You did all the right things. You found a licensed contractor for your job; they had a performance bond with an A rated surety company. Everything seemed to proceed fine until one day your contractor filed for bankruptcy. So, now what? How does the claim process work?
Remember – Unlike typical insurance, these bonds are not simply a means to claim and receive money. The purpose of the bond is to ensure that the work gets completed with both sides having reasonable assurance that they would not go belly up when there is a problem.
How does it start?
The owner (or oblige) needs to start the claim process.
• Contact the bonding company and provide a letter detailing how the contractor has failed in his duties.
• Make sure to include as many details as possible to avoid any delays in the process.
The surety will now immediately kick off an investigation into the claim. This is important because it keeps the contractors pushing towards finishing the job, to avoid the financial fallout.
Who pays the performance bond amount?
• If the owner has provided enough detailed information to the surety, it will rule in their favor.
• Once that happens, the payment is made very rapidly to them.
This is in stark contrast to litigation in court where the process could drag on for a long time. Then the surety sets out to make the contractor pay. In certain situations, the surety will simply take over and assign a new contractor to complete the job.
Will anyone be sued?
That depends on the situation. For performance bonds in Canada, if the surety rules in favor of the contractor, the owner may decide to file a suit against them and take it to court.
As you can see, the focus throughout is on taking productive action that will help in the completion of the job at hand and not stretch out the process indefinitely. For further information on performance bonds in Ontario, do go online.