Bond claims are essential to recovering money owed you on a construction contract. And yet, it’s an area where much confusion remains. More than once I’ve spoken to clients who thought they’d filed a bond claim, only to discover they were mistaken. A little unsure of the process yourself? Read on.
Payment bonds are often provided on both public and private projects to insure payment to certain subcontractors and suppliers. The timeframes and notice requirements for preserving those claims can vary based upon whether it’s a federal government project, a state government project, or a privately-owned project. Shared by all, however, is the need to file a bond claim to preserve rights under the bond.
To make a bond claim, a lawsuit against the bonding company must be filed generally within one year from the last work of the claimant on the project. It’s this action of filing a lawsuit that satisfies the requirement to file the bond claim—nothing else.
There are a couple of common scenarios that I have seen clients face that have led them to mistakenly believe that there was nothing to do but wait for a check from the bonding company.
The first occurs after they contacted the bonding company and let them know money was owed, at which point the bonding company responds with a form letter. The form letter says something to the effect of, “We have received your correspondence and require some additional information from you to process your claim.” Note: filling out the bond company’s paperwork and returning it to them DOES NOT meet the requirement of “filing a bond claim.” The mistake is an understandable, albeit fatal one.
Second, there are notices that are statutorily provided to preserve bond claims. Lawyers and construction notice services often—but not always—provide these notices, which generally go by the name “Notice of Bond Claim,” “Bond Claim Notice,” or just “Notice.” Sending one serves a few purposes, but none meet the requirement of filing a bond claim.
Moral of the story: Make sure either you or your lawyer are familiar with how to preserve your construction payment bond claims. If you have provided the notices required to keep your bond claim and are still not paid by the time a lawsuit is required to be filed (in Utah and on Federal Government projects one year from providing your last service or material), then make sure a lawsuit is filed.
Finally, don’t hesitate to contact me with any specific questions.
Conrad H. Johansen