If you are a homeowner who had a contract with a less than honorable general contractor & you are one of MANY homeowners who are forced to file a bond claim, how are all those claims paid? Would the bond company have to deny some claims?
3 replies
Jul 17, 2020
You file a claim on the bond. The bonding company, called a surety, asks the contractor they bonded (in this case your general contractor) whether the claim is valid. If the general contractor says it's not valid, the surety may deny the claim. If the surety decides it's valid, then it accept the claim.
What happens next depends on what kind of bond it is. If it is a payment bond, then the surety pays the claim. If it is a performance bond and the general contractor did not complete the work, the surety will hire a completion contractor to complete the work. It all depends on what kind of bond and the terms of the bond.
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Jul 17, 2020
Thank you! Specifically, Surety bond accepted & approved my claim, but then said they can’t pay on it cause too many claims against this contractor
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Jul 17, 2020
Ahhh. It might be a license bond. Those tend to be smaller bonds ($15,000 or so). It is entirely possible that the claims exceed the total amount of the bond. In that case, your remedy is to sue the contractor. A bond claim is often better because you know the surety can pay. But the problem here is the surety is only obligated up to the bond amount, which apparently has been eaten by other claimants.