How is a claim against a surety bond typically processed?

The process of filing a claim against a surety bond typically begins with the obligee submitting the claim to the surety company. This is a crucial step because the obligee is the party who is protected by the bond, often the project owner or entity requiring the bond. By filing the claim, the obligee notifies the surety company of the contractor's failure to fulfill their obligations, whether due to non-performance or other specified failures.

Upon receiving the claim, the surety company will conduct a thorough investigation to verify the validity of the claim. This investigation ensures that the claim is justified and that the terms of the bond have indeed been breached. The surety's role is to protect the obligee's interests, but it also has a responsibility to ensure that claims are legitimate before considering payment.

Immediate payment without an investigation would undermine the purpose of the surety bond by encouraging fraudulent claims. Similarly, requiring contractor approval before a claim can be made would hinder the obligee's ability to seek compensation for losses caused by the contractor's failure. Additionally, needing to close the bond before making a claim is not a common requirement, as claims can typically be processed any time within the bond's coverage period. Thus, the process establishes accountability, protects