How to Get the Bonding Company to Pay?- Florida Webinar

In this blog, presented by SunRay Construction Solutions and Alex Barthet, Principal, The Barthet Firm, construction professionals in Florida can learn what is payment bond claim, deadlines to follow, how to get paid after making a payment bond claim, and more.

What is a Payment Bond Claim?

So, what is a payment bond claim? In simple terms, it is a security device that helps protect a lienor’s right to payment. Typically, instead of making a claim on a property to foreclose it and get the money owed to you, in the case of a payment bond claim, you will make a claim against a surety bond to get the money owed to you.

You can think of a surety bond as a financial instrument which is generally backed by an insurance company, for example, Liberty Mutual, Travelers, etc.

As a construction professional, how can you find out whether the project is a bonded project or not?

• A copy of the bond should be referenced and attached to the Notice of Commencement.

• The Notice of Commencement is a document prepared by the property owner before the work starts on the project.  

• This Notice of Commencement is recorded in the public records and a copy should also be posted on the project.

So, if you need to get a copy of the bond, you can either look for it in the public records or look for it at the job site where it is supposed to be posted.  

What are the Bond Deadlines?

One of the most important things to remember is that deadlines play a crucial role in whether you get paid successfully after making a payment bond claim. If you fail to follow the deadlines, then there is no claim to make because you would have lost the ability to protect your rights to payment via a payment bond.

Here are the rules and deadlines that you need to follow diligently.

A) Private Bonded Projects

1. General rule for subcontractors and suppliers to the general contractor:

1. If you are a subcontractor or supplier to the bonded prime contractor, you do not have to send a Notice to Owner/Contractor.  

2. You must send out a Notice of Nonpayment within 90 days of your last day of work/delivery of materials. The last day of work does not include punch list and warranty work, and you need to count all the days including weekends and legal holidays.  

3. The final rule to follow is to ensure that you file your legal lawsuit on the payment bond within one year from your last day of work/delivery of materials.

2. General rule for sub-subcontractors and suppliers to subcontractors:

‍Pro Tip

• If you are a sub-subcontractor or supplier to a subcontractor, then you also need to check for subcontractor bonds.  

• In some cases, the prime contractor will have a bond and the subcontractor may also have a bond.  

• Now this bond is not recorded in the public record, so you will need to get a copy of it from the prime contractor or ask the subcontractor who should tell you whether there is a subcontractor bond or not on the project.

• If the subcontractor has a bond, then you must make a claim on the bond according to what that bond says. Instead of following the rules mentioned above, you need to read the subcontractor bond thoroughly to understand the process of making a claim on the bond.

B) State Public Bonded Projects

1. General rule for subcontractors and suppliers to the general contractor:

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1. If you are a subcontractor or supplier to the bonded prime contractor, you do not have to send a Notice to Owner/Contractor. Although, as mentioned earlier, it is good practice to send it even if it is not required.  

2. You also do not have to send out the Notice of Nonpayment but again, we recommend that you do send it out.

3. The one rule that you must follow is to file the lawsuit on the bond within one year from your last day of work/delivery of materials.  

2. General rule for sub-subcontractors and suppliers to subcontractors:

1. If you do not have a contract with the bonded prime contractor, then you must send out a Notice to Owner/Contractor within 45 days of your first day of work/delivery of materials.

2. You must also send out the Notice of Nonpayment within 90 days of your last day of work/delivery of materials.

3. Finally, you must ensure that you file your legal lawsuit on the payment bond within one year from your last day of work/delivery of materials.

Pro Tip

• As mentioned above, make sure to check for subcontractor bonds as an additional security for your right to be paid.  

Did You Really Miss the Deadline?

Dealing with all these rules can be quite confusing and it is not easy to remember all of them. The best way to stay on top of it is to use tools like SunRay’s robust deadline calculator or the Lien-O-Matic. These tools will help you to know exactly what you need to file and when you need to file to protect your lien and bond rights. All you need to do is visit the website, fill in your details, and the tool will be sent to you for free.  

How to Get Paid?

Now, assuming you have followed all the rules and deadlines diligently, the next question is how to get paid.  

• First and foremost, you need to understand that the Notice of Nonpayment just kickstarts the entire process.

• Once the bonding company receives your Notice of Nonpayment, they will typically send out two letters:

• One letter will go out to the bonded prime contractor who got the bond. They will let the prime contractor know that they have received a Notice of Nonpayment from one of their subs or sub-subs and ask them to respond.

• The second letter will be sent out to you acknowledging that they have received your claim and want you to fill out a Proof of Claim document and provide some backup documents to evaluate the claim.  

• Now there is no legal obligation in the state of Florida to fill out the proof of claim document. You only need to follow the rules that we have listed above to perfect your claim.

• You can voluntarily fill out the proof of claim, sign it under oath, attach your backup documents, and send it to the surety.

• However, we recommend that you do not send it out mainly for two reasons:

• The proof of claim document is often used by the surety company to reject your claim. For example, in your Notice of Nonpayment you have not mentioned your last day of work but the proof of claim for does. So, when you provide this information, and if the last day is not within the 45-90 days window, they can deny your claim.

• The other reason is that the surety company believes that if they keep you busy by projecting that they are in the process of adjusting your claim, you might end up waiting and you might end up running out of time to file the suit against the bond.  

• Most of the sureties will not agree to pay you voluntarily unless the prime contractor agrees to pay you first. So, you need to remember that a surety company is different from an insurance company.  

• Insurance companies typically work in a way where you are paying a premium and if something happens, they will verify everything and then write you a check.  

• Surety companies work in a different way. Typically, there are three parties involved: the bonded contractor (principal), the surety, and the claimant. The bond is for your benefit as a claimant, but you haven’t paid anything for it.  

• The surety will have a separate agreement with the bonded contractor which says that if the surety must pay for any loss because of the project that they have bonded to the contractor, then the bonded contractor must pay them back.  

• Another key point to remember is that there are ways for the surety to shorten your claim period from one year. There are documents called summons to show cause or a contest of lien which are sent via certified mail to you or served upon you and they can shorten your claim period.  

When Will They Pay Me?

So, what should you do to make sure that things are progressing, and the surety company makes good on your payment bond claim?

• Practice the 60/60 rule.  

• So, at about day 60 from your last work should be when you submit your Notice of Nonpayment. Although you have 90 days to do it, don’t wait until the last couple of days to send it out. You can send it out earlier than that as well but no later than the 60^th day.

• This is because the extra 30 days will give you sufficient time to prepare all your required documents, sign and notarize them, and send them out via certified mail so that the contractor and the surety receive it well within the 90-day deadline.

• Once this is done, in the next 60 days, you need to hassle your contractor and surety for payment. You can make phone calls, send out emails, letters, go to their offices, etc. You can use these 60 days to do whatever you can to get paid.

• Now, if you haven’t been paid even after the 60 days of hassling, then it is time to submit your claim to a construction attorney who can file a lawsuit for you.

• The construction attorneys don’t bother sending any demand letters to the surety. They just file the lawsuit, and this typically triggers the surety to pay you quickly because they can ignore all your letters and calls and emails, but they cannot ignore a lawsuit.  

• Once you file a lawsuit and if the surety doesn’t pay or respond to the lawsuit within 20 days, then you get a default which means you win, and they lose automatically.  

• Sometimes, there may be some business reasons why you decide to wait, maybe because you may be working on multiple projects for the same contractor, and you want to continue maintaining a good working relationship with them.  

• But in most situations, it is better not to wait because nobody is going to pay you voluntarily and if you want to be paid faster, then you need to be more aggressive and quicker in filing a suit against them.  

Key Takeaway

As mentioned earlier, a payment bond claim is one of the best tools to use to ensure that you get paid successfully on bonded projects; however, it will benefit you only if you follow all the rules and deadlines diligently to perfect your bond rights.  

If you find yourself facing issues, don't hesitate to reach out for guidance and support. SunRay can provide valuable assistance and expertise to help you navigate the complexities of construction payment disputes in Florida. Call 800-403-7660 today and get paid what you deserve!

Common Questions Contractors Ask

Do I need to send any notices before I can get the bonding company to pay?

This depends on your situation. If you have a direct contract with the prime contractor, you generally don't need to send notices. But for others further down the chain, a Notice to Owner/Contractor (must be received by the property owner within 45 days of first service) might be required.

What is the deadline to file a claim against the bonding company?

You typically have one year from your last day of work/delivery to file a lawsuit on the payment bond.

What documents do I need to submit with my claim against the bonding company?

This can vary, but commonly it would include copies of your contract, proof of service, and documentation of non-payment.

What happens after I file a claim against the bonding company?

The bonding company will investigate your claim. Be prepared to provide any additional information they request.

Do I need a lawyer to get the bonding company to pay?

While not mandatory, consulting a construction lawyer can be helpful, especially for navigating deadlines and complex claims.

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