Filing a claim on a performance bond is a formal process that provides financial protection to project owners (Obligees) when a contractor (Principal) fails to meet their contractual obligations. If a contractor defaults, the performance bond ensures the project can still be completed or compensated. Below is a step-by-step guide on how to file a claim effectively.
A claim can be filed on a performance bond under the following conditions:
The Contractor Defaults: The contractor fails to perform the work as agreed in the contract, such as missing deadlines or delivering substandard work.
Obligee Compliance: The project owner (Obligee) has fulfilled their own contractual obligations, such as providing payments and approvals.
Formal Declaration of Default: The project owner must formally declare the contractor in default before initiating a claim.
1. Review the Bond Terms
Read the performance bond agreement carefully to understand the specific requirements for filing a claim.
The bond will outline the obligations of the contractor, the conditions for default, and the steps to initiate a claim.
2. Gather Documentation
Collect evidence to support the claim, including:
The original contract and performance bond.
Records of correspondence with the contractor.
Documentation of the contractor’s failure to perform (e.g., missed deadlines, incomplete work, or defective workmanship).
Proof that the Obligee fulfilled their contractual obligations.
3. Notify the Surety Company
Contact the surety company that issued the performance bond. Provide a formal notice of default and state your intention to file a claim.
Include all supporting documentation and follow the submission process specified in the bond.
4. Surety Investigation
The surety will review the claim to determine its validity. This process typically involves:
Investigating the contractor’s performance.
Assessing whether the Obligee met their contractual obligations.
The investigation period varies but typically takes 30-60 days.
5. Resolution of the Claim
If the claim is valid, the surety will take one of the following actions:
Hire a New Contractor: Engage another contractor to complete the project.
Financial Compensation: Pay the Obligee the cost of completing the project.
Other Remedies: Resolve the issue based on the terms of the bond.
When a performance bond is called:
The surety becomes responsible for ensuring the project is completed or compensating the project owner.
The contractor (Principal) may still be held financially liable for the surety’s costs.
To learn more, visit How to Release a Performance Bond.
1. Meet All Contractual Obligations
The Obligee must ensure they have met all their responsibilities, such as providing payments or approvals, to strengthen their claim.
2. Provide Clear Evidence of Default
Ensure your claim includes detailed and documented proof of the contractor’s failure to fulfill the contract.
3. Follow Bond Requirements
Missing steps outlined in the bond agreement can delay or invalidate your claim.
What Is a Performance Bond Claim?
A performance bond claim is a formal request for compensation or project completion due to a contractor’s default. It is filed with the surety company that issued the bond.
Who Does a Performance Bond Protect?
A performance bond protects the project owner (Obligee) from financial loss due to a contractor’s failure to meet contractual obligations.
Can You Get Your Money Back on a Performance Bond?
Performance bond premiums are typically non-refundable. However, if the bond was never submitted to the Obligee and is returned in its original form, some sureties may offer a partial refund. Learn more at How to Be Released from a Performance Bond.
Performance bonds provide essential financial security for project owners by:
Ensuring contractors complete their work as agreed.
Offering a safety net in case of default.
Holding contractors accountable for delays, defects, or non-performance.
For a deeper understanding of performance bonds, visit What Is a Performance Bond?.
For more guidance on performance bonds and claims, explore the following topics:
Filing a claim on a performance bond can seem daunting, but by following the steps outlined above, you can ensure a smooth process. From gathering documentation to working with the surety company, attention to detail is key to filing a valid claim.
If you need assistance with performance bonds, claims, or other contract surety bonding needs, contact Swiftbonds today for expert advice and support.
Visit Swiftbonds Performance Bonds for more information or reach out to our team to discuss your specific project needs.