When a Bond Claim Happens
This page describes general practice and cites federal statutes that are stable. State deadlines change, and missing one ends the claim entirely with no remedy. Verify every deadline against current law for your state and project type before relying on it, and talk to a construction attorney. If a claim has been made against you or you need to make one, that call happens today, not next week.
There are two completely different situations both called "a bond claim," and they have almost nothing in common except the word.
You are the principal and someone has claimed against your bond. This is a threat to your company and to your personal assets.
You are a claimant — an unpaid sub or supplier claiming against someone else's payment bond. This is a collection remedy with hard deadlines.
Part 1 — You are the principal
How a performance bond default actually unfolds
It rarely starts with a claim. It starts with a job going sideways.
Stage 1 — The job is behind or over. You know it. The owner suspects it. Nobody has written anything formal yet.
Stage 2 — The owner sends a cure notice. Usually a formal notice under the contract giving you a defined period — often 7 or 10 days — to cure specified defaults.
This is the moment that matters most. Call your producer and your attorney on the day the cure notice arrives. Not after the cure period. A surety brought in at this stage has options — funding, a consultant, a negotiated schedule extension, a conversation with the owner. A surety brought in after a declaration of default has one set of options and they are all expensive.
Stage 3 — The owner declares default and terminates. Then formally notifies the surety and demands performance under the bond.
Stage 4 — The surety investigates. Claims counsel and often a construction consultant. They will want everything: the contract, the schedule, correspondence, daily reports, job cost, change order files, payment history. Under the GIA they have the right to all of it.
They are answering two questions: is the owner's declaration valid? and what is the cheapest way out of this?
Note that a surety's first move is often to challenge the default. If the owner failed to follow the contract's termination procedure, failed to pay you properly, or caused the delay, the surety has real defenses — and the surety's interests and yours are aligned in that argument.
Stage 5 — The surety chooses a remedy. It chooses, not you:
| Option | What happens | When it is chosen |
|---|---|---|
| Finance the principal | Surety funds you to finish, often with controls on the money | Your problem is cash, the relationship is good, and you are still the cheapest way to completion |
| Tender a replacement | Surety finds a new contractor and hands them to the owner | Common. Surety pays the difference between the tender price and the remaining contract balance |
| Takeover | Surety takes over the contract itself and hires a completion contractor | Gives the surety the most control; used when the job is complex or the numbers are large |
| Pay the penal sum | Surety pays the owner and walks away | When completing costs more than the bond limit, or when the surety wants out |
Stage 6 — The surety comes to you. Everything it spent — losses, consultants, attorneys, its own fees — becomes an indemnity demand against you and every GIA signer. And it may have demanded collateral long before this point, as soon as it set a reserve.
What to do the day a problem appears
- Tell your producer. Immediately, and before the owner does. This is the single highest-value action available to you, and the one most often skipped out of embarrassment.
- Call a construction attorney. Your general business lawyer is not the right person.
- Preserve everything. Documents, emails, texts, daily reports, photos, schedules. Issue a litigation hold. Deleting anything, even routinely, is catastrophic.
- Do not walk off the job. Abandonment destroys nearly every defense you have. If you must stop, stop only after written legal advice, with written notice, on stated grounds.
- Check the owner's compliance. Did they pay you? Follow the termination procedure? Cause the delay? Provide timely direction? Many defaults are defensible.
- Keep paying your subs and suppliers if you possibly can. Unpaid subs generate payment bond claims, which compound the problem and multiply the surety's exposure.
Do not sign anything the surety puts in front of you during a claim — collateral agreements, takeover agreements, releases, ratifications — without your own attorney reading it. The surety's counsel drafted it for the surety.
What a claim does to your future
Even a claim that resolves in your favor stays in the record. Sureties share loss information. Expect:
- Reduced capacity, sometimes to zero, for a period
- Higher rates or a worse rating tier
- Collateral requirements on new bonds
- A harder conversation with any new surety, for years
Which is the underlying reason that "call them early" is not just relationship advice. A problem managed with your surety often never becomes a claim. A problem hidden from your surety almost always does.
Part 2 — You are a claimant
If you are an unpaid subcontractor or supplier, the payment bond is often your best remedy — better than a lien, because it is a claim against a solvent insurance company rather than against real property.
But it is governed by strict deadlines, and they are unforgiving.
Step 1 — Get a copy of the bond
You usually have a statutory right to request it. On federal work, the contracting officer must furnish a copy to anyone who submits an affidavit stating they supplied labor or material and have not been paid.
Request the bond at the start of every bonded job you work on, not when you decide to claim. It takes one email at the start and can take weeks in a dispute.
You need: the surety's name, the bond number, the penal sum, and the exact name of the principal.
Step 2 — Know which law applies
| Project type | Governing law |
|---|---|
| Federal construction | The Miller Act, 40 U.S.C. §§3131–3134 |
| State, county, city public work | That state's "Little Miller Act" |
| Private work | The bond's own terms — read it, the deadlines are contractual |
Private bonds are the trap. There is no statute setting the deadline. The deadline is whatever the bond document says, and some private bond forms contain notice periods far shorter than any statute. Read the actual bond.
Federal projects — the Miller Act
Applies to federal construction contracts exceeding $150,000, requiring both a performance bond and a payment bond.
| Requirement | Deadline |
|---|---|
| Notice to the prime contractor — required only for claimants with no direct contract with the prime (second-tier subs and suppliers) | 90 days from the last day you furnished labor or materials |
| Filing suit | One year after the last day you furnished labor or materials |
| Where | U.S. District Court for the district where the contract was performed |
Two things people get wrong:
- The clock runs from last furnishing, not from the invoice date, not from the date payment was due, and not from when you gave up on getting paid.
- Warranty and punch list work generally does not restart the clock. Going back to fix something six months later usually does not buy you a new year. Do not rely on it.
Verify. Miller Act thresholds and procedures are set by statute and regulation and can be amended. Check current 40 U.S.C. §§3131–3134 and the FAR before relying on any figure here.
State projects
Every state has its own version, and they differ substantially — in the contract threshold that triggers a bond, in whether preliminary notice is required, in notice deadlines, and in the limitations period.
California, as one example: public works payment bonds are governed by Civil Code §9550 and following. Claimants without a direct contract with the direct contractor generally must have served a preliminary notice, and suit on the payment bond must be filed within a period tied to the stop payment notice window.
Verify before relying on any California figure. California's mechanics lien and public works statutes were comprehensively recodified in 2012 and amounts and periods have been amended since. Confirm current Civil Code §§9550–9566 and consult a California construction attorney. See the site's lien deadline calculator for related timelines.
Step 3 — Make the claim properly
Send written notice to the surety and the prime contractor, by certified mail, return receipt requested, and keep proof of delivery.
Include:
- Your company's full legal name and contact information
- The project name and location
- The bond number and the principal's exact name
- Who you contracted with, and the date
- What you furnished, when you started, and the last date you furnished — this is the date every deadline runs from, so state it explicitly
- The amount unpaid
- Supporting documents: contract or purchase order, invoices, delivery tickets, signed daily reports, unpaid pay applications, lien waivers already given
Send it early. Sending on day 89 of a 90-day period, by regular mail, with no proof of delivery, is how valid claims die.
Step 4 — After you claim
The surety will investigate: asking the prime for its side, asking you for documentation, and evaluating whether the amount is genuinely owed or is a disputed backcharge.
Common outcomes: the surety pays; the surety pays part; the surety denies on the basis that the prime has a legitimate offset; the surety denies on procedural grounds — late notice, missing preliminary notice, wrong party.
If it is denied and you believe you are right, you have to sue within the limitations period. The clock does not pause while the surety investigates. A surety that takes four months to decide has consumed four months of your one year, and nothing about that is unusual or improper. Track your own deadline independently.
The short version
If you are the principal: tell your surety before your owner does. That one habit prevents more claims than anything else in this guide.
If you are a claimant: get the bond at the start of the job, write down your last furnishing date, and calendar the deadline the day the job ends — not the day you decide to claim.
Not legal advice. Deadlines, thresholds and procedures vary by jurisdiction, by project type, and by the terms of the specific bond, and they change. Anything on this page must be verified against current law. If a claim is live, retain a construction attorney immediately.