What is a Bond Claim?
A surety bond claim is a legal action that a bond obligee can take against a bond principal, if the latter violates the law, or the conditions of the bond itself.
To understand how claims work, be sure to read up on what a surety bond is and how it works. Unlike insurance, surety bonds protect the clients and customers of the business obtaining the bond, rather than the business itself. A surety bond is an agreement between the business (bond principal), the customer or the public (bond obligee) and the surety issuing and backing the bond.
If an obligee feels they have been defrauded by a business, a claim against the business’s bond is their means of requesting compensation. If the claim is legitimate and successful, the obligee can then receive compensation up to the full penal sum of the bond.
Compensation for a bond claim is extended by the surety which has issued the bond. After the surety has compensated a claimant, the business must indemnify the surety for its coverage. Keep reading to out more about the different types of bond claims, and how you can avoid them.
What is a surety bond indemnity agreement?
When you obtain a surety bond, it constitutes a contract between three parties. The principal is either you or your business entity, the party that requires you to get bonded is the obligee, and the surety is the underwriter of the bond. By signing this contractual agreement, the surety grants its financial backing in your name, so that you can meet the requirements of the obligee.
Often, when getting bonded, you will be also required to complete a surety bond indemnity agreement. The difference between the general indemnity agreement (GIA) and the bond itself is subtle, but important to grasp.
The surety bond GIA is an additional contract between the principal and the surety that transfers risk from the latter to the former. It guarantees that the surety is financially protected and will receive all due payments from you, the bonded entity. As the principal, you take the role of an indemnitor who assumes full liability, while the surety is the indemnitee, which is freed from financial obligations.
Why is the GIA needed?
While the bond outlines your responsibilities in front of the obligee, it does not clearly state your relationship to the surety. With the indemnity, however, the surety obtains legal protection in case it has to pay out a proven claim on your bond. This additional document confirms that you are solely in charge of reimbursing the full costs that the surety incurs due to your violations of the bond.
As the indemnity contains enforceable legal rights, it is a preferred way for sureties to have extra security that they won’t suffer any losses by providing you with a bond. Instead of relying on general laws, the GIA provides actionable tools for sureties, to ensure your financial responsibility towards them.
What happens in a claim?
- In the event of a default, the Surety will investigate.
- If the claim is valid, the Surety will pay the obligee what they are due.
- The Surety then looks to the principal, seeking reimbursement for the amount paid (plus any legal fees).
- In cases where the principal is blaming a third party for causing the default, the Surety will investigate and have a right on subrogation. In this way, they can ‘step into the shoes’ of the principal and seek to recover damages to recover their losses.
What happens in a dispute?
The Surety is not usually best placed to resolve legal disputes between the principal and the obligee. They will sometimes try to mediate disagreements before they become disputes and breaches of contract. Ultimately, everyone involved in the deal wants to avoid that.
If there is a legitimate dispute between the principal and obligee, the Surety is not normally in a position to resolve it. That does not mean, however, that the Suurety will ignore a project disagreement. Disagreements can become disputes. Disputes can become breaches of contract. Breaches of contract can become defaults that justify termination of contracts. Everyone involved in the surety process is invested in avoiding that progression.
What is an Engineering Insurance Claims?
This is to seek indemnification to the insurance company who issued your policy which covers financial loss incurred by the insured due to loss or damage to machinery as a result of accidental electrical and mechanical breakdown. It reimburses the insured for the cost of repairs or replacement of machinery of like nature.
The cover provides protection to the insured machinery whilst at work or at rest and also when they are being dismantled for the purpose of cleaning, inspection and overhauling or removal to another position or in the course of their operations or subsequent re‐erection, provided these are performed in the same premises.
The Life Cycle of Engineering Insurance Claims
The insurance claims process is an arduous one. The insurance claim life cycle has four phases: adjudication, submission, payment, and processing. It can be difficult to remember what needs to happen at each phase of the insurance claims process. This blog post will break down the insurance claims life cycle for you so that you know where your claim stands!
Insurance companies send an engineer when there is a dispute between the two of you regarding damages and the cause of the damage, or the accurate way to repair or replace the damaged item.
The engineer will check various aspects of your claim to verify damage. They will often document all other damages in the home as well, whether they are related to the claim or not. Then, the engineer will produce a report.
Your insurer may send a notice about an engineer inspecting your claim. When this happens, it is often time to reach out to a Public Adjuster or another engineering firm to represent you at the time of the inspection.
What to do with yoru claims?
Notify your broker
Notify Insurers immediately giving details such as nature and extent of loss or damage
Prevent further loss
Take all practical steps within power to mitigate loss or damage
Make police report
Report to police authorities immediately in case of loss due to theft or burglary
Preserve property
Do not dispose off the damaged property and if possible, take photos
Work with us
Cooperate and provide assistance to the Adjusters when called upon documentation
Requirements
✔︎ Completed Claim Form;
✔︎ Written Statement of Claim detailing the property lost or damaged;
✔︎ Purchase invoices/delivery receipts;
✔︎ Technical/Damage Report on extent of damages (applicable for machinery claim);
✔︎ Estimate of repairs/replacement;
✔︎ Police Report, if lodged;
✔︎ Any additional information and documentary evidence as may be required by Insurers or Adjusters other than above.
Report a New Claim
Having an accident can leave you feeling a bit anxious and overwhelmed. We get it. But don’t worry, we’re here to help.
MTPA has been helping clients alleviate the stress of the claims process by knowing what to do and how to handle the claim.
If you have an after-hours claim related emergency and wish to speak to a member of our team, call us at 09173189778.
Knowing what to expect and how to deal with any potential obstacles will help ensure that your claim is paid faster.
New claim reports are handled the same business day.
If you have any pictures, police reports, accident reports, or other supporting documentation, be sure to upload those as well.
Simply fill out the form below to get your claim started. We’ll give you a call and guide you through the whole process.