec. 2253.026, respectively. If you've been sending your notices and claims to the contractor identifying a specific surety and they've failed to notify you that they have an updated payment bond - the contractor shouldn't be able to benefit from their failure (or the public entity's failure) to provide you with updated, accurate information.

What to do if the payment bond changes during the project

If the payment bond you filed a claim against was the project's payment bond at the start, then that bond could still be available for claimants to make a claim against throughout the entire project - even if there was a contractor change at some point on the project. Directly contacting the surety you've made a claim against should be helpful for clarity there. If the contractor remained the same, but the surety changed - then making a claim against that surety might be appropriate. If the deadline to do so hasn't passed, then it should be a non-issue. If the deadline to make a claim has passed - making a claim anyway and describing the situation might still be useful. If the surety is given copies of the prior claims and notices given to the GC - that might help to force them to take you seriously, as well. Finally, if your payment bond claims are denied, enforcing one or more claims could be an option. A claim filed against one bond generally can't be enforced against some other bond, though. So, if you made a claim against Surety A, then the claim could be enforced against Surety A - but not Surety B (and vice versa). It's possible that a surety would try and avoid liability, claiming that they're no longer responsible for claims on the project. However, sifting through whether or not that's a valid argument on their part would take an intimate understanding of the situation.

Even if bond claims or bond enforcement actions aren't available, other options will be

Payment bonds provide great protection, but there are always other claim options out there. For one, making a claim against the project funds could an option. That would ultimately freeze funds from going from the public entity to the GC, and could force the GC to resolve the issue. Levelset talks about claims on funds (plus bond claims) on this page: Texas Bond Claim Guide and FAQs. Additionally, making other legal claims could be an option. Making a claim under the Texas Construction Trust Fund statutes might be one option. Or, pursuing claims like breach of contract or under the Texas prompt payment laws could be effective, among other potential legal claims. Plus, simply threatening to make those claims could be a powerful option, too - a strong payment demand letter could go a long way. Finally, sending the debt to collections could be yet another option. If it looks like bond claims or a claim on funds won't be fruitful, then it might be worthwhile to consult with a local Texas construction lawyer. They'll be able to review your situation and advise on what options make the most sense for your situation. And, they'll be invaluable in negotiations and collection efforts - though, they tend to be expensive.

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