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Home>Levelset Community>Legal Help>in the state of IL which superceeds a public claim or a bond claim for collecting payment, what is the difference between the two and if the public claims get paid first/ how or why is that

in the state of IL which superceeds a public claim or a bond claim for collecting payment, what is the difference between the two and if the public claims get paid first/ how or why is that

IllinoisBond ClaimsLien on Funds

looking to file a claim was told Public claims get paid first over bonds, need to verify and understand how or why public claims get paid first if they do?

1 reply

Apr 9, 2019
That's a good question. First, I'll note that public claims aren't paid first over bond claims as any sort of rule. Functionally, however, it would make sense that a public claim on funds might be paid more quickly than a claim made against a bond. Exploring how both claims are made might help to explain why a public claim on funds will often be paid before a bond claim will. First, bond claims. When a claim is made against a bond, the claimant will generally notify both the contractor who issued the bond and the contractor's surety that the claimant has gone unpaid, and that the claimant now looks to the bond for payment. The surety, typically a large insurance (or insurance-like) company will take time to evaluate the claim and may ultimately sit on that claim and wait to see if further action will be taken on it. Or, the surety may instruct the contractor to resolve the payment issue before it becomes a larger dispute. Regardless of what exactly happens once the claim is made, a game of telephone takes place once a bond claim is made, and because there are multiple parties involved and because of the processing required to determine whether the claim is appropriate and/or was appropriately made, payment might not come all that quickly when a bond claim is made. That is, unless a contractor makes sure the claimant is paid before further action becomes necessary against the bond. But, in many cases, a claimant won't receive payment or much response to their bond claim for a while - and with the deadline to enforce (file suit on) a bond claim being 1 year from when the claim was originally filed, there might not be a sense of urgency for quite some time. While it's easy to see how bond claims could get bogged down, these claims can be effective, and there's an assurance that, at the very least, money exists to pay out the claim. Now, let's look at a public claim on funds. When a public claim on funds is made, that claim attaches to the payments owed to the project's prime contractor from the public entity. When a public claim on funds is made, the public entity is required to withhold payment in the amount f the claim from the contractor. So, the financial effect of a public claim on funds will be immediately felt by the project's prime contractor. Further, once a public claim on funds is made, the deadline to enforce that claim is a mere 90 days. So, once that claim is made, a contractor knows that within as few as 90 days, a legal action might be filed to pursue the payment of that claim. Thus, a more heightened sense of urgency is present. Though, if a claimant is not willing to enforce their claim 90 days after the claim is made, payment will be released to the contractor. Pursuant to all of the above - a contractor will generally feel the effects of a public claim on funds more quickly than a bond claim because it will (more or less) immediately affect their paychecks from the public entity. What's more, the timeframe for potential action tends to be sped up with a public claim on funds. However, bond claims, when properly made, might provide a little more security - and they also provide a more extended timeframe to try and work out any payment disputes at hand. Both claims have their merits, and these claims do a fair job at complimenting eachother in terms of strengths and weaknesses. For more information on Illinois bond claims and claims on public funds, this resource should be valuable: Illinois Public Project Overview.
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