If you are notified of a potential claim on one of your bonds, the first thing to do is relax. Many claims amount to nothing, and do not necessarily negatively impact your reputation as a contractor, or your relationship with your surety company. Your first step should be to call your agent and discuss the specifics of the claim.
Often times, a subcontractor or supplier will file a payment bond claim if their initial payment terms are not met. This could be a subcontractor, or even a supplier to one of your subcontractors, thus, you may not even know that a problem exists. In these situations, it is best to open a dialogue with the aggrieved party to find the best solution for everyone involved.
A performance bond claim can be a more serious event if the owner intends to default you on the contract. These situations require that you be in close contact with the surety and their claims department to resolve the situation.
In any case, if a surety bond claim proceeds beyond the initial discovery phase, the surety will request that you tender defense to them in the event of a lawsuit. If you do not, the surety will be forced to seek their own legal counsel and they will seek restitution and loss recovery from you via the General Indemnity Agreement.
