The Surety Won’t Pay Me? How to Get a Bond Company to Pay? - Webinar

In this blog, presented by SunRay Construction Solutions and Alex Barthet, a board-certified construction attorney, construction professionals in Florida can learn how to get a bonding company to pay you after you submit your notice of non-payment.  

What is a Payment Bond?

Let’s begin by understanding what a payment bond is. A payment bond is a method that helps secure a lienor’s right to payment.

• Typically, when you perform construction work in Florida and you improve a property, that improvement allows you to have a lien on the property.
• In some cases, there are ways for the lien to not be on the property, but on something else, which is called a surety bond. 
• A surety bond is a financial institution which is generally backed by an insurance company. These institutions issue a surety bond which helps in keeping the property free and clear of liens.  

This means that you will still have your payment rights intact but instead of foreclosing on the property and selling it to get paid, you will follow the usual process of filing your claim documents, and then a lawsuit (in case you are not paid). If you win the lawsuit, you will get your payment from the surety company.  

So, how can you determine if a property is bonded?

• Ideally, a copy of the payment bond should be attached and referenced to in the Notice of Commencement (NOC).  
• The NOC is a document prepared at the beginning of the project and it is signed by the owner and recorded in the public records.  
• If you are working on a public project, then you need to bear in mind that there are no NOCs required; however, the payment bond should be recorded in the public record.  
• It is also required to post the NOC at the job site. So, if you want to know whether the property is bonded, you can either check the NOC at the job site or in the public record.

What are the Bond Deadlines?

Below are the bond deadlines that you must follow to ensure that if you have a claim, you can keep it secure.  

A) Private Bonded Projects

A private project may refer to a large condo building, large commercial building, private hospital, a charter school, etc. The general rule in place is that:

• If you have a direct contract with the bonded prime contractor (for example, you are a plumber to the GC or a supplier supplying directly to the GC), then you don’t need to send that first notice to owner or notice to contractor.
• Although it is not required to send the notice, it is highly recommended that you do send it. One tip that you can follow is to have a process in place where any job that goes above a certain amount ($100, $500, etc.) gets notices automatically, irrespective of whether or not you need to send it.
• The other rule is that you must send a notice of non-payment which is a document that is signed and notarized. This document needs to be served, which means that it should be received by the contractor and the bonding company no later than 90 days (about 3 months) from your last workday or delivery of materials on the project.
• The deadline of 90 days includes all weekends and holidays in between. However, if the 90^th day falls on a weekend, then it would fall on the following Monday, and if Monday is a holiday, then it would go to Tuesday.  
• Also, you need to remember that the deadline refers to when it is received by the other side. So, do not wait until the last moment to start this process.
• The final deadline to remember is that you have to file a lawsuit to sue the bonding company within one year of your last workday or delivery of materials.  

What if you are a sub-subcontractor or a supplier to a subcontractor? In this case, if you do not have a direct contract with the bonded prime contractor, then:

• You must submit a Notice to Owner/Contractor no later than 45 days from your first day on the job or delivery of materials.
• The 45 days is the days that the notice has to be received. So, do not wait until the last moment to send this. You can send a Notice to Owner once you sign the contract, even if you have not started the work yet.
• Next rule to remember is that you need to serve the Notice of Nonpayment within 90 days of your last work or delivery of materials.
• Finally, you will need to file a suit on the bond within one year of your last work or delivery of materials.  
• Another key item to look out for is to check if there is another existing bond that you could make a claim against. This is called a subcontractor bond.
• For example, if you are a GC and you want your sub to perform well and pay their bills, you can ask them to provide a payment and performance bond.
• This subcontractor bond can protect you if you are a sub-subcontractor or supplier to the subcontractor.  
• This bond may not exist in the public record, so in order to determine if it exists or not, you can either ask the subcontractor (who may or may not provide it) or check with the general contractor.
  

B) Public Bonded Projects

Below are the general rules to be followed on public bonded projects. If you have a direct contract with the bonded prime contractor, then:

• You do not have to send a Notice to Owner which is like the rule followed for private bonded projects.
• You also do not have to send the Notice of Non-Payment. Although, it is highly recommended that you do send out these notices to be on the safe side.
• The only thing you need to do is file a lawsuit within one year from your last work or delivery of materials on the project.  

If you are a sub-subcontractor or supplier to the subcontractor, and you do not have a direct contract with the bonded prime contractor, then you need to follow the below rules which are like that of a private bonded project:

• You must send your Notice to Owner/Contractor within 45 days of your first work or delivery of materials on the project.
• You must serve your Notice of Non-Payment no later than 90 days from your last work or delivery of materials on the project.
• You must file a suit on the bond within one year of your last work/delivery of materials.
• You should also check for subcontractor bonds.  

Did You Really Miss the Deadline?

These varying rules can be pretty confusing and not adhering to them can result in severe consequences. You can use a free tool called the Lien-O-Matic tool to stay on top of all these rules. What this tool does is, it goes through all the rules and provides information on what to file, when to file, etc.  

This will enable you to prevent missing any deadlines for various types of projects, such as, private projects, public projects, bonded/non-bonded project, Miller Act projects, etc. So, if you are confused about when to serve the notice to owner or whether you need to serve the notice of non-payment, you can simply use this tool and get all the answers.  

To access this tool, just visit www.Lien-O-Matic.com.

How to Get Paid?

The first thing that you need to understand is that the Notice of Nonpayment only starts the process of getting you paid.

• Typically, the claimant will receive a letter from the surety asking for more information,
• When the claimant sends the Notice of Non-Payment, the surety sends out two letters – one is the ‘proof of claim’ which is sent to the claimant. This form will contain several questions like how much money is owed, who do you have a contract with request backup of various documents, etc.
• The second letter is sent to the bonded contractor, i.e., the person who issued the bond. The letter will inform them that the surety has received this claim and requests more information.
• A key point to remember here is that as a claimant, you are under no obligation in Florida to provide proof of claim. It is not mandatory for you to fill out this form.
• Most of the attorneys advise their clients not to fill in this form because the surety companies use the details provided in the form to look for reasons to not pay you.

So, how does surety work?

• When you are dealing with other insurances, you will typically submit a claim and your insurance company will adjust that claim and write a check.
• But sureties do not work like that. When the surety company receives a claim, they go back to the contractor and ask them to take care of it, i.e., make the payment. If the bonded contractor fails to make the payment, the surety company will pay the claimant but will retrieve that amount back later from the contractor. 

Most of the surety companies are not interested in paying you voluntarily, which is why you don’t get paid automatically. They instead hope and prefer that the contractor pays you so that they don’t have to make the payment and then chase the contractor to get reimbursed.  

Here are few things to keep in mind:

• The first thing to watch out for is a shortening of your claim period. There are some procedural measures that can be used by the owner, contractor, and surety to reduce the time you have to file your lawsuit.
• Typically, you have one year from your last work day or delivering of materials on the project to file the lawsuit; however, if you receive a document in the mail called Notice of Contest or you receive a lawsuit to reduce the time, then you may end up having only 60 days or 20 days to file your lawsuit.
• Another thing to bear in mind is that do not assume that by submitting your Notice of Non-Payment, you have perfected your rights. As mentioned earlier, it is just the beginning of the process.
• Many sureties also keep you under the false sense of security that they are investigating the matter, waiting for documents, etc., and before you realize, it's already one year from your last workday or delivery of materials. Since you have not filed your lawsuit as per the 1-year deadline, you will forever lose your rights against the surety bond.  
• So, never assume that surety is on your side because they are not.  

When Will They Pay Me?

So, when are they going to pay you and what can you do to increase your chances of being paid?

• Practice the 60/60 rule.
• You need to start the process of serving your Notice of Non-Payment no later than 60 days from your last work. This is because there are chances of unforeseen delays, documents getting lost, etc. So, if you wait until the 80^th or 85^th day, it will become risky for you.
• For the next 60 days after you serve your Notice of Non-Payment, you need to start hassling everyone to get paid. Phone calls, emails, letters, showing up at people’s offices – do whatever you can to get paid in those 60 days.
• If you are not seeing any positive results after following this 60/60 rule, then it is time to submit your claim to a construction lawyer for collection. Most lawyers would suggest going ahead and filing a lawsuit immediately.
• If there are strong business reasons to wait for the payment, then you can do so. However, simply waiting in the hopes of getting paid is not a good strategy. Following something like this often decreases your chances of getting paid successfully.

We hope the details provided in this blog help you to deal with the surety company in a successful and positive manner, and result in successful payment for your work on the construction project.